George Colony - Chairman & CEO Kelley Hippler - Chief Sales Officer Michael Doyle - CFO.

Timothy McHugh - William Blair & Company Vincent Colicchio - Barrington Research.

Good afternoon. Thank you for joining today's call. With me today are George Colony, Forrester's Chairman of the Board and CEO; Kelley Hippler, Forrester's Chief Sales Officer; and Mike Doyle, Forrester's Chief Financial Officer. George will open the call, Kelley will follow George to discuss sales, and Mike Doyle will discuss our financials.

We'll then open the call to Q&A. A replay of this call will be available until November 23, 2018 and can be accessed by dialing 1-888-843-7419 or internationally at 1-630-652-3042. Please reference the pass code 8066275#.

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 can 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..

Thank you very much and good afternoon and welcome to Forrester's 2018 Q3 investor call. After my short brief, I will hand the call over to Kelley Hippler, Chief Sales Officer, who will give an update on the selling team. Mike Doyle, the company's CFO, will give a financial review; and then Mike, Kelly and I will take questions.

The company's positive momentum from Q2 continued into the third quarter. Agreement value increased 8%, enrichment has moved to 100%, revenue is at the upper end of guidance, and EPS exceeded guidance for the quarter. We are on-track to achieve our plan for the remainder of 2018. Several factors are driving our performance.

Our customer engagement model or CEM continues to yield positive results. Customer success managers are focused on understanding our client's pain points and are delivering a tailored customer experience to our premier clients.

Clients with CSMs engage at higher rates as measured by document reads, attendance at forums, attendance of webinars and participation in our enquiry services. Elevated engagement directly correlates with higher renewal rates.

Solution partners are the sales executives in the CEM that match clients with a set of Forrester products and their work is driving higher enrichment rates. During this quarter we've expanded our product line.

As I talked about on the last call, we're developing the real-time customer experience cloud, a product that will enable clients to monitor and improve their experiences in real-time.

In simple terms, the cloud will gather feedback from multiple sources into a common data store, process that data through a common analytics engine and then feed relevant advice to multiple recipients within client organizations. With the acquisition of FeedbackNow in July, the first version of the cloud is now operational and generating new clients.

We had a number of wins in the quarter increasing the client base to over 200 companies.

The port authority of New York City had deployed the cloud at Newark, LaGuardia and Kennedy Airports; Schiphol Airport in The Netherlands, this is the third largest airport in Europe, has rolled out feedback now as part of it's Internet of Things initiative and it is recording over 25 taps or what we call feedbacks per day.

And then finally, a National Football League stadium in the Midwest has deployed the cloud to monitor and improve fan experience; this is our first large stadium win in the United States.

Our AI solutions team, formerly known as GlimpzIt, has designed a system to ingest social media data and correlate it to CX drivers; this will be an early feature of upcoming versions of the cloud. In the second quarter we introduced the customer experience certification program.

Clouds are using these digital courses to train CX skills and certify expertise. Customer experience remains a difficult discipline to master and talent remains very scarce, hence the drive to develop these resources from within. To-date, 73 clients have purchased CX certification.

Team access enables our most engaged audience, typically executive partners and leadership board members to give their direct teams membership in Forrester's research streams. This solution helps business leaders increase the IQ of their working groups.

We are matching our packaging to the way our clients work and organize, not forcing them into rigid deals and inflexible usage terms. So to conclude, I want to say a few words about our tech coverage. As you know, Forrester focuses on those parts of business that increase revenue and age [ph] of the customers.

In the IT space, we specialize in business technology; the technology systems and processes that wins or even retain customers. In addition, we intensively cover those parts of back office technology that enable companies to construct an effective BT portfolio.

Companies really cannot have a great BT without great back office tech, and Forrester advocates that both of these sets of technology must evolve quickly, what we call fast-fast. A critical element of IT that we cover in-depth is security risk management and privacy. In September I kicked-off our security forum at Washington DC.

Five years ago Forrester pioneered new digital security philosophy that we called Zero Trust; this is an approach that requires verification of all users, inside and outside of the enterprise.

Over the last two years, Zero Trust has become an accepted standard in the security space governing the strategies of vendors like Google, IBM, and large users like Netflix, WestJet and a number of U.S. federal agencies.

Our newest research in this space, the Cybersecurity And Privacy Playbook has just launched, and this playbook includes a digital maturity assessment, enabling companies to benchmark themselves against other companies in their industries and against best-in-class.

