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EARNINGS CALL TRANSCRIPT
EARNINGS CALL TRANSCRIPT 2019 - Q4
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Operator

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 March 14, 2020 and can be accessed by dialing 1 (888) 843-7419 or internationally 1-630-652-3042. Please reference the passcode 6135978, pound.

Before we begin, I'd like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, believes, anticipates, intends, plans, estimates or similar expressions are intended to identify these forward-looking statements.

These statements are based on the company's current plans and expectations, and 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..

George Colony Founder, Chairman, Chief Executive Officer & President

Thank you for joining the Forrester Q4 2019 call. Following my remarks, Kelley Hippler, Forrester’s CSO will update on sales and then Mike Doyle will conclude with a financial review for the quarter. We will then take questions. On many levels. 2019 was a watershed year for Forrester. We successfully integrated SiriusDecisions.

We grew our legacy research business and we continue to enhance and extend new products. And we did all of this while executing on our financial plans. Finishing the year at the upper end of revenue guidance and exceeding EPS targets. This marks two consecutive years of double digit EPS growth, and we are expecting a third year in 2020.

Client retention was at 72% one point above Q4 for 2018 and client enrichment, that's the average growth of client accounts remained at healthy levels at 106%. In its first year, the SiriusDecisions acquisition was accretive to earnings.

We are now a full year into the acquisition of SiriusDecisions and are excited about the opportunities that the deal is unlocking. As with all acquisitions, this one had its challenges highlighted by the changes we've made in sales in May, when we brought the SiriusDecisions sales force under the leadership of Forrester's global sales team.

While this created short term bookings gaps at mid-year and higher-than planned attrition in the Sirius salesforce, it has set the company up to achieve its 2020 plan. We chose to address our challenges earlier rather than later and I believe that that strategy will pay off.

With the structural integration complete, we are now operating as one company. In 2020 we are focused on three imperatives as an integrated operation. Number one, cross-sell.

The Forrester and SiriusDecisions salesforces were fully integrated as of January 1, with all sales people selling both portfolios, what we internally call everyone sells everything. We made this decision because Forrester Research and SiriusDecisions Research is typically sold to the same buyer and budget center.

This positions sales people to cross-sell the two research products, Forrester to SiriusDecisions clients and SiriusDecisions to Forrester clients. In 2019 we reached 2.9 million in cross-sold deals and in Kelley's remarks, she'll describe the combined sales force in more detail.

The second imperative is to expand the research staff for the SiriusDecisions product line, while we experienced higher than expected attrition in the Sirius sales force in 2019, research organization attrition was the below plan, which kept the product strong and moving forward as integration proceeded.

In 2020 we will be expanding the SiriusDecisions research staff to increase the already strong value proposition for clients. And finally we will continue to work to create a seamless portfolio of research that expands Forrester and SiriusDecisions.

Now, I described this architecture on the Q3 call, but I want to review it again on this call because it is fundamental to our go-forward positioning. The value proposition of the new Forrester is simple but powerful.

In the age of the customer where companies must enhance experience and operate differently to build customer obsession, they require help on three levels, all which are now provided by Forrester.

Number one, vision research, companies must have the ability to see around the next corner to see future opportunities, new external threats and changing competitive dynamics. And an example of this would be our new tech research, which plugs our clients into emerging technology early, so they can gain first-mover status.

Vision research has been a traditional strength and focus of Forrester and it is used by our clients to increase their speed. Secondly, strategy research.

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

Forrester and SiriusDecisions have long track records of directing our clients toward the right strategic choices. Examples would be Forrester's extensive library of technology comparison waves and SiriusDecisions Demand Waterfall framework. Having the right strategy enables companies to beat competitors. And finally, three, execution research.

Once companies see the future and have made the right choices, SiriusDecisions research direct them on how to operate, what models to deploy, how to make fact-based decisions, and how to apply best practices and benchmarks to bring more precision to operations.

The Sirius Way is a methodology for how to operate enabling our clients to align B2B marketing, sales and product to optimize the revenue engines. Companies are able to achieve this alignment grow 19% faster than unaligned companies. In 2020 we will be building out all three levels of research, vision, strategy, and execution.

