Q2 2021 Forrester Research Inc Earnings Call
[music].
Good afternoon, and thank you for joining today's call with me today.
They are George colony for you as chairman.
Chairman of the board and CEO and Carrie Johnson for his Theres, Chief Research Officer, and Scott and Art for interim Chief Financial Officer, and Treasurer, George will open up the call Carrie will follow George to provide a profit update and Scott will discuss our financials and we'll then open the call to.
For Q&A Kelley Hippler force their chief sales officer will be joining the Q&A portion of the call. A replay of this call will be available until August 28, 2021, and can be accessed by dialing 858592056 or 4 zero for 537.3.
For zero 6 please reference the conference I'd 7 take shape for 089.
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 $19.95 words, such as expects believes anticipates.
States 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 and and.
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.
And 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 a company undertakes no obligation to update publicly any forward looking statements whether as a result of new information future events or otherwise I will now hand the call over.
George Colony.
Welcome to Forrester is 2021 Q2 investor call.
Carrie Johnson, and Forrester, Chief Research and product Officer, and Scott Gerard Forrester as interim CFO.
The 3 of US will give brief remarks, we will then be joined by Kelley Hippler Forrester as Chief sales officer and the for US will then take.
Take your questions.
The momentum of the last 3 quarters continued into Q2.
And the second quarter contract value grew 26 million to $320 million.
And 9% year over year growth rate.
Revenue accelerated across research and consulting and events.
We have generated $70 million of cash and the first half of 2021 and that's more than the company is produced and any previous full year.
We earned <unk> 66, and the quarter.
And the top end of guidance by <unk> and revenue grew 13% to $128.7 million exceeding the top end of our guidance.
Our client accounts wallet retention and client retention all showed strong growth as we continue to wind back clients lost during the pandemic.
As a result of our performance in Q2 and the first half of the year, we are raising guidance for the second time this year and Scott will go into more detail in his financial update.
Forrester is building and economic model, which will drive shareholder value.
In this model we are 1 increasing.
And contract value.
Which to generate more cash, which 3 we then invest and sales product and acquisitions.
Improving our go to market structure and products, we will grow our contract value repeating the cycle and driving the model forward.
Now several factors are contributing to.
And the growth of CV.
Client retention rates are increasing moving up to 77% for the quarter Thats, our third consecutive quarter of increase.
Wallet retention and moved to 96% 7 points over Q1 of this year.
New business showed strong growth and the quarter, we now.
2940 clients and that's up 280 clients year over year.
And finally price increases set in January of this year are being realized.
So CV growth is contributing to the strong cash generation and the first half of 2021more.
CV equals more cash.
We deployed some of that cash to increase training and our sales force in the second quarter.
And it will fund the expansion of the sales force and the second half of the year preparing the company for the 'twenty 'twenty 2 plan.
Additionally, we've increased investments in marketing.
Now have and extending our demand waterfall advertising spend and client experience programs.
Our cash is also being deployed to improve our CV products and to launch new CV products.
Forrester research organization double down and producing content to help companies advance.
And on their customer obsessed journey and this is all the more important as the pandemic accelerated the demands of consumers.
He reports like the state of customer obsession help our clients understand their current state and provide best practices.
We've also produced new frameworks competitive benchmarks and models.
<unk> sales leaders and their teams execute on their vision with a number of critical reports such as the trust imperative.
Miss your anywhere work opportunity and hot desks or ice cold employee experiences.
And <unk> summit in May we debuted our next generation <unk> revenue waterfall, which.
Which helps firms accelerate opportunities and revenue in their sales pipelines.
We're using our cash to launch Forrester decisions.
As I explained on the Q1 call. This new portfolio of 15 research services will serve functional leaders and their teams.
It brings the.
Best of Forrester as vision and strategy research together with serious decisions operational research.
And our clients what 1 research source that can help them see the future and execute their strategy and they want 1 source for understanding our technology and business, our best combined and connected.
We have spent more than a year.
And we're working with our clients to design and build Forrester decisions.
It will become our flagship research product over the next 2 years as clients upgrade from the legacy Forrester and Sirius decisions portfolios.
This new product will enable us to push wider and deeper within our client accounts and become stickier, which will lead to higher.
Higher wallet retention.
There's a lot of excitement and the company and and our client base around the launch of this new TV product and Terry Johnson will go into more details and a few moments.
We are also investing in other CV business feedback now our startup real time customer experience measurement.
<unk> and operations solutions.
The 5 primary markets for this technology are retail.
<unk> infrastructure, mainly airports.
Headquarters and health care.
We are currently installed and 70 airports worldwide, including New York Kennedy and the airports of Paris Geneva Malone.
And Rome.
We are currently rolling out our cutting edge touchless devices, and we're piloting feedback now factors and the open platform, which combines real time CX data with other data sources, such as weather traffic flight delays and foot traffic.
Feedback now factors will deploy AI technology.
Milan and enabled clients to predict CX problems before they happen.
The final use of cash is acquisitions.
And we have no news to report today I can say that the company remains aggressive and active on the M&A front with multiple targets on our radar.
Acquisitions are focused in 3 areas.
<unk> new contract value products as with feedback now.
Improved geographical coverage as with springboard research and Asia.
And the ability to serve more personas within large companies as with serious decisions.
While our CV growth engine and accelerating our non TV businesses consulting and events are also.
Okay.
These businesses are critical to CV growth price, the consult with Forrester, our 15% more likely to renew the CV contracts.
And prospects for the tender events convert to become clients at 14% higher rates.
Forrester consulting organization posted an exceptional.
Driver with 22% growth year over year.
We continue to see the global reach of our practice expanding with our international markets posting their highest bookings quarter ever.
Among the exciting new engagements or a 5 year deal with a global services firm to conduct a longitudinal market study.
Core China.
And a contract for the European pharmaceutical firm to lead a full scale CX transformation, including work streams across CX marketing and technology.
And Q2, we saw continued strong demand for our content marketing programs, which drive lead generation for tech companies.
Study and this services expanded rapidly rapidly during the pandemic is BTB technology providers have sought and new marketing channels to replace events and face to face sales meetings.
