Forrester Research, Inc.
Q3 2013 Earnings Call Transcript

Published: 24 Oct 2013

[Operator:]

Good afternoon. Thank you for joining today’s call. With me today are, George Colony, Forrester’s Chairman of the Board and CEO, and 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. Michael Doyle will then follow Mike Morhardt to discuss our financials. We’ll then open the call to Q&A. A replay of this call would be available until November 22, 2013 and can be accessed by dialing 1-888-843-7419 or internationally 1-630-652-3042. Please reference the pass code 9233923#. 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 expect, believe, anticipate, intend, 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 the 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 within the Securities and Exchange Commission. The company undertakes no obligations 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:]

Good afternoon and thanks for joining Forrester’s Q3 conference call. I will spend a few moments reviewing the quarter. Following my remarks, Mike Morhardt, our Chief Sales Officer will give a short update on sales. Mike Doyle, Forrester’s CFO will then give a full financial review. Mike, Mike and I will then take questions. As I’ve stated throughout the year, the streamlining and strengthening of our organization continues to be a work in progress. The rebuilding our sales force is proceeding in gradual and steady increments as you’ll hear from Mike Morhardt. The build-out of our consulting organization as outlined in the Q2 call continues to pace. And finally we’re enhancing our research and product engines as I will outline below. Against this backdrop, I wanted to spend time today outlining the unique opportunity that is presenting itself to Forrester. Now this is a somewhat complex story but I believe that it should be well understood by our investors. We are in the age of the customer and this is a 20-year period during which buyers are taking power from institutions. Using technology, customers are able to price, critic and buy products from any company at any time, with few geographical boundaries. Customers are dynamic, moving quickly between brands, morphing their behavior and using technology to buy in hard to predict patterns. This is placing harsh demands on companies. They must be prepared for continuous changes and the onslaught of disruptive and unpredictable new market rules. In the age of the customer, three inter-related opportunities are opening up for Forrester. Firstly, Forrester helps its clients understand their customers. If large companies are to thrive in these times, they must have precise and continually updated information and data on their buyers. They must understand demographic, social and behavioral dynamics that are changing go-to-market rules. And as you know Forrester’s data business has been serving clients for over 15 years. We survey over 80% of the world is GDP with coverage including China, India and South America. Our data coupled with our analysis gives large companies like Procter & Gamble and L’Oreal early warning of changes in the marketplace enabling them to make better decisions about products, marketing strategies, partnerships and channels. Companies must understand their buyers, customer intelligence is an area in which Forrester excels. The second major opportunity for Forrester is helping marketing and strategy executives win customers. As you know, we serve the CMO and his reports and these are the six most critical roles in marketing and strategy. Through M&S RoleView and our M&S leadership boards, we are inspiring and guiding those executives to win, retain and serve the newly empowered customer. Forrester is the market leader in this business. Thirdly, we work with technology management executives ensuring that they deploy the right systems to win customers. Forrester believes that executives and technology management must now oversee two agendas in the age of the customer. The first agenda we can call IT, this is the work of automating the internal operations of the company, including supply chain, financial systems, productivity technology for employees, just a few examples. But tech management must now also take on a second agenda, building technology, systems and process, to win, retain and serve customers, what we call business technology or BT. Because Forrester advises companies on their customers and we guide the marketing strategy executives on how to reach those customers, we are uniquely positioned to guide CIOs as they look to build the best customer technologies. As an example of this, we’ll be hosting an exclusive forum in Napa next week for CIOs and CMOs, two executives that must unite and collaborate in the buyer centric world. In the age of technology enabled customers, all companies will be software companies. And fundamentally that is what BT is about. So simply stated, the opportunity is to help our clients with number one customers, two commerce and three, technology. Forrester is uniquely positioned in the marketplace to give an integrated solution that encompasses and interweaves all three of these challenges. We are able to answer difficult new questions for our clients such as how can our company support the always addressable customer or how can marketing and technology work together to support empower the clients. Or what technologies and platforms do we need to respond to customers as they move through time and space. Forrester is the only company that can help transform companies into customer obsessed enterprises. Now to better position Forrester to take advantage of this opportunity, we have recently changed our organizational structure. The first move we made was to combine the formerly separate research teams that served marketing strategy and technology management executives into one research organization. We made this move so that research could collaborate on topics that are germane to marketing executives and technology management executives. As an example, building excellent customer experience must be addressed by the customer experienced professionals and marketing in concert with application and development executives in tech management. These challenges are much better understood and analyzed by a more flexible and wider amateur research organization that works together rather in separate worlds. Cliff Condon, a 15-year veteran at Forrester will be leading our research organization. Cliff has touched nearly every part of the company since joining in 1997. He has had many roles including Director of Marketing and Strategy Research, Vice President of Research Operational Effectiveness, Director of Research Strategy and Innovation for both M&S and BT, and most recently he served as the global director of Forrester events. I have great confidence in Cliff’s ability to shape content strategy and improve operational effectiveness. The second organizational change we have made is to build a product management group. Products were formally diffused between corporate marketing and client groups, a structure that worked well when we operated with discreet sets of roles. But serving customer obsessed enterprises now requires a connective view of products. And as the company prepares to return to growth, we believe that we must have focus, professionally led product management with the capability to continually update and improve our current products, while aggressively launching new products. This group will also enable the company to more quickly integrate acquisitions. Our consolidated product organization will be led by Dennis Van Lingen. Most recently, Dennis, was the member of the executive team as the Managing Director of our Marketing and Strategy Research Organization. But his 13-year tenure at Forrester has also seen him as the Marketing Director for Europe, Vice President of Marketing for the Americas and President of Forrester EMEA. Dennis’s strong product management background will help us bring a better aligned strategy to the many products that Forrester delivers, including RoleView, Data, FLB consulting and events. Now, as I mentioned on our Q2 conference call, we are reengineering our consulting organization adding professionals who would perform project consulting for our clients. And we’re doing this for three reasons. Number one, to focus our clients on the creation of improved syndicated research, two, to improve the quality of project consulting and three to make it easier to scale our project consulting business to match demand. As we complete the first phase of this transition, I’m happy to announce that we have already reached our hiring goal of 21 consultants for the year. As we move on to the second phase of our consulting transition, we expect our hiring speed to increase enabling the company to fill our roster of 70 dedicated project consultants by December 2014. I’ll keep you updated as this effort progresses. Finally, I want to end with an update on capital structure. Then Mike Doyle will give you details. But I’m happy to report that we have bought $109 million of shares in 2013, that’s up from $30 million in 2012 and $18 million in 2011. Our share count has fallen from 22.3 million to 19.9 million shares in 2013. The company continues to repurchase its shares and we are planning more buybacks in 2014. We are working toward our goal of carrying $100 million of cash on our balance sheet. In conclusion, the work of turning around Forrester continues at our planned pace. In my estimation, we have the most experienced and capable executive team in the company’s history, one that can return the company to its historical revenue growth rates and operating margin. And as importantly the age of the customer is unlatching a very big opportunity for Forrester, one that we are uniquely positioned to exploit. So, I want to thank you very much. And I would now like to turn the call over to Mike Morhardt, Forrester’s Chief Sales Officer. Mike?