In addition we will be creating a seamless experience across all three levels, aligning topics, technologies and themes. So this portfolio is differentiated and unique, offering our clients a one-stop shop that can make them faster, more competitive and able to grow at higher rates in the age of the customer.

In addition to leveraging the SiriusDecisions acquisition, we plan to expand two other new products, certification and our real time customer experience cloud, what we call Feedbacknow. Both of these products experienced strong growth in 2019 and we expect that momentum to continue in 2020. That was the final note.

I wanted to talk about Forrester's financial position as we move into the year. We continue to retire debt incurred with the SiriusDecisions acquisition. During 2019 we've paid down $42 million of debt, including $36 million of discretionary payments on our revolver.

We will continue to accelerate debt payments in 2020 clearing our financial debts for future acquisitions. So to conclude, we are happy to have the integration of SiriusDecisions complete. We are excited about our prospects in 2020 and beyond.

The vision, strategy and execution portfolio that we have built resonates with our clients and it points the company toward accelerated growth, intensified client engagement and higher renewal rates. So now I'd like to pass the call over to Kelley Hippler, Forrester’s Chief Sales Officer.

Kelley?.

Kelley Hippler

Thank you George. Our original plan for 2019 was to run the SiriusDecisions sales team separately from the Forrester sales organization.

As George mentioned, in May we accelerated the integration and moved the SiriusDecisions teams under Forrester sales leaders, while SiriusDecisions attrition remained in the mid-thirties through year-end, Legacy Forrester attrition was down 3% over prior year.

Our ramped rep productivity on the Legacy Forrester side increased for the 12th consecutive quarter. We also saw a double-digit improvement in sales productivity for our rep selling the SiriusDecisions portfolio. In the quarter, our 12 months rolling client retention improved over prior year and thanks to our strong new business efforts.

We also saw an increase in total client count. Now turning to 2020, in mid-January we held a global sales kickoff in Boston, it was impressive to see the growth in our organization from 528 to just shy of 700 over the course of the past year.

Sales kickoff marked a pivotal moment in our company's history as our sellers had an opportunity to meet as a fully integrated team and the customer engagement model. It's also provided a great chance to network and share best practices with colleagues from across the globe.

There was a palpable excitement around the values that the new Forrester will bring to our clients across vision, strategy, and execution to help them drive growth.

During the sales kickoff client panel, one of our largest healthcare clients expressed his excitement about working with the new Forrester in 2020, sharing that quote, “You have both sides that a modern organization need, operational and aspirational, helping us to get ahead in the market.

I show up every day to solve business problems, some are strategic, some are operational. Having people that you trust in the trenches with you, solving these large problems is powerful” To ensure that our 2020 plan is met and that we continue to lay the groundwork for double-digit growth in future years.

Our priorities for 2020 will be to, number one increase sales head count. Not only are we back selling those individuals who left the organization with sales reps who have the traits and drivers that align to the customer engagement model, but we will also be expanding the sales force by 5% to start the year.

Number two, deliver cross-product training to help our clients reach their desired outcome, Forrester training sales reps and our customer success organization on the Forrester and SiriusDecisions portfolios. We will also be leveraging our sales footprint to accelerate the growth of Feedbacknow. Number three, improve the employee experience.

Our own research tells us that customer experience and employee experience go hand-in-hand.

We will continue to build out our sales training and enablement function to make sure that our teams are armed, with the training, collateral and tools needed to be effective in their roles and to allow them to maximize their client partnering with our clients.

We will continue to update you on our progress against these three priorities throughout the course of 2020 and with that I'd like to turn the call over to Mike Doyle to review our Q4 and full year financial results..

Mike Doyle

Thanks, Kelley. And we'll now begin my review of Forrester's financial performance for the fourth quarter of 2019, including a look at our financial results, the balance sheet at December 31, our fourth quarter metrics and the outlook for the first quarter and full year 2020.

Please note that the income statement numbers I'm reporting are pro forma and exclude the following items, impact on revenue from the acquisition related fair value adjustment to deferred revenue, stock based compensation expense, amortization of intangibles, acquisition and integration costs, and net gains and losses from investments.