Turning now to our events business, we held 3 virtual events in Q2, BTB Summit, North America CX to Asia Pacific.
Yes, North America.
The BTB summit and CF North America are the company's 2 largest events of the year.
Well the 3 events for virtual both sponsorship and attendance grew across the entire events portfolio.
Growth and sponsorship is an important bellwether for the overall health of our events business.
Sponsors are now more comfortable and the virtual setting and theyre prepared to spend marketing dollars to connect and prospects digitally and this is a good harbinger for a hybrid events in Q4 and also in 2022.
DDB summit revenue grew 32% year over year, and both sponsorship and attendance showed strong performance.
And with our audience growing by 40%.
Now before turning the call over to Kerry I wanted to discuss our commitment to advancing our environmental social and governance goals.
And the environmental front, we continue to manage our new office locations with recycled demolition materials and recycled build outs and furniture.
Well not all of our locations worldwide are LEED certified we are managing to the highest standards attainable.
And the locations.
We are also looking to operate with low impact and as an example, our new our new anywhere work policies will take more commuters off the road and out of their cotwo producing vehicles.
And for them and socially we continue to move forward, especially on the diversity and inclusion front.
As a research company. It is essential that we tap into many viewpoints and backgrounds and the quality of our work depends on a broad and full view of society business sellers and buyers.
We recently completed the DNI assessment across our global offices to understand where.
Or we should focus our work.
Over the next few years, our key priority areas to advanced Eni include increasing represent representation across race ethnicity, gender sexual orientation age and ability as well as engaging employees through inclusion and training.
We can and will do more on all of the ESG.
Vehicles fronts.
As mentioned during our Q1 call we updated our website, where you can find more detail unfortunate ESG work.
I'll conclude my remarks by saying that this is a very exciting time at Forrester.
Our CV growth engine is coming up to speed.
Our financial performance is solid.
S. G are increasing guidance for the year and we are launching a new core research product and will bring unprecedented value to our clients.
I am very proud of what the people of Forrester have accomplished over the last 18 months. Despite the challenges of the pandemic.
And remained focus on clients they've stayed bold and on the offense.
They've used technology to collaborate and create powerful teams and they are innovative and stayed agile.
This has truly been our finest hour.
And with that I'll turn the call over to Carrie Johnson, and Forrester Chief Research and product Officer Terry.
Thank you George.
Im excited today to share.
For the incredible value that our new product portfolio Forrester decision will deliver to clients and.
And then how it will accelerate our ability to deliver double digit CV growth for Forrester.
Forrester decisions is designed for our customers and by our customers.
Following the acquisition of serious.
These decisions.
We spoke with hundreds of Forrester and Sirius clients.
What we heard is that they wanted a simpler way of buying from and engaging with us and they chart their paths to customer obsession.
As George mentioned, our clients want 1 product that brings together the vision research for.
Forrester and the execution framework a serious as.
As well as the valuable elements for Forrester as other products like analytics and certification.
These conversations led to the creation of Forrester decisions and entirely new unified product offering.
Forrester decisions as a portfolio.
Of 15 standardized research services tailored TD, most critical priorities of senior leaders and their teams and technology marketing customer experience sales and product functions.
With each Forrester decision service customers get access to our bold vision.
<unk> research and <unk>.
Curated tools and frameworks and then extended time with our analysts to apply research to their context.
The Forrester decisions services are packed with new bold calls on the future.
Frameworks and models to run functions and also brand new.
Benchmarking data.
And we didn't stop there we're also launching and entirely new digital platform for all of Forrester as customers.
That will transform their ability to get personalized insights and increased speed to value from us.
No other research firm delivery.
Deliveries this combination of vision strategy and execution together in this way.
The product and the platform will save our clients' time money and empower them and their teams to deliver results.
We believe this will transform the dynamics of Forrester CV business and propel.
Appel RCV growth and 3 important ways.
1 pipeline velocity.
The Forrester decisions product will be significantly easier to both buy and sell.
By tailoring each service to our key target audiences and their priorities our sales teams can more quickly direct.
Customers to the right product for them, resulting in higher conversion rates and lifetime.
Number 2 higher wallet retention.
Forrester decisions frameworks and tools make it a sticky research product.
Our clients will run on and Forrester and it'll be very difficult to unplug. These services.
Correct. The availability of 15 services gives our account teams a clear roadmap for cross sell growth within existing accounts.
And then number 3 expansion of multi year deals.
The nature of the Forrester decisions product and its value of Forrester being by the side of our clients to execute.
Acute their most important priorities will result in longer term client contracts.
Priorities are not a single year commitment for achievement.
And the Forrester sales team will lead with multi year deals to ensure that we are able to deliver meaningful outcomes for our clients and their organizations.
Forrester is aligned across all product research sales and technology and marketing to deliver on Forrester decisions.
We've created and are delivering and forrester decisions to the market with record levels of both speed and conviction.
Our sales teams are excited to sell Forrester decisions.
And they are already receiving very strong indicators of client interest.
I'm grateful to the Forrester teams that have spent the last 18 months working tirelessly to create the future for Forrester for our clients and to set a new model for best in class and the research industry.
And of course to the customers that have left their time to this effort as well.
We have put customers and our brand promise to be by your side and on your side at the center of this product design and experience delivery, creating limitless opportunity for Forrester is growth and success.
Now I'll turn the call over to Scott.
Thanks Carey.
I'll now review for <unk> financial performance for the second quarter.
Quarterly metrics and our guidance for the third quarter and full year 2021.
Please note that the income statement figures. We review on this call are non-GAAP results, which we refer to as adjusted results we.
We have provided a reconciliation of our GAAP results.
<unk> to our adjusted results and our press release that we issued today.
As George mentioned, we had a great quarter with CV growth of 9% and.
And we delivered revenue operating margin and earnings per share that exceeded the upper end of our guidance.
Revenue growth was strong versus Q2 of last year with overall revenue.
13% driven by strong revenue increases across research, which is our CV business consulting and events.
Currency rates improved our revenue growth by about 2 percentage points compared to the prior year.
We continue to see momentum and the business with demand for our research services, showing and the 9% CV.