So to conclude, we are very pleased with our position going into the fourth quarter, momentum remains strong, the CEM is working well, we are launching new offerings and we continue to cover critical IT technologies for our clients. Thank you for being on the call, and now, I'd like to hand it over to Kelley Hippler.

Kelley?.

Thank you, George. Q3 was another solid quarter for the Forrester sales organization, both AV growth and enrichment had strong performances versus prior year. These metrics have been steadily increasing over the past four quarters. In addition, all geographic regions grew versus prior year.

Q3 also marked the seventh consecutive quarter of improved ramped-rep productivity. In Q4 we are going to continue accelerating growth through our Team Access offering, market development teams at lead generation efforts.

In our premier organization we are seeing increased interest in team access which better serves large organizations and dynamic project teams. We continue to evolve our vertically aligned market development teams and have begun piloting solutions that are specific to the industry that we serve.

We have also invested in our sales development efforts in North America and Europe, having resources dedicated to following up on in-bound leads being generated by marketing is leading to improved pursuit rates and pipeline conversion.

Our customer success team has enhanced the level of sophistication by which it operates having moved from measuring client engagement at the order level to the individual level with scores that now update dynamically in our CRM system.

We continue to evolve the way our core organization operates and as part of a core 2.O [ph] initiative we introduced new pricing and packaging. We've also designed and launched engagement dashboards which allow core reps to see their entire portfolio to help prioritize activities to drive client engagement.

We've also introduced a series of battle cards to help newer reps ramp more quickly. And as the volume of our new-tech research increases to support CIOs and their teams, we are aligning our new vendor business efforts to those technologies.

The above combined with our ongoing territory optimization are enabling us to grow bookings while improving our cost of sale and service. With that, I'd like to turn the call over to Mike Doyle to review our Q3 financial results..

total revenues of approximately $354 million to $357 million; pro forma operating margin of approximately 9.5% to 10.5%; pro forma effective tax rate of 31%; pro forma diluted earnings per share of approximately $1.33 to $1.36. We've provided guidance on a GAAP basis for the fourth 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 is from Tim McHugh..

First, I guess on agreement value; can you help us think about the growth rate in the research portion of that? And then, maybe also thinking about the research revenue here, I guess -- I'm not sure, just to clarify, was -- were the acquisitions contributing all to the growth rate of that piece or is that an organic kind of clean number when we look at it?.

I would say that it's -- we've gotten really good growth in AV and we're starting to see more and more bundling, and so I think you're seeing the lift that's coming more on the advisory and consulting side as we've bundled that in. I would say our core research is around 5 points in terms of thinking about growth in AV.

So it lags a bit the other side of our business which we -- we expected that as we started the year, it's been fully accelerating which is good, so we're getting the right kinds of momentum but we're still driven, I think primarily, more by our consulting and advisory that's bundled in with this..

How should we think about recognizing, you're not giving guidance for next year but thinking about margins from this point because I guess, if I look, the sales force hasn't really grown a lot lately so at some point you'll need to grow that to keep growing.

You talked about -- I think there was a comment about utilization being very high in the consulting business, and yet, kind of we're -- where margins are still probably, the EBITDA margins guided to be down this year.

So how do we think about the next two years, and given, it would seem like you would have to add more consultants and more sales people to drive the growth given those prior two comments you had made on the call?.

Look, I would say that while we haven't given guidance for next year Tim, our expectation is that we are going to guide to margin expansion.

This year was very much about really getting the model completed and I will say, I mean, we can't -- they are internal numbers but we are getting cost of sale improvement as a result, we are seeing real productivity out of the model. So the expectation is we move into next year is that, that will get an annualized effect on that.

And yes, we will be adding more heads next year but our expectation is that we plan to expand margins as well. So I think -- our view is that the decline in margin concept is over a lot of the cost we incurred in terms of getting CEM in place what will be behind us and we'll look to leverage that.

As I said, we'll always have ongoing technology investments that we're going to occur but I think you're going to see a margin lift primarily from sales but we're going to start to leverage acquisitions and the consulting business and advisory businesses, the margins there have been healthy, and yes, if we add consultants typically, the expectations; we will get a return relatively quickly there.

So, I'll have Kelley give any color she'd like..

