Good afternoon, and thank you for standing by. Welcome to Forrester's Third Quarter 2023 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to Vice President of Corporate Development and Investor Relations, Ed Bryce Morris. Please go ahead.

Thank you, and hello, everyone. Thanks for joining today's call. Earlier this afternoon, we issued our press release for the third quarter of 2023. If you need a copy, you can find one on our website in the Investors section. Here with us today to discuss our results are George Colony, Forrester's Chief Executive Officer and Chairman; and Chris Finn, Chief Financial Officer. Carrie Johnson, our Chief Product Officer; and Nate Swan, our Chief Sales Officer, are also here with us for the Q&A section of the call. 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, future events or otherwise. Lastly, consistent with our previous calls, today, we will be discussing our performance on an unadjusted 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.

Thank you for joining Forrester's Q3 2023 earnings call. As has been true for the last 4 quarters, we continue to navigate through a challenging macroeconomic environment while simultaneously progressing on a major product transition. As we enter the busiest selling season of the year for Forrester, I would like to cover 5 key themes: one, Forrester's third quarter performance; two, enhancements to the Forrester Decisions product; three, our work applying generative AI to our business; four, an update on our third quarter events; and five, improvements to our sales process. As a result of persistent headwinds, contract value was flat in Q3. However, we are pleased to report that Forrester Decisions has now reached approximately $200 million in contract value, representing 57% of our overall CV. In our non-CV businesses, we have seen signs of stabilization as well as a modest improvement in our strategy consulting volume. Consulting is transitioning to be a smaller part of our overall business, but its importance as part of our CV growth engine remains undiminished. We are piloting acceleration services, prepackaged consulting offerings that are aligned with priorities in the Forrester Decisions services. The packages will give clients in-depth direction and guidance as they apply our research models and frameworks in their organizations. We remain on track to convert 2/3 of our CV to Forrester Decisions by the end of the year, and Chris will go into more details in a few moments. Turning now to the enhancements we've made to the Forrester Decisions product. Firstly, we are excited to report that the addition of client outcomes, which was mentioned in our previous call, has made significant progress. As a reminder, client outcomes is a new feature that identifies our clients' most pressing initiatives and links them to contextually relevant Forrester Decisions assets.…

Thanks, George, and good afternoon, everyone. As George outlined, we continue to see business uncertainty impacting our results. The third quarter saw most metrics coming in lower than the prior year but generally consistent with the prior quarter. We believe this uncertain environment will continue to impact the remainder of the year and into 2024. This, along with our product migration, is limiting our CV growth and continues to depress our non-CV business, specifically with consulting and events. However, we are confident in our ability to execute and have maintained our revenue, margin and EPS guidance for the year. Furthermore, we continue to manage costs and set the business on a solid foundation to improve performance into 2024 and beyond. Q3 saw flat CV in the quarter, and overall revenue decreased 11% largely driven by our consulting business and declining legacy research. For the total company, we generated $113.4 million in revenue compared to $127.7 million in the prior year period. In terms of segment results for the quarter, research revenues decreased 7% compared to the third quarter of 2022 with revenue from our subscription research products down 1% coupled with declines in our reprint and other smaller and discontinued products. Overall client and wallet retention bulk dipped slightly compared to Q2 at 73% and 91%, respectively, while Forrester Decisions specific client and wallet retention also dipped slightly or flat versus the second quarter at 85% and 92%, respectively. Although overall client count is down from the prior quarter, Forrester Decisions client count continues to grow. And Forrester Decisions client retention remains well above overall client retention by approximately 12 points. As we noted previously, we expect continued noise around our client count and retention rates as we migrate our legacy base to the Forrester Decisions platform. We continue to…

Thank you, Chris. I would like to take a moment to express my gratitude to our employees and clients. As we approach Thanksgiving, we are thankful of the hard work and commitment of our employees, who have navigated through the prolonged headwinds and challenges we faced this year. Their dedication and resilience have been instrumental in driving our business forward and enabling us to adapt to the evolving needs of our clients. We are also grateful for the trust and partnership with our clients. Their continued support and engagement have allowed us to deliver impactful research, innovative consulting solutions and groundbreaking event experiences. We appreciate the opportunity to work with them and help them achieve their business outcomes. I'm going to hand the call now back to the operator, and we will take questions.

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

This is Tom Ross on for Andrew Nicholas. I wanted to ask about the CV growth stabilization or the stabilization of CV growth that you're seeing in the quarter. I know you mentioned you saw coming out of last quarter. And I was wondering if that was kind of in line with those expectations? Or did it improve, a little bit worse? And kind of what you're thinking as we exit this year?

Yes. Thanks for your question. It's Chris. So as you know, we don't specifically guide on CV growth per se. We've said in the past, we do expect our metrics to continue to be a little bit lumpy in that area as we go through our product transition, especially in light of the macroeconomic conditions that are out there. So for the next few quarters, we do expect to see CV growth move up and down a few points. I think we said it last time as well but essentially be relatively flat. That being said, we are continuing to have positive feedback on the FD platform, as I noted, and we're very confident in getting to our 2/3 of CV on the platform by the end of the year. And that, combined with the improvements that Nate and his team are making to the sales organization, do give us confidence that CV growth will return as we get further along in the product transition next year.

