Forrester Research's CEO Discusses Q4 2013 Results - Earnings Call Transcript

Feb.12.14 | About: Forrester Research, (FORR)

Forrester Research, Inc. (NASDAQ:FORR)

Q4 2013 Results Earnings Conference Call

February 12, 2014 04:30 PM ET

Executives

George Colony - Chairman of the Board and CEO

Michael Morhardt - Chief Sales Officer

Mike Doyle - Chief Financial Officer

Analysts

Timothy McHugh - William Blair

Vincent Colicchio - Noble Financial

Bill Sutherland - Emerging Growth

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 Colony will open the call. Michael Doyle will then follow to discuss our financials we will then be joined by Mike Morhardt and open the call for Q&A.

Please note that the conference is being recorded. A replay of this call will be available until March 14, 2014 and it 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 can 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 are discussed in our reports and filings with 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 Q4 and full year 2013 conference call. In my segment of the call I will outline the company’s plans for 2014. Following my remarks, Mike Doyle, Forrester’s CFO will give a financial review of the fourth quarter and full year 2013, Mike Morhardt, Chief Sales Officer will join to the question-and-answer session.

In 2013 we strengthened Forrester’s foundation. The company reorganized creating one research organization and the professional product management group. The company introduced the new website making it easier for clients to find the consumer research. The playbook portfolio neared completion enabling clients to manage technology through a full life cycle. And finally the sales force continued its voyage to improve skills talent and market knowledge. The 2013 changes have established solid ground that can support the plan for 2014 and subsequent years.

I am going to spend time this afternoon on four topics. One, the shift in our strategy towards the age of the customer. Two; the build out of our project consulting group. Three; play books. And finally four, sales.

And I want to start off with the go to market strategy shift. We are in a unique era what some refer to as the age of the customers. Because of the amount of information customers now have at their disposal the collected power of their social and the multitude of devices the use to engage with brands is clear that power has shifted to the customer.

Just being customer focused which companies have been talked to us for many years is really no longer enough. Forrester’s clients need to be customer obsessed to compete and win in these times. And that means investing customer insights and matching their technology, marketing and customer experience strategies.

Because of this power shift, large companies are rethinking their technology priorities. As enviable by 2017 we expect 30% of total marketing spend to be digital centered in technology. This represents the doubling in a five year spend to $90 billion in the U.S. alone.

A similar shift is underway in the technology management groups within large companies. When you examine the spending of the CIO and the staff our data shows that systems have engagement and this is technology for winning, serving and retaining customers. We will grow by 13% this year far outpacing the 4% growth expected in back office and infrastructure spending.

We routinely survey large enterprises to identify their top technology priorities. And five of the top successful applications for this year are client facing, centered in sales, marketing and field service. In fact 90% of Forrester’s CIO clients have told us that a top strategic priority is to improve their company’s customer experience.

I have visited with many clients worldwide in the last six months and they framed the challenges they face in the edge of the customer. The CEO of a large Asian airline said that while he was able to provide excellent customer experience on his planes, his company was following behind as competitors and providing a tremendously high quality experience in the digital worlds. And this divested beginning to threaten news market position.

The CIO of a large U.S. investment bank told me that while his IT budget as money for internal infrastructure was under cost pressure, he had unlimited funds for his business technology budget, the systems that wins retained and served customers.

I shared the technology panel at the world economic forum this year in Dallas and customer technology was prominently on display. Marissa Mayer, Yahoo talked about mobile apps. John Chambers of Cisco outlined how internet of things will connect companies to customers and Marc Benioff as referred [Forrester’s] efforts to produce advance technology in their consumer products.

The edge of the customer demands that CMOs work hand in hand with the CIO to create the best possible solutions for customers, because Forrester serves both marketing and technology executives and we have worldwide data on customers, we are uniquely positioned to help companies in this new era.

Forrester’s newly simplified structure with one research organization serving both marketing and technology management professionals will enable us to help our clients for the systemic challenges of delivering a synchronized marketing and technology solution, if and when retain and serve.

Let's look at mobility as an example. Forrester can array the research and advice that informs everything from mobile commerce to mobile branding for the CMO and her organization to mobile app development and mobile security for the CIO in his organization.