We continue to utilize an effective tax rate of 31% for pro forma purposes for 2019. In addition, we'll continue to highlight the impact of SiriusDecisions on our consolidated results by indicating year-over-year performance with and without the acquisition and the relevant sections of my comments.

In the fourth quarter Forrester delivered pro forma revenue at the upper end of guidance and earnings per share that exceeded guidance. Revenue grew by 27% for the quarter and by 6% excluding SiriusDecisions. Expenses were favorable to expectations, driven by open sales headcount and bonus savings.

Our full year earnings, exceeded guidance by $0.07 per share and increased 21% versus prior year, while we were integrating the largest acquisition in Forrester's history. We did experience some increased turnover and sales which impacted SiriusDecisions performance in 2019 and will impact our growth rate in the first half of 2020.

We are, however very happy with the product performance and client satisfaction with SiriusDecisions product line and it's a big part of our growth plan for 2020. Now let me turn to a more detailed review of our fourth quarter results.

Forrester’s fourth quarter revenue increased by 27% to $125.1 million from $98.6 million in the fourth quarter of 2018. SiriusDecisions impacted growth by approximately 21% in the quarter. Fourth quarter research services revenue increased by 29% to $80.1 million from $62.1 million and SiriusDecisions accounted for 26% of the growth in the quarter.

Research services revenue represented 64% of total revenue for the quarter. Fourth quarter advisory services and events revenue increased by 23% to $45 million from $36.5 million and SiriusDecisions accounted for 14% of growth in the quarter. Advisory services and events revenue represented approximately 36% of the total revenue for the quarter.

The international revenue mix was flat to the fourth quarter of 2018. SiriusDecisions impacted international revenue mix by a negative 1% for the quarter. I'd now like to take you through the product activity behind our revenues, starting with Forrester Research.

Forrester's published research and decision tools enable clients to better anticipate and capitalize on the disruptive forces affecting their businesses and organizations. We believe Forrester Research provides insights and frameworks as well as operational tools to drive growth in a complex and dynamic market.

Research revenue increased by 36% for the fourth quarter of 2019, but the SiriusDecisions accounted for all of the growth for the quarter. Onto our Connect offerings, which encompass our leadership boards, executive programs and certification products.

Leadership boards provide peer connections to our clients to collaborate and create plans borne from practical experience. Executive programs pairs clients with former C-level executives, trusted partners who clients can count on to help them make the big calls.

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

As of December 31, 2019, Forrester leadership boards and executive programs had a total of 1,469 members, down 1 % compared to prior quarter and down 2% compared to prior year. Connect revenue increased by 7% for the fourth quarter of 2019 driven mainly by our certification offering. SiriusDecisions accounted for 3% of the growth.

Our analytics products help clients understand and anticipate dynamic and changing B2B and B2C customers. Our services provide a view into potential future change and offer powerful measures and models to create a blueprint for growth.

For the third quarter, revenue increased by 27% driven by FeedbackNow, which accounted for 22% of the growth in the quarter.

Forrester's advisory and consulting offerings help clients apply Forrester's intellectual property to drive action across the enterprise, enabling them to move and act faster and smarter in a market that rewards customer obsession, speed and agility.

Revenue increased by 17% for the fourth quarter driven by strong delivery and higher utilization of our consultants and analysts. SiriusDecisions accounted for 7% of the growth in the quarter.

Our events business provides leading content via immersive experiences focused on enabling professionals in customer experience, digital transformation, privacy and security, sales and marketing. In the fourth quarter we held seven events.

In North America we held Customer Experience San Francisco, Data Strategy & Insights in Austin, SiriusDecisions Technology Exchange in Denver and our Q4 SiriusDecisions Roadshow. In London we held both our CX Europe and SiriusDecisions Europe events. And in Singapore we held our SiriusDecisions APAC Summit.

Fourth quarter events revenue increased by 65% with all growth being related to SiriusDecisions. Legacy Forrester events revenue remained flat year-over-year, despite having one less event in the quarter compared to last year. I will now highlight the expense and income portions of the income statement.

