Forrester Research, Inc. Stock

Thank you. Good afternoon and thank you for standing by. Welcome to Forrester's second quarter 2026 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to the Vice President of Corporate Development and Investor Relations, Ed Bryce Morris. Please go ahead.

Thank you, and hello everyone. Thanks for joining today's call. Earlier this afternoon, we issued our press release for the second quarter of 2026. If you need a copy, you can find one on our website in the Investors section. Here with us today to discuss our results are George Colony, Forrester's Chief Executive Officer and Chairman, and Chris Finn, Chief Financial Officer. Carrie Johnson, our Chief Product Officer, and Christophe Favre, our Chief Sales Officer, are also here with us for the Q&A section of the call. Before we begin, I'd like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, believes, anticipates, intends, plans, estimates, or similar expressions are intended to identify these forward-looking statements.

These statements are based on the company's current plans and expectations and involves risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements. Factors that could cause actual results to differ are discussed in our reports and filings with the Securities and Exchange Commission. and the company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise. Lastly, consistent with previous calls, today we will be discussing our performance on an an-adjusted basis, excludes items affecting comparability. While reporting on an an adjusted basis is not in accordance with GAAP, we believe that reporting numbers on this adjusted basis provides a meaningful comparison and an appropriate basis for our discussion. find a detailed list of items excluded from these adjusted results in our press release. And with that, I'll hand it over to George.

Thank you for joining Forrester's Q2 2026 Investor Call. I'll be covering the following themes before turning the call over to Chris Finn, our Chief Financial Officer. One, Forrester's second quarter performance and our outlook for the second half of the year. Two, recent AI research from Forrester. Three, our flagship B2B and CX events, which were held in the second quarter. And four, an update on Forrester AI, including adoption and usage. Trends from the first quarter continued into the second quarter as we hit our key metrics.

The equity decreased 3% while retention was flat. Client retention was down 1%, but client count increased in the quarter. Total revenue decreased 10% with research revenue down 8% and non-CV businesses down 15%. Market uncertainty drove the consulting and events declines, along with our exit of the strategy consulting business earlier in the year. Overall, our Q2 performance was aligned with our expectations with consensus beats on revenue, margin, and EPS. Despite headwinds in our consulting and events businesses, we have confidence in attaining our plan in the second half of the year. We continue to be laser focused on achieving CV growth in 2026, and we are maintaining our revenue, margin, and EPS guidance for the full year.

AI technology continues to evolve at fast rates, stimulating our clients' need for guidance. In the quarter, we produced hundreds of new AI research frameworks, models, benchmarks, and technology blueprints. And I wanted to quickly reference a few here to give investors a window into how we are helping our clients. Forrester is creating a series of reports outlining how high-level corporate roles will be changed in the AI era. In Q2, we released three, the AI CIO, the AI CMO, and the AI Chief Information Security Officer. The AI-CIO report envisions a world in which the CIO is managing a new way to develop software and a corporate environment where tasks are performed by autonomous agents overseen by human intelligence that will be continually curating and managing outputs. In this world, the CIO will have four new roles.

One, architecting enterprise decision making. Agents will make decisions and the CIO must guarantee 24-hour availability to the company. Two, governor of autonomous systems. Agents will fail. The CIO must navigate the risk and contain the damage. Three, economists of AI value. AI will be expensive to operate. The CIO must manage costs and calculate the tradeoffs between agentic and human work. And finally, four, boards of directors are accustomed to deterministic reporting, AI yields probabilistic outputs, and the CIO must be continually educating the corporation on the risks and opportunities afforded by this approach. A narrative has emerged that companies will not need CIOs and IT in the future.

Our report rejects this view, asserting that agentic AI will present serious risks and vulnerabilities in large organizations. Firm but opportunistic centralized management of technology will be critical to maintain operations in companies as the Wild West of AI computing unfolds. Another fascinating report from the quarter revealed the state of artificial intelligence within marketing agencies in the U.S. AI is now pervasive across U.S. marketing agencies, with nine of the ten top agencies using generative AI and 50% using gentic AI for marketing execution. AI is deployed to ideate creative concepts and prep for pitches, aggregate and assemble strategic insights, and summarize media insights and reporting. Google is the number one AI provider to the agencies, with Adobe at number two in the generative AI space and Anthropic at number two for Agentic. These three vendors have displaced OpenAI.

As is typical in the early days of AI, the agency industry is deploying the technology to increase productivity and drive cost efficiency, not for increased market effectiveness, creativity, and long-term brand growth for their customers. Forrester's research remains ahead of the market, impervious to faddish narratives and unafraid to pop bubbles and take iconoclastic stands. Our clients are making multi-million dollar decisions. They rely on Forrester's objectivity and research-based analysis to ensure that they are making the right decisions. Turning now to events. At our B2B Summit North America in Phoenix, our largest yearly event, we explored the tectonic shifts underway in how B2B companies sell and promote their products. And Forrester calls this the go-to-market singularity. The event was a clarion call to B2B leaders across marketing, sales, customer success, and product functions to discard outmoded go-to-market practices and embrace a new, augmented, resilient, and collaborative GTM approach that will capture AI-centric customers and generate revenue growth.

Despite years of volatility driven by changing customer behavior, most B2B firms have failed to change how they engage with buyers. They are clinging to ineffective marketing practices such as mass emailing, marketing-qualified lead obsession, gated content, and siloed teams. AI is quickly destroying these practices as it transforms buyer journeys and continues to shift power away from sellers toward buyers. Now, as the GTM singularity unfolds, B2B firms must augment sales and marketing efforts with agents, respond to customer shifts faster, and better align marketing, sales, and product groups to act in unison. A singularity change that is happening right now is what Forrester calls the visibility vacuum. SEO and search decline, customers are going dark, making it impossible to gather buying signals from customers and increasing the need to adopt some form of answer engine optimization. The B2B Summit saw a 9% year-over-year increase of attendees.

