Q3 2019 Earnings Call

October 24, 2019

Good afternoon. Thank you for joining today's call with me today or George Colony, Forresters Chairman of the board and CEO Kelley Hippler, Forresters, Chief sales Officer, and Mike Doyle Forresters, Chief Financial Officer, George will open the call Kelly will follow George to discuss sale.

Sales and Mike Doyle will discuss our financials.

Well then open the call Tucuman name a replay of this call will be available until November 20, Threerd 2019, and can be accessed by dialing one 880.

8437 for one nine or internationally 163, 065 to 304 too.

Please reference the passcode 6194, 408, followed by the pound sign 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.

Estimate 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 statement.

Some of the important factors that could cause actual results to differ are discussed in our reports and filings with the securities and actual results.

I'm, sorry with filings with the Securities and Exchange Commission the company under takes 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.

Thank you for tuning into the forced or Q3 2019 coal.

That's my remarks, Kelly will discuss developments in the forces Salesforce fall, but Mike Doyle, who will give financial update for the quarter. We will then take questions.

The year continues to progress well with Forrester at the upper end of revenue guidance and exceeding EPS targets.

Client retention was at 73% two points above Q3 of 2018 incline enrichment. The average growth applying accounts was at 111% up two points from Q3, 2018 and up three points when compared with Q2 of 29 team.

In a year when we are busy integrating serious decisions and rolling out new offerings. We're pleased weve been able to show continuing improvements in our metrics and financial performance.

Like the turn first to integration.

The value proposition of the new Forrester is simple but powerful.

In the age of the customer where customer obsession has become imperative for companies to succeed and survive for sure provides number one vision what is coming what are the future opportunities what are the external threats and what are the looming competitive dynamics.

Helping companies see around the corner is a traditional strength and focus of Forrester and it enables clients to increase their speed.

Two strategy.

Once companies have a clear view of the future Forrester works with them to plan what they should do.

What technologies to invest in how to organize what skills to acquire where to focus executive attention and what markets to attack.

Legacy Forrester and serious decisions have long records of directing clients strategy, having the right strategy enables companies to beat competitors.

And then finally number three execution.

Once companies see the future and have the right strategy serious decisions can direct them on how to operate.

What frameworks to deploy how to make decisions based on fact, how to how to apply best practices and benchmarks and how to harmonize operations.

The serious way enables our clients to align BTB marketing sales marketing sales and product and to optimize the revenue engine to grow faster.

And we recently completed some research on 6000 user companies with more than $1 billion in revenue.

Forrester clients are 34% more profitable than the average large user corporation.

Highly engaged Forrester clients are 54% more profitable.

In addition companies that align marketing sales and product in the serious way grow 19% faster than average and they are 15% more profitable.

So our portfolio a vision strategy and execution enables for sure to serve clients in ways that traditional research and consulting firms cannot.

Unfortunately board of clients. This is a group of clients that Advisory Committee and strategy was in Cambridge in early October they believed that forces expanded offering through serious decisions will be valuable to them and their organizations in the marketplace. This deal continues to make a lot of sense.

Now the structural integration of the two companies a nearly complete with research sales consulting events and learning now working together.

The new foreseeable capture revenue synergy on four levels number one cross sell.

Selling serious to force or clients and selling Forrester too serious clients.

Number two global expansion.

Selling serious more aggressively in EMEA and Asia.

Pre roll expansion is extending the serious research model into new roles, including I.T. security and risk and customer experience.

And then finally number four vertical expansion selling serious into new markets, including precision manufacturing BTB telecom and financial services.

Let's spend a few moments to update you on the progress of new products at Forrester.

Feedback now Forresters real time customer experience cloud had a number of new business wins in the quarter, including Love's travel shops in the U.S. and London Luton Airport.

It has been sold primarily by dedicated sales force through Q2, but in Q3, we began to see more involvement from the general Salesforce and in fact, a forrester sales person assigned a 1 million plus deal for feedback now in the third quarter.

In addition to feedback now Forresters, new certification business continued to outgrow our plan.

Completion rates for certification clients and this is the number of clients who complete the full course currently stands at 93% well exceeding learning industry benchmarks.

And in addition, 37% of the clients who have completed the program are displaying their forresters certification badges on Linkedin and this is a proxy for the market and credential value of the product.

