George Colony – Chairman and Chief Executive Officer Mike Doyle – Chief Financial Officer.

Tim McHugh – William Blair Vincent Colicchio – Barrington Research Allen Klee – Sidoti & Company.

Good afternoon. Thank you for joining today's call. With me today are George Colony, Forrester's Chairman of the Board and CEO; and Mike Doyle, Forrester's Chief Financial Officer. George will open the call. And Mike Doyle will discuss the financials. We'll then open the call to Q&A.

A replay of this call will be available until March 9, 2018, and can be accessed by dialing 1-888-843-7419 or internationally, 1-630-652-3042. Please reference the passcode 5657678#. Before we begin, I'd like to remind you this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Words such as expects, believes, anticipates, intends, plans, estimates or similar expressions are intended to identify these forward-looking statements.

These statements are based on the Company's current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements.

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

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

one, to invest back into the business; two, for M&A activity; and three, returning value to shareholders through dividends and share repurchase. The new tax structure has not changed those priorities. Now while I'm on the topic of divestments, I wanted to give a brief summary of two areas of focus in 2018.

One, the real-time customer experience measurement; and two, new digital delivery of our research. In the last call, I referenced the experimental consumer app that Forrester's built called Tap. This app enables consumers to give quick feedback and ideas for improvement to locations and brands.

We have been testing and enhancing the app through Q4, primarily in the Boston market with two smaller tests in San Francisco and London. This app is the first element of the real-time customer experience platform, a multi-input facility by which companies can track and improve their customer experience in real time.

We believe that demanding customers will require companies to be continually enhancing the experiences and fixing problems on a minute-to-minute basis and we are exploring how we can launch products into this space to help companies do just that. And I will update investors on future calls on this effort.

And also by the way, you can get Tap by going to www.downloadtap.com. We will also invest in updating our products to connect to our changing clients. Through our measurement and tracking tools, we see that the behavior of our users is shifting. They are consuming our reports analytics and graphics in data in new ways.

As examples, through experimentation we have found that 60-second audio analysis on the Forrester iPhone and Android apps have four times more click through rates than a one page written brief. Forrester's podcast, which was launched midyear 2017, has quickly grown to 90,000 downloads and we will shortly go over the 100,000 mark.

In 2018, our Head of Technology Steven Peltzman will be spearheading a number of additional tests of new content forms. Forms that could potentially replace the written report, data sheets and other deliverables over the next three years.

Our goal is to make our products more accessible and valuable to our clients in a time when their habits and behavior are changing. We are already seeing success through our Forrester Research app with a notification click-through and monthly sessions doubling in 2017. A quick comment on company culture.

For the second year in a row, Forrester was on the list of Glassdoor top companies. This is important for two reasons; one, its an indication of the health of the internal culture; and two, 100% of prospective employees view Glassdoor before applying and accepting a job at the company.

So the high ranking is increasing our ability to hire the best and the brightest. We had our Q4 board meeting yesterday and our two newest board members were present, Neil Bradford and Jean Birch. Neil is the former President of Forrester U.S., who left the company in 2006 and has been the CEO of three research companies in the UK since that time.

Neil brings deep research business experience to the board as well as an intimate knowledge of our operations. Jean has been the CEO of several publicly-traded companies and brings valuable experience in how B2C user organizations are digitally transforming.

After the addition of Neil, Jean and our three other new board members, the Forrester board is well structured to carry the company into a faster growth or highly innovative future. So in conclusion, I'm very pleased about our performance in 2017 and especially with our over performance in the fourth quarter.

We've done a lot of hard work over the last three years to put us in the right position to grow the company at faster rates, and it appears that that hard work is now beginning to pay off. And now I'd like to turn the call over to Mike Doyle, who will provide a financial update.

Mike?.

Our B2B Marketing Forum in Austin; our Customer Experience Forum in San Francisco; and our new forum on new technology in Boston, event revenue increased by 9% year-over-year. I will now highlight the expense and income portions of the income statement.