No, just to reinforce what you stated Mike. Tim, we do plan on starting to add additional sales headcount next year, probably in the low single-digit range because we don't feel like we've yet maxed out the productivity from our existing folks.

So by continuing to focus on productivity and adding in some heads, we expect to be able to continue to drive growth while continuing to lower cost of sales and service..

And our next question comes from Vincent Colicchio from 1965 [ph]..

Mike, a follow-up on the sales side.

You're clearly seeing a couple of quarters of improvement here with the new model, do you want to like -- perhaps frame how much you may grow the sales force in the next year? And then also, are any -- is there any concern now with the tight labor market that it's going to be difficult to fund the right people?.

I'll let Kelley talk to the tight labor market. And I think, we haven't gone out to guide to what we think in terms of growth in sales headcount. I don't think -- I think in the past people have -- to get double-digit, we'd say we're going to increase headcount double-digit, that's not going to be our model.

I would say it's probably low-to-mid single-digits best case. For Kelley to get the improvement she's gotten this year with essentially flat headcount but nice productivity increases, that's encouraging, I mean, it really -- it is. And I think the new model allows for greater productivity.

I'll let Kelley talk to sales talent, yes, it's hard to get; I think that she is selective, appropriately given what we're doing with our selling model but I think we've gone some fantastic talent but I'll let her cover that..

In terms of the overall sales talent we find our gates to hire are still holding, so we haven't seen an uptick there.

We have a very strong employee referral program which allows us to find folks who are good cultural fit and are able to make their way into Forrester pretty quickly; but that coupled with the various markets in which we serve also gives us flexibility, so we don't expect that to be an inhibitor for us but always something that we want to keep in mind as we look to expand but not seeing any pressure there right now..

And Vince, remember that Nashville [ph] helps us a lot here as well, as far as labor market goes..

Yes, I mean we're finding very talented folks down in the Nashville market which is certainly helping us in our efforts to expand, and just having multiple geographies just gives us a lot of different options in terms of finding the best talent to deliver what it is that we provide to our clients which is very customized experience..

And George, could you give us some more color on the new CX product, the real-time CX product? It sounds like you're off to a really nice start; 200 clients. Just curious, what the pilot plan looks like? Is it Fortune 1000 companies? Is it specific verticals? Just any color would be helpful..

So those 200 clients, remember those are clients that came to us either from FeedbackNow or they were new business in Q3. I'll ramble [ph] here a little bit on this product; what you're going to see Vincent is that, it is starting in it's physical form which is -- we call it physical feedback now because it has physical buttons.

But as the cloud continues to roll, as we go through version 2, 3 and 4; you're going to have digital, you're going to have partner data, you're going to have that more powerful analytics engine that I talked about. So it's going to be one of those products which is just going to get enhanced quarter-by-quarter.

The next big enhancement you're going to see is, will likely be for Q3 of next year.

And who is the sport [ph]? It does tend -- you look at the FeedbackNow clients and you look at our -- what we call the ICPs or the ideal client profiles, they do tend to overlay pretty nicely on top of our ICPs, the accounts -- the vertical markets that we are in fact pursuing.

So -- but this is large companies, Fortune 1000 companies, lot of retail, lot of financial services; so a good overlay. So that's what it's going to look like, again, you're going to see it rollout in waves and it's going to be in -- within our ICPs.

One of them like Kelley described was the CX certification product that also is just rolled out and that was probably the other one you were going to be asking about. So I'll let Kelley tackle that one..

Sure.

So the CX certification product is a very exciting one for us because one of the things we see is that all of our clients across the board, whether it be some of the smaller vendors that we have or the large multi-nationals, all meet to levels that with their employees about what it means to deliver great customer experience, and this tool is a great snackable [ph] way to do that across their organization.

So we've actually seen across those 73 clients, literally, every region we've had clients come to us and in every one of our sales team. So we think it is very broadbased application and this is really just the start of this particular product.

We are sort of starting off with the 101 and we will be developing masterclasses as we move forward so that as our CX professionals, and their practice has become more sophisticated, we'll have additional offerings for them to help them grow and scale their teams as well..

Thank you. And this concludes our question-and-answer session. I will now turn the call back over to Mike Doyle for final remarks..

Great. Thanks, everyone, for listening in and we're excited both about where we've been for the first nine months in the journey but we'll be out on the road talking about how we plan to finish out the year and what next year is going to look like. So we look forward to getting together with everyone soon. Thanks very much..

Thank you very much..

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