The Zero Trust certification program, which trains clients on Forresters unique security and risk philosophy.

Had a very successful third quarter launching with launching with 18 clients.

In the last week, we have launched the first serious decisions certification offering b to B marketing.

And we're going to expanding this product on a continuous basis through 2020 and beyond certification. As a reminder is syndicated with profit margins equivalent with our research offerings.

We continue to retire debt incurred with the series decisions acquisition.

In Q3, we've paid down 77.6 million of our debt, including $6 million of discretionary payments on our line of credit.

So to conclude we continue to make significant progress with the integration serious decisions and the rollout of feedback now and certification.

The vision strategy and execution portfolio that we have built resonates with our clients and a points the company toward accelerated growth and higher renewal rates.

Now on pass the call I will pass the call over to Kelley Hippler, Forresters Chief sales Officer Kelly.

Thank you George.

Q3 marked another solid quarter for the Forrester sales organization with growth across all geographic region.

Legacy Forrester 12 month Rolling client retention is holding steady and we increased our enrichment rate.

Q3, Mark the 11th consecutive quarter that productivity of our ramp spreads improved.

The customer engagement model continues to drive positive results for the business and more importantly, greater value for our clients as we focus on the outcomes, they're looking to achieve.

Our decision earlier this year commit the serious decision sales team under Forrester leader It produced improved results in Q3.

As we prepare to finish out the year in a positive note, we're turning our attention to 2020 planning.

We've conducted a deep analysis of our clients and prospects, including buying centers budgets and customer feedback on how they want to engage with us.

Based upon this work we are modeling moving to a fully integrated sales and customer success organization operating under the customer engagement model that has helped fuel forresters growth.

And 2020 Forrester reps will be selling serious decisions products and serious decisions reps will be selling forrester product.

Let's go to market approach will enable us to deliver the full value proposition of the new Forrester by providing clients with guidance around vision strategy and execution with that I would like to turn the call over to Mike Doyle to review, our Q3 financial results.

Thanks, very much Kelly.

I will now begin my review Forresters financial performance for the third quarter of 2019, including a look at our financial results.

The balance sheet at September Thirtyth.

Our third quarter metrics and the outlook for the fourth quarter and full year 2019.

Please note that the income statement numbers on reporting our pro forma and exclude the following numbers five items.

Impact on revenue from the acquisition related fair value adjustments to deferred revenue.

Stock based compensation expense.

Amortization of intangibles acquisition and integration costs, and net gains and losses from investments.

We continue to utilize an effective tax rate of 31% for pro forma purposes for 2019.

In addition, we'll continue to highlight the impact of serious decisions on our consolidated results by indicating year over year performance with and without the acquisition in the relevant section of my comments.

For the third quarter Forrester delivered pro forma revenue at the upper end of guidance and earnings per share that exceeded guidance.

Organic revenue grew at a rate of 8% compared to last year, 9% on a constant currency basis.

Expenses were favorable due in part to lower than planned headcount and continued expense management, resulting in earnings that surpassed guidance.

Now, let me turn to a more detailed review of our third quarter results.

Forresters third quarter revenue increased by 30% to 110.3 million from 84.9 million in the third quarter of 2018.

Serious decisions impacted growth by approximately 22% in the quarter.

Third quarter research services revenue increased 35% to 76.2 million from 56.3 million and serious decisions impacted growth by 30% in the quarter.

Research services Rep revenue represented 69% of total revenue for the quarter.

Second quarter Advisory services and events revenue increased by 19% to 34 million from 28.6 million and series decisions accounted for 6% of growth in the quarter.

Advisory services and events revenue represented 31% of total revenue for the quarter.

Our international revenue mix was 22% down 1% from 23% in the third quarter of 2018.

Series decisions impacted into international revenue mix by a negative 2% for the quarter.

I'd now like to take you through the product activity behind our revenue starting with Forrester research.

Forresters 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 as well as operational tools to drive growth in a complex and dynamic market.

Research revenue increased by 48% for the third quarter of 2019.

Series decisions accounted for 43% of the growth for the quarter.

Onto our connect offerings, which encompass our leadership boards executive programs as well as our certification products.

Leadership boards provide peer connections to our clients to collaborate and create plans born from practical experience.

