Forrester Research, Inc.
Q1 2017 Earnings Call Transcript

Published: 27 Apr 2017

[Operator:]

Good afternoon. Thank you for joining today's call. With me today are George Colony, Forrester's Chairman of the Board and CEO; Michael Morhardt, Forrester's Chief Sales Officer; and Mike Doyle, Forrester's Chief Financial Officer. George will open the call. Mike Morhardt will follow George to discuss sales. Mike Doyle will then follow Michael Morhardt to discuss our financials. We will then open the call to Q&A. A replay of this call will be available until March 10, 2017 and can be accessed by dialing 1-888-843-7419 or, internationally, 1-630-652-3042. Please reference the passcode 8392738# 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 as 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 will now hand the call over to George Colony.

[George Colony:]

Thanks for joining our first quarter call for 2017. I will give a short brief on the quarter, I will then hand the call over to Mike Morhardt who will outline the state of sales and the customer engagement model our new go to market structure. Mike Doyle, Forrester’s CFO will give a financial review of the quarter and then the three of us will take questions. In the Age of the Customer companies must have been closer to their buyers and this maxim also applies to Forrester. In 2017, we are working to drive engagements, increasing client usage of our products through improved responsiveness, ease of use and value. To this end we are pursuing three initiatives; one, rolling out a new selling model, two, covering down the digital to make our products engagement accessible and three, expanding how we work with our user clients. Successfully executing these efforts will enable the company to increase renewal rates, expand enrichment levels, win new business and ultimately lay the foundation for revenue and ETF growth. Looking sort of the high level view of the road of our new selling structure, what we internally call the customer engagement model. As you remember our model splits accounts into two segments. Core, our smaller clients that purchase a limited set of products and Premier, our largest clients who deploy complex solutions. Most of our Core accounts will be served with an inside sales force based in Nashville, Tennessee. Our Premier accounts are served with the client executives focused on expanding the accounts, a solutions partner configuring the right products to solve the customers’ problems and a client success manager devoted to working with the account to ensure they are just getting the highest possible value from its investments. In the fourth quarter of 2016, we beta tested the Premier selling motion and I reported on the last call that we experienced better than expected results. In the first quarter we launched three new Premier teams and experienced that increase in year-over-year renewal rates and an year-over-year wallet share and Mike Morhardt will give you more detail in a few moments. We are on schedule to launch four additional Premier teams in Q2. Hiring and training plans are on track and we will complete the full North American transition by the end of 2017. Client feedback with the new model has been very positive. A large North American transportation company that had 23 empty return seats had those seats filled within one month after having the transition over to the new model. On the Core transition, we are on pace with hiring in Nashville adding approximately five new associates per month. We have signed a lease for permanent space in the city with a moving date in the October, November timeframe. So I am very glad to report that our sales transition is proceeding on schedule with early good results. In addition to the customer engagement model, we are continuing to improve our business technology, this is the technology, systems and processes to win serve and retain clients. As I reported for the fourth quarter, two products that we digitized in 2016 experienced faster sales and performance than expected. This was the customer experience index in digital reprint and that trend continues into the first quarter. Over the last 30 days, our new digital communities grew by 10% increasing client engagement with Forrester advisors and with peers. We have launched a second generation of research app to the iPad and iPhone, a universal interface that operates seamlessly across the two platforms. This app will be available on android later in 2017. To increase engagement, we introduced a new website experience actually earlier this week that enables clients to more quickly access research which is most relevant with projects and challenges. The second generation in this site will be launched in mid-May, which will unite and connect all of Forrester products in one place, data, research, leadership boards consulting and events. Forrester’s weekly podcast and it’s called What It Means is now available on iTunes, SoundCloud, TuneIn, Stitcher and Google Play. Each podcast runs for approximately 30 minutes and features analysis from a Forrester research leader. And I would urge listeners on this call to check it out if you want to get a window in some of our most provocative findings and advise. What It Means has had over 9500 unique downloads since its launch. I want to turn now to our user business. The company is changing the way it works with its user clients. To increase user renewal rates and new business. Firstly, we are focusing on the 12 vertical markets that have mostly impacted in the Age of the Customer and we call that our ideal client profile. Secondly, we have intensified our research coverage on the critical business technologies that companies must master to win customers. Forrester’s output of waves, this is our methodology for evaluating technology increased 21% in 2016. And have worked with clients that we analyzed over 400 technology categories ranging from MarTech, to security risk management, to internet of things to artificial intelligence. In 2017, we will evaluate over 800 vendor offerings through our wave technology and that’s a 50% increase since 2014. Finally, we are also tracking user company engagements with a goal of simulating users. Levels of report download, weather on participation, equal usage and event attendance could have a significant influence on renewal and enrichment rates. And I am pleased to report that user company engagement loads appreciably in the first quarter, so those companies served by the new customer engagement model teams. While it is still early in our efforts, user renewal and enrichment rates both improved in the first quarter. So to conclude, our goal for 2017 is to add value through every client engagement across every product line. It is good. Our new selling motion is resonating results including clients, our digital products are stimulating usage and engagement targets are having a positive impact on our user business. While there is still work to be done, I believe we are setting a solid foundation for growth throughout 2017. I’d now like to hand the call over to Mike Morhardt, Forrester’s Head of Sales. Mike?