[Mike Morhardt:]

Thanks, George. As George mentioned, we continue to see improvements in the sales organization. Our goal is to methodically build a more mature, performance driven culture marked by greater accountability, discipline and results. As I’ve said from the start, our strategy has centered around three key areas. First, geographic sales expansion, putting more sales people where our clients are located so we can develop stronger relationships. Secondly, operational discipline, bring more analytics and data into our decision making driving consistent execution and thirdly, improving our overall sales force productivity. Q3 showed continued improvement across all three of these key strategies. Make no mistake, we are seeing progress. Our geographic sales expansion continued as we added three new cities to our coverage totaling 10 for the year. Discounting has dropped 4.9% year-to-date and 7.4% for Q3 year-over-year. We’re seeing improved productivity for those reps that attended our redesigned new hire class this past Spring. We saw bookings improvements across all regions and all teams quarter-over-quarter. And finally our net new client acquisition improved quarter-over-quarter by 31 net new logos. While, these signals are encouraging, we still have a lot of work to do. The velocity of our change is dependent upon the related changes across the company, from recruiting of a sales person to the delivery of a project. Our success is dependent on the alignment of Forrester as a whole. So the recent organizational changes George announced will have a significant impact in our ability to serve our clients more effectively. Alignment across research, consulting, product and sales is instrumental to our success. In the short time that the new organization has been in place, we have seen better and faster responses to clients and prospect requests. To wrap up, we are seeing positive signs from the changes we have made. We’re not where we want to be and we realize there are obstacles ahead but we are very encouraged by the progress we made in Q3. And with that, I’m going to turn it over to Mike Doyle, to give the financial update.

[Mike Doyle:]