Operating expenses for the fourth quarter increased by 12% as reported and 10% on a currency adjusted basis and were $80.7 million, compared to $72 million the prior year. Cost of services and fulfillment increased by 11% as reported and 9% with constant currency due to higher headcount, merit and increased professional services.

Selling and marketing expenses increased by 15% and increased by 30% with constant currency, driven by higher headcount and merit increases. General and administrative costs increased by 9% and increased 7% on a constant currency basis due to merit increases and higher professional services costs.

Overall headcount increased by 1% compared to the fourth quarter of 2016 and as compared to the third quarter of 2017. At the end of the fourth quarter, we had a total staff of 1,392, including our research and consulting staff of 515 and a total sales force of 539.

Research and Consulting headcount decreased by 1% compared to the fourth quarter of 2016 and increased by 1% sequentially. Total sales force increased by 3% compared to the fourth quarter of 2016 and increased 2% sequentially.

Operating income was $9.7 million, or 10.8% of revenue compared with a $11.5 million or 13.8% of revenue in the fourth quarter of 2016. This is a decrease of 15% year-over-year. Other income for the quarter was $53,000 compared to $366,000 in the fourth quarter of 2016.

Net income for the quarter was $5.9 million and earnings per share was $0.32 on diluted weighted average shares outstanding of 18.3 million compared with net income of $7.1 million and earnings per share of $0.38 on 18.6 million diluted weighted average shares outstanding in the fourth quarter of 2016.

Now I'll review Forrester's fourth quarter metrics to provide more perspective on the operating results for the quarter. Agreement value. This represents the total value of all contracts for research and advisory services in place without regard to the amount of revenue that has already been recognized.

As of December 31, 2017, agreement was – agreement value was $242.9 million, up 2% from the fourth quarter of 2016 and up 3% on a constant currency basis. As of December 31, 2017, our total for client companies was 2,409, down 1% compared to last year and up 1% compared to last quarter.

Client count, unlike our retention and enrichment metrics, is a point-in-time metric at the end of each quarter. Forrester's retention rate for client companies was 76% as of December 31, 2017, flat compared to last quarter and up 1% compared to last year.

Our dollar retention rate was 88%, flat compared to last quarter and up 1% – 1 point compared to last year. Our enrichment rate was 96% for the period ending December 31, 2017, up 2 points compared to last quarter and up 3 points compared to last year.

We calculate client and dollar retention rates and enrichment rates on a rolling 12-month basis due to the fluctuations which can occur between quarters with deals that close early or slip into the next quarter. The rolling 12-month methodology captures the appropriate trend information. Now I'd like to review the balance sheet.

Our total cash and marketable securities at December 31, 2017, was $134.1 million, which is a decrease of $4 million from $138.1 million at year-end 2016. Cash from operations was $700,000 for the quarter as compared to $6.2 million in the fourth quarter of last year.

We received $4.6 million in cash from options exercised for the quarter as compared to $6.7 million in the fourth quarter of last year. We did not repurchase any stock during the fourth quarter and we paid a dividend of $3.4 million or $0.19 per share during the quarter.

Accounts receivable at December 31, 2017, was $70 million compared to $58.8 million as of December 31, 2016. Our days sales outstanding at December 31, 2017 was 71 days compared to 65 days at December 31, 2016. And accounts receivable over 90 days was 4% at December 31, 2017, compared to 3% at December 31, 2016.

Deferred revenue at December 31, 2017 was $145.2 million, an increase of 8% compared to December 31, 2016 and an increase of 6% on a constant currency basis. So in closing, we finished 2017 achieving the financial objectives established at the beginning of the year. We beat our revenue and EPS targets and achieved our targeted operating margin.

We returned $53.6 million to our shareholders in the form of share buyback dividends; and more importantly, set ourselves up to improve our performance in 2018. We made significant progress on our key strategic priorities in 2017.