Executive programs pairs clients with former C level executives trusted partners, who clients can count on to help them make the big calls.

Our certification products right companies with training and certification opportunities for their teams that combine hands on activities with instruction from Forrester analysts.

As of September Thirtyth, 2019, Forrester leadership boards and executive programs had a total of 1469 members.

Flat compared to prior quarter and up 2% compared to prior year.

Connect revenue increased by 11% to the third quarter of 2019, driven mainly by our certification offering.

Serious decisions accounted for 4% of the growth.

Our analytics products help clients understand and anticipate dynamic and changing b to b and B to C customers.

Our services provide a view into potential future change in offer powerful measures in models to create a blueprint for growth.

For the third quarter revenue increased by 4% driven by feedback now.

Each accounted for 5% of the growth in the quarter.

Forresters advisory and consulting offerings help clients apply forresters intellectual property to drive action across the enterprise enable him to move in and act faster and smarter in a market that rewards customer obsession speed and agility.

Revenue increased by 18% for the third quarter, driven by strong delivery and higher utilization of our consultants and analysts.

Serious decisions accounted for 5% of the growth in the quarter.

Our events business provides leading content via immersive experiences focused on enabling professionals and customer experience digital transformation privacy and security sales and marketing.

In the third quarter, we held three events customer experience, Singapore security and risk in Washington, DC, and our third quarter serious decisions Road show.

Third quarter events revenue increased by 56% with 25% of the growth related to serious decisions.

Legacy Forrester events revenue grew 31%, despite having one less event in the quarter compared to last year.

I will now highlight the expense and income portions of the income statement.

Operating expenses for the third quarter increased by 30% and were 99.1 million compared to 76.4 million the prior year.

Cost of services and fulfillment increased by 29% with 22% of the growth related to serious decisions and the remainder driven by higher legacy Forrester head count and annual Merit increases.

Selling and marketing expenses increased by 34% with 25% of the growth due to serious decisions and the remainder due mainly to higher headcount merit and commissions.

General and administrative costs increased by 23% of 11% growth related to serious decisions and the remainder due to higher professional services higher headcount and merit increases.

Overall headcount increased 26 compared to 26% compared to the third quarter of 2018 with 22% of the growth due to serious decisions.

At the end of the third quarter, we had a total staff of 1785, including products and advisory services staff of 673.

And total Salesforce of 699.

Products and advisory services head count increased by 24% year over year with 18% due to serious decisions.

Total salesforce increased by 35% year over year with 32% due to serious decisions.

Operating income was 11.1 million or 10.1% of revenue.

Compared to operating income of 8.4 million or 9.9% of revenue in the third quarter of 2018.

Interest expense for the quarter was 1.9 million as compared to no interest expense in the third quarter of 2018.

Net income for the quarter was 6.5 million and earnings per share was 34 cents on diluted weighted average shares outstanding of 18.7 million compared with net income of 6 million and earnings per share of 33 cents on 18.4 million diluted weighted average shares outstanding in the third quarter of 2018.

Ill now review Forresters third quarter metrics to provide more perspective on the operating results for the quarter.

These metrics are inclusive of acquisitions when appropriate.

Agreement value. This represents the total value of all contracts or research and advisory services in place without regard to the amount of revenue that has already been recognized.

As of September Thirtyth 2019 agreement value was 355.2 million up 38% from the third quarter of 2018.

Serious decisions impacted third quarter agreement value growth by 26%.

As of September Thirtyth 2019, our total for client companies was 2867 up 22% compared to last year, and essentially flat compared to the second quarter.

Serious decisions impacted Q3 client count growth by approximately 17%.

Client count unlike our retention and enrichment metrics is a point in time metric at the end of each quarter.

As we mentioned last quarter, we've updated the methodology, we used to calculate client retention dollar retention to and enrichment to focus on account level activity as opposed to contract level activity.

Additionally, we have broaden the products and services and include included in the calculation, which better reflects our solutions oriented approach to serving our clients.

Historical values have been restated to allow for the appropriate comparisons.

The retention and enrichment metrics reflect legacy Forrester performance and exclude the impact of our recent acquisitions.

Forresters client retention rate was 73% for the third quarter unchanged compared to last quarter and up two points compared to last year.