Thanks, Mike. I’ll now begin my review of financial performance for Forrester’s third quarter results, the balance sheet at September 30, our third quarter metrics and the outlook for fourth quarter and full year of 2013. Please note that the income statements numbers I’m reporting are pro forma and exclude the following items, amortization of intangibles, stock-based compensation expense, reorganization costs, and net gains and losses from investments. Also for 2013, we will utilize an effective tax rate of 39% for pro forma purposes. The actual effective tax rate for the third quarter of 2013 was approximately 39%. For the third quarter, Forrester met its revenue and exceeded its pro forma operating margin and EPS guidance. Revenue gains in our marketing strategy business continued to offset some softness in our business technology business, while both planned and unplanned expense savings from unfilled positions and tight expense management help bolster operating profit. We did see modest bookings improvement in the third quarter relative to the third quarter of last year. And we’re making progress across all sales teams. That said, to reinforce what Mike and George previously said, we saw work ahead of us to return to historical growth levels. The changes Mike has made to our sales organization and processes has had some immediate benefit to our results, but the full effect will come over the next three to four quarters. On the capital structure front, we continue to repurchase shares of Forrester stock during the quarter, with our year-to-date purchases totaling approximately $109 million. This exceeds Forrester’s repurchase activity for the previous three year’s combined. Now, let me turn to more detailed review of our third quarter results. Forrester’s third quarter revenue increased by 2% to $69.6 million from $68.5 million in the third quarter of 2012. Third quarter research services revenue decreased 1% to $49.8 million from $50.3 million last year and represented 72% of total revenue for the quarter. The decline was driven by our data business, which has seen a decrease in syndicated revenue, partially offset by an increase in one-time data revenue. Excluding data, research services revenue was up 1% compared to the third quarter of last year. Third quarter advisory services and other revenue increased 8% to $19.8 million from $18.2 million in the third quarter of 2012 and represented 28% of total revenue for the quarter. Growth in M&S and BT consulting as well as the shift of syndicated to non-syndicated data revenue are the primary drivers behind the increase. Our international revenue mix was 27% for the period ending September 30, 2013, which is down from 28% in 2012. U.S. revenue increased by 3% for the period while international revenue decreased by 3% for the period, driven by continued challenges in Europe, partially offset by strong performance in our Asia-Pac region. I’d now like to take you through the activity behind our revenue, starting with research. We continue to make progress with developing playbooks with four more rolled out in the third quarter bringing the total to 62. We plan to continue expanding the number of playbooks available to our clients into 2014. In the third quarter, 275 new research documents were added to RoleView and we hosted 47 webinars with a total attendance of 1,330. At the end of the quarter, the top three research roles were application development and delivery with 5,792 members, enterprise architecture with 4,050 members and analyst relations with 3,210 members. Forrester Leadership Boards are peer offering for senior executives, achieved flat year-over-year revenue in the third quarter with growth in our marketing and strategy leadership boards offset by declines in the BT leadership boards. As of September 30, 2013, Forrester Leadership Boards had a total of 1,849 members, down 6% from September 30, 2012. Our data business continues to be a critical part of our value proposition as George described earlier. Our continually refreshed data now covers more than 80% of global GDP and technology spending. We survey over 400,000 consumers and 60,000 businesses in over 20 countries annually. This data provides our B2C and B2B clients with actionable insights on issues ranging from enhancing social media strategies, to developing and deepening brand equity to aligning sales and marketing with customer demand. It also gives our analysts the most accurate and timely facts they need to drive their research forward. On a year-over-year basis revenue decreased by 4% for the third quarter driven by the phasing out of our tech marketing navigator product. Elements of this product will be incorporated into our foresights product in 2014. Excluding tech marketing navigator, data revenue increased by 1% for the quarter. Our consulting business increased by 6% versus prior year in the third quarter with both BT and M&S showing favorable results on a year-over-year basis. Going on to events, in the third quarter Forrester held the Second Annual Asia Pacific CIO Summit Series, with events taking place in Sydney, Singapore and Mumbai. Attendance grew by 6% for these events on a year-over-year basis. IN addition, Forrester released a 2014 events calendar in the third quarter, which will feature one new event in Asia-Pac with a launch of a summit in Sydney for marketing and strategy professionals focused on customer experience. This brings the total forum scheduled in 2014 to 24 as compared to a total of 23 in 2013. I will now highlight the expense and income portions of the income statement. Operating expenses for the third quarter were $63.1 million, up 6% from $59.3 million to the prior year due mainly to increased compensation from higher