Good afternoon, and thank you for standing by. Welcome to Forrester's First Quarter 2025 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation there will be a question-and-answer session. 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 first quarter 2025. 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, 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 involves 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 obligations 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 exclude items affecting comparability. While reporting on an unadjusted 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.

Good afternoon, and welcome to Forrester's first quarter earnings call. I'll be joined today by Chris Finn, our Chief Financial Officer, who following my remarks will provide an update on our financial performance in the quarter. While the company has completed the transition to Forrester Decisions, its challenges persisted in the first quarter, with decreases in both revenue and contract value. That said, the company showed healthy cash flow in the quarter and earnings per share and operating margin exceeded consensus. The last mile of the Forrester Decisions transition is optimizing our go-to-market motion to match our product platform. The company's sales force continues to move towards processes and methodology to reach higher level executives whom Forrester Decisions was designed to serve and expand the number of personas served within accounts. Sales activities and sales pipelines are increasing month-on-month, and I expect this trend to continue throughout the year, improving our performance as we progress through the quarters. Economic uncertainty emerged in the quarter, and we are planning for it to persist throughout the year. While the U.S. federal government makes up less than 6% of our contract value, we have had several contract cancellations associated with the DOGE efforts in Washington. To date, these have been minimal, but we expect the renewals and new business in the government sector will remain tight throughout the year given the administration's posture. Tariffs imposed by the U.S. government are driving hesitancy on the part of buyers, something that we encountered most predominantly in our Asian and European businesses in the first quarter. As with COVID five years ago, the lack of certainty is resulting in budget tightening, increased sourcing attention and spending pauses, especially in the most impacted vertical markets such as discrete manufacturing and retail. So how are we responding to…

Thanks, George, and good afternoon, everyone. Our first quarter results reflected the macroeconomic and geopolitical uncertainty in the marketplace with our CV research business impacted in our consulting business showing mixed results. Despite these uneven results, we continue to manage our costs closely and deliver the operating margin and EPS above consensus estimates. Furthermore, we delivered positive free cash flow this quarter of $26.1 million on the back of prudent cash management. Q1 saw a 7% CV decline in the quarter and based on an expected ongoing challenging operating environment, we're now expecting CV to be flat to slightly down for the year. Although this market is challenging, we see areas of opportunity and are actively working on several initiatives to improve our performance, including ongoing retention work, focus on the user and government portions of the business and pricing and packaging augmentation of our portfolio aimed at broadening the market for our products. One retention area where we are seeing positive momentum is in multi-year contracts. We hit 73% of CV in multi-year contracts in Q1, an all-time high. For the total company, we generated $89.9 million in revenue compared to $100.1 million in the prior year period, which is an overall revenue decrease of 10%. As we noted on our Q4 call, we expected revenue to decline this year due to the bookings declines we experienced in 2024. The ongoing government efficiency efforts by the current administration have had a small negative impact on our first quarter results. However, our overall federal government business is less than 6% of total contract value. Therefore, we anticipate that any potential future contract cancellations by the government will be a slight headwind in 2025. More broadly, although we believe that economic volatility will be a constant theme throughout 2025, and this…

Thank you, Chris. Before we move on to Q&A, I'd like to restate where we stand. While we had anticipated a more placid economy for the year, that has not been the case, and we are ready for any eventuality. We have the right research for our clients in a time of volatility. We are the AI research company. We are looking to take advantage of the changes in the U.S. federal government, and we continue to improve Forrester Decisions. We are on the side and by the side of our clients in these turbulent times. And this is evident in our client engagement data as the number of advisory, guidance and inquiry sessions have increased from the fourth quarter of 2024. We remain diligent in our work of completing the last step of our transition, ensuring that our go-to-market system is best positioned to sell and serve our power research platform. So with that, I'll hand the call back to the operator for questions.

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

Hi, good afternoon. Thanks for taking my question. First, I just kind of wanted to ask a little bit more about guidance. I think, George, you mentioned first quarter being a little bit below plan. Obviously, macro uncertainty is a bit more elevated versus when we last spoke. Just kind of wondering what gives you conviction in the maintained guidance given the more disruptive environment? And then also and I apologize for the multi-part question, but if we're talking about what went below plan in the first quarter, was that more macro budgetary driven? Or is there some government headwind in that number as well?