We established and built out a core selling team in our new national office; we completed the rollout of the CEM initiative in North America; and began our European rollout. This has resulted in improvement across our key customer metrics of retention and enrichment.

We made significant investments in digitizing our business model with investments in iPad, iPhone and Android apps, enhanced versions of most of our data products and improved web experience. We plan to accelerate our efforts in this area in 2018 as we are receiving favorable response from our clients.

As a result, we plan to utilize half of the expected savings from the tax rate cut, approximately $2 million pretax, to reinvest in further product digitization.

We continue to innovate with our products – with the executive team – with the executive program team access and other products showing meaningful growth in 2017, helping drive improved growth in our user business. We feel very good about what we've accomplished and the results suggested as resonating with our clients.

We expect that our performance will improve at accelerated rates in 2018 as we look to build on the success of this past year. Now let me take you through the specifics of our guidance for the first quarter and full year 2018.

As a reminder, our guidance excludes the following; amortization of intangible assets, which we expect to be approximately $200,000 for the first quarter and approximately $700,000 for the full year 2018; stock-based compensation expense of $2 million to $2.2 million for the first quarter and $8.3 million to $8.8 million for the full year 2018; and any investment gains and losses.

We expect foreign currency effects to benefit revenue growth by approximately 1% or 1 point in 2018 with a corresponding impact to expenses and EPS for 2018. The guidance that I will discuss now and that we issued in our press release earlier today reflects our projected foreign currency rates for 2018.

We expect the following changes versus 2017; the euro to appreciate approximately 5%; the British pound to appreciate approximately 5%; and the Canadian dollar to appreciate approximately 4%. Forrester will be adopting the new revenue rules effective as of January 1, 2018.

Although we do not expect there will be a significant effect on our full year results, there will be approximately $1 million of revenue from expired event tickets that will no longer be recognized in the first quarter, rather be recognized during the remainder quarters of the year based on the number of events held in each quarter.

In addition, the company will no longer capitalize and amortize our data survey costs, which will result in higher costs in the first quarter of the year and lower costs for the remainder of the year.

In addition to these items, our first quarter margin is negatively impacted by the initiative spend that I mentioned and the fact that our revenue beat in the fourth quarter of 2017 aid into our backlog for consulting and refund revenues as we enter into 2018.

Forrester's providing first quarter 2018 financial guidance as follows; total revenues of approximately $77 million to $80 million, pro forma operating margin of approximately 1% to 3%, pro forma effective tax rate of 31% and pro forma diluted earnings per share of approximately $0.03 to $0.07.

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

We provided guidance on a GAAP basis for the first quarter and full year 2018 in our press release and 8-K filed today. Thanks very much. And I'm now going to turn the call back over to the operator for the Q&A portion of the call..

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Tim McHugh from William Blair. Please go ahead..

Thanks. Just want to follow-up on the investment spending or the decision to reinvest part of the tax benefits. I guess, can you walk through why, I guess, just – I get that it's obviously, kind of windfall of cash flow, but you've also been investing the last few years.

So were these things that were on a wish list that you just couldn't get to before? I guess, talk me through the thought process..

I think, from our standpoint, Tim, we looked at this – we have a running list of initiatives that we keep, strategic initiatives, as part of our broader five-year plan. And I think the combination of factors that enter into our decision to do more in 2018, certainly the tax rate helped.

I think, more importantly, what George described in the beginning is we are beginning to see this resonate in a very real way. And I think we're trying to accelerate the investments in these key areas, frankly, to build growth at a much faster rate.

So the tax rate reduction certainly helps because it helps to sort of fund that and still, the net result is a higher EPS year-over-year than we would've expected otherwise. But it did create the opportunity to invest in what we see is a very high growth potential for Forrester..

Tim, George here. I think it's enabled us to grow faster..

Yes..

These investments, we would have maybe delayed if we hadn't had the – if the windfall hadn't been there. But we're just glad to be able to accelerate – as an example, the real-time customer experience platform, we could get to that faster than we would have. So it's just speeding us up, which we like..