Then you add our data products, Technographics and ForecastView and we alone can provide deep insights into the attitude, behaviors and conversations about consumers and business buyers globally.

In the 30 year history of Forrester, there have been three, maybe four opportunities as important or rich as the edge of the customer. It doesn't matter if you're in financial services, insurance, cars, healthcare or energy, the increasingly powerful customer will change your business. And Forrester will be there to insure that our clients can thrive in this new era.

I now want to switch gears and say a few words about consultant. As I had mentioned over the past two quarters, we continue to hire consultants, who are dedicated in performing projects for our clients. And as a reminder we're doing this to number one focus our analysts on improving the quality of syndicated research. Two to improve the quality of our project consulting offerings. And three to make it easier to scale our consulting business to match demand.

I'm very pleased to report that the new organization is performing beyond our expectations. Consulting client satisfaction as measured by our customer experience index has reached new highs. Project consulting rate ahead of expectations in the fourth quarter 2013 and it's gotten off to a very strong start for 2014.

Collaboration between research and consulting is an area of potential conflicts has been well navigated by Cliff Condon, Head of Research and Victoria Bough, Head of Consulting.

Finally, we've been able to attract highly talented consultants in our first year of hiring. And this way it has accelerated the professionalization of our nascent practice. The growing team is able to take on larger projects and that is wide to our bandwidth to perform breakthrough work in the age of the customer space.

As an example, the group recently completed a project for a major U.S. consumer package goods company that assess its mobile offerings and recommended how it could build technology for intensifying interactions with customers. As of year-end 2013, consulting headcount was at 60, the number is planned to grow to 79 people at the end of the first quarter, putting us on track to have a full roster of 114 professionals by the end of 2014.

I want to take a moment to update you on the progress around playbooks. As you know, playbooks are sets of research that take our clients to the lifecycle of a challenge. And this research product is unique to Forrester. The ‘13 report that comes in playbooks get clients’ direction and how to discover, plan, act on and optimize technology projects. We currently have 64 playbooks live on forrester.com, double the amount we had at this time last year.

Of the eight different types of research, clients consistently write playbooks as the number one or two most helpful. Playbooks help Forrester’s clients navigate the age of the customer. Examples include the customer loyalty playbook for customer insight professionals and the contact centers for customer service playbook for application development professionals.

We now entered the second stage of our playbook content strategy. All playbooks will be updated on a continuous basis in a design to be leaving reports. Every year small number of [titles] will be retired replaced by new line up of relevant entries. We expect to have a total of 72 playbooks live by the end of 2014.

Turning to sales, at this time last year Mike Morhardt had just taken control of the Forrester team. While his work is certainly far from being complete, he has made significant stride to 2013 to improve his group’s performance. Under Mike’s leadership attrition in our quarter carrying sales reps has dropped from 29% in 2012 to 24% in 2013. This is still not where we want to ultimately operate, but we are on a path to our target.

Discounting has dropped significantly in 2013, manifestation of Mike’s strong control over sales procedure and discipline. Mike has changed the hiring profile to ensure that these new reps are located close to their customers. And we’ve already seen this tactic improved productivity of this new wave of sales people.

So in summary, Mike had a busy, but productive first year. His experience and operational expertise are just what Forrester required and I am excited to watch his performance in 2014.

As a final note, I am happy to report that we purchased 118 million of shares in 2013 and that’s up from 30 million in 2012 and 18 million in 2011. Our share count has fallen from 22.3 million at the end of 2012 to 19.8 million shares at the end of 2013. We’ve reduced the amount of cash invested on our balance sheet from $243 million in 2012 to $155 million at the end of 2013 and we continue to make progress to our goal of ultimately carrying $100 million of cash on our balance sheet.

So in conclusion, 2013 was a year of hard work as we reinforce the foundations of the company. We are all very excited to be moving into a year during which we will build on that foundation, helping our winning the age of the customer, completing the build out of our project consulting business, leveraging our playbook advantage and continuing the work at building a world class sales organization. We certainly have much more work to do, but we are confident that we are on the right path.

Thank you. And I’d now like to turn the call over to Mike Doyle, Forrester’s Chief Financial Officer. Mike?