Our dollar retention was 90% on Jim unchanged compared to last quarter and prior year.

Forresters enrichment was 111% for the third quarter up three points compared to last quarter and up two points compared to last year.

We continue to 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 to close early or slip into the next quarter.

The rolling 12 month methodology captures the proper trend information.

Now I'd like to review the balance sheet our cash.

September Thirtyth 2019 was 67.6 million, which is a decrease of 72.7 million from 140.3 million at year end.

The decrease in cash was due to the funding of serious decisions acquisitions, which I will explain in more detail.

Cash paid for serious net of cash acquired was 237.7 million of which 175 million was funded with debt and 62.7 million was funded with cash on hand.

We also paid 4.6 million of debt issuance costs as a part of the transaction.

Cash from operations was $12.3 million for the quarter as compared to nine point million in the third quarter of last year.

For the first nine months of 2019 cash from operations was 45.9 million, which has an increase of 23% from the 2018 period.

Debt payments were 7.6 million during the quarter, including 6 million of discretionary payments on our revolver.

For the first nine months of 2019.

Debt payments were 40.7 million, including 36 million of discretionary payments.

That outstanding at September Thirtyth, 2019 was 134.3 million.

We received 1.3 million in cash from options exercised and our SPP program for the quarter as compared to 7.5 million in the third quarter of last year.

Accounts receivable at September Thirtyth, 2019 was 54.6 million compared to 38.6 million as of September Thirtyth 2018.

Our days sales outstanding at September Thirtyth, 2019 was 47 days compared to 42 days as of September 32018.

And accounts receivable over 90 days was 6% at September 32019, compared to 5% as of September Thirtyth 2018.

Deferred revenue at September Thirtyth, 2019 was 168 million, an increase of 31% compared to September Thirtyth 2018.

In closing, we had a very good quarter.

Pro forma revenue performed at the upper end of expectations.

EPS exceeded guidance and cash flow was up 23% on a year to date basis, which allowed us to continue to pay down our debt.

To date, we've paid down 40.7 million, bringing our debt outstanding to 134.3 million, leaving the balance sheet in good shape.

Our current full year pro forma guidance has revenue growth in the range of 31% to 33% EPS growth in the range of 12% to 16%.

In addition, as we finish out 2019 and entered 2020, we have worked through most of the SD attrition issues and the legacy for Salesforce attrition is below historical averages.

This fully integrated Salesforce will enter 2020, selling all Forrester products and services, which allows us to realize the revenue synergy of the combined companies.

Despite this our shares are currently trading at historically low PE range based on the recent share price movement.

While we're not giving guidance for 2020, you should expect healthy topline growth and accelerating earnings per share growth.

We expect cash flow to continue to improve which will allow us to pay down debt and utilize our cash in other ways to enhance shareholder value.

Now let me take you through the specifics of our guidance for the fourth quarter and full year 2019.

Our guidance excludes the following.

The fair value adjustment to the acquired deferred revenue from the series acquisition of approximately <unk> point 8 million for the fourth quarter and 11.3 million for the full year 2019.

Amortization of intangible assets of approximately 5.7 million for the fourth quarter and $22.7 million for the full year 2019.

Stock based compensation expense of three to 3.2 million for the fourth quarter and 11.6 to 11.8 million for the full year 2019.

Acquisition integration costs of 1.2 to 1.5 million for the fourth quarter and nine to 9.3 million for the full year 2019.

And any investment gains and losses.

Forces, providing fourth quarter 2019 financial guidance as follows.

Pro forma revenues of approximately 121 to 126 million.

Pro forma operating margins of approximately 11% to 13%.

Pro forma effective tax rate of 31%.

And pro forma earnings per share a 45 cents to 50 cents.

Our full year 2019 guidance is as follows.

Pro forma revenues of approximately 469 to 474 million.

Pro forma operating margin of approximately 10.5% to 11.5%.

Pro forma effective tax rate of 31%.

And pro forma diluted earnings per share of approximately $1.53 to $1.58.

We have provided guidance on a GAAP basis for the fourth quarter and full year 2019 in our press release and 8-K filed today.

Thanks, very much and Im now going to turn the call back over to the operator for the Q and a portion of our call.