[Michael Morhardt:]

Thanks, George. In Q1, Forrester’s sales organization made progress across our two key focus areas for 2017 hitting targets and migrating to the new customer engagement model. From a performance perspective, we hit our Q1 target and saw a solid performance in Asia-Pac, Europe, and our International partners. In North America, we had mixed performance with a strong performance in our vendors, in small user client teams. Our large user client teams had mixed performance across the various regions. Our second area of focus in 2017 is the customer engagement model. We made significant progress in migrating our sales and service organizations into the new model based on the strong results we saw in our Q4 beta test. Our first goal for Q1 for the customer engagement model was to move three additional teams into the model. North America has a total of 13 Premier user teams, four are now set up, four will be added in Q2, and we will add two more in July and the last two in October. Based on the results of the beta, we have accelerated our plans for the year. In late February, we added the three additional teams to the model. The results continued to be promising. To the team that entered the model back in September of 2016, we saw a continued improvement year-over-year in every metric, bookings, retention, wallet share, enrichment booking and pipeline conversion. With a dedicated person, the Customer Success Manager, focused on engagement and retention, the sales person now has more time to grow their clients in conjunction with the solution partner. The three other teams started their migration at the end of February. While their metrics in many cases were better year-over-year, we expect a three to five months ramp to see the kind of results we saw in the beta team. The North American transition to the new model will be completed by the end of the year. As George mentioned, we are on track from a training, hiring, and overall implementation perspective. We will be following the same process in Europe and Asia and we will focus more efforts on these geographies in the second half of 2017 and into 2018. We also made significant progress in our Core client segment. In Q1, the team met expectations across hiring, training, and bookings performance. We are currently tracking to our goal to have 40 to 50 inside sales professionals in our new office by the end of the year. Finally, we ended Q1 at our planned headcount of 535. Based on our plans, we will be increasing net new hires in Q2 with a planned goal of growing the sales organization by 7% to 10% by the end of the year. Attrition was lower in Q1 than expected, so we feel confident we can hit this goal by the end of 2017. With that, I will turn it over to Mike Doyle for the financial update.

[Michael Doyle:]