Mike Doyle

Thanks George. I will now begin my review of the financial performance for Forrester’s fourth quarter and full year results the balance sheet at December 31st, our fourth quarter metrics and the outlook for the first quarter and full year of 2014. Please note that the income statement numbers that I am reporting are pro forma and exclude the following. Amortization of intangibles, stock-based compensation expense reorganization cost, acquisition-related cost and net gains and losses from investments. Also, for 2013 we utilized an effective tax rate of 39% for pro forma purposes, the actual effective tax rate for the full was approximately 36%.

For the fourth quarter and full year, Forrester met its revenue and exceeded its pro forma op margin and EPS guidance. Strong performance in our advisory services business drove revenue growth, while expenses remained in line with expectations.

More importantly, about one year ago when I was reviewing where we stood after 2012, I indicated we had a lot of work ahead of us. I spoke about the adverse impact of the 2012 sales pivot and how it would take 12 to 18 months to rebuild the sales organization and gave guidance with caution for the full year of 2013. I am going to talk about the sales rebuild, which is showing real progress later in my comments.

Relative to the full year 2013 guidance we gave back in February of last year, I am pleased to report we’re at the upper-end of that revenue guidance and exceeded the operating margin and EPS guidance we provided you back then.

Given the busy year we had as a company with our new website, expansion of playbooks and the project consulting organization, as well as the headwinds we faced in Europe, it’s a very satisfying result.

Bookings continue to improve in the fourth quarter relative to the fourth quarter of last year with most of our markets maintain the positive we saw in the third quarter. We definitely saw our sales organization getting better traction in the second half of the year, with performance improving in five of our seven sales groups. We continue to see economic and execution headwinds in our European operations, which are adversely impacting performance.

Fortunately, growth in North America and Asia Pacific is helping to offset declines in that region. We continue remained active on the share repurchase front, although we experienced a slower rate of repurchase activity in the fourth quarter relative to previous quarters. That said, we completed a record year for repurchases of the company, which I will discuss in more detail in a few minutes.

Now let turn to more detailed review of our fourth quarter results; Forrester’s fourth quarter revenue increased by 3% to $77.5 million from $75.2 million in the fourth quarter of 2013. Fourth quarter research services revenue decreased 1% to $51.4 million from $51.9 million last year represented 66% of total revenues for the quarter. The decline was driven by an expected contraction in our syndicated data business. Excluding data, research services revenue grew by 1% compared to the fourth quarter of 2012.

Fourth quarter advisory services and other revenue increased 13% to $26.1 million from $23.2 million in the fourth quarter of 2012 and represented 34% of total revenue for the quarter. This was fueled by strong growth in BT consulting and advisory services, but also supported by more moderate gains in our marketing and strategy consulting and in our events business.

International revenue mix was 27% for the period ending December 31, 2013, which is down from 28% in 2012, U.S. revenue increase by 5% for the period. International revenue despite continued strong growth in Asia Pacific only increased by 1% driven by continued challenges in Europe.

I'd now like to take you through the activity behind our revenue starting with research. We come into 2014, as George mentioned, with 64 row-based playbooks live declines. These playbooks will be reflected annually to ensure the most relevant content is available to our clients.

Over the course of 2014, we plan to add 8 more playbooks based on this year’s market imperatives such as mobile mind shift. In the fourth quarter 288 new research documents were added to RoleView and we hosted 40 webinars with a total attendance of 1007.

At the end of the quarter, the top three research roles were applications, development and delivery with 6,274 members, enterprise architecture was 4,376 members and the CIO counsel with 4,199 members.

Forrester leadership boards are peer offering for senior executives achieved the revenue increase of 1% year-over-year in the fourth quarter with healthy growth in M&S leadership boards partially offset by declines in BT leadership boards.

As of December 31, 2013 Forrester leadership boards had a total of 1,755 members, down 6% from December 31, 2012. Volumes in BT membership were partially offset by growth in marketing and strategy membership.

Our data business continues to be a critical part of our value proposition. We survey over 400,000 consumers in 21 countries, representing 80% of global GDP and over 60,000 businesses in 10 countries, representing 66% of global IT spending.

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 year-over-year basis, revenue decreased by 6% for the fourth quarter due mainly to the phasing out of our tech marketing navigator product. And this product will be incorporated into our foresights products in 2014. In our consulting business, revenue for the fourth quarter increased by 12% versus prior year.