Thank you Leo will now begin the question and answers fashion. If you have a question. Please press Star then one on your touched on the fall. If you are using a speaker phone any to pick up a handset first before pressing any numbers. Once again, if you have a question. Please press Star then one on your touched on following our first question comes from an.

Andrew Nicholas Your line is now open.

Hi, This is actually Trevor Romeo and for Andrew Thank you for taking the call here.

First question would just be so it looked like the pro forma revenue and EPS guidance were both lowered slightly at the midpoint for the full year. Despite you coming in at the high end or above the guidance this quarter.

So as our changing in the outlook for the fourth quarter compared to what would have been implied previously and if so what would be driving that.

No Trevor the answer this is Mike Doyle the answer is no.

We typically tighten up our guidance in the fourth quarter.

In the fourth quarter includes.

Both consulting and advisory, which it's easy to shift and bleed into one quarter ago. So we tend to be a little conservative as we put out our numbers. So it doesn't reflect a fundamental change in our view on the business.

I think if we look at our full year numbers and look at how they stack up relative to what we gave last time and earlier in the year, there's not all that much different. So now no fundamental change I think it's just a tightening up of things and probably a little bit of conservatism that we try and put into our guidance.

Okay fair enough those helpful.

And then I.

I think at the end there you mentioned Mike.

Looking forward initially the 2020 or we can expect a healthy topline and accelerating EPS growth.

So I know Theres a lot of.

I guess Noah based on the cost structure right now due to the integration.

But where I guess, where do you think margins can go over time.

Our expectation is that we're going to expand margins next year. What we've said is that it's going to be somewhere between a 100 200 basis points. So we haven't given specific guidance, we have talked about that.

Both when we first brought on series decisions and talked about what we thought it would mean to us and our view hasn't changed on that front I think our expectation is that.

We've got some cost synergies, but the bigger opportunity here as the revenue synergy and with with Kelly combining the sales teams that we now have a fully integrated Forrester salesforce going into 2020.

We think thats, where there is going to be some big opportunities. So that's what we're building towards we look for margins to expand at a 100, a 200 basis points as we as we roll into 2020.

Okay, great and if I could sneak in one more.

So I know you mentioned that the.

Salesforce attrition for serious would kind of be the bulk of challenges with the behind you going into 2020.

So.

Along with that did you see improvement there relative to last quarter I think you'd said it was something like 27% last quarter.

Actually I am let Kelly answer I think last last quarter I think we're running at 37%. So I think both have had finished tack, allowing them.

So thanks for the question in terms of attrition overall as a company. We are in line with year ago numbers, we have seen some our attrition and pockets and the serious decision sale side, which while disappointing is definitely part of any integration.

I think we thought it scenic come and go and a couple of different wave you have said those folks who left immediately because they're easy pray for recruiters whenever and acquisition gets announced.

Then I think we saw a little bit of a second wave from nociceptive question, whether or not they can be successful in the new company, what I will say for those that are here and engage we've seen some great performances on and we have a number of really talented rats and managers, who we do expect to play an increasingly larger role for us as we continue to grow in scale south.

We've had a couple of waves of it though we do see it started to taper back down.

And as I think about it financing from our perspective, Trevor look I think the notion and it's appropriate to look at attrition because it is always important in this business because as you replace head count, which we're doing and we'll continue to do there is a ramp time, what excites me I think as we get into 2020 is that we've got to Kelly's point, a core group of SD reps, who.

Performing well that I think are excited to be a part of something much larger and the Forrester legacy Forrester reps, where we've had lower than normal attrition. This year, who were very excited about selling a fully integrated product. So we go into the year with a good sized sales team is now selling everything and that was not the case during the course of this year. So I.

I get excited about that and yes to Kelly's point, we always going to have a normal level of attrition and that does create a little bumpiness its own than I think thats. That's a normal course, and we're working our way through that but I'm really excited about the combined Salesforce I think thats what gives us a lot of confidence of as we think about 2020, and we still love. This product. It is a great product the Georges point the clients love. It so were.

Going into 2020, feeling really good about what's happening.

Okay, great. Thank you very much that color resolve very helpful. Thanks.

Our next question comes from Vincent Colicchio. Your line is now open.

Yes, George on macro question for you are you seeing anything change in terms of customer sentiment on the economic side in the us and.