Okay. And can you talk into bookings. It seems like it was obviously nice to see some improvement in the quarter.

How much of that is coming in from the traditional research business versus the kind of the consulting or advisory types of – parts of the business? And, I guess, how does that impact how you think about the margins over the next few years and the predictability of what you expect for next year or this year?.

I mean, I think, look, we had healthy bookings in our consulting and advisory, but we've been happy with the performance of – with their core research business. So I think that part has been good and been very encouraging.

I think we've made meaningful progress there, I think we've been very encouraged by what happened, to George's point, this year-end. As we look at our product set, year-over-year, we've got, frankly, the bulk of our products growing at a meaningful way, whereas, a year ago it was probably less than half.

And so we feel really good about it, and core research being one of them..

I think digital is helping us here, Tim, especially in the data space, and the work that we're doing around – the new forms and the new ways to deliver the research. As I said, we've doubled the iPad and Android use and also the iPhone use, so it's – we're feeling good about the syndicated side of our business as well..

Okay, thank you..

Thanks, Tim..

And our next question comes from Vincent Colicchio from Barrington Research. Please go ahead..

Yes. Mike, you've mentioned that five of the six teams had healthy growth.

Was that – the one that did not, was that Europe? Can you give us help with that?.

Actually, no. Europe, we had a good quarter in Europe. We were pretty happy Europe rebounded nicely. And so we're hoping this is the beginning of a real trend. I think they're getting some benefits from CEM. But also, I think, some leadership stabilization, things are starting to happen that we're feeling good about..

I think the economy is improving..

Yes it is. So we’ve got that going. I think it was really the West team, which was the last North American team to go into the market, has struggled a bit. They've made some – in addition to the CEM change, they're making some leadership changes and transition. And we think that's temporal.

But no, we're actually happy with what's going on in Europe right now and feel really good. I mean, we've got five of the six teams really moving well and showing good numbers, it was very, very encouraging.

And more importantly, I think the notion that teams that have been in this model the longest have performed consistently better and had a really good year is very encouraging. Because as the rest of the teams continue to sort of ramp up, if you will, and come down the learning curve, we're going to see this performance will continue to accelerate..

And then, as you rightsize the sales territories, are you seeing any meaningful pushback in terms of the culture?.

No, I actually think the sales teams are frankly very excited about the rightsizing because I think they felt, in the past, that we put them out in territories that weren't necessarily target rich.

I think the old model of just higher sales headcount, put them in the field and they'll find sales opportunities, frankly, it wasn't that effective, I think. This notion of taking a step back, looking at the territories and try and match them appropriately with the resources, the sales folks are happy with that because it's a much better opportunity.

And I think what they've done is balance more existing AV so that they start with an existing book of business to work from and a list of target candidates that fit nicely with the target verticals that are in our space. I actually think this is good all-around for everybody.

If you look at the new selling model, Vince, we're going to be asking for growth in those territories over time, with the AV growth – we're getting net driven value increase in each of those territories. To do that, Kelley really had to give them – and a very legitimate group of clients in a territory, which is well-endowed with opportunities.

So it's really a precursor to the growth of those territories over time..

And then with the momentum improving in the quarter, your accounts receivable, your DSOs ticked up quite a bit.

Do you see that normalizing in the first half?.

Yeah, I wasn’t too concerned with that. I mean we did notice that. But I think I'm not too concerned. I think we will have our Q1 numbers may be a little bit impacted. We’ve rolled out with the new revenue model, we're also in the midst of changing systems.

So we finished up 2017 with a systems changeover and moving everything out of Siebel into Salesforce. So what we'll probably see is a little slower cash collection in Q1. So we may see some impact in Q1. But I think by the end of the first half, we'll be back to normal. I'm not concerned about the quality of receivables.

I'm very comfortable with our collection process..

Thanks guys..

Thank you, Vince..

Thanks Vince..