We had 1,400 attendees, 59 sponsors, and 110 sessions. We estimate the summit influenced approximately $3.5 million of contract value bookings. Customer experience forums were held in New York City, San Francisco, and Amsterdam in the second quarter. At the forums, we unveiled Forrester's updated total experience score. The TX score debuted in 2025, a unique metric that combines the customer experience and brand experience of large companies to accurately forecast the growth potential of those firms. Added this year was a third component, employee experience, yielding a more complete view of where companies are tracking. The TX score places companies in four groups based on our data, leading, plateauing, lagging, and churning. 2026 global total experience score rankings of 375 brands, evaluating companies across Asia Pacific, Europe, and North America in 10 vertical markets.

Looking at the U.S. automobile market, Honda was dominant in the leader category. Tesla was plateauing, Chrysler lagging, and GM churning. Overall, 41% of the organizations measured improved their scores from 2025, while only 3% declined. The Amsterdam and New York CX forums were sold out. Turning now to developments in Forrester AI. In Q2, we announced the Forrester AI Agent for Microsoft Copilot, enabling clients to access trusted Forrester research and guidance directly from their Microsoft workflows. This announcement follows Forrester's integration of Forrester AI into Microsoft Teams, continuing our efforts to make research available to our clients where they work. revolutionizing how clients engage with research and advisory firms.

By the end of Q2, we had activated hundreds of accounts to access Forrester AI from teams and co-pilot. AI usage increased to new highs in the quarter, with total users up 33% in Q2 versus Q1 and up 69% year over year. Forrester AI prompts were up 58% in Q2 compared to Q1 and up 105% year over year. In Q2, Forrester AI eclipsed indexed search to become the dominant method used by Forrester Decisions clients to interact with our research database. We continue to work on integrating Forrester AI with other platforms, including Gemini, Claude, Slack, and others. Watch this space. I will now hand the call over to Chris Finn, our CFO, for more detailed financial analysis of the quarter. Chris.

Thanks George and good afternoon everyone. In the second quarter we saw continued momentum in our CV business. This This was exhibited in our CV bookings growth for the quarter and the ongoing stabilization of metrics. The CV decline and wallet retention were consistent with the prior quarter and in line with our expectations. retention dipped by one point but we did see an increase in client count. Our performance in the second quarter gives us renewed confidence of hitting our CV plan for the year with the target of achieving CV growth as we exit 2026. In addition, we restarted our stock buyback program during the period and we intend to continue with repurchases throughout the remainder of the year. Q2 saw a 3% CV decline in the quarter.

This mirrors our first quarter performance and, as stated earlier, was in line with our expectations. We believe this trajectory will improve in the second half of the year as we continue to grow CV bookings. We remain on a path for CV growth by year-end. Despite some market turbulence, we are seeing consistent demand for our products. driven by the need for trusted AI advice, continued adoption of Forrester AI, and ongoing product enhancements, making Forrester more embedded in clients' workflows. For the total company, we generated $100.2 million in revenue compared to $111.7 million in the prior year period, which is an overall revenue decrease of 10%. In terms of our revenue breakdown for the quarter, research revenues decreased 8% compared to the second quarter of 2025, with revenue from research products down 7% and reprints down 12%. Client retention at 77% was up three points from the prior year and down one point from the prior quarter.

Client count increased by 10%. clients in the quarter to 1,770 clients supported by new business growth. While at retention of 89%, it was up four points from the prior year and flat from the prior quarter. Churn, downsell, and new business were all at or above expectations, while upsell was slightly below expectations and remained flat versus prior period. We continue to see success in our AI access product. This product has delivered approximately $10 million in bookings since its launch nine months ago, and continues to gain traction in the market. We remain focused on retention improvements driven by customer success, sales, and ongoing product enhancements, and believe these will continue to pay dividends, in the second half of the year. Our consulting business posted revenues of $20 million, which is down 15% compared to the prior year.

The majority of the decline can be ascribed to the strategy consulting business, which we stopped actively selling earlier in the year. We will continue to execute on our existing strategy consulting backlog over the coming quarters and exit this business by year end. Decision and exit strategy consulting allows our Salesforce to continue to focus on the expansion of our CV offerings. content marketing business was down 13%, and this was partially offset by strong performance in the advisory business, which grew 21%. And finally, regarding our events business, we held four events in the second quarter and posted revenues of $8.5 million, representing a decrease of 17% compared to the second quarter of 2025. sponsorship and ticket revenues are impacted by the shift in our event strategy, which focuses on shorter, more intimate forms. We are receiving very positive feedback about our new events format, which prioritizes deeper in-person connection and peer networking. Continuing down our P&L on an adjusted basis, operating expenses for the first quarter decreased by 8%, primarily driven by lower compensation costs. Headcount was down 7%, driven by the restructuring earlier in the year.

However, as you look to return to CV growth, we've started to add to our sales capacity and we did see a slight increase in our sales capacity. quarter carrying headcount number. Operating income decreased by 24% to $10.4 million, or 10.4% of revenue in the current quarter, compared to $13.7 million, or 12.2% of revenue in the second quarter of 2025. Interest expense for the quarter was $0.4 million, down from $0.7 million in the second quarter of 2025. Finally, net income and earnings per share decreased 21% and 22% respectively compared to Q2 of last year, with net income at $7.7 million and earnings per share of $0.40 for the current quarter decreased. compared with net income of $9.8 million and earnings per share of 51 cents in the second quarter of 2025. Looking at our capital structure, cash flow from operating activities was $25 million in the first half of the year, and capital expenditures were $18.2 million. $16.6 million of the capital expenditures are associated with the ongoing build-out of our Cambridge headquarters. And we have received $2.7 million of reimbursements from the landlord, which reported as a cash inflow from operating activities. Free cash flow for the first half of the year, excluding the net spending on the build-out, was approximately $20.7 million.

