Good afternoon and thank you for standing by. Welcome to Forrester's Fourth Quarter and Full Year 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session. Please be advised that today's conference is being recorded. I'd now like to turn the conference over to Vice President of Investor Relations, Tyson Seely, please go ahead.

Thank you, and hello, everyone. Thanks for joining today's call. Earlier this afternoon, we issued our press release for the fourth quarter and full year 2022. If you need a copy, you can find one on our website in the Investors section. 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. Factors that could cause actual results to differ are discussed in our reports and filings with the Securities and Exchange Commission and the company undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, further events, or otherwise. Lastly, consistent with our previous calls, today we will be discussing our performance on an adjusted basis, which excludes items affecting comparability. While reporting on an adjusted basis is not in accordance with GAAP, we believe that reporting numbers on this adjusted basis provides a meaningful comparison and an appropriate basis for our discussion. You can find a detailed list of items excluded from these adjusted results in our press release. And with that, I'll hand it over to George Colony, Forrester's CEO and Chairman. George?

Thanks, Tyson. And welcome to Forrester's fourth quarter and full year 2022 investor call. Following my update, Chris Finn, Forrester's CFO will give a financial review of the quarter and full year. At the end of the call, I'll ask Nate Swan, Forrester's new Chief Sales Officer to give a few remarks. We will then move on to the Q&A portion of the call joined by Carrie Johnson, our Chief Product Officer. In the fourth quarter 2022, Forrester's revenue increased 2% with adjusted operating margin at 9.4% and EPS at $0.45. Total CV increased 3% in the fourth quarter, down 4 points from Q3. Wallet retention was 94%. For the full year revenue increased 9%, adjusted operating margin was 13%, and EPS grew 18%. These results were driven by healthy bookings in the first half of 2022, as well as continued close management of our cost structure in the second half of the year. 2022 was a tale of two cities. In the first half of the year the company was focused on hiring employees as we look to expand contract value at rates aligned with our fast 2021 pace. At mid-year, we recognized the three factors were impacting our progress. One, funding and budget pressure on our smaller technology clients. Two, the impact of inflation, geopolitical uncertainty, and the turbulent economy. And three, the complexity of transitioning our clients out of legacy research products and into our new platform Forrester Decisions. While we had hired aggressively and built new systems to enable the company to sustain double-digit CV growth, these moves were not enough to enable us to outrun the three intervening factors. Subsequently, we did not achieve our bookings plans in the second half of the year, and this impacted CV growth, deferred revenue, wallet retention, and ultimately…

Thanks, George. And thank you everyone for joining us this afternoon. As George discussed, our fourth quarter results were mixed. We were in line with our guide on the topline, while we exceeded our guidance for adjusted operating margins and EPS. At the same time, we continue to see a few of our key metrics decline compared to the previous quarter. Before getting into our detailed fourth quarter and full year results for 2022, I'd like to take a step back and discuss a few of the important decisions we made over the course of the past year. As we've talked about on our recent calls, we along with the broader market we're faced with a lot of uncertainty, global inflation, war in Europe, FX headwinds, lingering impacts from COVID, and the possibility of a recession in the U.S. Unfortunately, most of these headwinds have not abated. Fortunately, though, we have taken actions to weather what's ahead and manage our P&L, and drive CV growth as we exit 2023. To this end, there are two specific areas I will highlight, our cost management and the accelerated transition to Forrester Decisions. Regarding cost management, as George noted, we began to tightly manage our cost structure going into the second half of the year. This culminated in a difficult decision in early 2023 to reduce approximately 4% of our workforce. This along with ongoing prudent management across our cost base allows us to remain agile for the year we see ahead. Further, we made the decision in mid-2022 to accelerate our CV transition to our new research platform, Forrester Decisions, and announced the sunsetting of our remaining legacy products. While this has created some churn within our smaller clients, the decision to pivot more quickly on the migration efforts have begun to…

To summarize today's comments, the tech slowdown, economic conditions, and the transition to our new research platform dampened our growth in 2022. But we remain laser-focused on rolling on Forrester Decisions, which is fast growing, renewing at high rates, with high client engagement. We expect 2023 to start slowly, with improving performance in the second half of the year. Now before we head off to Q&A, I wanted to turn the call over to Nate Swan, our new Chief Sales Officer. Nate?