Revenues and consulting revenues outperforming expectations and the very successful execution of our 2 flagship events the b to B summit and CX North America during the quarter.
We continue to generate significant cash flow with operating cash flow of $70 million for the first 6 months of 2021 being a record.
The growth period and forced his history and.
And we used $2.7 million of this cash to start buying our shares during the quarter.
Overall, we have seen the momentum and the business continue and the second quarter and are confident and our performance for the remainder of the year, resulting in us raising guidance for revenue operating margin and EPS.
And which I will describe in a few minutes.
And as we discussed on our last call. We are reporting a new set of metrics. This year and have published these metrics going back to the first quarter of 2019 on the Investor Relations section of our website.
And let me spend a few minutes explaining these metrics with the overall concept being that our metrics.
And now based on our contract value products.
So contract value or C. V. This is the measure of the annualized value of our recurring research products.
This is predominantly made up of a subscription research research products.
We also include reprints reprint products and CV as these products include a subscription component.
<unk> are used throughout the year by our clients and are typically renewed.
We show the CV metric on a currency neutral basis.
Okay.
Wallet retention measures how much of a C V that we retained from the prior year, which includes gains from expanding the relationship with clients that we retained and losses from client attrition.
And client count includes all clients that purchase a CD product and the vast majority of these clients heavy subscription and research relationship with us.
Turning to the results for the quarter research revenues were up 8% compared to the second quarter of 2020, CV growth was 9% compared to Q2 of 2020.
And we have seen 4 straight quarters of sequential growth and C V with growth and CV accelerating during the second quarter.
Similar to C V. We have experienced a sequential upward trend and wallet and client retention from a low in Q3 of last year and client count has increased steadily from Q3 of last year.
Consulting revenue was the primary driver of our revenue beat this quarter with 22% growth compared to the prior year with strength and both of our content marketing and strategy offerings.
This represents 3 consecutive quarters of double digit growth and consulting revenue.
Event revenue increased 33 per cent compared.
And quarter of 2020 turn and driven by increased sponsorship revenue and sponsors continue to see the value and our virtual events.
Operating expenses for the second quarter increased by 15%.
And driven by the reinstatement of annual bonuses compared to the second quarter of 2020 and merit increases.
The SEC higher professional services.
Ending head count was down 7% compared to the second quarter of 2020.
Operating income increased by 3% to $19.7 million or 15, 3% of revenue and the current quarter compared to $19.2 million or 16, 9% of revenue.
And the second quarter of 2020.
Interest expense for the quarter was $1.1 million as compared to $1.3 million and the second quarter of 2020 due to reduced debt levels.
And net income was up 4% and EPS increased by 2% compared to Q2 of last year with net income coming in at $12.7.
7 million and earnings per share at <unk>, 66 cents and the current quarter compared with net income of $12.2 million net and earnings per share of <unk> 65.
And the second quarter of 2020.
Cash flow from operating activities was $29.5 million for the quarter and $70.1 million for the first 6 months of 2000.
1.7.
7 and $70.1 million of cash flow represents an increase of 180% from the prior period.
And Capex was $3.8 million for the quarter and $5.2 million for the 6 months and we ended the quarter with over $146 million of cash on the balance sheet.
Thousand 20 memory, we had a great quarter with CV growth revenue and earnings that exceeded our expectations.
Our client count and retention metrics continue to trend upwards and our cash flow was at a record level.
In addition, we began to use that cash to buyback our stock and plan to continue to buy opportunistically as the year progresses.
So and sell our products and engagement model are resonating with our clients and the introduction of Forrester decisions should deepen that relationship lead to further increases and wallet retention and will be a key driver and achieving our goal of sustained double digit CV growth.
While there are headwinds that we face with the pandemic attrition.
And a difficult hiring environment, we felt confident and achieving our goals for 2021 and beyond.
And in regards to our 2021 guidance first a few words on our second half events.
Q3 is a light events quarter for us and those events are planned to be virtual.
The majority of our Q.
For events are being planned for a hybrid experience, which will be a mix of in person and virtual experiences and this of course will be subject to the local conditions once we get closer to those events.
And we have raised our full year revenue guidance by $12 million or 3% and full year EPS guidance.
Tricia and 17 cents or <unk> 10 per cent.
We have provided guidance on a GAAP basis and listed the items excluded from our adjusted guidance and our press release and 8-K filed today.
Our third quarter guidance on an adjusted basis is as follows.
Revenues of $114 million to $118 million.
<unk> operating margin of 6% to 8%.
And effective tax rate of 31 per cent and diluted earnings per share of 22 to 28 cents.
Our full year 2021 guidance on an adjusted basis is as follows.
Revenues of $485 million to $495 million.
Operating.
By surgeon of 11% to 12% and.
And effective tax rate of 31% and diluted earnings per share of $1.75 to $1.85.
And I am so proud of the work that all of our employees have done throughout the pandemic.
From passionately, serving our clients to be and great teammates.
Operating margin in each other and.
And developing and launching Forrester decisions.
And in achieving the financial performance that we reported today.
Thank you very much for joining us and I will now turn the call over to the operator for the Q&A portion of the call.
Thank you.
Since it was a reminder, that gate question and you will need to press star 1 on your telephone to withdraw.
My other question price per pound Keith please standby with deposits.
And hey roster.
Our first question comes from Andrew Nicholas with William Blair. You May proceed with your question.
Hi, Thank you for taking my questions and good afternoon.
On the first question I had was just with respect to Q results looking back.
Sounds like consulting and domain area that.
Surprised to the upside for you, but if you could maybe break that down a little bit further and to where you see strength, specifically within that that line item and and maybe clarify if I may.
And you and do you in terms and what the upside was and the second quarter specifically.
Hey, Andrew This is Scott. Thanks for the question Yeah, you're right. We did surprise on the upside with consulting and what was good this quarter as we saw strength in both the content marketing, which has been strong for us for a while and we also saw some.
And that's really strength with the strategy consulting and consulting.
And that we have so as good kind of across the board from a geographic standpoint, and also from and offering standpoint.
Got it. Thank you and then maybe as a follow up to that.