Remaining cap-back spending for the build-out will be approximately $11 million. However, we expect to receive an additional $14.5 million of reimbursements from the landlord in the second half of the year. of the year. Our balance sheet is strong with cash at the end of the quarter of over $130 million and debt of only $35 million. We did not pay down any debt in the quarter, however, we did repurchase approximately $1 million worth of shares this quarter starting late in the period. We have over $76 million of our stock repurchase authorization intact. plan on accelerating our stock repurchase program in the second half of the year. Moving on to guidance, for 2026, we remain confident in our ability to execute. We are maintaining our guidance at this stage.

Let me provide some additional commentary on our outlook for the year. For 2026, we continue to expect revenue to be $350 to $360 million, or down 9 to 12% versus 2025. This guidance assumes the outlook for research to be a mid-single-digit decline. resulting to be a decline in the low 20s and events to be a decline in the mid to high teens for the year. We still expect our operating margins to be in the range of 6% to 6.5% for 2026, and interest expenses are expected to be $2.3 million for the year, and we are guiding to a full-year tax rate of 29%. Taking all of this into account, we still expect EPS to be in the range of 72 to 82 cents for the full year. We continue to execute against our goals for 2026. There is accelerated adoption of Forrester AI, we continue to focus on retention improvement initiatives, and clients are reacting positively to our new embedded product portfolio.

To capitalize on this, we will continue to innovate in the second half of the year to drive CV growth by year-end. Thank you all for taking the time today. With that, I'll hand the call back to George.

Thank you, Chris. We met our expectations for the quarter and reiterated our guidance for the full year. Furthermore, we remain on track to deliver CV growth in the full year. The era of AI computing is driving demand for Forrester's Insights as our clients plan how they will build their private AI models for their customers, and they begin to replace their enterprise systems with a new generation of AI software. Simultaneously, Forrester's AI capabilities are enabling us to deliver better insights faster, embedded where our clients do their work. This is an extraordinary opportunity for Forrester, and we are diligently working to leverage this moment for our clients and our investors. So I'll now turn the call over to the operator for questions. Thank you, sir.

As a reminder, to ask a question, you would need to press Star 1-1 on your telephone. We would enjoy your question. Please press star 11 again. Please stand by while we compile the Q&A roster. And I'm sure our first question comes from the line of Anya Sildestrom from Siddhoti. Hi, and thank you for taking my question.

What kind of visibility do you have for that expectation of contract value growth by the year end?.

Yes, this is Chris. So it's a good question. We've seen meaningful improvement in our retention metrics this year, as we talked about on the call. We've got a continued laser focus on retention and product innovation, and we expect those improvements to continue into the second half of the year. Pipeline continues to increase. I think the work that Christoph's been doing with the sales organization combined with, obviously, the work we've done from a product innovation standpoint with AI access and improvements that we know are coming with additional product in the back half of the launching Q3. all give us confidence as we go forward here. So, we continue to look at the models and run the analysis and we see upside as we move forward here and that's what gives us confidence. Christoph, you wanna talk about some of the changes? Yes, we had,.

CV grows booking in Q2 with really pockets of momentum. One of them was tech research that grew by double digits. as well as continue positive NCVI in the international markets in EMEA as well as in APAC. Of course, there are areas of challenges, and the North American government segment was one of them. However, I see a turning point in Q3.

in that segment. Okay. And what do you anticipate to drive that turning point?.

Yes, we expect a turning point in the government, especially in the Fed area, where we have built up a very nice pipeline in the area of AI access, as well as the overall portfolio that we have around our executive leader seats. We've seen some very interesting opportunity there, and we'll know more by the end of Q3.

I was in Washington two weeks ago with clients, and the overall mood there is they're getting back to business. I mean, These are not typical times, but it is after the Doge efforts a year ago. These agencies have to get their work done. So they're getting back to work.

OKAY, GREAT. THANK YOU. AND ALSO IN TERMS OF THE SALES YOU SAID YOU ADDED SOME HEAD COUNTS THERE. Do you anticipate to add more and how is the current work? Are they ramped or are they still building up experience? Yes. We had in Q2 a small increase of headcount.

However, my focus right now is about improving the productivity of the Salesforce as well as their performance. I will review at the end of the Q3 if we add additional growth headcounts for the back of the year.

Okay, thank you. That was all for me. Anya, thank you. Thank you.

Thank you. And I'm sure our next question comes from the line of Vince Colicchio from Barrington Research. Please go ahead.

Yes, Christoph, to be clear, so when you say a pipeline is expanded for CV, you're talking sequentially, correct? Correct.

I'm speaking year over year. Year over year, okay. We're booking growth year over year for Q2.

I think he's recording. But pipe, you saw that pipe, I think. Yes. Yes. And the pipeline as well.

And what sales process changes would you say are having the most impact?.

So one is the change that we make in our go-to-market strategy, having organized the North American sales organization around six vertical industries, as well as the work we do in preparing our sales organization to take advantage of the new AI era. And as well, of course, is working closely with our product organizations. And we see a great update around our new product portfolio, especially around AI access, as well our embed solution. especially the Microsoft Copilot solutions, because what we see is customers that want to bring forester proprietary expertise where they work. They want to have forester embedded in their tools. They really want to make decisions to move faster with higher confidence. And Forrester is very well positioned to help them to do that and help them to take action faster. You may also want to mention the balanced scorecard as a tool here.

Yes, we have also implemented what I call the Salesforce balanced scorecard in order to make the Salesforce and the sales leader more accountable of the quality of the work they do. more carefully area linked to the pipeline health as well as the pipeline performance.

and in terms of verticals I know you said the Fed should improve in Q3 any change in terms of other verticals that are improving in the Q2 period? I.