headcount. Overall headcount increased 4% as of September 30, 2013 compared to the same period last year. At the end of the third quarter, we had a total staff of 1,263 including a research staff of 466 and a sales staff of 474. Research headcount was up 6% versus prior year and also as compared to June 30, 2013. We continued to grow our sales force with sales headcount increasing 6% versus prior year and up 1% compared to June 30, 2013. Sales attrition remains elevated as we remain diligent about managing performance, but it has come down from peak levels in 2012. Headcount growth is slower than we expected for both sales and research. We just had a short-term impact on our ability to accelerate top-line growth. We’re beginning to see progress on this front, as we improve our ability to accelerate time to hire and recruit on a regional basis. Operating income was $6.5 million or 9.3% of revenue compared with $9.2 million or 13.4% of revenue in the third quarter of 2012. Other income for the quarter was a negative $100,000, down from approximately $400,000 in income in the third quarter of 2012. Net income for the third quarter was $3.9 million and earnings per share was $0.19 on diluted weighted average shares outstanding of 20.7 million that compares with net income of $5.8 million and earnings per share of $0.26 on 22.9 million diluted weighted average shares outstanding in the third quarter of last year. Now I’ll review Forrester’s third quarter metrics to provide more perspective on the operating results for the quarter. 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 September 30, 2013 agreement value was $210.7 million, a decrease of 5% from the third quarter of 2012. As of September 30, 2013 our total for client companies was 2,482, up 31 from the second quarter but down 1% compared to the third quarter of 2012. 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 76% as of September 30, 2013 which is unchanged from June 30, 2013 and our dollar retention rate during the same time period was 89%, also unchanged from the prior quarter. Our enrichment rate was 95% for the period ended September 30, 2013 also unchanged from June 30, 2013. 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. As of September 30, 2013 there were 2.4 roles per client, an increase of 6% from June 30, 2013. Now I would like to review the balance sheet. Our total cash and marketable securities at September 30, were the $166.8 million, down $75.9 million or 31% from our year end 2012 balances, which reflects a significant repurchase of our shares totaling $109.2 million for the first nine months of 2013. Cash from operations was a negative $4.9 million for the quarter as compared to a positive $3.8 million in the third quarter of last year. The decline is due to lower earnings year-over-year as well as timing of tax payments. We received $4 million in cash from options exercise and our employee stock purchase plans for the third quarter of 2013. We also paid a dividend in the third quarter which amounted to $3 million or $0.15 per share. Accounts receivables at September 30, 2013 was $37 million compared to $44.1 million as of September 30, 2012. Our day sales outstanding as of September 30, 2013 was 49 days down from 59 days at September 30, 2012, and accounts receivables over 90 days was 4% at September 30, 2013 down from 12% at September 30, 2012. Our capital spending for the third quarter of 2013 was approximately $800,000 compared to $1.6 million during the third quarter of 2012. Deferred revenue at September 30, 2013 was $126.7 million up 1% over September 30, 2012. Deferred revenue plus future AR, a key indicator of future performance declined 4% year-over-year. Our future AR balances are amounts to be invoiced in the future for clients with multi-year deals or scheduled payment terms. I want to close my discussion with some comments on capital structure and guidance both fort this year and next year. As I mentioned earlier, we have spent $109 million purchasing approximately 3 million shares during the first nine months of this year. We will continue to be opportunistic with share repurchases going forward as we look to drive our cash towards our targeted $100 million level. In addition, we’ve said before, we will consider short term borrowing when necessary to support ongoing investment in our business and allow for acquisition opportunities. We remain committed to enhancing our shareholder value. As I mentioned in my opening remarks, we met our guidance on revenue for the quarter and exceeded our guidance for operating margin and earnings per share. We are beginning to see results from our sales changes with bookings growth growing during the quarter and improvement across all sales teams. To reinforce George’s message, this continues to be a work in progress as we put changes in place to ensure we delivered double-digit top-line and bottom line growth for the long term. In addition to the sales, George discussed some changes to our research, product and consulting organizations. I expect we will realize the full benefit of all these changes by the second half of 2014. When I combine the impact of the changes with our bookings performance, year-to-date as evidenced by our deferred revenue plus future AR, I want to provide some context for 2014. I’m projecting 2014 revenue will grow in the mid-single digit range with earnings per share growing in the low double-digit range, with both metrics accelerating in the second half of 2014. This is a very preliminary estimate as we have a very important quarter ahead of us. And we’ll provide more detailed guidance for 2014 on our February 2014 call. Now I’d like to review our guidance for 2013. As a reminder, our guidance excludes the following