Thanks very much, Mike. I'll now begin my review of Forrester's financial performance for the first quarter of 2017, including a look at our financial results, the balance sheet at March 31, our first quarter metrics and the outlook for the second quarter and full year of 2017. Please note that the income statement numbers I am reporting are pro forma and exclude the following items, stock-based compensation expense, amortization of intangibles, reorganization costs and net gains and losses from investments. Also for 2017, we continue to utilize an effective tax rate of 40% for pro forma purposes. For the first quarter of 2017, Forrester was at the upper end of guidance for revenue and pro forma operating margin and exceeded earnings-per-share guidance. As we indicated in our February call, 2017 will be an investment year growing sales and consulting headcount, continuing our investment in product digitization and opportunistically using our balance sheet to enhance shareholder value. During the first quarter, we made good progress on these objectives, growing sales and consulting headcount, launching the new Forrester home page and universal iPhone, iPad apps, and repurchasing of our 0.5 million of our shares. In addition, as Mike mentioned, we continue to expand the customer engagement model in North America with early results indicating the experienced in the productivity improvements we targeted. While we are driving a number of initiatives across the company, we remain committed to delivering our targeted financial performance levels during 2017. The first quarter results were a good start to the year. Now let me turn to a more detailed review of our first quarter results. Forrester’s first quarter revenues decreased nominally to $77.2 million from $77.4 million in the first quarter of 2016 and increased nominally on a currency adjusted basis. First quarter research services revenue decreased by 3% to $51.7 million from $53.2 million last year and decreased by 2% with constant currency and represented 67% of total revenue for the quarter. First quarter advisory services and event revenue increased by 5% to $25.5 million from $24.2 million in the first quarter of 2016 and by 6% with constant currency and represented 33% of total revenue for the quarter. Our International revenue mix was 22% for the period ending March 31, 2017, down compared to 23% both as reported and on a constant currency basis. I’d now like to take you through the 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 framework to drive growth in a complex and dynamic market. In the first quarter of 2017, Forrester’s research library included 60 play books, the addition of 409 new documents, and we hosted 39 webinars to our clients. As of March 31, 2017, the top three research roles were the CIOs with 8082 members; application development and delivery were 5201 members and analyst relations with 4931 members. Onto our Forrester Connect offering which encompass our leadership force and executive program. The Forrester Connect offering is designed to help clients connect with peers and Forrester’s products and professionals and to coach executives lead far reaching change within the organization. As of March 31, 2017, Forrester Connect had a total of 1420 members, down 4% compared to last year. During 2016, we worked hard to bring consistency and standardization to the product improving the overall experience. As George mentioned, one of the focus areas in 2017 is expanding our user business and our Connect product is an important part of that initiative. Our data products and services are designed to provide fact-based customer insights to our clients. Clients can leverage our data products and services or choose to have us conduct custom data analysis on their behalf. For the first quarter, revenue decreased by 9% due to decline in Technographics. We are currently investing in a new digital platform for our Technographics business which we expect to rollout later this year. Forrester Consulting, which includes our advisory and consulting businesses, saw total revenue for the first quarter increase 8% compared with the prior year. We saw in the fourth quarter of 2016, we began the year with a very healthy backlog and had another highly productive quarter. We do anticipate some moderation to this performance trend in the second quarter, but remained confident in our full year outlook. Forrester Events had no events scheduled in the first quarter of 2017 pursuant to last year’s rebranding and rescheduling with a number of forums. Bookings continue to grow at a healthy rate and we remained pleased with the rebound we’ve seen in our Events business over the last year. I will now highlight the expense and income portion of the income statement. Operating expenses for the first quarter were $71.8 million, up 1% from $71.3 million in the prior year and up 2% with constant currency. Cost of services and fulfillment increased by 1% and increased by 2% with constant currency, due to higher headcount, and partially offset by lower