Yes, we see really an uptake in the tech industry in Q2, and we believe it will continue in Q3. as well as interesting trend also in the industry and manufacturing area, where we see those B2B companies willing to transform their go-to-market strategy and as well as taking advantage of this new AI era.

These are companies like Siemens or Honeywell. Okay. Thank you. Thank you. And as far as your integration into workflows, are you ahead of the competition in that regard? What does that look like? Okay.

Sure. Hi Vince, it's Carrie. We are the first research company in our competitive set to have a presence in Microsoft Teams and we're the first to have an agent in AI agent and co-pilot. We know from the conversations that we're having that we're on the front line of this and that's what our customers expect us to be so we'll continue to be that moving forward as well.

Okay, thank you. Thanks, Vince. Thank you. That concludes our Q&A session. At this time I would like to turn the conference back to Chris Finn, Chief Financial Officer, for closing remarks.

Yes, thanks all for joining today. Appreciate it. Any questions or follow-up, just reach out to Ed or myself.

Thank you. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

Good afternoon, and thank you for standing by. Welcome to Forrester's First Quarter 2026 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the conference over to the Vice President of Corporate Development and Investor Relations, Ed Bryce Morris. Please go ahead.

Thank you, and hello, everyone. Thanks for joining today's call. Earlier this afternoon, we issued our press release for the first quarter 2026. If you need a copy, you can find one on the website in the Investors section.

Here with us today to discuss our results are George Colony, Forrester's Chief Executive Officer and Chairman; and Chris Finn, Chief Financial Officer. Carrie Johnson, our Chief Product Officer; and Christophe Favre, Chief Sales Officer, are also here with us for the Q&A section of the call.

Before we begin, I'd like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, believes, anticipates, intends, plans, estimates or similar expressions are intended to identify these forward-looking statements. These statements are based on the company's current plans and expectations and involves risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements.

Factors that could cause actual results to differ are discussed in our reports and filings with the Securities and Exchange Commission, and the company undertakes no obligations to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Lastly, consistent with our previous calls, we will be discussing our performance on an adjusted basis, which excludes items affecting comparability. While reporting on an adjusted basis is not in accordance with GAAP, we believe that reporting these numbers on this adjusted basis provides a meaningful comparison and an appropriate basis for our discussion. You will find a detailed list of items excluded from these adjusted results in our press release.

And with that, I'll hand it over to George.

Hello, and welcome to Forrester's Q1 2026 Earnings Call. With me is our Chief Financial Officer, Chris Finn, who will deliver a financial report following my remarks.

I'll be covering 4 key themes today: one, our financial performance in Q1 of 2026; two, trends in the AI world and their impact on Forrester; three, an update on our journey to become the AI research company, including key research releases; and four, an update on our progress toward our 4 company initiatives.

Starting off with a summary of our financials. In Q1, we saw continuing momentum on our key business indicators. While retention improved by 2 points from last quarter to 89%, this metric is up 3 points from the previous year.

Client retention improved by 1 point from the prior quarter to 78%, up 5 points from the prior year. Finally, the percentage of multiyear deals as a percentage of our total CV has reached 72%, up from 71% last quarter.

On the CV side, we saw a decline of 3%, an improvement on the 6% decline in Q4 of 2025. Our revenue was down 5% from the prior year at $85.5 million.

Research revenue was down 2%, while consulting revenues declined by 13%. Consulting weakness is associated with our decision to exit the strategy consulting business in 2026. We had strong cash flow in the quarter, delivering $19 million of free cash. We are increasing the low end of our revenue guidance, driven by improving metrics and confidence in our business, and Chris will go into more detail shortly.

AI technology continues to shift and evolve at fast rates, presenting our clients with 2 challenges. One, they will have to construct a private model that will serve their customers; and two, they will be replacing many of their internal systems like CRM or financials, with new software based on what Forrester calls AI computing.

The market is composed of public models built by Anthropic, OpenAI, Google and others and private models deployed by Bank of America, Bloomberg and many other large enterprises.

Forrester believes that approximately 70% of the revenue earned through AI in the future will come from private models, not public models. Now why will private models proliferate? Data sensitivity, regulatory pressure and intellectual property protection will increasingly push businesses to building and operating their own AI models for specific use cases across banking, insurance and other sensitive industries.

Retaining customer trust will be a primary incentive driving the construction of these models. The second challenge for our clients will be rebuilding internal systems using new software constructed with AI computing technologies, primarily Agentic AI. The way that our clients operate their businesses will be vastly changed over the next 5 years.

Now, why are these 2 changes relevant to Forrester? Whenever there has been a revolution in how large companies connect to their customers as with the advent of mobile and social, Forrester's business in B2B marketing and B2C marketing has grown.

And when global enterprises move to a new generation of internal systems as with cloud computing, our technology research business has historically expanded at faster rates. Change is the gasoline that drives our model faster and the AI wave is forcing unpredictable and relentless change on our clients.

Now this was very evident last week, when we held our B2B Marketing Summit in Phoenix. The theme of that event was the go-to-market singularity, how AI is radically shifting the rules of developing, marketing and selling products in the B2B world.

In the first quarter, we released over 420 research reports and data sets, and I wanted to highlight 2 of them here. A report entitled Accelerate your AI Voyage found that most enterprises are struggling to turn growing AI adoption investment into measurable business impact. One of the key factors holding businesses back is low artificial intelligence Quotient or AIQ, Forrester's measure of AI Aptitude, with many employees lacking a clear understanding of how to use the technology.

Other barriers include an overemphasis on productivity-focused use cases, difficulty measuring impact and siloed adoption within individual functions. This report surveyed over 1,500 AI decision-makers at firms accelerating their AI efforts. It found that while there is an urgency to adopt AI, many businesses are paralyzed by a lack of understanding and disjointed siloed adoption.

Forrester's AI use case catalog, another report, is designed to help senior decision-makers narrow their options on where AI should be applied. It includes more than 900 use cases organized by functions, industries and desired outcomes.