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

Yes, I wanted to go back to the question on your first quarter guidance.

Help me understand, if you're going to reinvest back half of the tax savings, wouldn't your bottom line results be better? Why are you modeling it that EPS is going to be down year-over-year?.

You can see from our full year obviously, the EPS is growing nicely. And I think what's happening, there's a couple of things going on. The change in accounting rules meaningfully impact how we treat event ticket revenues. So effectively, we would normally have a block of event revenue, ticket revenue that would fall in Q1 happened every year.

And that's now going to follow when the events occur, which our events really begin in Q2 of this year. So.

And no event in Q1..

So that goes away, there’s an impact in terms of the way data survey costs are being treated. We used to spread them over the course of 12-months, as people use the survey. The Regs basically push for that cost impact to hit as you spend, so essentially almost like a cash basis. So that has driven up costs. So those two things are meaningful impacts.

In addition, we had strong performances, as you can see both on reprints and consulting revenue in the fourth quarter. Some of that is frankly backlog that we expected to hit the first quarter. And it's meaningful. So that, that's definitely coming out.

So those things impacting us in first quarter, clearly you can see from our full year guidance, we expect all of those things to stabilize. They are truly temporal in terms of the impact and it falls primarily in Q1. So it creates sort of an odd situation for us in Q1.

Lower revenues due to the backlog effect and the effect of the event ticket revenue, which is – all that's meaningful. And then more costs coming in, plus initiative costs coming in during the first quarter so the combination of those two things compresses margin.

And historically our first quarter has always been our lowest earnings quarter because we have no events. We typically see sort of consulting revenue, other things come down. So it's normally a low quarter. But you all have – all your normal expenses, as a matter of fact, some expenses sort of come up in the first quarter.

All of your tax related to comp comes up. So we're seeing a little bit more compression than normal due to some of these changes that I mentioned. But again, for the full year, we feel pretty confident. This is just I think a Q1 aberration..

Okay. And then sort of following up on that, for your full year guidance, I think you're not really modeling – I don't believe operating margin expansion.

Is that – would that be due to accounting reasons or any other reason?.

No. It's really due to investment. It's not due to accounting. It's due to our desire to invest back in the business.

So what we've looked at is – and this gets to the question Tim was asking, and I think we look at tax saves that we had and decided to put an additional $2 million of expense back onto the books in the form of investment to go – continue to double down on product digitization. And so that's had an impact.

To your point, that's correct that we've seen basically, on a percentage basis, margins that are approximately flat year-over-year. Obviously, the EPS guidance shows growth of 13% to 19%. So we – clearly, earnings per share's going up or opting to push back in and spend money to drive additional growth..

Okay, thank you.

And how much cash did you say, if any, you were planning to repatriate or you did?.

We're not, at this point, planning to repatriate any cash. I think what we're – we're continuing to look at our M&A pipeline and look at investment opportunities overseas. And so we've made, at this point, we made a conscious decision that the cash will stay there.

Until we determine that in fact we needed either, back here to George's point, I think you referenced if there was, in fact, a large M&A opportunity in the U.S. and we obviously have to consider bringing it back. So we'll look at those things as the year progresses, but for now, we were opting to keep the cash right where it is..

Okay. And finally, I don't think you bought back any shares in the quarter.

Just any thoughts or maybe what your authorization is and any thoughts on how you're thinking about that going forward?.

internal investment, number one; acquisition opportunities, if we believe they're appropriate for the company; and then third being essentially returning cash to shareholders in the form of the dividend, which we announce we'll increase that to $0.20 per share per quarter. And share repurchase will be opportunistic as it always has been for us..

Thank you very much..

You bet..

Thanks Allen..

Thanks Allen..

And we have no further questions at this time. Thank you, ladies and gentlemen. Okay, go ahead..

Thanks very much everyone. I appreciate you joining the call. And we will be out visiting with investors during the course of the quarter, so we look forward to seeing you soon. Thank you..

Thank you..

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