Internationally and also in terms of tech spend sentiment.

No, but we did put out a one of our economy spreader reports and the tech spending in Europe would be would be fairly challenge next year, but in Asia in the us the numbers I should look quite good the border clauses. Your couple of weeks ago, Vince and we talked a lot about this and they didnt they didnt.

And with the these guys as well as they did not broached the top of the topic that we did not see anything from them.

I'm actually had to Asia Tomorrow I'll be there next week, so leaders and we see velocity up there, but generally.

There's a lot of political terminal obviously.

And there continues to be bit of investing case, but generally no no flashing lights at this point.

And.

One could I would add soon we've we've we've been at a couple of conferences and had been on the road. So I talked a lot of both and you're not seeing it I think there are some.

Aspects of manufacturing, particularly as a result of some of the China activity that are impacted thats not net of a vertical that we target. So I think we don't necessarily get impacted by that that's helped us somewhat.

Again to Georges point, I'd say something won't happen, but everything we're seeing right now it's still reasonably positive and our Asia business did quite well in Q3 Yep Yep.

And on the SD size in term of does for Kelly I think.

So Kelly has there been any change in the seniority of the people, leaving and on the Salesforce.

Thanks and for the question I would say, we've not seen any shift in terms of this and you already have the folks that are leaving it's been pretty.

Pretty much distributed across the population what I will say is that people that we are recruiting and bringing onboard to backfill. We are hiring with effects that profiles that we do is historically here at Forrester you put into the customer engagement model. So that helps our backfilling with on average are bringing in a little bit more experience than potentially though is that.

Last but I would say as we look across those departures, it's pretty evenly distributed across our different teams and experience level.

And George I've been seeing a lot of feedback now type of things in airports I don't know Thats, you guys or not.

Is there more competition or is there just.

What would you say about how that markets evolve and you can figure out if it's us if you look closely.

I didn't look closely enough obviously, sorry [laughter] also were three were three buttons are green yellow rose.

The businesses.

You have it have you are not number one and we are very very close number two and you have a lot of little tiny guys out there is actually like this because it's a very it's an immature early market and we like that because it means that we can you know we can land and expand here and we're doing that I could tell you in that business now just over the fiscal side of the of the cloud.

Having the Forrester backing has really really accelerated that business.

We are getting we have a lot of big elephants out there right now, which is which is terrific. So again, you're going to see a lot of little guys out there, but it's really two horse race at this point.

Thanks, guys nice quarter.

Thanks, good thanks Ben.

And our final question comes from Allen Klee. Your line is now open.

Module and things that are getting audit.

Thank you.

Okay.

Alan Your line is now all fan.

Oh, Hello, sorry about that.

So.

In terms of the those who the overall sales force to do you have.

No sense of where you were how much you where do you want that to be kind of percentage wise.

By the end of the year and kind of.

How you think about the timing of the productivity.

So we're in the early stages of planning element I will say is our top priority right. Now is backfilling. The headcount that has departed but based on early stage planning, we're probably looking at high single digit growth for our quota carriers for next year, but well hone in on that as we get further into Q4, so we will be.

Expanding quota carriers, most likely high single digit because we also don't want to move away from the focus and traction that we're getting around driving productivity and want to make side of our balancing those two things as we move forward that will also help us with improving margin as we go forward to out to not just on higher bunch of had but also continue to drive the productivity of those that we have here with us.

Hey, good and I'm not sure if I missed this did you provide like what the.

Grow organically organic growth rate of the legacy business was and.

If we could think about whats curious was if it was on last year for both of them.

You mean, we had we did talk about it we had.

We talked about organic revenue growth rate of 8%, which is if you look on a constant currency Alan I was around 9%.

I think for for similar I think the which you have for serious decisions is a low single digit quarter from a revenue perspective, and I think thats a function of some of the attrition that we had earlier in the year and we're just feeling the effects of that and again I think thats the.

The temporal effect that will work through and then that will next year the numbers will be dramatically different. So overall, though I think good organic quarter.

And we're seeing again with the settles and we're going to see a lot of goodness series is the big growth story for US next year. So we're pretty excited about things.

Okay and last thing you said the for next year, you're not giving guidance, but you said healthy top line.