The tool allows clients to filter their specific needs to service a short list of use cases and pinpoint the AI opportunities that best align to their specific business goals. So we are leading this new era by expanding our research coverage of AI, but that is not the only way that we are seizing the moment.

As we've talked about on previous calls, we are using AI technology to improve the way that our clients use our research and services. And I want to take this opportunity to update on our progress.

We have upgraded our AI model from the first generation, what we call Izola, to a new generation, Forrester AI. This new version has improved capabilities. One, the model is now fully conversational, enabling clients to go deeper into our content. Forrester AI suggests prompts leading users to comprehensive answers.

Two, we've made structural improvements to bring more transparency and depth to the responses. Now when our user types a prompt, Forrester AI is deploying reasoning to show how it arrives at the response, servicing the key steps and research underlying the answer.

And finally, three, Forrester AI provides responses in 197 languages.

In March, we announced that Forrester AI is certified for Microsoft Teams and is available as an app in Microsoft Marketplace. This means that a client can use Forrester AI from within Teams. We are going where our clients work and live.

Last week at B2B Summit in Phoenix, we announced that clients will be able to work in Microsoft Copilot, but receive analysis and answers from Forrester AI. These answers can be integrated with a range of Microsoft tools, including e-mails, presentations and documents.

We are doing this through the deployment of our Model Context Protocol server. In addition to Teams and Copilot, we are developing integration with other models and systems, again, going where our clients work.

Client adoption of Forrester AI continues to grow. Usage hit an all-time high in Q1 with overall usage up 55% year-over-year and prompt volume up 65%, reflecting growing client demand for trusted research-based AI guidance.

Turning finally to our 4 key initiatives for the year. While these are internal initiatives, I thought that investors should be informed on our progress. They are: one, execution of the retention life cycle, our post-sales program for ensuring that clients are engaged and getting value from our research. From Q4 to Q1, the customer success organization accelerated clients' time to onboard, and this is one factor helping us to improve client retention numbers.

Two, expanding the product portfolio and embedding Forrester AI where clients work. With the Teams and Copilot integrations, we are on schedule here. We are leading AI.

Three, building a culture of growth within sales. Q1 was the first quarter under the guidance of our new Chief Sales Officer, Christophe Favre. We have made a good start to the year, with Q1 CV productivity per rep 6% higher than a year ago. We have intensively trained the sales force on how to position and sell our new Forrester AI portfolio.

And finally, four, offering actionable all seasons research. We are building more research that our clients can apply immediately and research that is relevant even when companies are not transforming, hence, all seasons. This imperative is on track as we have created 70 initiative blueprints in Q1, step-by-step guidance on how our clients can advance their most important projects.

The year has gotten off to a good start with Forrester AI growing, more practical research in the hands of our clients, engagement with the clients accelerating and sales continuing to focus on expanding CV.

We are turning the company back toward growth, and we have made a good start executing that pivot.

Thank you, and I'll now turn the call over to Chris. Chris?

Thanks, George, and good afternoon, everyone. In the first quarter, we saw improvements in our key metrics, continuing the momentum that we experienced in the second half of 2025.

Client retention and wallet retention continue to improve and the decline in CV continues to slow. With the improvement in our metrics and progress on our strategy of embedding our products for our clients' work, we are raising the low end of our revenue guidance for the year.

In addition, we generated strong free cash flow of approximately $19 million for the quarter, and excluding our onetime headquarter CapEx of $5.4 million, free cash flow was approximately $25 million.

Q1 saw a 3% CV decline in the quarter. And based on incremental improvements over the coming quarters, we continue to expect CV to be slightly up for the year, driven by the following areas: one, client demand for trusted advice to help them navigate their AI journey; two, our continued investment to enhance the capabilities of Forrester AI; and three, our product strategy with AI access and embedding Forrester AI in clients' existing work environments, along with further product portfolio enhancements to come.

All these initiatives will continue to support and drive improvement in CV performance. These ongoing efforts are laying the foundation for sustained CV growth in the coming years.

For the total company, we generated $85.5 million in revenue compared to $89.9 million in the prior year period, which is an overall revenue decrease of 5%.

As we outlined on our Q4 call, we expect revenue to decline this year due to the bookings declines we experienced in 2025. The sunsetting of our strategy consulting business and the reimagined events portfolio.

In terms of our revenue breakdown for the quarter, research revenues decreased 2% compared to the first quarter of 2025 with revenue from research products down 4%, offset with growth in reprints.

Client retention of 78% was up 1 point from the prior quarter and up 5 points from the prior year, while retention was up 2 points to 89% from 87% in the prior quarter and up 3 points from the prior year.

We believe the retention improvements reflect the ongoing alignment and improvements across the go-to-market ecosystem of customer success, sales and research functions as they execute on the retention life cycle work.

Our consulting business posted revenues of $18.6 million, which was down 13% compared to the prior year. The content marketing business was down 5%, while the advisory business was up slightly. The majority of the decline can be ascribed to the strategy consulting business, which we stopped actively selling early in the quarter.

We will continue to execute delivery on existing strategy consulting backlog over the coming quarters and exit this business by year-end.

And finally, regarding our events business, revenues were insignificant this quarter and in the prior year as we did not hold any events during these periods.

Continuing down our P&L on an adjusted basis, operating expenses for the first quarter decreased by 1%, primarily driven by lower real estate costs. Headcount was down 8%. However, these savings were offset by onetime costs largely associated with the now concluded litigation.

Operating income decreased by 135% to negative $0.9 million, or negative 1% of revenue in the current quarter compared to $2.5 million or 2.8% of revenue in the first quarter of 2025. Interest expense for the quarter was $0.8 million, up from $0.7 million in the first quarter of 2025.