BT advisory, BT project consulting and M&S project consulting all experienced double-digit growth of a quarter, due to analyst productivity improvement and achievement of our planned consulting headcount additions which George mentioned earlier. Turning to our events business, Forrester hosted five forums in the fourth quarter. In the U.S., we held the joint forum for CIOs and CMOs and events for application development delivery professionals, e-business and customer experience leaders.

We ended the year with a sold out European customer experience forum in London. Despite holding fewer events, increases in total attendance and sponsorship resulted in revenue increase of 9% compared to the fourth quarter of 2013.

I’ll now highlight the expense and income portions of the income statement. Operating expenses for the fourth quarter were $71 million, up 10% from $64.5 million in the prior year due mainly to increased compensation from higher headcount in sales and research. Overall headcount increased by 4% as of December 31, 2013 compared to the same period last year. At the end of the fourth quarter, we had a total staff of 1,288 including a research staff of 475 and a sales staff of 485.

Research headcount was up 10% versus prior year and up 2% as compared to September 30, 2013. Our sales team continues to expand with headcount increasing by 5% versus prior year and by 2% compared to September 30, 2013. Sales rep headcount increased by 9% compared to the fourth quarter of 2012 though fully ramped sales rep headcount grew only 7%. This reflects an increased level of late hiring compared to 2012.

Sales attrition achieved its lowest level in the last eight quarters though we remain diligent about managing performance. Although we’ve got off to a slow start, we were successful in achieving targeted headcount levels in sales and in research by the end of the year including our planned additions to our project consulting team.

Operating income was $6.5 million or 8.4% of revenue compared with $10.6 million or 14.2% of revenue in the fourth quarter of 2012. Other income for the quarter was $32,000, down from 404,000 in the fourth quarter of 2012.

Net income for the fourth quarter was $4 million and earnings per share was $0.20 on diluted weighted average shares outstanding of 20.3 million compared with net income of 6.7 million and earnings per share of $0.30 on 22.7 million diluted weighted average shares outstanding in the fourth quarter of last year.

Now, I’ll review Forrester’s fourth 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 December 31, 2013, agreement value was $216.5 million, a decrease of 2% from the fourth quarter of 2012.

As of December 31, 2013, our total for client companies was 2,471, down 9 from the third quarter but up 9 compared to the fourth 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 73% as of December 31, 2013, a decline of 3 points from September 30, 2013 and our dollar retention rate during the same time period was 86%, also down 3 points from our prior quarter. Client retention was adversely affected by shortfalls in our European and data businesses.

Our enrichment rate was 97% for the period ending December 31, 2013, up 2 points from September 30, 2013 which is encouraging. 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 December 31, 2013 there were 2.4 roles per client, unchanged from September 30, 2013.

Now, I would like to review the balance sheet. Our total cash and marketable securities at December 31 were $155.1 million, down $87.5 million or 36% from our year end 2012 balances which reflects the significant repurchase of our shares, totaling $118.2 million during 2013.

Cash from operations was a negative $1.6 million for the quarter as compared to a positive $10.4 million in fourth quarter of last year. The decline is due to lower earnings year-over-year as well as the lower accounts receivable balance entering the fourth quarter of 2013 as compared to the prior year.

We received $2.9 million in cash from options exercised for the fourth quarter in the fourth quarter of 2013. We also paid a dividend in the fourth quarter which amounted to $3 million or 0.15 per share. Accounts receivable at December 31, 2013 was $77.5 million compared to $74.6 million as of December 31, 2012.

Our days sales outstanding as of December 31, 2013 was 92 days which is consistent with December 31 of last year. And accounts receivable over 90 days was 4% at December 31, 2013 compared to 3% at December 31, 2012. Our capital spending for the fourth quarter of 2013 was $1.1 million compared to $300,000 during the fourth quarter of 2012.

Deferred revenue at December 31, 2013 was a $152.9 million, up 2% over December 31, 2012. Deferred revenue plus future AR, a key indicator of future performance was flat compared to the prior year. Our future AR balances are amounted 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.