Operating expenses for the fourth quarter increased by 27% and were $107.6 million compared to $84.9 million in the prior year. Cost of services in fulfillment increased by 28% with all of the growth related to SiriusDecisions.

Selling and marketing expenses increased by 29% with 21% of the growth due to SiriusDecisions and the remainder due mainly to higher head count, merit and commissions. General and administrative cost increased by 17% with 12% of the growth related to SiriusDecisions and the remainder due to higher facilities and services costs.

Overall headcount increased 25% compared to the fourth quarter of 2018 with 21% of the growth due to SiriusDecisions. At the end of the fourth quarter we had a total staff of 1,795 people, including products and advisory services staff of 688 and total sales force of 698.

Products and advisory services headcount increased by 23% year-over-year with 18% due to SiriusDecisions. Total sales force increased by 32% year-over-year with 29% due to SiriusDecisions. Operating income was $17.5 million, or 14% of revenue, compared to operating income of $13.7 million, or 13.9% of revenue, in the fourth quarter of 2018.

Interest expense for the quarter was $1.7 million as compared to no interest expense in the fourth quarter of 2018.

Net income for the quarter was $10.7 million and earnings per share was $0.57 on diluted weighted average shares outstanding of 18.7 million, compared with net income of $9.6 million and earnings per share of $0.52 on 18.4 million diluted weighted average shares outstanding in the fourth quarter of 2018.

And now I'll review Forrester's fourth quarter metrics to provide more perspective on the operating results for the quarter. These metrics are inclusive of acquisitions when appropriate. Agreement value.

This represents the total value of all contracts for research and advisory services in place without regard to the amount of revenue that has already been recognized. As of December 31, 2019, agreement value was $358 million, up 34% from the fourth quarter of 2018. SiriusDecisions impacted Q4 agreement value growth by 26%.

Compared to December 31, 2019, our total for client companies was 2,880, up 22% compared to last year and essentially flat compared to the third quarter. SiriusDecisions impacted Q4 client count growth by approximately 17%. Client count, unlike our retention and enrichment metrics, is a point-in-time metric at the end of each quarter.

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

Additionally, we have broadened the products and services included in the calculation, which better reflects our solutions-oriented approach to serving our clients. Historical values have been restated to allow for the appropriate comparisons.

The retention and enrichment metrics reflect legacy Forrester performance and exclude the impact of our recent acquisitions. Forrester's client retention rate was 72% for the fourth quarter, down 1 point compared to last year and up 1 point compared to last year. Our dollar retention rate was 90%, unchanged compared to last quarter and prior year.

Forrester's enrichment rate was 106% for the fourth quarter, up 5 points compared to last quarter and down 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 proper trend information. Now I'd like to review the balance sheet. Our cash at December 31, 2019 was $67.9 million, which is a decrease of $72.4 million from $140.3 million at the end of 2018. The decrease in cash was due to the funding of SiriusDecisions acquisitions, which I will explain in more detail.

Cash paid for Sirius, net of cash required was $237.7 million of which $175 million was funded with debt and $62.7 million was funded with cash on hand. We also paid $4.6 million of debt issuance costs as a part of the transaction.

Cash operations from operations was $2.8 million for the quarter was compared to $1 million in the fourth quarter of last year. For the full year cash from operations was $48.4 million, which is an increase of 26% from the 2018.

Debt payments were $1.6 million during the quarter and $42.3 million for the year including $36 million of discretionary payments on our revolver. Debt outstanding at December 31, 2019 was a $132.8 million. We received $700,000 in cash from options exercised in the quarter as compared to $1.8 in the fourth quarter of last year.

Accounts receivable at December 31, 2019 was $84.6 million compared to $67.3 million as of December 31, 2018. Our days sales outstanding at December 31, 2019 was 63 days consistent with a prior year. And accounts receivable over 90 days was 6% at September 31, 2019 compared to 4% as of December 31, 2018.

Deferred revenue at December 31, 2019 was $179.2 million, an increase of 32% compared to December 31, 2018. In closing, we had a very good quarter and year. Pro forma revenue performed at the upper end of expectations, Earnings per share exceeded guidance, and cash flow was up 26% for the full year, which allowed us to continue to pay down our debt.