[Operator:]

Thank you. We will now begin the question-and-answer session. (Operator Instructions). Our first question comes from Tim McHugh from William Blair. Please go ahead.

[Matt Hill:]

Hi, this is Matt Hill in for Tim McHugh this afternoon. One of the questions, I guess, could you walk through a little bit more about the organizational change and some of the benefits you see occurring to your customers and then also on your side? And then also any of the changes – there is going to be a change to the subscriptions or you have to consolidate some of those, that sort of thing?

[George Colony:]

Yes, this is George here. Very simply stated, the new organization is – was really designed and built to enable us to be – to take advantage of the opportunity around age of the customer. With topping age of the customer, if you look at a large company like L’Oreal, they are working intently every day to combine the efforts of the marketing executives, L’Oreal into tech management executives at L’Oreal, to build a whole bunch of new technologies like mobile engagement which I won’t bore you talking about but giving L’Oreal the ability to connect to the technologies that their customers are using. And this is a very cross-disciplinary effort which is going on in the clients that we serve. We could not serve that cross-disciplinary effort unless we were – unless we also had a combined research organization which enables as an example to take the work of our customer – in our customer experience based in marketing with the application development space in the tech management side. So, it really – organization was really responsible – there are really two goals to the organization. One was to enable us to more – to structure – to manage that opportunity that’s one. And two, it simplifies how we operate internally. We had two research organizations, we had no designated product organization. And now with the new structure, it’s very clear who’s in-charge, who is in-charge of products, who is running research and exactly how the decisions are going to be made. So it really is number one to take advantage of the opportunity and number two to simplify how we operate.