As I mentioned earlier, we spent a record level to repurchase Forrester shares in 2013. During the year, we repurchased 118 million of our stock, representing approximately 3.3 million shares. This is up from approximately 30 million in 2012 and 18 million in 2011. We remain committed to driving shareholder value and are happy with what we accomplished during 2013. Our stock price rose over 40% during 2013. And when you include the dividend, the overall return was approximately 43%. This compares favorably to both the Russell 2000 and the NASDAQ for the same period.

In addition, today we announced that we will increase our ongoing quarterly dividend 7% from $0.15 a share to $0.16 per share. Despite this aggressive level of repurchasing our shares, we ended the year with approximately $155 million in cash, above our targeted level of a $100 million. 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 had said before, we will consider using our cash and short-term borrowing when necessary to support ongoing investment in our business and allow for acquisition opportunities.

As I mentioned in my opening remarks, we met our guidance for revenue for the quarter and full year and exceeded our guidance for operating margin and EPS. To reinforce George’s point, we're seeing real signs of improvement from the changes we made in 2013, as encouraged by the progress made by the sales organization in the second half of 2013, with steady improvement from five of our seven sales teams.

The expansion of our project consulting organization and the transition of our research teams to focus on short term and advisory consulting has already had a positive impact. Both project and advisory consulting had solid performances in Q4 and performed above expectations. We continue to demonstrate the ability to manage in our operating expenses to fund the necessary investments in our business while delivering results in line with expectations.

As we move into 2014, we've remained somewhat cautious with our revenue guidance as we complete to build out of consulting organization and enhance our data products. We will keep you updated as the year progress and update our guidance quarterly to reflect the progress we’re making with these important initiatives.

Now I’d like to review our guidance for the first quarter and full year of 2014. As a reminder our guidance excludes the following. Amortization of intangible assets which we expect to be approximately 500,000 for the first quarter and approximately $2.2 million for the full year 2014, stock-based compensation expense of $1.7 million to $1.9 million for the first quarter and approximately $7.5 million to $8 million for full year 2014 and any investment gains and losses.

For the first quarter of 2014, we’re aiming to achieve total revenues of approximately $70.5 to $73.5 million. Pro forma operating margin of 5.5% to 7.5%. Pro forma income tax rate of 38% and pro forma diluted earnings per share of approximately $0.12 to $0.16, for the full year, we’re targeting total revenues of approximately $304 million to $312 million. Pro forma operating margin of 9.5% to 10.5%. A pro forma income tax rate of 38% and pro forma diluted earnings per share of between $0.93 and $1 per share. We provided guidance on a GAAP basis for the first quarter and full year 2014 in our press release and 8-K filed today.

Thanks very much. And now I’m going to turn the call back over to the operator for the Q&A portion of the call.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions). And our first question is going to come from Timothy McHugh. Please go ahead. Your line is open.

Timothy McHugh - William Blair

Yes, thanks. First I guess you mentioned 5 of the 7 areas picked up sales I guess what didn’t and I guess and of the 5 that picked up any stronger than others I guess?

Mike Doyle

Yes. So I’ll start with the positive Tim instead of the negative so we kind of keep it on a up note and then we’ll cover the ones that splitted it.

So we have three groups within North America, all of which did extremely well both our new business teams as well as our East Division and our West Division, both pretty much have been sort of consistently sort of paving the way growing and growing. Then Asia-Pacific which has been strong pretty much all year along. They’ve really had a really great year and then our events business okay which picked really well.

I would say Europe had an up and down year. We had a good third quarter and then the fourth quarter slipped backwards. So we’re still fighting some headwinds there. And then to a lesser degree but some of our larger premier accounts we had some activity in the fourth quarter that caused us to slip a little below what our expectations were. So I would say some of our larger accounts in Europe are the drag right now and then the other five that I mentioned are had some nice momentum in the back half and some of those teams have had good momentum throughout the year.

Timothy McHugh - William Blair

And then most of your bookings growth is coming on the marketing side.

Mike Doyle

It’s kind of an interesting split then. So I would say that we highlighted for example on our FOB business that yes, M&S versus BT that’s the case I think in general that’s the trend but what’s interesting is if you look at consulting I think we highlighted more on the revenue front but some pretty healthy activity on the BT side on consulting. So it’s kind of a mix story still more sharing towards overall M&S is stronger and is rebounding at faster rates than our BT business and across the board. But within that we are seeing some interesting times of positive things in the BT business as well.