To date, we have paid down $42.3 million, bringing our debt outstanding to $132.8 million, leaving the balance sheet in excellent shape. We entered 2020 having integrated three acquisitions in less than two years of sustaining double-digit earnings per share growth.

As Kelley mentioned we’ve opened up the sale of SiriusDecisions product to be entire sales force which will drive the SiriusDecisions product growth to double-digit growth level.

The first half of 2020 will focus on training existing reps, beginning the broader sales rollout of the serious assistant product and accelerating the higher hiring of new sales reps. As we do this growth will gradually accelerate throughout the year.

In addition, we will see continued growth in products we invested in during 2019 FeedbackNow and our certification product, both achieved double-digit growth in 2019 and we expect a continuation of that trend in 2020.

Our guidance reflects the growth in these products as well as modest growth and events and leadership boards as we enhance the value proposition for these products are in 2020. Our guidance shows continued top-line growth and a continuation of double digit earnings per share growth.

Let me take you through specifics of our guidance for the first quarter and full year of 2020. Our guidance excludes the following. Amortization of intangible assets of approximately $4.7 million for the first quarter and $19 million for the full year, 2020.

Stock-based compensation expense of $2.7 million to $2.9 million for the first quarter and $10.5 million to $11.5 million for the full year 2020. Integration costs of 0.9 are based on $900,000 to $1.2 million for the first quarter and $1.8 million to $2.2 million for the full year 2020.

Fair value adjustment to the acquired deferred revenue from the Sirius acquisition of approximately $200,000 for the first quarter and $400,000 for the full year of 2020 and any investment games and losses. Forrester's providing first quarter 2020 financial guidance as follows. Pro forma revenues of $108 million to $112 million.

Pro forma operating margins of 4% to 6%. Pro forma effective tax rate of 31%; pro forma earnings per share of $0.12 to $0.18. Our full year 2019 guidance is as follows. Pro forma revenues of $4950 million to $507 million. Pro forma operating margin of approximately 11% to 12%. Pro forma effective tax rate of 31%,.

and Pro forma diluted earnings per share of approximately $1.82 to $1.94. We provided guidance on a GAAP basis for the first quarter and full year 2020 in our press release and 8K 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..

Operator

Thank you. [Operator Instructions] And we have a question from Andrew Nicholas, [William Blair & Company] You can go ahead with your question, Andrew..

Trevor Romeo

Hi. This is actually Trevor Romeo in for Andrew. Thanks for taking my question. First of all, so very strong margin performance in the quarter relative to your guidance. Looked like G&A expense showed some good leverage as a percentage of revenue.

Just wondering if you had any more details on what drove the upside there? And then given the strong margin improvement in 2019, could you see any upside to your margin guidance in 2020, which I think implies only about 20 basis points of improvement at the midpoint, if I'm looking at that correctly?.

Mike Doyle

Yes, Trevor. This is Mike Doyle. So we did have good improvement in the fourth quarter. A couple of things, as I mentioned in my comments, one was open headcount. And then on the G&A side, I think it's – we had bonus savings.

So essentially, we had an aggressive bonus target that we fell a little short of, so we made an adjustment to our bonus matrix in the fourth quarter. That brought favorability, if you will, into G&A. I think that's the primary reason for that.

In terms of opportunity for margin expansion, I think the key is, for us, and it's a little bit – we had originally had an expectation, probably something a little higher. A lot depends on how quickly we can hire, train and ramp reps and book business.

So I think that, as Kelley mentioned, we had attrition that sustained itself at a higher level on the SD side. I think that as we staff up, also as we train our existing Forrester legacy reps to be selling this SD product, those factors, if they move ahead of what we expect, will drive greater top line growth, which then will expand margins.

That's where the energy is. It's really how do we grow both our bookings faster and then ultimately, revenue faster. So I think if it comes anywhere, it will be that we get out of the gate a little bit quicker than we anticipate, we can ramp quicker. And that will drive better top line growth..