And looking at third.
Some nicer expectations I guess I'm.
Given what was really really strong CV growth and at least relative to what I had expected I guess I'm curious what.
And what your expectations are for consulting and.
And events and the third quarter because I.
And I guess I'm, just surprised that day.
And third quarter revenue guidance, and a little bit higher given.
The sequential increase or the sequential step up and television. So if there's any other factors that you could kind of call out and I don't know if that is it a sequential step down and consulting and given the strong corridor and just.
Just breaking that down 1.1 step further would be helpful.
Quarter sure Yeah, when you think about the revenue streams.
Events as I was saying for light quarter for us so minimal revenue. There. There are 2 events are 2 of our smaller events for that revenue certainly steps down significantly from Q2.
And for consulting and during the summer months, it's always 1 of the lower quarters of revenue for US. So you were saying.
Potential stepped down and consulting revenue.
And then on the research line Yeah. The CV growth is providing sequential revenue growth in the third quarter, but if you recall a portion of our research revenue growth comes from the event entitlement and a subscription product so that steps down because there are fewer.
Our events and the third quarter.
Got it that makes sense and then maybe if I can just squeeze 1 more and on capital allocation plans.
Like you you were a little bit more active on the share repurchase front and you had been and some time could you help us size not only what the repurchase activity was in the quarter because I missed that.
You know peso is how big of a percentage or.
A portion of your capital allocation plan that will become.
Going forward that would be great. Thank you Dan.
Sure, So we repurchased $2.7 million in the quarter and as we said on the call we plan to.
Be opportunistic with future buys you know that being said, we had our board meeting yesterday, and there's still a fair amount of discussion on future capital allocation.
But.
You know there is a commitment to a certain level of repurchases going forward again being opportunistic with stock price and so no firm.
That commitment that we still have you know.
Over $50 million left on our repurchase authorization. So we have capacity there and we have capacity with our with our covenants. So we have a few options for the second half and we need to look at that strategically based upon what we want to do from an acquisition standpoint, or a debt paydown standpoint, or you know kind of level of future purchases.
Purchases.
And Andrew Andrew George here.
We think we're undervalued as a company.
So we are going to be as Scott said opportunistic and buybacks. That's 1.2 are the first place capital goes and our companies to build the business, especially to build the CV growth engine.
So priority 1 will be.
<unk> internal investment.
Thank you.
Thank you.
Thank you and our next question comes from Vincent Colicchio with Barrington Research you May proceed with your question.
Okay.
Congrats on a good quarter guys.
Uh huh.
We will pay a day.
Bookings are on the CV side improve.
As the quarter per.
And just trying to get a sense for momentum and then as the sales pipeline on the CV side higher now than it was at the beginning of the quarter.
Thanks, Vincent this is Kelly hippler her and so in terms of.
For you for momentum, we actually had a strong quarter consistently across all 3 months of the quarter. So basically we started seeing momentum pick up last December and it's really continue to increase considerably and led to the results. We saw in Q2 and while we.
Our early in the quarter, we're pleased with what we're.
Bookings from our Q3 pipeline perspective, especially with the launch of Forrester decisions. We do believe that that's going to lead to strong pipeline growth and the quarter off for this quarter as well as Q4.
And George you had mentioned that some of the new clients that some of your old clients returned and the quarter.
How does that break down in terms of the client growth.
And the return of old clients versus new clients.
Yes.
And I'll give it and precise answer and then Kelly will give you the real answer.
And it's really half Forrester and a half serious decisions.
Probably a little bit more.
And the serious decision side.
And with that I'll give it back and Kelly.
Great. Thank you George So we did have a win back programs that are ongoing are with both of our selling motions, our premier user organization as well as our core selling organization. So definitely split 50.50 on the result side, there, but what's great Vincent.
We're seeing some of the larger retailers and automotive companies that we lost last year due to the pandemic coming back now that their businesses are starting to come back which is very encouraging and that premier user program already hit its target that we gave them for the year. So we doubled it for the second half and I think as momentum continues.
And just to pick up and with the new Forrester decisions offering and will continue to see more of our clients looking to reengage with us.
It looks like you're being impacted by the tight labor market I think you I think you mentioned.
Will that change your and your initial goal for the salespeople you hope to have in place.
The end of the year and.
How how do you think wage inflation is is is gonna be meaningful here and the second half.
[noise], well I would save and to you know similar to other companies. We are facing some talent acquisition acquisition and retention challenges, but we are hiring very aggressively and actively working to backfill positions for so that we can be ramped up and ready to go for next year 1 of the things that we've been doing is I'm expanding the geography.
Within which we are seeking our employee population, which is helping to keep wages and line with our expectations right. Now we did expect there to be a spike and attrition just based on pent up demand last year. So nothing that will impact our ability to get to our targets for 2021, what we do on and actively continue to hire so.
We can hit or 2022 targets, but this is also getting us to continue to think about and invest in technologies that can help our existing sales force to be more productive as well. So I think as you know and we sort of have done and parallel investing in the sales organization, but also building the infrastructure around our existing folks to help them to be more.
<unk> and and make it easier for them to get to their targets and will continue to take that balanced approach as we head into 2022 as well.
Sure I'll.
I'll go back and the queue again, and a nice quota.
Thank you and visit and visit with a little bit more and the last question and you have to them. Just 1 is at our tech has been fantastic for people working anywhere.
And so that the neighborhood and until he said the W. At the higher anywhere and also we're going into a flex work.
Playing for reflects work within 3 days.
Flex and 2 days and the office. So a lot of flexibility there was helping us and the label mortgage but this is a crazy labor market.
Thanks for the questions.
Cool.
Thank you and I as a reminder to ask a question and you'll need to crush for 1 on your telephone.
For you stay involved with from all the queue and they're all Sir.
And thank you I'm not showing any further questions at this time I would now like to turn the call back over to Scott's and hard for any for the remarks.
Thank you.
I want to thank everyone for joining us from a call today and we look forward to updating everyone on our progress during our third quarter call. Thank you.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating and then I'll disconnect.
[music].
Uh-huh.
Uh-huh.
[music].