[Matt Hill:]

Okay, great. And then also in the press release, I think one of the last comments was seeing some positive signs in some areas of the business. Can you expand on that a little bit more, maybe what those areas are and then conversely what are the areas that maybe aren’t looking so good?

[George Colony:]

I’ll sort of offer, we can kind of ramble around the three of us here. On the areas where we’re seeing proven events to be an example, where we have rebuilt the experience for events. We’re seeing better attendance this year. So I think events generally that would be one-two, would be our business in Asia, which is very stable and is growing pretty much to their plan right to this point. So that’s working pretty good. On the downside I’ll probably let Mike, address this. I think Europe is still a work in progress, I mean for everyone, not just us but other companies operating there.

[Mike Morhardt:]

Yeah. I would echo George’s comments on Asia-Pac and events, I would say. The other thing that I’m encouraged by is our new business acquisition. That engine has kicked in after some changes in leadership and alignment. And it’s great to see when you make some of these changes, the impact it can have over a couple of months. How we’re aligning to our clients, I mean, George mentioned the organizational alignments, I’ll echo what he is saying. In the short term, this is really only been a place since the beginning of October. We can see the responsiveness to our clients around some of the initiatives George outlined with the age of the customer. Our ability to bring the right research analysts, right consultants to a particular client problem has been remarkably improved. We started work to do there. And we know there is a great market for it. So, that’s good. On the downside, again, we’re trying to put processes in place that in some cases are different than say what has been in place in the past. And so those, cultural changes which is aligning to our clients from an engagement model perspective where we follow a very disciplined approach in how we engage our clients over the life of their contract. There is a lot of work that needs to be done there to train everyone up across the organization to make sure that we continue to focus on retaining our clients. So we’re seeing the new business engine working but we have other things in place that we need to push. And then Mike mentioned one other piece from a sales perspective. While attrition is down, it’s not down where I’d like it to be. Part of that has to do with things that we have put in place around performance management. So we want to make sure that we’re building out the right team with the right expectations about how to grow the business. But from a hiring perspective, we’ve been able to increase the number of cities that we’re covering. But again, this is some new muscle memory that we’re trying to develop here as far as how we recruit in particular geographic areas, the types of candidates that we’re bringing in is a little bit different than what we have done in the past. And the discipline around how we do that hasn’t been in place. So everybody is learning a little bit around that as well.

[Mike Doyle:]

Yes, I think I would add just to – so we can close on an up-note with the finance guy. We will – yes, I think consulting had a strong quarter. And I think that’s benefiting both from our existing analysts but also some of the new consulting part that we’re bringing into the business. And that’s had a nice growth year-over-year, so that’s certainly encouraging. I think we’re seeing more broadly M&S beginning to sort of research which is great news for us. I think on the challenge front, we clearly would like to hire more people, more quickly. And I think we’re working hard at that. I mean, we’ve got opportunities for business out there that we can’t fulfill in some instances. So that’s a challenge. But I think we’ll work our way through that. And overall I think expense management is our main tie. So profitability from a company standpoint has been pretty strong.

[Matt Hill:]

Okay. And then, on the capital allocation plans, is it still the $100 million – getting down to $100 million, is that still the goal for the end of the year or is that maybe spread out a little bit?

[Mike Doyle:]

Matt, its Mike. Our target – look, our target has been the end of the year. We’re just going to have to see – we’re going to have – as I say, we’d be opportunistic in that to some degree as a supply demand situation. So we’ve got to find sellers frankly for us to buy and buy at the right price. So it remains the target but I’m not necessarily going to lock ourselves into a 12/31 date. But as both George said and I said, our target is to get to the $100 million. We’ve been aggressive this year, I think as we highlighted we’ve cleared stepped up our purchase activity. And our game plan is to continue.