George Colony

Tim, this is George. If you look at the tech management space, our expectation is that as Forrester focuses more closely in tech management on business technology it’s a technology serve between customers that we will get turn on our business in ‘14 and ‘15 as I said in my remarks CIOs and even CEOs and they lean in when you start to talk in those terms yield IT infrastructure business I mean that’s very critical with these companies but that’s an area of cost pressure and cost reduction the area of BT is one of cost expansion really. So I think it’s going to help in turnaround in ‘14 and ‘15.

Timothy McHugh - William Blair

Okay. That’s great. On the consulting given I guess order agreement value finished and then expansion on the consultant base. Is it fair that we should expect this year consulting to be growing faster? And I guess what’s -- I’m assuming you have embedded this in the margin, but just to understand the dynamics. What are the margin impact differences I guess as you see faster growth on the margin or on the consulting side?

Mike Doyle

Yes I think, first I do think consulting is going to grow faster I think in this term. I think that in 2015 you are going to see that sort of Y cost shift again. The analogy George like use internally is that consulting is about six months to a year ahead of what we are doing on product research side. So, we ended the year really well and I expect that that’s going to continue. And it certainly has impacted our margins in ‘14 because we are continuing to hire aggressively consulting.

So, we’re going to in aggregate the headcount is going to almost double down again in consultants by the time we end the year. So, you get people ramping up producing sort of towards the tail-end so it does impact our margins in the near-term.

I think and our view is in the long run this is going to be a much, much more efficient model. We are opening up our research teams want to do little bit more advisory should they choose to do that, but more importantly build out their research content. So, and provide more support to sales.

So, our view is that we are going to get much better top-line growth. I think we are not walking away from our 70% target on syndicated. I think in the near-term you are probably going to see a shift a bit towards the consulting in advisory side in ‘14, but then I think it’s going to turn itself back around in ‘15 and will start marching back towards that 70%, but in aggregate with the overall top-line growing in ‘15 and beyond at double-digit rates, healthy growth in consulting and in research.

Timothy McHugh - William Blair

Is the target still to get to agreement value growth in the double-digits by the end of the year, I guess or given where you’re starting in terms of new bookings, is that a stretch?

George Colony

Look, our targets are still that by the end of the year we're going to see that we're going to move to high single-digit to double-digit growth in the back part of the year. Yes, that's still the game plan. The theory is we're going to start cautiously and slow and momentum will build. As I referenced in my comments and I'm not sure it was clear enough, we got to our planned sales headcount, but it was much more back-end loaded than we had originally hope. So, those folks are still ramping in the first part of the year. So, I think where Mike is going to start getting some rhythm and I'll let him comment briefly if you want, but when he is going to start getting rhythm on that group that came in the back part of this past year in ‘13, it's going to be in the back half of ‘14.

Timothy McHugh - William Blair

Okay. And then last question, Mike just what did you assume in terms of share buybacks in the guidance. Is there any, is the share count flat, did you assume more buybacks in this?

Mike Doyle

We assume that we're going to see a slight downtick in overall share count. So, what I use the share count that I quoted was the sort of the fully diluted share count of 20.3, the diluted weighted average share is 20.3 I expect that that's going to drift below 20 before the end of the year. The share count George has used was just the basic weighted to $19.7 million. But either way, we're going to march our way down, not dramatically, but we expect that it's going to continue to come down a bit.

Timothy McHugh - William Blair

Okay. Thank you.

Mike Doyle

You're welcome.

Operator

Thank you. And then our next question is going to come from Vincent Colicchio from Noble Financial. Please go ahead, your line is open.

Vincent Colicchio - Noble Financial

Yes, I'm curious Mike how large is Europe now to the company? And any sense in the fourth quarter you had some weakness with few large customers. I'm wondering so far in the New York you're seeing the environment improve at all, but there are only tech companies, some tech companies saying they are seeing a better environment?