[music].
Yeah.
[music].
[music].
[music].
Good afternoon, and thank you for joining in today's call with me today are George Colony Force. There is chairman of the board and CEO, Terry Johnson Force Theres, Chief Research Officer, and Scott Chouinard, Forrester interim Chief Financial Officer, and Treasurer George.
And we'll open.
[music] call Carrie will follow George to provide a product update and then Scott will discuss our financials. We'll then open the call to Q&A Kelly.
Kelley Hippler Force Theres, Chief sales officer will be joining the Q&A portion of the call. A replay of this call will be available until August 28, 2021, and can be accessed by dialing 8.
And up to 58592056 or 4 zero for 537.3 for zero 6 please reference the conference I'd 7 and 6.8 for 089.
Before we begin I'd like to remind you that this call will contain forward looking statements within the meaning.
<unk> for 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 and.
And involve risks and uncertainties.
Meaning that could cause future activities and results of operations to be materially different from those set for any 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 a company undertakes no obligation to update publicly.
Any forward looking statements, whether as a result of new information future events or otherwise I will now hand, the call over to George colony.
Welcome to Forrester is 'twenty, 'twenty, 1 and Q2 investor call.
And we were with Terry Johnson, and Fortunately cheap research and product officer, and Scott Gerard Forrester as interim CFO.
And the 3 of US will give brief remarks, we will then be joined by Kelley Hippler Forrester Chief sales officer and the for US will then take your questions.
The momentum of the last 3 quarters continued into Q2.
Forrester is focused on growing contract value and its customer obsessed content is producing strong financial performance.
And the second quarter contract value grew $26 million for $320 million and 9% year over year growth rates.
Revenue accelerated across research consulting and events.
We have generated $70 million of cash and the first half of 2021 and that's more than the company has produced and any.
Previous full year.
We earned <unk> 66, and the quarter, beating the top end of guidance by 8 cents and revenue grew 13% to $128.7 million exceeding the top end of our guidance.
Our client accounts wallet retention and client retention.
All showed strong growth as we continue to win back clients lost during the pandemic.
As a result of our performance in Q2 and the first half of the year, we are raising guidance for the second time this year and Scott will go into more detail and his financial update.
Forrester is building and economic model.
Model, which will drive shareholder value.
And this model, we are 1 increasing contract value.
Which to generate more cash, which 3 we then invest and sales products and acquisitions.
Improving our go to market structure and products will grow our contract.
Racked value repeating the cycle and driving the model forward.
Now for several factors are contributing to the growth of CV.
Client retention rates are increasing moving up to 77% for the quarter Thats, our third consecutive quarter of increase.
Wallet retention moved to 96% 7.
Over Q1 of this year.
New business showed strong growth and the quarter. We now have 2940 clients and that's up 280 clients year over year.
And finally price increases set in January of this year are being realized.
So CV growth is contributing to the strong cash generation and the first half of 2021 more CV equals more cash.
We deployed some of that cash to increase training and our sales force in the second quarter.
And it will fund the expansion of the sales force and the second half for the year preparing the company for.
<unk> 'twenty 2 plan.
Additionally, we've increased investments and marketing.
Extending our demand waterfall advertising spend and client experience programs.
Our cash is also being deployed to improve our CV products and to launch new television.
For the <unk> research organization doubled down and producing content to other companies advance on their customer obsessed journey and this is all the more important as the pandemic accelerated the demands of consumers.
He reports like the state of customer obsession help our clients understand their current state and provide best.
<unk> practices.
We've also produced new frameworks competitive benchmarks and models to help leaders and their teams execute on their vision with a number of critical reports such as the trust imperative don't Miss your anywhere work opportunity.
And hot desks or ice cold employee experiences.
Profit BTB summit in May we debuted our next generation <unk> revenue waterfall, which helps firms accelerate opportunities and revenue and their sales pipelines.
We are using our cash to launch Forrester decisions.
As I explained on the Q1 call this new portfolio of 15.
And services will serve functional leaders and their teams.
It brings the best of Forrester as vision and strategy research together with serious decisions operational research.
And our clients want 1 research source that can help them see the future and execute their strategy and they want 1 source.
For understanding our technology and business, our best combined and connected.
We have spent more than a year working with our clients to design and build that Forrester decisions.
It will become our flagship research product over the next 2 years as clients upgrade from the legacy Forrester and Sirius decisions portfolios.
This.
New product will enable us to push wider and deeper within our client accounts and become stickier and which will lead to higher wallet retention.
There's a lot of excitement and the company and and our client base around the launch of this new TV product and Terry Johnson will go into more details and a few moments.
And so investing in and other CV business feedback now our startup real time customer experience measurement and operations solutions.
The 5 primary markets for this technology are retail.
Fatality infrastructure, mainly airports.
Quarters and health care.
We are currently installed and 7.
We are all airports worldwide, including New York, Kennedy and the airports of Paris, Geneva, Milan and Rome.
We are currently rolling out our cutting edge touchless devices, and we're piloting feedback now factors and open platform, which combines real time CX data with other data sources, such as weather traffic flight delays.
<unk> traffic.
Feedback now factors will deploy AI technology to enable clients to predict CX problems before they happen.
And finally use of cash is acquisitions.
And they have no news to report today I can say that the company remains aggressive and active on the M&A.
And put on.
With multiple targets on our radar.
Acquisitions are focused in 3 areas new contract value products as with feedback now.
Improved geographical coverage as with springboard research and Asia.
And the ability to serve more personas within large companies as with serious decisions.
M&A from our CV growth engine is accelerating our non TV businesses consulting and events are also driving.
These businesses are critical to CV growth twice, the consult with Forrester, our 15% more likely to renew their CD contracts.
And prospects and a tender events convert to become clients at 14%.
Higher rates.
Forrester consulting organization posted an exceptional quarter with 22% growth year over year.
We continue to see the global reach of our practice expanding with our international markets posting their highest bookings quarter ever.
Among the exciting new.
The engagements are a 5 year deal with a global services firm to conduct a longitudinal market study and China.
And a contract with the European pharmaceutical firm to lead a full scale CX transformation, including work streams across CX marketing and technology.