Great. And then for a follow-up, I know you mentioned the AI product, Izola. And it's being pilot by some customers. I was wondering what kind of feedback you're getting right now? And then also just gen AI in general, kind of what opportunities you see there going forward from the product side?

Sure. This is Carrie. I'll take that one. We rolled Izola out to about 80 beta clients last week. The early feedback has been unbelievably positive. In particular, clients like the ability to get quick answers from our entire body of research and then figure out which research is the most relevant for them to then dig into. So Izola doing very nicely for us, and we're hoping to roll this out to more customers soon because we really do believe this is a massive leap forward in how customers interact with us and help move their journeys forward. So we're very proud of this and excited to launch to more customers soon.

Yes. I mean, gen AI is a way for people to converse in their own language English for us with big piles of data. We have a very big pile of data. And it's a daunting pile of data. It's hard to find the right research. With Izola, it's -- strangely enough, you get there immediately. So this is, again, as I said, the biggest change since our website, which is why we have 4 projects internally ongoing. Thanks for the question.

And I show our next question comes from the line of Anja Soderstrom from Sidoti.

So I'm just curious about the clients. Is that still mainly due to shedding on nonstrategic accounts or...?

Yes. From a client churn perspective, yes -- this is Chris, Anja. Yes, we're still seeing that really in the small vendor cohort. That's ongoing as we go through the transition, and we get a smaller base now on our -- in our legacy business from a CV perspective going into Q4 now and the next year. So look, we continue to expect our retention numbers to be a little bit lumpy and as we go forward. But obviously, as we continue to make that migration progress, we're going to see it stabilize going into next year.

Anja, one of our Board member's a Silicon Valley executive. And she said that 650 starters have gone out of business in the last 4, 5 quarters. And she expects another 1,500 go out of business over the next 4 quarters ahead. So it's pretty extraordinary what's happening in the small vendor world.

Yes. No. And in terms of the clients that have transitioned to Forrester Decisions, you're talking about the wallet retention and retention rate is higher than the overall. Did you say to what magnitude that is?

Yes, from a client retention standpoint, it's approximately 12 points higher on FD than it is for the overall platform. The overall -- sorry, overall business.

Okay. And then in terms of the AI addition to your platform, how much of an upsell is that?

Actually, Anja, it's Carrie. Izola will be included in the Forrester Decisions product line and not included in our heritage line.

So again, more incentive to migrate.

More incentive to migrate, correct.

And I show our next question comes from the line of Vince Colicchio from Barrington.

Yes. Curious what caused the sequential decline in sales. Was that voluntary, involuntary? What does that look like?

Sorry, you mean on sales headcount?

Yes, yes. Sorry.

Got it. It's down slightly. I don't know, Nate, you want to comment on that?

Are you talking from Q2 to Q3 post reduction in force?

Yes.

Okay. Post production in force, we've had just slight declines. We're in the process of actually adding back in headcount right now. So actually, opening up a lot to -- for backfill. So we're excited about that. We're looking forward to continuing to grow our sales force. We need to invest in the right areas, and the right areas really are around new business development. That's part of the reason Carter is here is getting focused on the end user opportunity that we see out here. We're already very good capturing the midsized vendors. We're going to get really focused on how do we capture more user clients. So we will be focused in that area and adding headcount in that area. So right now, we're just down due to attrition, but we are bringing those back up. And we don't anticipate going lower than what we are right now.

And Vince, attrition is very low. It's in the single digits.

Single-digit attrition.

So kind of historically low attrition.

And Nate, how are you feeling about the important process of selling more to more senior people, clients and prospects? Is that progressing as you had expected?

Yes, I think so. I mean, it's a journey that we go through. There is -- it's a different model that we're selling to events or different sets that we're selling to. So that's a change in skill set. But the sales force is reacting really well to that. They want to be where we're going. They want to have more senior-level relationships. And they are enjoying doing the skill building to get there. We're also doing this. We got great feedback back from our Board of clients that, that was the value that they see in working with Forrester is better alignment across their teams. These are some of the most senior executives at rather large organizations. And they specifically look to Forrester to understand what's happening in their organization because we can connect that all together for them. So it's not just that we think this is something that's good. Our clients are telling us that this is good as well.

And Chris, on the decline in clients, small clients is obviously the key driver there. How large is the small client base as a percentage of the total now?

Yes. As a percentage of the total at this point, I mean, I think we're down to -- in the legacy business, I mean, it's less than 30% at this point. So we feel pretty good about the ongoing migration in general from a legacy perspective. And look, that churn is expected, and it's kind of built into our numbers as we go forward. And obviously, the further we get in the migration going next year, the less of an impact that's going to have and especially as we go out past '24. We do expect that to really be an immaterial part of the business on the legacy side once we get into '25 and beyond.

Yes. Vince, we made a decision to not sell to sub-$50 million vendors. So we are turning the sales force again toward larger users primarily and of course, the large vendors.

I'm showing no further questions in the queue. At this time, I'd like to turn the call back over to Chris Finn for closing remarks.

Yes. Thanks, everybody, for joining us today. We really appreciate it. Any questions, follow-up comments, please reach out to us, myself or Ed Bryce Morris. Thank you all.

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