T&E. Selling and marketing expenses increased by 1% and increased by 3% with constant currency driven by higher sales headcount, and partially offset by lower T&E. General and administrative cost increased by 1% and increased by 3% with constant currency, due to higher headcount and recruitment fees partially offset by lower professional services cost. Overall headcount increased by 4% compared to the first quarter of 2016 and remained essentially flat compared to the fourth quarter of 2016. At the end of the first quarter, we had a total staff of 1,375, including a research and consulting staff of 512 and a total sales force of 535. Research consulting headcount increased by 6% compared to the first quarter of 2016 and decreased by 2% compared to the fourth quarter of 2016. As we transition into the new customer engagement model, we will no longer report on quota carrier headcount, as it’s no longer a meaningful metric on its own since new positions such as the Customer Success Manager are instrumental in directly driving sales but are not quota-bearing. We feel the more appropriate headcount number to focus on is total sales force. The total sales force increased by 4% compared to the first quarter of 2016 and increased by 2% compared to the fourth quarter of 2016. Operating income was $5.4 million, or 7% of revenue compared with $6.1 million or 7.8% of revenue in the first quarter of 2016. This is a decrease of 11% year-over-year. Other income for the quarter was $9,000 compared to a negative $328,000 in the first quarter of 2016. Net income for the first quarter was $3.2 million and earnings per share was $0.17 on diluted weighted average shares outstanding of $18.5 million compared with net income of $3.4 million and earnings per share of $0.19 on 17.9 million diluted weighted average shares outstanding in the first quarter of last year. I’ll now review Forrester’s first quarter metrics to provide more perspectives on the operating results for the quarter. Agreement value, this represents the total value of all contracts to research and advisory services in place without regard to the amount of revenue that is already been recognized. As of March 31, 2017, agreement value was $236.6 million, down 2% from the first quarter of 2016 and flat on a constant currency basis. As of March 31, 2017, our total for client companies was 2427, down 2% compared to last year and essentially flat compared to last quarter. Client count unlike our retention and enrichment metrics is a point in time metric at the end of each quarter. Forrester’s retention rate for client companies was 74% as of March 31, 2017, down one point compared to the fourth quarter and down three points compared to last year. Our dollar retention was 87%, flat compared to the prior quarter and down by one point compared to last year. Our enrichment rate was 94% for the period ending March 31, 2017, up one point compared to the prior quarter and down three points compared to the first quarter of last year. We calculate client and dollar retention rates and enrichment rates on a rolling 12 months basis due to the fluctuations which can occur between quarters with deals that close earlier slipping to the next quarter. The rolling 12 month methodology captures the appropriate trend information. I’d now like to review the balance sheet. Our total cash and marketable securities at March 31, 2017 was $134.6 million, which is a decrease of $3.5 million from a $138.1 million at year end 2016. Cash from operations was $19.5 million for the quarter as compared to $21.6 million in the first quarter of last year. We’ve received $2.7 million in cash from options exercised for the quarter as compared to $1.2 million in the first quarter of last year. We repurchased $21.5 million of stock during the first quarter and we also paid a dividend of $3.5 million or $0.19 per share during the quarter. Accounts receivable at March 31, 2017 was $55 million, compared to $49.4 million as of March 31, 2016. Our days sales outstanding at March 31, 2017 was 65 days compared to 58 days at March 31, 2016 and accounts receivable over 90 days was 7% at March 31, 2017 compared to 5% at March 31, 2016. Deferred revenue at March 31, 2017 was $156.3 million, an increase of 1% compared to March 31, 2016. In closing, our first quarter went as planned. We performed at the upper-end of revenue and margin guidance and exceeded earnings per share guidance for the quarter. We made good progress against the initiatives we identified for 2017. Continuing to expand the customer engagement model and sales headcount, expanding our consulting headcount, investing in product digitization, and using the balance sheet to enhance shareholder value. Our plan for the second quarter and the balance of 2017 will be to continue to focus in these areas as we believe they will the momentum necessary to accelerate top-line and bottom-line growth. Now let me take you through the specifics of our guidance for the second quarter and full year 2017. As a reminder, our guidance excludes the following