Michael Morhardt

I'll give you an approximate on Europe for us Vince and then we can -- I’ll let Mike probably talk to the environment. But Europe all in, is just going to be a little north of 21% or 22% of our total sort of bookings and revenue numbers. So, it’s still a big piece of our world. And so, as a result, we are actively looking to reenergize that in a big time way. And there is lot of work there. I’ll let Mike talk about where he wants to go, where he is headed with it. But it’s still a good size of piece of business for us. I still think there is a tremendous amount of opportunity for us in Europe.

Some of the issues we have are around making I think George has said that on previous calls, it’s an execution driven piece, some economic headwind that’s it, there is opportunity there. But I’ll let Mike maybe go a little deeper on how he is doing the prospects there in larger accounts.

Mike Doyle

Sure. So Vince I think we’ve mentioned on previous calls we had a different type of go-to-market strategy for the sales organization and specifically in Europe we were aligned by market segment, by size of client and necessarily regionally focused. And so, in 2013 we made a ton of progress of aligning the organization on a regional basis. In the last couple of months, we've hired leaders to lead our German team, our French team. And we have all the leaderships in place on a regional basis. And at same time, one of the other missing characteristics of driving business in Europe was nearly strong alignment with our research and consulting peers. And over the course of the last four, five months we've been to able to -- been much more aligned replacing our bets both in the sales perspective, but also from the research and consulting perspective.

So, I think it’s set up the right way. And we’re starting to see some nice signals from certain parts that have already been set up that way. You had asked a question about some of our larger accounts and some of the softness there. That softness is also in Europe. And so, well Mike mentioned we have kind of a couple of different issues, we have a global accounts organization that has a lot of European accounts and that’s where we saw the softness.

And so, we’re focused on implementing the plan around regional sales model that’s in place now. We’re focused on making sure that we have in our research and consulting peers right alongside that in place and going to be in place as we grow the consulting organization. And that was the question of just execution as we go into 2014. I am not expecting good things out of the Europe, there is -- the microeconomic issues I don’t think are standing in our way, there is plenty of opportunity there.

Vincent Colicchio - Noble Financial

Thanks for that color. And Mike or George, how long will be transition away from the tech navigator product continued impact the company in a meaningful way?

George Colony

Yes, I don’t think it’s going to have a meaningful impact in 2014. I think we’ve said it taking our [paying] this past year and I think that the features of that product that we like are going to be incorporate into our business for such product and frankly we were feeling pretty good about the data we’re investing a lot in terms of data headcount so we feel pretty good about that. So, it’s not going to be a drag on 2014 like it was 2013.

Vincent Colicchio - Noble Financial

Okay. Thanks guys.

George Colony

Thank you.

Operator

Thank you. And then our next question is going to come from Bill Sutherland from Emerging Growth. Go ahead your line is open.

Bill Sutherland - Emerging Growth

Thanks. So, I just want to get clear on the consultant headcount so I couldn’t quite here George’s tally as of year-end, what was that number?

George Colony

So within -- if we look at it though within -- and they show in our research number, but within that we ended ‘13 with 60 consultants, we plan to end ‘14 with about 114 and then sort of George talked about, we had a small group of core consultants in there. I think George talked about the adds that were coming on top of that group we already had. So I think this year we added I think 21 or something George to that group that’s the new hired group. So, those are sort of some of the numbers go, but when you get -- we plan to end the year about 114 in our consulting organization.

Bill Sutherland - Emerging Growth

So when you -- I should think of those as separate and apart, I mean it’s unrelated to anybody doing research in that group of all 60 as of the end of the year?

Mike Doyle

Correct.

Bill Sutherland - Emerging Growth

Okay. I had the number and this is probably wrong at just 21 at the end of September.

Mike Doyle

21 and I think we probably created that confusion on the last call but 21 was what we had targeted to add to the existing group that we had, Bill…

Bill Sutherland - Emerging Growth

Okay.

Mike Doyle

During the course of 2013, and I apologize for that confusion. So the new group that we have been added in and then there is -- so I think that was what created the confusion.The numbers we gave you today are better.

Bill Sutherland - Emerging Growth

And so this can pretty ratable this March from 60 to you said 114.

Mike Doyle

It is although the hope is that we plan to get them in sooner rather than later. The idea and the target is that we’ve got our research teams out of project consulting by the end of 2014. That’s the target that we are setting. So if you assume some ramp, the hope is that by the time we end the year, every research analyst that’s here in Forrester isn’t worried about project consulting anymore, they are focused on advisory and writing research, taking events, working with the sales teams. So that’s our target Bill.