And Q2, we saw continued.
Continued strong demand for our content marketing programs, which drive lead generation for tech companies.
This services expanded rapidly rapidly during the pandemic is BTB technology providers have sought new marketing channels to replace events and face to face sales meetings.
Turning now to our events business.
And we held 3 virtual events in Q2, DDB Summit North America <unk>.
The Asia Pacific and CX North America.
The <unk> summit and CX North America are the company's 2 largest events of the year.
Well the 3 events for virtual both sponsorship and attendance grew across the entire.
Events portfolio.
Growth and sponsorship is an important bellwether for the overall health of our events business sponsors are now more comfortable and the virtual setting and theyre prepared to spend marketing dollars to connect and prospects digitally.
This is a good harbinger for a hybrid events in Q4 and also in 2022.
It would be somewhat revenue grew 32% year over year and both sponsorship and attendance showed strong performance with our audience growing by 40%.
Now before turning the call over to Kerry I wanted to discuss our commitment to advancing our environmental social and governance goals.
And the environmental front, we continue to manage our new office locations with recycled demolition materials and recycled build outs and furniture.
While not all of our locations worldwide are LEED certified we are managing to the highest standards attainable and given the locations.
We are also looking to operate with low impact and as an example, our new.
New our new anywhere work policies will take more commuters off the road and out of their producing vehicles.
Socially we continue to move forward, especially on the diversity and inclusion front.
As a research company. It is essential that we tap into many viewpoints and backgrounds and the quality of our work depends on abroad.
Broad and full view of society business sellers and buyers.
We recently completed a DNI assessment across our global offices to understand where we should focus our work.
Over the next few years, our key priority areas to advanced Eni include increasing represent representation across race ethnicity gender.
<unk> sexual orientation, and age and ability as well as engaging employees through inclusion and training.
We can and will do more on all of the ESG fronts.
As mentioned during our Q1 call we updated our website, where you can find more detail. Unfortunately ESG work.
I.
I'll conclude my remarks by saying that this is a very exciting time at Forrester.
Our CV growth engine is coming up to speed.
Our financial performance is solid.
We are increasing guidance for the year and we are launching a new core research product and will bring unprecedented value to our clients.
I am very proud of what the people of Forrester.
We have accomplished over the last 18 months, despite the challenges of the pandemic.
They remained focused on clients they've stayed bold and on the offense.
We use technology to collaborate and create powerful teams and we have innovated and stayed agile.
This has truly been our finest hour.
And with that I'll turn the call over to Carrie Johnson, and Forrester Chief Research and product Officer Terry.
Thank you George.
I'm excited today to share the incredible value that our new products portfolio and Forrester decision will deliver to clients.
And then how it will accelerate our ability to deliver double digit CV growth for Forrester.
Yeah.
Forrester decisions is designed for our customers and by our customers.
Following the acquisition of Sirius decisions.
We spoke with hundreds of Forrester and serious clients.
What we heard is that they wanted a simpler way of buying from and engaging with us.
Mr and they chart their paths to customer obsession.
As George mentioned, our clients want 1 product that brings together the vision research and Forrester and the execution and frameworks of serious as.
As well as the valuable elements for Forrester as other products like analytics and certification.
These conversations.
And led to the creation of Forrester decisions and entirely new unified product offering.
Forrester decisions as a portfolio of 15 standardized research services tailored TD, most critical priorities of senior leaders and their teams and technology marketing customer.
Customer experience sales and product functions.
With each Forrester decision service customers get access to our bold vision research and <unk>.
Curated tools and frameworks and.
And then extended time with our analysts to apply and research to their context.
The Forrester.
<unk> services are packed with new bold calls on the future frame.
Frameworks and models to run functions and also brand new benchmarking data.
And we didn't stop there we're also launching and entirely new digital platform for all of Forrester as customers that will transform their.
Third a study to get personalized insights and increased speed to value from us.
No other research firm deliveries for this combination of vision strategy and execution together in this way.
The product and the platform will save our clients' time money.
And bill empower them and their teams to deliver results.
We believe this will transform the dynamics of Forrester CV business and propel our CV growth and 3 important ways.
1 pipeline velocity.
The Forrester decisions product will be significantly easier to both buy.
I am so.
By tailoring each service to our key target audiences and their priorities. Our sales teams can more quickly direct customers to the right products for them, resulting in higher conversion rates and lifetime.
Number 2 higher wallet retention.
Forrester decisions.
And frameworks and tools make it a sticky research product.
Our clients will run on Forrester and it'll be very difficult to unplug. These services.
The availability of 15 services gives our account teams a clear roadmap for cross sell growth within existing accounts.
And then number.
Expansion of multi year deals.
The nature of the Forrester decisions product and its value of Forrester being by the side of our clients to execute their most important priorities will result in longer term client contracts.
Priorities are not a single year commitment for achievement and the Forrester.
Their sales team will lead with multi year deals to ensure that we are able to deliver meaningful outcomes for our clients and their organizations.
Forrester is aligned across all product research sales and technology and marketing to deliver on Forrester decisions.
We've created.
3 and are delivering and forrester decisions to the market with record levels of both speed and conviction.
Our sales teams are excited to sell Forrester decisions and they are already receiving very strong indicators of client interest.
I'm grateful to the Forrester teams that I've spent the last 18.
18 months working tirelessly to create the future for Forrester for our clients and to set a new model for best in class and the research industry and of course to the customers that have lent their time to this effort as well.
We have put customers and our brand promise to be by your side and on your side at the center of this product.
Create and experience delivery, creating limitless opportunity for Forrester is growth and success.
I'll now turn the call over to Scott.
Thanks, Carrie I'll now review for <unk> financial performance for the second quarter, our quarterly metrics and our guidance for the third quarter and full year 2021.
Please.
Design and that the income statement figures. We review on this call are non-GAAP results, which we refer to as adjusted results.
We have provided a reconciliation of our GAAP results to our adjusted results and our press release that we issued today.
As George mentioned, we had a great quarter with CV growth of 9%.
Note and we delivered revenue operating margin and earnings per share that exceeded the upper end of our guidance.