[Operator:]

Thank you. [Operator Instructions]. And it looks like we have our first question from Tim McHugh.

[Timothy McHugh:]

Yes, thanks. Just wanted to follow-up on the retention metric that you wouldn’t give us as a trailing 12 month number. So, and I guess, at least the client retention number ticked down a little, is that reflective of trends last year? I guess, just kind of rolling into that 12 month number, can you give us anymore real-time sense of how retention was trending here early in 2017?

[Michael Doyle:]

Tim, it’s Mike Doyle. Yes, I mean, just absolute client retention did tick down. In terms of the specifics, it was 74.8 to 74.3 to give you a very specific number. So about a half a point and from Q4 to Q1 I guess, there is – there it can be, but slight tick down. That said, it’s a big focus for us. Our goal with the new customer engagement model is to drive that back up. It’s been as high as 80%, Tim, and that’s what we need to march to. Dollar retention, if I get to the specifics, it went actually maybe 6.5 to 87, a tick up a half point the other way. These, still aren’t the numbers we want. We are looking to be at 80 and 90 and the focus of the customer engagement model is to drive that kind of performance. So, as I look at it, there wasn’t a spike down, it sort of flattened out for the most part. What we need to see is obviously a steady movement upwards into the right on these.

[Michael Morhardt:]

Tim it’s Mike Morhardt, and from the teams that went into the customer engagement model we thought a 3 to 4 point jump in retentions. So this is a mix across all the different teams. These are vendor of those teams that are in the model, those teams are not.

[Timothy McHugh:]

Okay, and just, the agreement value, I guess, the agreement value includes I believe the consulting as well as the research business and I guess, I was a little surprised by the relative performance of those two in terms of revenues. I guess, when we look at what’s coming in the door, are you still seeing that split a little bit where in the flat agreement value, is that more weighted to a consulting versus research? And is this kind of more of a – I guess, a sustained trend we are seeing in the business shifting?

[George Colony:]

Agreement value for us does not include consulting, Tim.

[Timothy McHugh:]

Okay.

[George Colony:]

That’s not factored in. So, what you are seeing essentially is primarily our research business and again, I think this is, we talked in the last year with a flat sales it kind of actually dipped a bit in the fourth quarter. So this is just a reflection of our bookings activity that for us is essentially low single-digit in that area right now and again, we’ve expanded sales headcount in the first quarter and the expectation to the point Mike make is, is this Mike, is that going to continue to happen and the early results in the data we are getting productivity out of the – certainly the first team analyses stood up team working throughout the four, the expectation is we are going to see that start moving up in a meaningful way and it doesn’t capture the consulting activity which we haven’t a really good fourth quarter for consulting, which translated – from a booking standpoint, translated into good revenue in the first quarter in consulting and now, so we are trying. That could tamper a little bit, because the bookings activity was good, but not as big as we like in the first quarter, but we are focused now to build that back up in Q2.

[Timothy McHugh:]

And is that comment on bookings, is that you had a comment in there about performance probably not being as good in Q2. Are you just referring to that bookings level?

[George Colony:]

Well, for consulting, it’s a function of where we sit with the backlog and we had a really big backlog at the end of the fourth quarter and so we went into the first quarter and had really strong consulting performance and I think now, it’s – we are back to building more backlog in Q2. So revenue will probably tamper as consultants are writing more proposals and doing large deliveries. So, it’s a little bit of this give and take and ebb and flow that seems to happen in the consulting business. So, that’s what I mean, I think it will tamper, and I think it’s still going to grow probably not as high as it did in Q1.

[Timothy McHugh:]

Okay. Fair enough. All right, Thank you.

[George Colony:]

Thank you.

[Michael Doyle:]

Thanks, Tim.

[Operator:]

And we have our next question from Bill Sutherland. Go ahead.

[Bill Sutherland:]

Thanks very much. Want to follow-up on Tim’s questions of AV. So, when you have all the teams in place by October, you feel like they – the timing there and to be part of the selling season will be about right for realizing most of that increase in sales for kind of directly reflected in kind of an AV growth number.

[Michael Morhardt:]

Yes, that’s the Bill. So the way that we are looking at it right now is that we’ll have all the teams sit up in North America by October, November. As I mentioned in my comments, we are seeing about a three to four to five months lag kind of as people ramp as they get introduced to the accounts as they learn to work together. We are expecting two pieces to this, it was actually three pieces. One, we are expecting better retention, because of the engagement metrics that we are tracking and holding everyone accountable too. We are expecting better enrichment having two individuals focused on growing the accounts and we are expecting more new logos as well as we deploy our resources we are targeting these ICP, ideal client profile clients that are – lend themselves to be better client for Forrester. So we are looking for improvements in metrics on all three of those areas and that would be towards the end of this year as more and more teams stand up where we will have eight stood up shortly of the 13 in North America, but there will be ten by the first couple of weeks of Q3.

[Bill Sutherland:]

And the kind of metrics with the inside sales group focus to drive in all of the same categories or it is little different?