Yes. Hey, Andrew, this is Chris. Yes, from a guidance perspective, the guide on revenue was fairly conservative on the bottom end in the beginning of the year when we talked last time in the last call. So, look at this juncture, it's early in the year. There's a lot of possible scenarios that can unfold. We do have a little bit of favorable foreign currency, obviously, in that number, it's about one point on our outlook based on the dollar. And look, we're being more mindful of earnings, margin and cash flow and we're prepared to ensure costs remain in line with the top line as we move forward. And so this outlook obviously is in a recessionary outlook. So that's why we're maintaining the guide. I mean if things do get considerably more challenging and worse with the tariff and the DOGE situation, obviously, we would change the guide. But at this juncture, I mean, I think, look, we see some opportunity on the government side. We did have about $2 million of cancellations in government so far. But like we said, it's approximately less than 6% of our overall business. And we do see some opportunities there. We've identified by account where the risk is on the government side, and we see about probably $1.5 million to $2 million of additional risk in the back half. And we have new leadership as well on the government side, which I think Nate can talk to, which we've got some high confidence in around those relationships that have come with that new hire. And so I think overall in the guide, I think we are just pretty conservative down the middle right now, and we're trying to balance opportunity with risk.

Hey, Andrew, it's Nate Swan. So, did hire a new leader in January. He's doing a great job with that team, got them very focused on building pipeline and making sure that they are working with the appropriate mission leaders within the government. We are making sure that our -- we're focused where we can win. We also see opportunities across the state and local government as well to compete. So while we're not taking our eye off of the federal government because we still think there is opportunity to win there, I'll speak to that in a minute. We are focusing on state and local business and have seen some good success so far getting on some vehicles to go through some purchase. So I feel confident about that. As George mentioned in his prepared remarks, the government is focused on AI and cybersecurity, and we are really good in that space. So we're making sure that they understand our capabilities and how we talk about them with Izola as a -- really as a leading force for us, the way we can help people get answers quicker is really appealing to our government contact. So we're not out of the woods. We still have a lot to do on that space, but we believe that we have potential in the federal space, in the state and local space, and we're actually seeing government wins around the world as well.

Great. Thank you. I appreciate the color. And then for my follow-up, again, I think George mentioned evidence of progress with the sales force and reinvigoration and execution, pipelines and activity increasing month-over-month. So I was just hoping you could spend a little bit more time there. What are some areas where you're particularly excited about maybe early signs of better performance from a sales force organization perspective? Thank you.

Yes, sure. So I will give you three specific areas that we are working on. So our sales methodology, our fast methodology, our sales teams are really leaning in on that. So making sure that we speak the right way with our clients and internally. So we're actually doing a session with our analyst group tomorrow on that same methodology, so we make sure our analysts and our salespeople are communicating the same way. So getting on the same page about how we talk about our business and opportunities. That's one. Number two, our pipelines on a per AE basis. Now keep in mind, we're down slightly from a AE headcount year-over-year. So year-over-year per AE basis, pipelines are up about 33% through Q1 and continue that trend in April. I'm really proud of what the sales team is doing. They are very focused on getting more meetings, more opportunities, qualifying them quickly to try and keep -- to move them through the pipelines as quickly as possible. Certainly, it's a volatile market right now, and it's taking longer to go through there, getting longer approvals. And we definitely saw a little bit more wait and see. So pipelines are improving. And then number three, really our retention life cycle activity, the activity that our customer success organization is really ramping up on and our sales organization. So making sure that we're talking to the senior leaders of the organizations that are buying our services, talking to them about what -- how are they using Forrester and what value can they be expecting back. So we're really seeing the organization lean in on those areas around making sure that they're driving retention. And I know that will pay off for the organization in the long run. So sales methodology, pipeline improvement and then just process improvement with our retention life cycle.

If I could squeeze one more in, Nate, because you mentioned the headcount growth in the sales force. I mean, is there any way for us to think about what's voluntary attrition there versus involuntary? It does look like it ticked down a decent bit sequentially. So just want to get a sense for that and maybe what the headcount growth plans are planned as we move through the rest of the year?

Sure. So we're -- we have the headcount growth in our second half plan. We're actively looking at where we can apply going into the year, I think we felt like we had a good opportunity to go with the government. We're having to rethink how we're adding headcount there and maybe redistribute that into other areas. But we're looking around the globe as to where does it make sense to add headcount to the organization. We are down year-over-year. That is partly attrition and partly we did not backfill some territories as we were going through a reduction. Now we are feeling very confident that we got the right territory size, and it's time to start growing back. And I want to emphasize, I think the sales team is doing a great job at building pipeline, and they're showing that we can create the opportunities out there. We just need to start converting that growth pipeline.