Celebrating bottom line, we will just what is accelerating bottom line, meaning does that just means that it will be growing or growing relative to some something.

Yeah, what it would help well what it means is that right now worse expecting this year with guidance that we are growing at a 12% to 16% rate over a year ago I'm, saying it will be a faster rate. So it's not going to be 12% to 16% next year will be something larger than that in terms of EPS growth and again it it's driven in part by its primarily drove.

Bye bye.

The full integration of serious decisions, so you're adding revenue synergies, writing some cost synergies and that should drive very healthy earnings per share growth year over year. So it's going to be better than the growth. We're experiencing this year. So thats, what I was trying to get out we're going to have obviously fully refined guidance in the February call, but I wanted to at least give a perspective on how we.

We're seeing at right now we're still in the midst of our budgeting process. So.

We will find to net income February early February will have the final numbers outperformance.

Okay, maybe one last question is there.

I know you took on Dec related to.

The series decision acquisition, you have been paying it down.

Yeah.

When do you think you did my bet you might feel comfortable with with using some.

Free cash flow to buy back stock I know Thats hard question to answer but can you had any thoughts on that.

I think what happens every quarter I mean, we sit down with the board and the discussion really centers around.

What's the best use of cash to drive shareholder value is that paying down debt is that buying downs is that is it buying back stock is it are looking at internal investment or the potential acquisitions that are tuck in out there and it's a it's an exercise we go through quarterly with the board. Obviously I think we have in February we will is a larger meeting and.

We'll probably talk a lot about it there, but it is something that George and the board discuss literally every quarter.

Okay. Thank you so much.

You bet. Thanks of thank you.

I'll now turn the call over to Mike Doyle, Forresters, Chief Financial Officer for closing comments.

Yes, thanks, very much everyone for joining the call we are planning to be out and speaking with a lot of folks during the course of the quarter. So we do appreciate all your interest in forest or thank you.

Okay.

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

Good afternoon. Thank you for joining today's call with me today or George Colony, Forresters Chairman of the Board Oh, Kelley Hippler, Forresters, Chief sales Officer, Mike Doyle Forresters, Chief Financial Officer, George will open the call Kelly will follow George to discuss.

Sales and Mike Doyle will discuss our financial.

Well then open the call documenting a replay of this call will be available until November 20, Threerd 2019, and can be accessed by dialing 180.

For three seven for one night or internationally 163, 065, Q3 zero four Chu. Please reference the passcode 6194 408, followed by the pound sign.

Before we begin I'd like to remind you that this.

Paul 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 estimate or similar expressions are intended to identify these 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 extra resolved.

I'm, sorry with filings with the Securities and Exchange Commission the company under takes no obligation to update publicly any forward looking statements rather as result of new information future events or otherwise I'll now hand, the call Ritu George colony.

Thank you for tuning into the forced or Q3 2019 call.

After my remarks, Kelly will discuss developments in the force with Salesforce fall, but Mike Doyle, who will go financial update for the quarter. We will then take questions.

The year continues to progress well with forest or at the upper end of revenue guidance and exceeding as targets.

Client retention was at 73% two points above Q3, 2018 incline enrichment. The average growth of client accounts was at 111% up two points from Q3, 2018 and up three points when compared with Q2 of 29 team.

In a year when we're busy integrating serious decisions and rolling out new offerings. We are pleased weve been able to show continuing improvements in our metrics and financial performance.

Like the turn first to integration.

The value proposition of the new Forrester is simple but powerful.

And the age of the customer where customer obsession has become imperative for companies to succeed in survive for sure provides number one vision what is coming what are the future opportunities what are the external threats and what are the looming competitive dynamics.

Helping companies see around the corner is a traditional strength in focus of Forrester and it enables clients to increase their speed.

Two strategy.

Once companies have a clear view of the future Forrester works with them to plan, what they should do what technologies to invest in how to organize what's skills to acquire where to focus executive attention and what markets to attack.

Legacy Forrester in serious decisions have long records of directing client strategy, having the right strategy enables companies to beat competitors.

And then probably number three execution.

Once companies see the future and have the right strategy serious decisions can direct them and how to operate.

What frameworks to deploy how to make decisions based on fact, how to how to apply best practices and benchmarks and how to harmonize operations.