Trevor Romeo

Okay, great. That's helpful. And then, Mike, I think you had also said that all of the growth in the research revenue line came from SiriusDecisions in the quarter, which I guess implies that the legacy was kind of flat.

Just, I guess, anything you'd call out there in the quarter? I know you saw a little acceleration in legacy Forrester Research last quarter.

So just any thoughts on what drove the deceleration there?.

Mike Doyle

Yes, it's interesting. In the legacy research, we actually had some growth. We actually had, for us, which is unusual, our reprint business, which typically grows at a pretty healthy rate, actually declined in the fourth quarter. So that's unusual. We think it's a onetime anomaly.

And since that is bucketed with the broader legacy Forrester Research, that's what's driving it down. So no, we still – in the quarter, for legacy research, we feel like we had a good quarter, particularly on the user research that was good. We're pretty happy with that. And again, we're hoping that's going to compound itself as we go into the year.

And I do think the reprint revenue will sort itself out. That was just, again, a onetime thing in the fourth quarter..

Trevor Romeo

Okay. Got it. That’s very helpful. Thank you..

Mike Doyle

Thanks, Trevor..

George Colony Founder, Chairman, Chief Executive Officer & President

Thanks, Trevor..

Operator

And our next question comes from Vincent Colicchio, [Barrington Research Associates]. Go ahead, Vincent..

Vincent Colicchio

Yes. Kelley, I apologize if I missed it.

What was the SiriusDecisions attrition in this quarter versus the prior quarter?.

Kelley Hippler

So attrition on the SiriusDecisions side has been running between 35% and 37% the last couple of quarters..

Vincent Colicchio

Okay.

So it was consistent this quarter with the prior quarter, is that right?.

Kelley Hippler

That is correct..

Vincent Colicchio

Okay.

And is the level of seniority in terms of the turnover, was that consistent as well?.

Kelley Hippler

Yes, pretty much....

Operator

[Operator Instructions] We do have a question from Allen Klee, [National Securities Corporation]. If you want to go ahead with your question, Allen..

Allen Klee

Yes, hi. So can you talk about like how you think about the overall demand environment, maybe now versus a year ago? And if you think that has any difference on your general longer-term thoughts of annual pricing power and any abilities to kind of lower cost of generating research, such as surveys? Thank you..

George Colony Founder, Chairman, Chief Executive Officer & President

Yes, I'd say that this is just a general color about the economy. From our standpoint, Allan, all is moving very quickly, very fast, very healthy. I mean, coronavirus aside, we don't – our analysts and our economists here are trying to factor that all in. But generally, our demand is very strong.

We will have a price increase in July, and we believe we can justify that price increase. Cost of surveys has not dropped. I would say that the fact that we now have a real-time source of survey material through FeedbackNow, that is a very low-cost way to gather survey and research information.

So we see it in the real-time side, but not on the typical traditional survey side. So I would say cost staying flat. Nothing is increasing unexpectedly on us, and demand is strong for the company and our products..

Mike Doyle

And our numbers, Allen, do not reflect any sort of potential impact of, to George's point, things that may tip the economy, like the coronavirus, like Brexit. Our FX rates are pretty much roughly the same year-over-year in terms of our assumptions. So that obviously could change if there's a disruption in the economy.

You probably didn't see a strengthening of the dollar, and that would impact, obviously, our businesses outside the U.S. But to George's point, we're not seeing anything yet. Therefore, our numbers don't reflect anything..

George Colony Founder, Chairman, Chief Executive Officer & President

And by the way, our business in China is small.

I don't have the number right in my head, did you guys have that number?.

Mike Doyle

It is – yes, well, our Asia Pac business is decent in size, but China as a piece of business, well, is relatively small..

Allen Klee

Maybe just following up on what you said with FeedbackNow. Could it seems like it can be very powerful.

Could you maybe talk a little more, maybe give an example of like as this scales up of how you see customers using this? And what this can turn into?.

George Colony Founder, Chairman, Chief Executive Officer & President

Yes. So just to give you some context here, we're currently logging about 450,000 per day now through FeedbackNow. I would expect to go well over 100,000 next year, probably in the 600,000 range. But the entire – the value model here, Allen, is this is not survey-based customer experience.