Finally, net income and earnings per share decreased 135% and 136%, respectively, compared to Q1 of last year, with net income at negative $0.7 million and earnings per share at negative $0.04 for the current quarter compared with net income of $2 million and earnings per share of $0.11 in the first quarter of 2025.

Looking at our capital structure. First quarter cash flow from operating activities was $25.6 million and capital expenditures were $6.2 million. Approximately $5.4 million of capital expenditures are associated with the onetime physical build-out of our Cambridge headquarters.

Remaining cash spend for the build-out, net of reimbursements from the landlord will be approximately $4 million to $5. Our balance sheet is strong with cash at the end of the quarter of over $145 million and debt of only $35 million. In addition, in March, we executed an extension of our credit facility, moving the maturity date to March of 2029. We did not pay down any debt nor did we repurchase any shares in the quarter.

Moving on to guidance. For 2026, we are increasing the low to midpoint range of our revenue guidance with the rest of our guidance remaining unchanged.

Let me provide some additional commentary on our outlook for the year. For 2026, we now expect revenue to be $350 million to $360 million or down 9% to 12% versus 2025. The increased confidence in the range is driven by the metric improvements previously discussed and stronger sponsorship bookings for the upcoming events. This guidance assumes the outlook for research to be a mid-single-digit decline, consulting to be a decline in the low 20s and events to be a decline in the mid- to high teens for the year.

Despite the first quarter onetime expenses, we still expect our operating margins to be in the range of 6% to 6.5% for 2026 and interest expense to be expected to be $2.3 million for the year, and we are guiding to a full year tax rate of 29%.

Taking all this into account, we still expect EPS to be in the range of $0.72 to $0.82 for the full year. We are continuing to see the positive momentum we experienced as we exited 2025. The first quarter of 2026 saw significant enhancements to our Forrester AI capabilities. This included embedded access via Microsoft Teams and the launch of the Forrester AI Agent and Microsoft Copilot, public models and custom applications as we embed Forrester AI into the places where our clients work.

In addition, our unique research focus on key AI topics puts Forrester in a strong position to take advantage of the upcoming AI demand. We are looking to capitalize on this demand, continue our focus on execution, and use it to drive continued metric and operational performance throughout 2026. Thank you all for taking the time today.

And with that, I'll hand the call back to George.

Thank you, Chris. To conclude, we are making steady progress on our 4 key initiatives for the year, including our execution of the retention life cycle, increased product options and AI opportunities, a renewed culture of growth within sales and actionable all-seasons research. As a result of these measures, we are seeing early but encouraging positive signs in our key metrics.

I will now turn the call over to the operator for questions.

[Operator Instructions] And I show our first question comes from the line of Anja Soderstrom from Sidoti.

So first, I'm curious, even though you see contract value decline, but you expect that to increase in the coming quarters. What gives you confidence in that?

Sorry, can you repeat the question?

Yes. You mentioned you expect incremental increases in the contract value in the coming quarters. What gives you confidence in that?

Events.

Yes, from a contract value standpoint -- events. Yes. Yes, we've seen really good, strong bookings this year compared to last year on the sponsorship side. And we're coming off a really great B2B event in Phoenix, where engagement was incredibly strong with clients. I think we had a significant increase actually.

We're up 10% in attendees.

Up 10% on attendees. And so yes, I think all the metrics are pointing in the right direction. On the events business, certainly much stronger starting this year off with event season than last year or prior years.

And so yes, we continue to expect that momentum to move in the right direction. And once again, the way the events business works, attendees and sponsorships are sold significantly in advance. So we're seeing really good engagement there this year. And so we're really excited. And I think a lot of the changes that we made in the format more local and customized kind of content is really making a difference.

Okay. And then in terms of the product portfolio expansion, sort of what does your road map look like there for the rest of the year?

Anja, it's Carrie. Thanks for the question. We have 2 sort of key initiatives on the expansion of the product portfolio front. One is, as you sort of noted, providing clients with more options in the way that they buy Forrester. So AI Access was a big change that we announced last year, and we're seeing good success there, and you'll continue to see more of those types of products, both for some access options for Forrester and then also to work more closely with our most sort of senior analysts. So stay tuned for that and from the road map.

The other side of the road map is, as you've heard a lot about Forrester AI, we continue to have major releases of Forrester AI, as George mentioned, and also plan to continue to deliver on what we call our where you work strategy, which is embedding Forrester AI where clients work. So George talked about Copilot. Stay tuned for more options for our clients that work in other types of tools as we build out that road map throughout the year.

Yes. So there are 2 major initiatives here, Anja. One is embedded, embedding AI where our clients work, as Carrie just said. And then the other one is filling out the product line, essentially more optionality, so embedded and optionality.

Okay. And as you get embedded in the systems, do you see a strong uptick in interest? Or how is that affecting your sales model?

Yes. Well, we can talk about it from a sales perspective, but I will say we launched Microsoft Teams first in March, and that was very well received. And then the launch of Copilot has actually seen traction sort of double even that, which I think is a good testament to some clients are just finding it even on their own through things, like the Microsoft Marketplace because it is such a compelling offer to really remove some of the friction in accessing Forrester, both the insights, of course, and now getting true advice alongside their actual work. So really pleased with what we're seeing so far there.

Yes.

And from a sales perspective, Anja, it's clear that you start to see large enterprise willing to scale intelligence across their different functions. And Forrester has the ability with Forrester AI to get trusted advice fast. And those organizations are looking to elevate leaders, confidence to act and decide in that type of uncertainty, volatility, but also opportunity with the AI revolution.

So I'm training my sales organizations to be able to sell those large enterprise-wide deals, and we see a very interesting pipeline moving forward.

Okay. And also, I have a follow-up for you. You mentioned in the prepared remarks, you're building a culture of growth within the sales. Can you just sort of talk about what kind of changes you made for the sales force to sort of motivate them more?

Yes. So we have already some pockets of growth in the international market. My focus since I took my new role has been to focus on the North American business. And what we have done in North American business is organized the North American business around 6 industries where Forrester has strong expertise and growth opportunities.