[Michael Morhardt:]

It is a little different. We’ve seen a nice uptick in the new business on the inside sales front and our core teams’ for users and vendors which has been great. There is a scalability function to that type of model. But our expectations are still one that with a reduced product set that they are selling, they are ramping more quickly and they have ability to engage their clients based on the client loads that they have. So we expect improvements in retention, because a lot of these clients weren’t necessarily been called on effectively in the field. They are getting the attention and love that we want them to and that’s going to lead to both better retention and better enrichment. So, again, they are under the same metrics that we are trying to track for the Premier teams.

[Bill Sutherland:]

Consulting, pretty much been in the starts up sort of level at a time at year end is obviously there?

[Michael Morhardt:]

I am sorry, I didn’t that catch that Bill.

[Bill Sutherland:]

Consulting just like the Premier consulting pretty much all set up be effective into the – part of the selling season?

[Michael Morhardt:]

Yes. As Mike mentioned, or George mentioned, we’ve signed the leases. In some cases, we are aggressively hiring down there. Right now in a particular space that we love to expand but we are – I think hopefully in Q4 we will have our own space and we can get even more aggressive. But they are ramping more quickly and as George mentioned, we are looking to hire five associates per month and if we see what we are continuing to see we are going to hopefully accelerate that as we go into 2018.

[Bill Sutherland:]

What was headcount at the end of the quarter, end of Q1?

[Michael Morhardt:]

20 something, since already lot of people down there Bill.

[Bill Sutherland:]

And then last, I will focus on sales activity. Mike, are you planning to – what are the plans for Europe with this selling model?

[Michael Morhardt:]

Yes, as I mentioned, we are running the same play in Europe and that is the first thing we need to do is segment the clients into Core and Premier. We started to make those changes now where client’s stats are more into Premier selling model. We want to make sure that those are into Premier selling motion and then Core, moving into the Core selling motion, we are looking at the back half of this year to continue working with the European teams. In fact, some of them over here this week talking about how we do that implementation. So, in Europe, everything is a little more complicated. So we want to be thoughtful about how we do this, but the plan is to run the same play for both Europe and Asia-Pac.

[Bill Sutherland:]

Beginning in third quarter.

[Michael Morhardt:]

Yes, starting in Q3 and then moving into 2018.

[Bill Sutherland:]

Okay. So, kind of just a one year lag.

[Michael Morhardt:]

Yes, exactly.

[Bill Sutherland:]

Okay. All right. Thanks.

[Michael Morhardt:]

Thanks, Bill.

[Michael Doyle:]

Thanks, Bill.

[Operator:]

And we have our next question from Allen Klee.

[Allen Klee:]

Yes. Can you give us a sense of – as you break out your business from Premier and Core, how much of the business is very well, each one of those areas and kind of how you think about the opportunity for each one?

[Michael Morhardt:]

Yes, so the majority of our clients, I would say a good 65%, 70% of them from a numbers perspective are in Core. So, of the 2500 or so, 2400 clients that we have, roughly 600 or so – 600 or 700 are actually in our Premier selling motion. These represents our biggest vendor and user clients. The ones that George mentioned that are interested in purchasing a whole suite of services from Forrester. The Core selling motion, again some of these clients are large, but they may not necessarily be in our ideal client profile. So, they may not be on in the customer journey, they may not be interested in our data products, they may not be interested in leadership force because that’s not a focus of their business. And so while they still love our research, or they still may want to come to our events we are more than happy to service them and we do. So we expect both of these groups to grow. The Core selling model, we are trying to do that through a lower class servicing the sales model and gaining leverage there and in the Premier model, the idea is that we put more resources against this free up the sales organization to future partners and find executives to focus on the growth while the Customer Success Manager focuses on retention. We have seen in the beta that that is actually working very well and we are seeing those clients if we are spending up time with them that they will grow with us.

[Allen Klee:]

Great, thank you. And then, could you just remind me again for digital of how you see that as – and you mentioned a couple of things as you said last year, but where you see kind of see that you think the growth is going to come in 2017?