The serious way enables our clients to align VTB marketing sales marketing sales and product and to optimize the revenue engine to grow faster.

And we recently completed the research on 6000 user companies with more than $1 billion in revenue.

Forrester clients are 34% more profitable than the average large user corporation.

Highly engaged Forrester clients are 54% more profitable.

In addition companies that align that marketing sales and product in the serious way grow 19% faster than average and they are 15% more profitable.

So our portfolio a vision strategy and execution enables for sure to serve clients in ways, the traditional research and consulting firms cannot.

Unfortunately board of clients. This is a group of clients that advise the company in strategy was in Cambridge in early October they believe that fortunes expanded offering through serious decisions will be valuable to them and their organizations in the marketplace. This deal continues to make a lot of subs.

Now the structural integration of the two companies are nearly complete with research sales consulting events and learning now working together.

The new for sure we'll capture revenue synergy on four levels number one cross sell.

Selling serious to force your clients and selling Forrester too serious lives.

Number two global expansion.

Selling serious more aggressively in EMEA and Asia.

Three role expansion is extending the serious research model into new roles, including I.T. security risk and customer experience.

And then finally number four vertical expansion selling serious into new markets, including precision manufacturing BTB telecom and financial services.

Let's spend a few moments to update you on the progress of new products at Forrester.

Feedback now Forresters real time customer experience cloud had a number of new business wins in the quarter, including Love's travel shops in the U.S. in London Luton Airport.

It has been sold primarily by dedicated sales force through Q2, but in Q3, we begin to see more involvement from the general Salesforce and in fact, a forced or sales person inside a 1 million plus deal for feedback now in the third quarter.

In addition to feedback now Forresters, new certification business continued to outgrow our plan.

Completion rates for certification clients and this is the number of clients who complete the full course currently stands at 93% well exceeding.

Learning industry benchmarks.

In addition, 37% of the clients who have completed the program are displaying their forresters certification badges on Linkedin and this is a proxy for the markets and credential value of the product.

The Zero Trust and certification program, which trains clients on for sure is unique security and risk philosophy.

Had a very successful third quarter launching with launching with 18 clients.

In the last week, we have launched the first serious decisions at certification offering me to be marketing.

And we're going to expanding this product on a continuous basis through 2020 and beyond certification. As a reminder is syndicated with profit margins equivalent with our research offerings.

We continue to retire debt incurred with the serious decisions acquisition.

In Q3, we paid down 77.6 million of our debt, including $6 million of discretionary payments on our line of credit.

So to conclude we continue to make significant progress with the integration I'm serious decisions and the rollout of feedback down and and certification.

The vision strategy and execution portfolio that we have built residential their clients and the points the company toward accelerated growth and higher renewal rates.

Now I'll pass the call I will pass the call over to Kelley Hippler, Forresters Chief sales Officer Kelly.

Thank you George Q3 marked another solid quarter for the Forster sales organization with growth across all geographic region.

Legacy Forster 12 month Rolling client retention is holding steady and we increased our enrichment rain.

Q3, Mark the 11th consecutive quarter that productivity of our ramped reps improved.

Customer engagement model continues to drive positive results for the business and more importantly, greater value for our clients as we focus on the outcomes, they're looking to achieve.

Our decision earlier this year to move the serious decision sales team under Forster liters produced improved results in Q3.

As we prepare to finish out the year in a positive note, we're turning our attention to 2020 planning.

We've conducted a deep analysis of our clients and prospects, including buying centers budgets and customer feedback on how they want to engage with us.

Based upon this work we are really moving to a fully integrated sales and customer success organization operating under the customer engagement model that has helped fuel for growth.

In 2020 Forster reps will be selling serious decision products and serious decisions reps will be selling forrester products.

Go to market approach will enable us to deliver the full value proposition of the new Forrester by providing clients with guidance around vision strategy and execution.

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

Okay.

Thanks, very much Kelly.

I will now begin my review of Forresters financial performance for the third quarter of 2019, including a look at our financial results the balance sheet at September Thirtyth.

Our third quarter metrics and the outlook for the fourth quarter and full year 2019.

Please note that the income statement numbers on reporting our pro forma and exclude the following numbers five items.

The impact on revenue from the acquisition related fair value adjustments to deferred revenue.