Revenue growth was strong versus Q2 of last year.
Overall revenue is up 13% driven by strong revenue increases across research, which is our CV business consulting and events.
Currency rates improved.
And our growth by about 2 percentage points compared to the prior year.
We continue to see momentum and the business with demand for our research services, showing and the 9% CV growth consulting revenues outperforming expectations and the very successful execution of our 2 flagship events, the b to B summit and CX North.
Our revenue during the quarter.
We continue to generate significant cash flow with operating cash flow of $70 million for the first 6 months of 2021 being a record for any period enforced its history and.
And we used $2.7 million of this cash to start buying our shares during the quarter.
Overall, we have seen the momentum.
And the business continue and the second quarter and are confident and our performance for the remainder of the year.
<unk> and are raising guidance for revenue operating margin and EPS, which I will describe in a few minutes.
And as we discussed on our last call. We are reporting a new set of metrics. This year and have published these metrics going back.
North America first quarter of 2019 on the Investor Relations section of our website and.
Let me spend a few minutes explaining these metrics with the overall concept being that our metrics and now based on our contract value products.
So contract value or C. V. This is the measure of the annualized value of our recurring research products.
This is predominantly made up of a subscription research research products.
We also include reprints.
Print products and CV as these products include a subscription component are used throughout the year by our clients and are typically renewed.
We show the CV metric on a currency neutral basis.
Wallet retention.
And how much of a C V that we retained from the prior year, which includes gains from expanding the relationship with clients that we retained and losses from client attrition.
And client count includes all clients that purchase of C. D product and the vast majority of these clients heavy subscription and research relationship with us.
Turning to the results for the quarter research revenues were up 8% compared to the second quarter of 2020, CV growth was 9% compared to Q2 of 2020, and we have seen 4 straight quarters of sequential growth and C V with growth and C V accelerating during the second quarter.
Similar to C V. We.
And with the sequential upward trend and wallet and client retention from a low in Q3 of last year and client count has increased steadily from Q3 of last year.
Consulting revenue was the primary driver of our revenue beat this quarter with 22% growth compared to the prior year with strength in both our content marketing.
And and strategy offerings.
This represents 3 consecutive quarters of double digit growth and consulting revenue.
Event revenue increased 33% compared to the second quarter of 2020 turn and driven by increased sponsorship revenue and sponsors continue to see the value and our virtual events.
Operating expenses for the second quarter increased by 15% driven driven by the reinstatement of annual bonuses compared to the second quarter of 2020, and merit increases and higher professional services.
Ending head count was down 7% compared to the second quarter of 2020.
Operating income increased by.
By 3% to $19.7 million or 15, 3% of revenue and the current quarter.
And paired to $19.2 million or 16, 9% of revenue and the second quarter of 2020.
Interest expense for the quarter was $1.1 million as compared to $1.3 million and the second quarter of 2020 due to.
Debt levels.
And net income was up 4% and EPS increased by 2 per cent compared to Q2 of last year with net income coming in at $12.7 million and earnings per share at 66 cents and the current quarter compared with net income of $12.2 million and <unk>.
<unk> per share of <unk> 65.
And.
The second quarter of 2020.
Cash flow from operating activities was $29.5 million for the quarter and $70.1 million for the first 6 months of 2021 to 7 and $70.1 million of cash flow represents an increase of 180% from the prior period.
And Capex was.
And $3.8 million for the quarter and $5.2 million for the 6 months and we ended the quarter with over $146 million of cash on the balance sheet.
So in summary, we had a great quarter with CV growth revenue and earnings that exceeded our expectations, our client count and retention metrics continue to trend upwards.
And our cash flow was at a record level and.
In addition, we began to use that cash to buyback our stock and plan to continue to buy opportunistically as the year progresses.
Our products and engagement model are resonating with our clients and the introduction of Forrester decisions should deepen that relationship led to further increase.
<unk> and wallet retention and will be a key driver and achieving our goal of sustained double digit CV growth.
While there are headwinds that we face with the pandemic attrition and a difficult hiring environment, we felt confident in achieving our goals for 2021 and beyond.
And in regards to our 2020.
And.
First a few words on our second half events.
Q3 is a light events quarter for us and those events are planned to be virtual.
The majority of our Q4 events are being planned for a hybrid experience.
It will be a mix of in person and virtual experiences and this of course will be subject.
And to the local conditions once we get closer to those events.
And we have raised our full year revenue guidance by $12 million or 3% and full year EPS guidance by <unk> 17 or 10%.
We have provided guidance on a GAAP basis and listed the items excluded from our adjusted guidance.
And in our press release and 8-K filed today.
Our third quarter guidance on an adjusted basis is as follows.
Revenues of $114 million to $118 million.
Operating margin of 6% to 8%.
And effective tax rate of 31% and diluted earnings per share of 22 to <unk>.
And <unk>.
Our full year 2021 guidance on an adjusted basis is as follows.
Revenues of $485 million to $495 million.
Operating margin of 11% to 12% and effective tax rate of 31% and diluted earnings per share of $1.70.
And the 8 to $1.85.
And I am so proud of the work that all of our employees have done throughout the pandemic.
From passionately, serving our clients to being great teammates and supporting each other.
And developing and launching Forrester decisions and and achieving the financial performance that we reported today.
Fine. Thank you very much for joining us and I will now turn the call over to the operator for the Q&A portion of the call.
Thank you.
A question and you will need to press star 1 on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from Andrew Nicholas with William Blair. You May proceed with your question.
Hi, Thank you for taking my questions and good afternoon.
The first question I had was just with respect to <unk> yourself thinking back sounds like consulting was the main area of it.
Supply and the.
The upside for you, but if you could maybe break that down a little bit further into where you see strength, specifically within that that line item and and maybe clarify if I misheard you in terms of what the upside was and the second quarter specifically.
Hey, Andrew This is Scott Thanks for the question, Yeah, you're right we did.
Surprised on the upside with consulting and what was good this quarter as we saw strength in both the content marketing, which has been strong for us for a while and we also saw some nice strength with the strategy consulting and consulting.