Thanks for the warm welcome, George, and good afternoon, everyone. I'd like to spend a few moments talking about what attracted me to Forrester, as well as provide a high level view of my philosophy and approach that I'm bringing to the sales organization. As both George and Chris have outlined, the launch of Forrester Decisions in 2021 has proven to be a great success. This platform is still in the early innings and I look forward to leading the sales force and driving this product to the next level. But it wasn't just the product portfolio that attracted me to Forrester, it was the people. Forrester has strong leadership team in place, as well as employees across the organization who are motivated and capable of delivering growth. Regarding my philosophy, I firmly believe that in order to be a successful growth company, we need to ensure we have high performing sales culture with coaching and collaboration to drive better outcomes for our customers, the business and each other. Creating a culture of high performance happens by having a clear customer-obsessed go-to-market strategy, which includes enablement, coaching, and development plans. Teaching leaders have to be great coaches with laser-focused on developing and helping them win. Ensuring our sales leaders are focused on controllables, specifically the inputs that are going to make our reps successful with the goal to always achieve and beat plan. Enabling our salesforce to call high in organizations and focus on the outcomes of executives and the companies they represent, and giving opportunities to everyone in the sales organization to grow their careers where they want to go, driving the biggest impact for themselves and the company. If they aren't successful, we won't be successful. The team at Forrester has shown that we have a unique value proposition and go-to-market plan that has positive results for our clients. That unique value proposition has been incredible total addressable market, giving us no shortage of opportunity. As I see it, it's about understanding why we're successful and replicating those best practices around the business until they become standard practices that scale. In summary, Forrester's value to positively impact our customer is unique. We have untapped market opportunities to bring in new customers, as well as the ability to upsell and cross-sell within our current clients. While there is work to do, the future at Forrester is bright. I'm so happy to join all Forresterites on this path forward. Let me now hand it over to the operator for the Q&A portion of this call.

[Operator Instructions] And I show our first question comes from the line of Andrew Nicholas from William Blair. Please go ahead.

Hi, good afternoon. First question I wanted to ask was on how 2022 played out. George, I think you mentioned twice the three factors that are impacting progress between funding pressure on smaller tech clients, the economy, inflation, and then the transition onto the FD platform, I'm just kind of wondering relative to where we stood six months ago, which of those three buckets have deteriorated if any or if those factors are largely consistent with kind of how you expected them to play out, just trying to get a sense for what ultimately unfolded over the past couple of quarters versus maybe what you expected six months ago?

So, I think that -- look, nobody is paying for anything in 2022, it was a very unexpected year. It's [indiscernible] we get deeper into the fourth quarter, Europe is actually beginning to improve. So I think the economic signals remain mixed but maybe a little more positive as the year-ended. I think there's -- I think tech was degrading faster of those three factors in Q3 and Q4, we saw that in the layoffs.

Got it. And then, in terms of capital allocation, I apologize if I missed it in the prepared remarks, but just kind of wondering how you're viewing that for '23, looks like you still have about $50 million of debt, not sure if you have any plans to pay that down at any point, if you have prioritization of share repurchases or just kind of an update there would be great? Thank you.

Yes, sure. I'll take that one. So, we generated a lot of cash, as you know, currently we have over $120 million of cash and investments on hand. Our priorities remain the same going forward from a capital allocation standpoint. One is reinvesting in the business; two, being opportunistic and looking at value-creating acquisitions as we move forward; and then the third is paying down debt. We're going to be a little bit more opportunistic about share buybacks, not really in the plan at this juncture, but really our priorities kind of remain the same. And to the end of -- around value-creation acquisitions, we just hired a new Head of Corporate Development, that's an area that we're going to definitely search or look harder at as we go forward certainly with values being where they are in the sector. And we do have $50 million of debt outstanding as you noted and approximately $75 million share buyback authorization intact as we go forward here.

Thank you.

Thank you.

Thank you.

Thank you. And I show our next question comes from the line of Anja Soderstrom from Sidoti. Please go ahead.