[Mike Morhardt:]

Yes, Matt, also depending on M&A activity which as you know can be – it is always unpredictable, exactly when an instant deal might go down, so.

[Matt Hill:]

Yes, certainly. And then, one numbers question, I’m sorry, I might have missed this. But did you give the events revenue or number of events during the quarter?

[Mike Doyle:]

We did not give events revenue, the number of events was three. And the event’s revenue for the quarter was – it’s all done – we’ve got $350,000. So these were the three-ish back, relatively small events.

[Matt Hill:]

Okay. All right, well, thank you.

[George Colony:]

Thank you.

[Mike Doyle:]

Thanks, Matt.

[Operator:]

Our next question comes from Vincent Colicchio from Noble Financial. Please go ahead.

[Vincent Colicchio:]

Hi, good afternoon guys. Mike, could you give us more color on the data weakness within research services?

[Mike Doyle:]

Yes, I mean, real quickly Vince. Essentially what’s going on is we’ve got two things going on. We’ve got a – we had – what we call tech marketing navigator product that was a syndicated data product that we’ve been phasing down. And we think that that our clients can be better served by taking elements of that model and taking into our foresights data package. And we’re planning to do that in 2014. So that’s had tech marketing navigators been sort of the downward pull on our data business. So, it’s also what it’s done is, we’ve also seen a shift out of syndicated data and more into one time. That offset some of the syndicated data weakness with one time. And I think that’s just phenomenon we’re seeing. I think that’s something that we’re looking at as we go into ‘14 to see – I think first of all the transition out of TMA and into foresights is going to help. That’s going to be a plus. Then the question is, can we push more back into a more syndicated oriented data model. And that’s just a work in progress with our data team right now. I feel comfortable where we’re headed and I like what we’re doing. It’s just as transitioning with tech marketing navigator that’s proven to be a little bit of a drag on a data business.

[Mike Doyle:]

Renewing the completion of that then.

[Vincent Colicchio:]

And Mike Morhardt, I’d be curious at this point, in a sales organization process. To hear from your perspective, any positive or negative surprises you’ve – you’ve encountered on your journey there?

[Mike Morhardt:]

Sure. I’d say from a positive perspective now I’ve been here, I’m coming up on my one year anniversary in November. And I’m impressed by the talent that we have. I’m impressed by the talent that we’re bringing on board. So that gives me a lot of encouragement over the last six months or so, some of the new folks that have joined us, their ability to hit the ground running and produce results quickly, locally is great encouragement. The other part to the business is I think George outlined, the alignment with the rest of the business, I can’t underestimate how happy I was personally of having this alignment with the research and consulting and product organizations because as a sales leader, feeling with a bunch of different leaders, it makes you more difficult when it comes to servicing our clients and working with our prospects. So that move has already started to pay dividends and I’m excited about what that’s going to mean in 2014 as we can become further aligned. So generally very encouraged with the talent that we have – that the talent we’re bringing on. Frustrated that I can’t hire faster but that’s – part of the reason is we don’t want to hire the wrong people. And so, we’re going to be thoughtful about doing this and creating the right territories and putting them in the right locations that are going to drive the right productivity. And so, overall I’m satisfied but looking forward to the next couple of quarters and seeing some of these changes that we’re making, produce the results like we have with discounting and net new logos and some of the other things that we’re seeing now.

[Vincent Colicchio:]

Okay. Thanks guys.

[Mike Morhardt:]

Thanks, Vince.

[George Colony:]

Thanks, Vince.

[Operator:]

Our next question comes from Bill Sutherland. Please go ahead.

[Bill Sutherland:]

Hi, thanks. Hello everybody. Hi Mike, I’m curious what your hiring plans look like as you head into the year-end. Obviously it’s a challenging time to be ramping I would think, a lot of new hires?

