Forrester Research (FORR) Q2 Earnings call transcript Jul 30, 2024
AInvestWednesday, Jul 31, 2024 4:04 pm ET
2min read
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In the recent earnings call for Forrester, the company provided insights into its second quarter 2024 financial performance and strategic initiatives. The call, led by CEO George Colony, CFO Chris Finn, and other executives, highlighted several key themes and trends, offering investors and analysts a glimpse into the company's financial health and growth prospects.

Financial Performance and Transition to Forrester Decisions

Forrester reported a decrease in total contract value (CV) of 3% in Q2 2024, but managed to beat its CV bookings plan, registering a growth of 5% year-over-year. The company attributed this performance to improved renewal rates of Forrester Decisions, a greater-than-expected volume of cross-sell deals, and improving new business flow from both vendor and enterprise user clients. Despite this positive movement, Q2 revenue showed a 10% year-over-year decline, primarily due to underperformance in the Events and Consulting businesses.

Forrester is aggressively transitioning to its Forrester Decisions platform, with 73% of CV now on the platform. The company is targeting 80% of CV in Forrester Decisions by year-end, a move that is expected to yield benefits in terms of predictable revenue flow and increased client satisfaction. The transition to Forrester Decisions is also leading to an increase in multiyear deals, with 68% of FD contract value now being 2 or more years in length. This shift towards longer-term contracts is beneficial for Forrester, as it reduces revenue volatility and enhances client loyalty.

Product Innovations and Events

Forrester's product enhancements, particularly the rollout of the generative AI tool Izola, have been a highlight of the quarter. Izola, which is now available to all clients of Forrester Decisions, has seen significant adoption, with the percentage of questions answered from a single prompt reaching 91% in Q2. The tool's success underscores Forrester's commitment to leveraging AI to make its research more accessible and useful for clients.

The company's events, however, did not meet sponsorship targets in Q2, impacting full-year revenue. Forrester is taking steps to address this challenge, with new leadership in its event sales sponsorship business and a focus on adjusting to the changing market conditions. The company is confident in its ability to improve event sponsorships and drive revenue growth in the coming quarters.

Management and Board Changes

Forrester also announced some key changes in its management and Board. The appointment of Jobina Gonsalves as Chief People Officer and the addition of Cory Munchbach and Bob Bennett to the Board are strategic moves aimed at strengthening the company's leadership and governance. Munchbach, a former Forrester analyst, brings valuable expertise in the B2B marketing space, while Bennett's experience in driving annual recurring revenue in the software industry will be invaluable as Forrester seeks to grow its CV business.

Financial Outlook and Guidance

Looking ahead, Forrester expects revenue to be in the range of $425 million to $435 million for 2024, with operating margins projected to be in the range of 8.5% to 9.5%. The company is continuing to guide for a full-year tax rate of approximately 29%. While the macroeconomic environment remains challenging, Forrester is optimistic about its product strategy, the value of Consulting and Events to drive retention and new business, and the long-term trends supporting its business.

In conclusion, Forrester's second quarter 2024 earnings call provided a comprehensive update on the company's financial performance, strategic initiatives, and future outlook. The company's focus on transitioning to Forrester Decisions, product innovations, and key appointments to its management and Board demonstrate its commitment to navigating the current economic challenges and positioning itself for future growth. Investors and analysts will be closely watching Forrester's progress in the coming quarters, particularly its ability to drive revenue growth and enhance client satisfaction through its Forrester Decisions platform and other strategic initiatives.

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