[George Colony:]

Yes, George here. I think what you are looking at is, a gradual transition of all of our products over from, I mean, they were obviously – they were web based over to a more interactive digital form and that’s a – that happen to be a customer stream index. That’s what happened to the reprint business and what you see now is two of the data products moved to be fully digital by the end of this year. We are experimenting a lot of ideas in our research - in the research format is to have a maybe more interactive – how we can split them and offer IT in a variety of different packages from the same force. So there is a lot of creativity going on right now that within Forrester. We have this – we have a bigger Forrester lab. We do lot of the testing. Most of the labs that we run are not successful but we’ve had a couple of very good successes there. So, it is – we are spending a lot of money, lot of investment here. And again, as I said before, as we sort of succeed, we saw very rapid increase in bookings for CXI and also in reprint in Q4 and that was driven to a great extent by the digital format.

[Allen Klee:]

So, lots of spacing. Okay, thank you. And then, I think I heard you say as you bought back 21.5 million of stock during the quarter, any view on how that is – and how you will allocate this free cash flow going forward?

[Michael Doyle:]

Yes, at the end of – in our February call, what we had said was and what we had talked about with the Board was to be opportunistic with our balance sheet and our cash in particular. And we were able to – we thought when the stock dipped a little bit, we were able to take advantage of some good pricing and we bought. And we will continue to do that. I mean, we said before that we want to be opportunistic with our cash and being thereby and we felt like the pricing dips to a level we think it’s not really justified. And at the same time, we continue to evaluate other options to the balance sheet in terms of both internal investments to George’s point and acquisitions. So, it’s sort of an ongoing dialogue and we really don’t – we continue to focus on it and we don’t want the balance sheet to be dormant, so.

[Allen Klee:]

And then just following up on that, I think last call you said you would ideally like to do one M&A deal this year. If you could pick kind of the perfect kind of the deal or whatever, what type of things would you be excited about?

[George Colony:]

So, Allen, we look across really three dynamics, one is, globalization, most global, so buying outside of the US, that would be one. Second would be, to enhance our current products, especially to buy the new roles as an example, HR might be an example of that, maybe CFO be an example of that. And then the third which is really new for us is to look at certain – at companies that may have technology that could help us with our digitization but also bring in new digital products to our clients as they look to capture their customers through technology. So it’s really technology geography and then product plays role. And I would say that we’ve been very active over the last – over the last six months and we have a very good portfolio and backlog of potential deals. As you know about M&A, it’s been always on finished volume and then there is no action, but so it’s hard to predict, but we feel good about the amount of – what we have in the portfolio and also the amount of action we had on our side. So, extremely good news. I am not guaranteeing one this year, but that is certainly our goal.

[Allen Klee:]

Thank you.

[George Colony:]

Thanks.

[Operator:]

We have our next question from Vincent Colicchio.

[Vincent Colicchio:]

It Vince Colicchio here back in. Mike Morhardt, you had mentioned that large users were mixed. I am just curious if there is any particular vertical or region that stands out and is any of that weakness carrying over to April?

[Michael Morhardt:]

Yes, so we saw – we saw good performance up in Canada, well, overall, we saw good performance for those teams that had entered into the new plan engagement model. We saw the good signs that we had hoped to be had seen. So not all the teams have been migrated over. So, in general that’s a statement. If you look at sort of the metrics of all the different teams, that is one of the things that we saw. We also saw some good performance specifically up in Canada, which was great. But those teams that don’t necessarily have all of the similar resources, it wasn’t bad across the board. They were below what some of the expectations of these teams that have gone through the customer engagement model were. So, not hair on fire, just they want to try some of the other teams that have done well.

[Vincent Colicchio:]

Okay, thanks for that and, Mike Doyle, I am sorry, if I missed it, but how the consulting revenue perform in the quarter?

[Michael Doyle:]

Consulting and advisory revenue was up about 8%. So, a good quarter. So, it was, from our perspective, we were happy with the performance. Again, we went into the quarter with a good backlog that we had from the fourth quarter. So, felt pretty good about things.

[Vincent Colicchio:]

Okay and certainly, thank you.

[Michael Morhardt:]

Thanks, Vince.

[Operator:]

Thank you. And it looks like we have no further questions at this time. I would now turn the call over to Mike Doyle for closing remarks.

[Michael Doyle:]

Great. Thanks everybody for joining the call. We are looking forward to getting out on the road and seeing a number of you. We expect to be active and busy during the quarter. So, thanks again, and we will see you soon.

[Operator:]

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