Thank you very much.

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 question. Have addressed most of them, but if I understand right, the pipeline is expanding, but the sales cycles you see a little bit prolonged?

That's correct, Anja. We're seeing about 10 days longer, 10 to 12 days longer in our initial view to close out deals. So not surprising, much more layers of scrutiny. We're certainly hearing it from our account managers as well as from clients that, hey, there's a new process in place. We weren't aware of this process. This just changed. So pretty rapid development in Q1 as we were going through both renewals and growth cycles. I think we're very prepared for those conversations now as you -- things have changed with long-time buyers where they didn't have a process before, now they have the process. Great. We need to react to that and make sure that we're on track with them and feeling pretty good about how we're doing. We should not be getting surprised going into the remainder of the year is that there's more scrutiny and more tie-offs that have to happen before contracts get signed.

Okay. Thank you. And are you still hosting the two large events in the second quarter? And if so how are they shaping up?

We do. Hi, Anja, it's Carrie. We have our CX events, one in Europe and London here coming up in a few weeks, and then we have CX North America at the end of the month in Nashville. Both are looking very good from an audience perspective. CX North America, in particular, we're seeing really good growth there in the total attendee side for the year so far. So excited about those and excited to get those executives together.

Okay. Thank you. And also in terms of sectors, were there any -- are there specific sectors that were more challenging? Or is it across the board for you?

I think we're seeing the -- besides the government sectors, we're seeing challenges across the board more with certainly on the manufacturing side, a little bit on the financial services side. But I think it's kind of equal pressure around different industries and cohorts.

Retail as well, Anja. As I said in the remarks, the biggest impact we saw in the tariffs was really in Asia. Companies there hesitating Asia followed closely by Europe.

Okay. Thank you. That's all for me.

Thanks, Anja. I appreciate it.

And I show our last question in the queue comes from the line of Vincent Colicchio from Barrington Research. Please go ahead.

Yes. Most of my questions were asked already as well. Just Chris, how strong is your -- how does your visibility to the revenue estimate for the year at the low end compared to what it was in the year ago period?

Yes. I think it's strong. I mean, on the subscription side of the business, obviously, for research, that's a very good estimate for the year. Obviously, the outlook has us with a forecast on FD, I think is, like I said, right down the middle, balances our risk and opportunities, especially on the government side and across the sectors where we have seen a little bit of weakness. High-tech has been kind of our best performing vertical though overall, which is good. And so our expectation that we're going to watch that closely and hope that it continues to perform the way it has been. And I think on the Consulting side, certainly, we think that's a balanced view as well. Same thing for events. So we feel pretty good about the outlook. Obviously, like I said earlier in the call, it's not a recessionary outlook. It is a balanced view based on what we can see right now and how this expectations around where this administration is and the macroeconomic environment. And yes, we're going to continue to watch it closely. So we feel pretty good about the guide on especially on that one.

And the client decline -- excuse me, the decline in total clients, is that still solely or primarily small clients? And if so, well, when do you expect that to start to grow again?

Yes, it is Vince mostly in the -- still in the smaller clients. We certainly are seeing really good results out of our emerging tech business. It is one of our better performing business, but that is at the higher end of that market. So kind of following our strategy of greater than $50 million, we're seeing better retention numbers out of that group. But it's still churning some of those smaller vendors, some of them that had migrated over to the new product and maybe it was not a fit, which it wasn't designed to be a fit for an organization that was not growing and utilizing those services.

Yes. The biggest reason for non-retentions, Vince, is a mismatch. We sold to the wrong persona, the wrong product, and that's the primary reason. We're very vigilant about this now when we are selling, making sure that the client is matched up with the priorities and matched up with the persona. But that's the primary reason for non-retention.

Yes, and single seat holders is -- with contracts is kind of our place that we need to avoid, right? We want to sell people work in teams. We want to sell team solutions for them. So when we get a client that only has one license, it tends to be a little more difficult. We certainly can sell through that, but it's an area of opportunity where we can get better.

Thank you gentlemen. Appreciate it.

Thanks Vince.

Thanks Vince.

That concludes our Q&A session. I would now like to turn the conference back to Chris Finn, CFO, for closing remarks.

Yes. Thanks all for joining today. Any follow-up questions, please reach out to myself or Ed. We're always here to help. Thank you.

Thank you very much.

Thank you.

Thank you.

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