Hi, thank you for taking my questions. I'm just curious for -- you mentioned a couple of drivers for the year to drive the second half there, but you didn't mention anything about new products or offerings, what can we expect in terms of that and how does that play into your forecast for the year?

We have a very big product called Forrester Decisions, which we're very focused on. I'll let [indiscernible].

Sure. Hi, it's Carrie. As George said and we heard in the comments, Forrester Decisions is still our venue product offering. We're focusing all Forrester innovation in that platform, in the research and the product itself, and the value that we're driving for customers, expected to not launch many new products as we look to primarily migrate our existing customer base to Forrester Decisions. Chris mentioned that would be two-thirds by the end of the year and focusing all of our efforts there.

Remember one of our major priority is enhancing that product. So we expect to put two or three very big new features into that product every year.

Okay, thank you. And I understand that you are cutting some of your workforce, but how does that help the sales team, are you still hiring and expanding there or are you just taking a step now and focusing on what you have?

Yes, so from a sales force perspective, we are definitely focused on hiring the sales [liquidation]. We were up approximately 11% last year, so a double-digit growth in the salesforce as George noted. We've got a record number of quota-carrying reps coming into this year, and our plan is to expand quite double-digits more like mid-single digit rates and we're really looking very hard at productivity enhancements as we go through the year, in-line with our planned growth.

Okay, thank you. That was from me.

So the question -- it didn't really - under the reduction in force really did not impact the quota-carrying adjust not at all.

Okay, thank you.

Thank you, Anja.

Thank you. And I show our next question comes from the line of Vincent Colicchio from Barrington. Please go ahead.

Yes, thanks for taking my questions. George, could you give us more color on the complexities involved in the transitions. I suppose, some things that had happened that were unexpected. Any color would help?

Yes. We decided when we launched Forrester Decisions that we would continue likely products on for -- going to end up in three years. And the complexity is primarily, as I mentioned in my remarks that, this complexity was really around the smaller tech vendors, and their -- they were not as prone to make the transition as we had predicted and put in our models. So it's really our intention that you have to appreciate the problems in the tech industry generally, as in terms of funding and also venture money because much tighter is the Europe, as the Europe pushed onwards. So that's my answer, Carrie even give you another answer that's the primary complexity that we saw in 2022. You have answer here?

No, I had the same answer. Although the goal and the design of Forrester Decisions needs to go a bit higher in both our target audience and target customer base, in terms of places where we would have the opportunity to sell the new products, and also cross-sell and enrich on that existing products. So we did expect some long vendor churn as a result of that, but I think the macroeconomic conditions contributed more to some of the complexity than we expected.

I think the good news is that many of the large tech vendors are more than 50% migrated to Forrester Decisions and those are actually very complex conversations with the -- you can imagine the Microsoft's of the world, who have been buying from us, using our research in a certain way and now Forrester Decisions is a little bit, 50-degree pivot there. But the good news on that those conversations are going well, and we're -- again we're 50% through those.

And when you -- I assume you're trying to attract new clients obviously with the FD approach, so to speak, so, are you seeing -- did you hit your expectations in the quarter of signing up new FD clients, what does that look like?

Sure. It's Carrie. We did, I mean, as you suspect the majority of Forrester Decisions sales do come from our existing base, that's by design, but we're very pleased with our new business results over half of our new business bookings in the year or to the new platform. Very pleased with that progress as well. So we're happy with both new business and the renewable side of it.

Okay. And I'd add one thing too Vince is that, remember from the sunsetting discussions that we've had this year, we are only selling new FD. So there no longer new sales of legacy business. So we have a laser focus on new business sectors are for sure.

Yes. And this maybe too much information for you but -- remember that Forrester Decisions -- I'll just look at large tech here for a moment. We are selling not -- we are selling new products into those companies primarily to our CMOs, CLOs, having customer experience. So we're attracting -- this is our, of course, our largest vertical. But again of companies, we're attracting a whole set of new executives so that's helping our business deal as well.

Okay, thank you.

Thank you. I'm showing no further questions in the queue at this time, I'd like to turn the call back over to management for closing remarks.

Thank you everyone for joining us this evening. The IR team, Mr. Tyson will be around this evening and tomorrow and the weeks ahead for any follow-up questions. Please feel free to reach out to us. Thank you for joining.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.