Where – and we've been doing this for many, many years where we would survey within a company, understand their – the level of their customer experience months later and then they would strategically change their customer experience.

This is about giving our clients the ability to monitor experience in real time, and given them the ability to then improve experience in real time. So it's very different than the traditional model and very well received.

I mean, we're starting – our presence is first in the physical side soon and with – I would – if I pick a number here, we're 85% physical, 15% digital. But as we go deeper into 2020, that digital is going to grow.

Mike Doyle

I think the other piece that's happening now and in the fourth quarter, we landed the largest deal we've ever had. And that was sourced by one of Kelley's sales players. So we – prior to that, I've been working pretty much with the existing FeedbackNow sales reps.

Their model has been lots of smaller deals, some maybe decent-sized deals, but a lot of small deals. We're going to shift to bigger deals, and that should help us accelerate, partnering with Kelley's sales organization, accelerate the growth of FeedbackNow both in 2020 and beyond..

George Colony Founder, Chairman, Chief Executive Officer & President

That deal was north of $1 million..

Allen Klee

That's great. And then maybe just something – one more thing on the SiriusDecisions sales force attrition.

I'm trying to speculate that if I was a salesperson at SiriusDecisions, why would I be one of those people attritioning? And I would – first choice I would say is if I thought I was going to make less money, potentially, my accounts would go down or I'm getting a lower payout.

Or is – can you respond to that? Or do you think that whatever that issue is that something is going on that maybe that won't be an issue going forward?.

Kelley Hippler

Sure, Allen. So to that point, I think one of the things that we learned after the acquisition was that rep success rates in the prior below industry standards. And anytime you have a sales force that is not by and large hitting its number, we're going to stop for attrition because people aren't getting to their goals and their objectives.

So I think unfortunately we dealt with some of the ramifications of things that had happened before we stepped on the scene.

With that said, we have actually just gone through a process right now to level all the SiriusDecisions reps to make sure that we have looked at their skill sets, looked at their quotas, location, et cetera, and making sure that they map appropriately to the same level at Forrester.

So we've made quite a bit of investment there with that sales force to make sure that they're at the proper level with the Forrester sales organization. So unfortunately, a lot of it were driven by things that happened before the acquisition.

And again, it's also unfortunate that a lot of the conversation has been about the folks that have left and not some of the individuals that have stayed.

We have some fantastic folks that are now part of the Forrester organization who originated with SiriusDecisions who are going to be big contributors for us as we move forward here, including folks on my leadership team and our management ranks that we're really excited about..

Allen Klee

Okay, thank you so much..

George Colony Founder, Chairman, Chief Executive Officer & President

Thanks, Allen..

Kelley Hippler

Thanks, Allen..

Operator

And we have a follow- up question from Vincent Colicchio, [Barrington Research Associates]. Go ahead, Vincent..

Vincent Colicchio

Yes. Kelly, when I got cut off, I was asking if the seniority level of the people leaving at SiriusDecisions was consistent with the prior quarter..

Kelley Hippler

Yes. I'm sorry, I thought it was something I had said, Vince. So I'm glad there was a technical glitch. So yes, with that, we've continued to see pretty much steady attrition numbers across different populations. Again, I think, typically, with the sales force, Q1 is – there's some seasonality to attrition.

I think once we get through this quarter, things are definitely going to stabilize. But it's been pretty consistent across job levels and geographies as we worked our way through 2019, and we expect it to stabilize shortly here in 2020..

Vincent Colicchio

And I'm not sure who this one is for.

But how conservative is the 5% growth rate for the sales force for 2020? May that increase a bit if we come in with better-than-expected performance in first half?.

Kelley Hippler

Sure, Vince. I'll take that one. So we are starting off with 5%. And then the work that we have ahead of us is to reevaluate and reassess the territory scoring model that we developed as part of our move into the customer engagement model to figure out what the optimal size territory is.

So there is a possibility that we will add more as we go throughout the year once we do that work. But we also want to be thoughtful about making sure that we have adequate territories for our sellers to be able to get to their quotas. But I would not be surprised if by midyear, we are continuing to add to that number..