Offering that we have so as good kind of across the board from a geographic standpoint, and also from and offering standpoint.
<unk> got it. Thank you and then maybe as a follow up to that.
Looking at third quarter expectations, I guess I'm.
Given and what was really really strong CV growth at least relative to what I had expected I guess I'm curious what.
And what your expectations are.
Salting them and events and the third quarter because.
Hmm.
And I guess I'm, just surprised that the third quarter revenue guide is I'm, a little bit higher given the sequential increase or the sequential step up and television so if theres any other.
Other factors that you could kind of call out and I don't know if it's a.
Sequential step down and consulting given the strong corridor and just just breaking that down 1.1 step further would be helpful.
Sure.
And you think about the revenue streams.
Events as I was saying, it's a light quarter for us so minimal revenue there. The 2 events are 2 of our smaller events for that revenue certainly steps down significantly from Q.
For him and for consulting and during the summer months, it's always 1 of the lower quarters of revenue for US. So you were seeing a potential step down and consulting revenue.
And then on the research line Yeah. The CV growth is providing sequential revenue growth in the third quarter, but if you recall.
2 of our research revenue growth comes from the event entitlement and a subscription product so that steps down because there are fewer events and the third quarter.
Got it that makes sense and then maybe if I could just squeeze 1 more and on capital allocation plans. It sounds like you you were a little bit more active on the share repurchase front and you.
You had been and some time could you help us size not only what the repurchase activity was in the quarter because I missed that but also just how big of a percentage or.
Portion of your capital allocation plans that will become a.
Going forward that would be great. Thank you Dan.
Sure, so, we repurchased $2.7 million and the quarter and as we said on the call we plan to be opportunistic with future buys.
That being said, we had our board meeting yesterday, and there's still a fair amount of discussion on future capital allocation.
And you know there is a commitment to.
And you know certain level of repurchases going forward again being opportunistic with stock price and.
So no firm commitment that we still have over $50 million left on our repurchase authorization. So we have capacity there and we have capacity with our with our covenants. So we have a few options for the second half and we need to look.
Look at that strategically based upon what we wanted to do from an acquisition standpoint, or a debt paydown and standpoint, or you know kind of level of future purchases.
And Andrew Andrew George Here, we think we're undervalued as a company.
So we are going to be as Scott said opportunistic and buybacks. That's 1.2 are the first place.
Capital goes and our company is to build the business.
And to build the CV growth engine.
So priority 1 will be will be internal investment. Thank.
Thank you.
Thank you.
Thank you and our next question comes from Vincent Colicchio with Barrington.
Research and then proceed with your question.
Okay.
Congrats on a good quarter guys.
A few for me.
And these are on the CV side improve.
As the quarter per.
And just trying to get a sense for momentum and then as the sales pipeline on the CV side higher.
And now that it was at the beginning of the quarter.
Thanks, Vincent this is Kelly hippler here and so in terms of bookings momentum and we actually had a strong quarter consistently across all 3 months of the quarter. So basically we started seeing momentum pick up last December and it's really continue to increase.
Considerably and led to the results we saw in Q2 and while we are.
Our early in the quarter, we're pleased with what we're seeing from our Q3 pipeline perspective, especially with the launch of Forrester decisions. We do believe that that's going to lead to strong pipeline growth and the quarter for this quarter as well as Q4.
And George you had mentioned that some of the new clients.
Your old clients returned and the quarter.
How does that break down in terms of the.
And the client growth.
Turning to old clients versus new clients.
Yes, I'll give it and I'll give it and precise answer and then Kelly will give it a really true.
And it's really half Forrester and a half serious decisions.
And with a probably a little bit more and serious decision side.
And with that I'll give it back and Kelly.
Great. Thank you George So we did have a win back programs that are ongoing are with both of our selling motions our premier user.
And their organization as well as our core selling organization. So definitely split 50.50 on the result side, there, but what's great Vince and as we're seeing some other larger retailers and automotive companies that we lost last year due to the pandemic coming back now that their businesses are starting to come back which is very encouraging.
And that permit.
Their user program already hit its target that we gave them for the year. So we doubled it for the second half and I think as momentum continues to pick up and with the new Forrester decisions offering and we'll continue to see more of our clients looking to reengage with us.
And it looks like you're being impacted by the tight labor market I think I think you mentioned.
And will that change your and your initial goal for the salespeople you hope to have in place by the end of the year and.
How do you think wage inflation is.
We're gonna be meaningful here and the second half.
Well I would say Vincent you know similar to other companies.
We are facing some talent acquisition acquisition and retention challenges, but we are hiring very aggressively and actively working to backfill positions for them. So that we can be ramped up and ready to go for next year..1 other things that we've been doing is expanding the geographies within which we are seeking our employee population.
And which is helping to keep wages in line with our expectations right. Now we did expect there to be a spike in attrition just based on pent up demand last year, so nothing that will impact our ability to get to our targets for 2020, 1, but we do want to actively continue to hire so that we can hit our 2022 targets, but this is also.
Also getting us to continue to think about and invest in technologies that can help our existing sales force to be more productive as well. So I think as you know and we sort of have done and parallel investing and the sales organization, but also building the infrastructure around our existing folks to help them to be more productive and to make it easier for them to get to their targets.
Continue to take that balanced approach as we head into 2020.2 as well.
And I'll go back and the queue again nice quarter. Thank.
And Vince a little bit more and the last question you really have 2 advantages 1 is it R. Tech has been fantastic for people working anywhere.
And so that's enabling us until he said.
And then we have to hire anywhere and.
And also we're going into a flex work.
Our plan reflects work, which means 3 days.
And flex and 2 days and the office. So a lot of flexibility there is helping us and the labor markets, but this is a crazy labor market.
Thanks for the questions.
Cool.
Yeah.
Thank you and as a reminder to ask a question you will need to press star 1 on your telephone.
And while we compile the Q&A roster.
Okay.
And thank you I'm not showing any further questions at this time I would now like to turn the call back over to Scott <unk> for any further.
Thanks.
Thank you.
I want to thank everyone for joining us on the call today, and we look forward to updating everyone on our progress during our third quarter call. Thank you.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.