And what I've ensured is to redefine the territories to ensure that our best reps account manager as well as our best new business developer are in front of the highest potential accounts.

The second thing that I've done is really train our sales force to leverage AI in order to improve their productivity and feel more confident when discussing some key AI changes which are taking place in the marketplace. So one, change on the territories; two, training; and third, building their confidence. And really, everybody is excited by the new Forrester AI road map that we put in place.

And I show our next question comes from the line of Vince Colicchio from Barrington Research.

Yes. Christophe, what portion sort of, of the changes that you plan to make have started to get implemented? And the other question is, how long before you expect your changes you bring to bear to have a meaningful impact?

Yes. So Vince, I wanted to act fast, because the opportunity is in front of us. So all the change organizational change that I just discussed have been put in place in the North American business. And we've put the sales technology and the market technology to help that organization grow in efficiencies.

So we can now really take advantage of the new Forrester AI portfolio, and we start to see pockets of growth in the North American business, and I will name 2 industry where we see that growth, one in high-tech and the second in the industry sectors. Some -- we see some good momentum here.

Vince, George here. Christophe is not want to wait. He's moving quite fast. I mean, it's all he's speaking about is he is implementing.

Good to hear. Next question on the sales pipeline for CV. Has that improved since last quarter?

Yes. We see consistency in the growth pipeline, and we see an acceleration in 2 areas. One, thanks to Forrester AI, organization is really looking at having help in adopting AI and get trusted advice faster. And so with Forrester AI, we have a unique competitive edge on the marketplace.

The other one is, as I mentioned, is we start to see very large organization interested in our embed portfolio. And the announcement we made in our partnership with Microsoft Teams as well as Microsoft Copilot has resonated in very specific industries. So that's looking good.

Which industries, Christophe?

So we saw financial services, the agencies as well as government being interested in that type of solutions.

And George, how is AI Access performing versus expectations? And is it helping to continue to bring back old clients?

Yes, we're a little bit ahead. You look like you want to say something.

Well, I'm nodding them on. Yes. So AI Access has basically hit our expectations and primarily especially on 2 fronts. One, new business, which is quite a motion for win-back programs of winning back former clients who are looking for more flexible price points, but appreciated Forrester's insights and advice. And Christophe can expand on that.

And the other is for us is for expanding within existing accounts, which is the role, in fact, of launching that product as well. So pleased with it doing what we wanted it to do for our CV portfolio.

40% of reps have now sold AI Access. So that's very encouraging to have.

Yes. And Vince, this is Chris. I would add on there, too, good momentum just as a percentage mix of the portfolio from a CV perspective. I mean it's just under 5% -- and in the near term here, we expect it to be approaching sort of 10% as we exit the year and get into 27%.

So -- and really happy with the fact that as we look at our CV per client, we're not seeing any kind of degradation there. CV per client has been pretty consistent in that $160 to $162 range. So we're really happy with that. So we're not seeing cannibalization at all either.

I'm showing no further questions in the queue at this time. I'd like to turn the conference back over to Chris Finn, Chief Financial Officer, for closing remarks.

Yes. Thanks, everyone, for joining today. Just reach out to Ed or myself, if you have any follow-up questions. Appreciate it.

Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good afternoon, and thank you for standing by. Welcome to Forrester's Fourth Quarter and Full Year 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to Vice President of Corporate Development and Investor Relations, Ed Bryce Morris. Please go ahead.

Thank you, and hello, everyone. Thanks for joining today's call. Earlier this afternoon, we issued our press release for the fourth quarter and full year 2025. If you need a copy, you can find one on our website in the Investors section. Here with us today to discuss our results are George Colony, Forrester's Chief Executive Officer and Chairman; and Chris Finn, Chief Financial Officer. Carrie Johnson, our Chief Product Officer; and Christophe Favre, our Chief Sales Officer, are also here with us for the Q&A section of the call.

Before we begin, I'd like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, believes, anticipates, intends, plans, estimates or similar expressions are intended to identify these forward-looking statements. These statements are based on the company's current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements. Factors that could cause actual results to differ are discussed in our reports and filings with the Securities and Exchange Commission, and the company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Lastly, consistent with our previous calls, today, we are discussing our performance on an unadjusted basis, which excludes items affecting comparability. While reporting on an unadjusted basis is not in accordance with GAAP, we believe that reporting numbers on this adjusted basis provides a meaningful comparison and an appropriate basis for our discussion. You can find a detailed list of items excluded from these adjusted results in our press release. And with that, I'll hand it over to George.

Good afternoon, and welcome to Forrester's Q4 2025 and Full Year Earnings Call. I'm joined by our Chief Financial Officer, Chris Finn, who will provide a detailed financial update after my remarks. I'll be covering the following key themes today: one, the progress we made in 2025; two, our financial performance in Q4 and 2025; three, our focus areas for 2026.

As I look back at 2025, it is now clear that our clients are operating under a new paradigm shaped by AI. Large companies are confronted with complex buying decisions, disconnected CX journeys and quickly changing customer behavior. At the same time, they're dealing with new technology challenges, how to implement and scale generative AI, how to ensure safe data usage with Agentic AI and how to maximize IT investments amidst a changing buying landscape. Complexity is growing.

Forrester is uniquely positioned to help large companies navigate these problems. As I've talked about on recent investor calls, we have strongly pivoted over the last 3 years to align our research with the AI changes, to build AI technology for our clients and to leverage AI technology to help us create research in new ways. Simply stated, we are guiding our clients to seize the AI opportunity to win, serve and retain their customers and to navigate the new risk landscape. True to our long-held positioning, we are researching at the intersection of business and technology where the battle for customers in the age of AI will be waged.