Bill Sutherland - Emerging Growth

So, it’s going to be kind of a noisy number in terms of revenue per consultant and that kind of thing until we get okay?

Mike Doyle

It will be, we’ll attempt to -- when we come out with first quarter, I think we are going to attempt to look at and breakout more by ramped consultants, so you can get some sense as to the how ramps consultants are producing just what they are trying to do, we are just giving ramp sales headcount, we’ll attempt to do the same on the consulting side.

So you can get little bit more color in terms how we are progressing. And as George mentioned, the early performance has been really good, we have been really happy.

Bill Sutherland - Emerging Growth

Any check, any plans for events in terms of either numbers or size planned?

Mike Doyle

No. Essentially the event business, we are sticking with the plots we did, we took last year, which is we scale back the number of events but we are going with sort of the few of the bigger, here is no dramatic change in numbers of events between ‘13 and ‘14. I think the bigger task is, I think George’s challenge was really more to build out the content and making these events just even a richer experience for our clients.

So, we are staying pretty focused on numbers of events and trying to build on in size with that sort of that foundation.

That means that not all rolls we get events but the primary, the larger roles will get very large events as we forward in times. The example the experience forum at New York City, I think that’s 1,400 -- a lot of people there and success on the West Coast repeated event, and success in Europe repeat of that event.

So you’re probably looking at five to seven core roles that we get large, that we’ll have large events and getting over time year to year.

Bill Sutherland - Emerging Growth

Okay. Now I just want to also understand in terms of Mike's build out, the salesforce build out. So you in terms of just total sales staff, it was a 5% year-over-year with that. So, I didn’t know that was the adjusted year-end target or whether the quota bearing portion of that was at the greater percentage?

George Colony

In ‘13 the quota bearing was up, I want to say 9% in 2013 over 2012 and…

Bill Sutherland - Emerging Growth

Okay.

George Colony

Yes. And our target for 2014 is net is going to be up 6%, but we -- so the 6% and again I'll let Mike give more color, if our years continuing to move downward, we're getting good momentum that’s what changed quickly. Within that 6% though within ramp headcount, we expect that group to be up 9%. So that's sort of the ramping and the people came into the back half of the year or so. Net-net, these ramped headcount will be up about 9% in ‘14 is our target, similar to what posted past year.

Bill Sutherland - Emerging Growth

Okay.

Mike Doyle

Yes, Bill I’ll just add, so from an overall sales organization, this 5%, we try to keep our eyes on management sales support keeping those levels stable and focused on quota bearing headcount. Most of that quota bearing headcount came in the second half of the year in fact in Q4. As I’d mentioned on previous calls, we were building out kind of the muscle memory around recruiting and building territories in remote regions and that up to our goal of 12 new cities that we were looking to have coverage in. And so we're taking that into the first half of 2014. The engine is working, but we're keeping an eye, so we get into the first half to see what signals we along with Mike to determine whether we want to ramp that up.

Bill Sutherland - Emerging Growth

Okay. And then lastly just if you can give us a little more color on that large account of [SAC] that you saw on the fourth quarter just help us understand if that was very client specific or kind of a momentary pause, as far as you can see?

George Colony

Well, there is a couple that had to do with reorganizations, which are never fun. And as the client goes through that the organization we’re in the process of now calling on different buyers. I’d like to thank those revenues are stable and we’ll bring those clients back in Q1 and that's the plan.

You never want to be surprised in Q4 and one of your larger clients, when it goes reorganization, but we had two or three of those that surprised us. And so we put some plans in place to not have that happen again. And they were based in Europe primarily and we’re after those try to put them back in Q1.

Bill Sutherland - Emerging Growth

Okay. Thanks guys appreciate it.

George Colony

Thanks Bill.

Mike Doyle

Thank you Bill.

Operator

Thank you. And we have no further questions at this time. So I’d like to turn the call back over to Mike Doyle.

Mike Doyle

Great, thanks everyone. And thanks for joining us for the call. We look forward to seeing folks out on the road over the course of the next quarter or two and keeping you rest of the progress that we've made. And we’ll be talking to you soon. Thank you.

Operator

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

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