[Mike Doyle:]

I think, Billy, you’re speaking about sales?

[Bill Sutherland:]

Yes.

[Mike Morhardt:]

Yes. It is a challenging time. But this is an end situation we need to deliver a number end build for 2014. And right now I think you’ll see as we go into Q4, we’ve been preparing for this. We realize that we have some additional folks that we need to bring on board. The pipelines are good. We’re learning every day and how do this more effectively whether it’s a recruiting organization or sales managers. There is a mind-shift that need to take place within the organization, specific to the sales organization and the sales leaders that you are part of a growing organization. And so that’s been a good sort of benefit of some of the work we did in Q3, and we saw some improvement there. We’ve done a lot of our performance managements so we’re not out-running attrition like we were in the first – in Q2 and Q3. So, the net news I think we’ll have a bigger impact, we’ll see more net news in Q3 based on what we’re forecasting from a net new sales person perspective.

[Bill Sutherland:]

And do you happen to have the number of quarter carrying reps that you had at quarter end, maybe Mike has – I mean, Mike Doyle?

[Mike Doyle:]

Yeah, I mean, the quarter carrying at the end of September was 281 Bill, this exclude event sales reps. There is another 13 of event sales rep. So, all on you’ve got 294 what I call bag carrying reps. And that’s up. We ended…

[Bill Sutherland:]

Can you tell us what that compares to?

[Mike Doyle:]

Well actually, it’s only up one relative to the end of June. And it’s up seven year to date.

[Bill Sutherland:]

Okay.

[Mike Doyle:]

On the event side. So you’re up nine year-to-date.

[Bill Sutherland:]

Okay. And Mike Morhardt, I’m just curious, I keep hearing about better tone of the economies in Europe, even Spain. What are you seeing most recently over there, anything that gives you a little more confidence?

[Mike Morhardt:]

Yes. So, as I mentioned in the last call, we have brought on Alex Harp, who is now our European sales leader. We’re in the process of Alex, just got over there probably two or three weeks ago. And so, he’s meeting with all the teams. The good news there is we have seen some good improvements in new business. We have seen pockets in specific countries starting to pop which is good. We’ve seen stability within the sales ring, so we don’t – we haven’t seen the attrition that we have in the past. Those are all good signals that it allows us to sort of build off of. I’m – I know there is still going to be macroeconomic trends relative to Europe. But in the markets that we’re serving right now I’m starting to see some better signals.

[Bill Sutherland:]

Good. And so, in the U.S. your plans for the geographic sales expansion, kind of where would you like the – I mean, what’s – what would the more or less complete coverage from number of cities?

[George Colony:]

I think you know, that’s – it’s a great question. I don’t know the exact number. I think we’re starting from a low base right, where we had the vast majority of our sales organization located in a couple of specific hubs, Cambridge in San Francisco and Dallas. And as you break out of that looking at L.A. and Denver and Chicago and all the other locations, what we’re finding as we’re building out these territories, there is definitely in our prospects. And what we’re trying to do is making sure that they’re productive territories so that there is a mix of existing contract value, existing contracts that they can maintain and also build off of that. So, there are all the logical locations and we have a scoring model that we leverage to look at those particular territories that we want to prioritize first. So, I don’t know what the total number of cities would be. But we’re scheduled to probably be at around 12 by the end of the year. And then in some cases, it’s not so much adding another city, it’s adding another person to an existing city.

[Bill Sutherland:]

Okay. I think that does it from me. Thanks.

[George Colony:]

Thanks, Bill.

[Mike Doyle:]

Thanks, Bill.

[Operator:]

(Operator Instructions).

[George Colony:]

Great. I think if there is, no further questions, thanks very much for everyone attending the call. And we look forward to seeing most of you on the road over the course of the upcoming quarter.

[Operator:]

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