Vincent Colicchio

That’s it from me. Nice quarter guys..

George Colony Founder, Chairman, Chief Executive Officer & President

Thanks, Vince..

Kelley Hippler

Thanks, Vince..

Operator

And our next question comes from Anja Soderstrom, [Sidoti & Company].Go ahead, Anja..

Anja Soderstrom

Hi, everyone..

Kelley Hippler

Hi, Ania..

Anja Soderstrom

So I just had a follow-up on Allen's question about the FeedbackNow. So you are monitoring the customer experience in real time. And then are you already now able to act on that? Or is that something that's coming in the future to respond to the...

George Colony Founder, Chairman, Chief Executive Officer & President

Are you talking about the clients being able to act on that?.

Anja Soderstrom

Yes.

I mean when the customer are giving feedback, they are able to act on it in a real-time sort of?.

George Colony Founder, Chairman, Chief Executive Officer & President

Yes. The customers have real-time connection to that data through website, but also through mobile apps. And in fact, that's how – primarily how it's being used by our clients today. This is the current FeedbackNow. It is being used to respond quickly to problems, to dirty bathrooms, to any area that's being monitored that goes red.

So yes, it is being used today to monitor in real-time and to improve in real time. Now there are some clients who are better at improving real time and some who are less better. So it's – this is a – I would say this is a growing muscle in the part of these clients. This concept, that experience can, in fact, be moved, can be improved in real time..

Anja Soderstrom

Okay, okay. That was helpful. And then in terms of the other certificates. You launched one in the third quarter.

So you have two, three now, right?.

George Colony Founder, Chairman, Chief Executive Officer & President

Yes..

Anja Soderstrom

Yes. How do you see that portfolio building out in terms of the...

Mike Doyle

We actually are very happy with that business. I mean, we literally have just got going with that and we've had really healthy growth. And we inherited the business also from SiriusDecisions, but we've essentially – we're moving forward with that business, we expect it's also going to grow double digits again in 2020. We like the product.

We've got a good team running it. And we're pretty bullish on what that can do for us. So we're feeling good about it, Anja..

George Colony Founder, Chairman, Chief Executive Officer & President

Yes. And on the two primary certification spaces. The first, of course, is customer experience, and there are believed three levels of customer experience certifications. That's the first. And the second is B2B marketing. And that's coming directly from SiriusDecisions.

There's lots of opportunity in certification to ride on the SiriusDecisions Research and to build, as an example, in demand marketing, in marketing operations, in sales operations. So lots of new areas to be launched in certification, primarily running off the execution research or SiriusDecisions Research..

Anja Soderstrom

Okay.

And what sort of ramp do you foresee having on that like a set figure per year or?.

Mike Doyle

From my perspective, I think those businesses are going to grow and accelerate. And the intent of talking about them both in this call and as it relates to the year was, in terms of dollars, they are not huge yet.

But I think the point we were trying to make is we are continuing to invest in a broad array of products within Forrester in addition to managing through the SiriusDecisions acquisition integration. So – but I think that these are integral parts of our business and that they're going to grow at a pretty healthy clip over the next five years.

I think FeedbackNow has a tremendous amount of upside. To George's point, we're really in, I would say, stage one in the physical form, but there's more to come. And certification, as George described, has a lot of opportunities to take this business into other areas in addition to the ones we currently service..

Anja Soderstrom

Okay. Thank you. That was all for me..

George Colony Founder, Chairman, Chief Executive Officer & President

Thanks, Anja. I appreciate it..

Kelley Hippler

Thank you..

Operator

We have no more questions in the queue at this time.

Would you like to make some final statements?.

George Colony Founder, Chairman, Chief Executive Officer & President

Yes. First everyone thanks for the patience. I apologize to the minor technological glitch, it does periodically happen. We have already put some dates out there with folks we're looking forward to getting out on the road and talking about the story and look forward to a very exciting 2020 for Forrester. So thank you very much for joining..

Mike Doyle

Thank you..

Kelley Hippler

Thank you..

Operator

And thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect..

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