Forrester Research, Inc. Q2 FY2025 earnings call

Key Themes

• Economic instability impacted enterprise and vendor clients; CV and wallet retention decreased, but client retention increased to 74%.
• Total revenue down 8% due to declines in research, consulting, and events businesses; Q2 performance was a modest improvement over Q1.
• Maintained full-year margin and EPS guidance despite uncertain economic outlook.
• Government sector showing momentum with significant contracts in U.S. state/local and European federal governments, driven by competitive wins and interest in AI research applications.
• Progress in sales organization: 5 strong executives under sales leadership, pipeline up 15% QOQ, faster removal of low-performing reps, improved hiring time, and adoption of fast sales methodology/standardized account plans.
• Q2 saw debut of 2 new research constructs: buying networks in B2B and total experience score in B2C.
• Events business: Attendance increased for CX summits, new Events Head with B2B conference background, and alignment with marketing/organization to drive contract value expansion.
• Izola tool updates: Enabled to draw from graphics/figures in research, increased client usage (22% QOQ) and prompts (44% QOQ).

In the second quarter, total revenue was $111.7 million, down 8% year-over-year. Research revenue was $77.9 million, down 7% YOY; subscription research products saw a 3% decline, excluding the FeedbackNow divestiture, research revenue declined 5% YOY. Consulting revenue was $23.4 million, down 5% YOY. Events revenue was $10.2 million, down 23% YOY. Revenue contribution: research was the largest segment, followed by consulting, then events.

• Maintained full-year margin and EPS guidance.
• Revenue guidance revised to $400M-$410M for 2025, down 5%-8% YOY; research mid-single-digit decline, consulting mid to high-single-digit decline, events 20% decline.
• Operating margins expected to be 8%-9% for 2025.
• Interest expense expected at $2.7 million; full-year tax rate 29%; EPS guidance $1.20-$1.35.

• Economic uncertainty, geoeconomic, and political volatility impacting revenue and margins.
• Challenges in events business with sponsorship revenues; need to address competition and modernize offerings.
• Potential issues with sales conversion rates despite pipeline growth.

Q: What initiatives can be taken to improve the events business, especially sponsorships?

A: Carrie Johnson mentioned focusing on modernizing offerings outside traditional booths and upskilling sales teams to sell outcome-based experiences. George Colony added moving the CX event from London to Amsterdam to stimulate sponsorship interest.

Q: How is the trend of multiyear deals?

A: Nate Swan stated that multiyear deals are trending up, with 22% of contracts being 3-year, and the sales organization is adopting this well with regions showing strong performance in 3-year contracts.

Q: Was the decline in sales force due to voluntary or involuntary turnover?

A: Nate Swan said it's a mix of voluntary and involuntary, with performance management leading to some voluntary departures but headcount numbers are not materially down.

Q: What can be done to improve conversion rates?

A: Nate Swan mentioned getting involved early in the sales process, identifying committed buyers, and setting up a social contract with buyers to ensure commitment from both sides to improve conversion rates.