Last week, we saw disruption in equity markets as investors feared that AI would destroy the software industry. Will it? No. But it will spawn new technology, what we call AI computing, that will rival, and in some cases, replace the old SaaS model. It is these types of market evolutions that Forrester was built to analyze and research. And the more disruption, the faster our business model will grow. And we are evolving that business model. Forrester has been actively embracing AI for 3.5 years, and we have offered Izola, our generative model to clients for 2.5 years. We have 2 development teams devoted to building our AI capabilities, and we have years of experience working with the technology and testing and learning with our clients.

In 2025, we launched a product based on AI, AI Access. In Q4, unique users of Forrester AI was up 55% year-over-year. The number of prompts was up 65% year-over-year. AI increases the value of our research, making it more accessible to clients and enabling them to create new and original content like a Board of Directors deck from Forrester's data and models. Having one research platform, Forrester Decisions, has given us an advantage, streamlining our AI efforts and optimizing our client experience. Companies want their executives to be using AI in their daily work, and this has increased the attractiveness of our AI products. Before I leave an overview of 2025, I wanted to reiterate the go-forward value of Forrester in the AI era. We have 3 capabilities that public large language models cannot deliver: one, proprietary data; two, original ideas and analysis; and three, the ability of our clients to talk to the people that created the data and ideas and how they can be applied to the specific environments of our clients. Floating over all of this is a big word, trust. When executives work with Forrester, they know they're turning to trusted sources backed by human experts.

Turning now to our financial performance. While the future holds great promise for Forrester, we continue to work through challenges in Q4 and in the full year. In Q4, CV declined 6%, while revenue declined by 7% year-over-year. CV and revenue declines showed improvement compared with the previous quarter. Full year revenue in 2025 declined by 8% as our Research business was impacted by the final leg of our migration to Forrester Decisions. Consulting and Events revenue were down 9% and 29%, respectively. We are repositioning these businesses in 2026, as I will cover in a few moments.

2025 free cash flow was approximately $18 million, while retention reached 87%, up 1 point from the start of 2025. Client retention was up 3 points in Q4 and up 4 points from the start of 2025, reflecting the positive impact of our new AI Access product. Client count increased in Q4 as well, our first quarterly increase in this metric since Q4 of 2021. Our ability to offer a broader portfolio of products is helping drive up client count. Additionally, the percentage of CV and multiyear deals increased with 72% of CV made up of multiyear deals at year-end, up from 69% in Q4 of 2024. Finally, our new AI Access product is generating new business and showing positive forward momentum. Released in September, AI Access had over $5 million in bookings for 2025 and will be a strong area of focus for us going forward.

I would now like to turn to 2026. Our plan is to return to CV growth in the year as we focus on 4 initiatives: one, consistent execution of our retention life cycle; two, the introduction of more product options, including embedded Forrester AI; three, a culture of growth within sales and improvements to our go-to-market execution; and finally, four, actionable all-seasons research and the production of more data. In 2024, we introduced the retention life cycle, a standard process for periodically checking in with the economic buyer of our research to ensure that we're delivering value to our customers. In September, we hired Julie Meringer, a former Forrester executive, to run customer success at the company. She is bringing more accountability, discipline and rigor to the life cycle process. Our data shows a double-digit improvement in seat holder retention when we execute the steps in the life cycle. The data is clear. Julie and team are leading consistent execution, which will reduce client churn and downsell.

Our second initiative is on the product front. We will do 2 things: one, introduce more product options to fill out the portfolio; and two, expand the capabilities of Forrester AI. In 2026, we will be adding new versions of Forrester Decisions, built to enable teams of executives to work more closely together and complete corporate initiatives faster. And we will be expanding the capabilities of Forrester AI to enhance the conversational capabilities of the model and embed it within our clients' systems. As part of this effort, we are changing the name of our flagship AI tool, Izola, to Forrester AI. This evolution reflects Forrester AI's broad range and use cases as we expand beyond question-and-answer applications, including future integrations into third-party workflows.

Our third initiative is to continue to improve our go-to-market systems and talent. This will be led by our new Chief Sales Officer, Christophe Favre. Christophe has been at Forrester for over 14 years. Early in his Forrester career, Christophe managed our international business development team, the third-party reps who sell in countries where we do not have presence. In 2016, Christophe moved from Europe to Singapore, where he ran Forrester sales in Asia Pacific, including India. During his time there, he tripled the size of our business in that region. In 2021, he relocated to London, where he assumed management of all of Forrester's business in APAC and also in EMEA. Over the last 3 years, his sales regions have shown the best performance of the company and the highest net contract value increase. Christophe's plan is to create a culture of growth in sales and to sharpen sales execution. Christophe and I have spent a lot of time over the last decade selling to prospects and clients. I have high confidence in his ability to move our sales force back into growth.

The fourth initiative of 2026 is to create research that is actionable, relevant in different business cycles and yields more data. Our clients use Forrester's research to make decisions and to take action. Our new initiative, Blueprints, gives step-by-step guidance on how to tackle key efforts that span weeks, months and quarters with reports, templates, tools, and guidance sessions plotting the best path. We will increase the volume of actionable research in 2026. The second effort is what we call Research for All Seasons. Forrester Decisions is often used to make corporate transformations go faster and to improve their chances of success. Our challenge is ensuring that our research has increased value between transformations when companies are not in change mode. To this end, we'll be creating more content to help our clients improve their personal and professional effectiveness and to solve everyday problems that may be unconnected to broader projects. Finally, we will be investing in additional proprietary data. This will include adding new layers of B2B buyer insights and expanding the total experience index.

On February 9, we announced a restructuring affecting 8% of our employees. We made this move to align costs with revenue and to focus the company on expanding research contract value. As part of this effort, we are exiting the strategy consulting business. This business has been negatively affected by the ongoing instability of U.S. federal government contracts and an increasingly competitive market. Our consulting business will now consist of advisory work, our analysts doing day-long engagements with clients, and our content marketing business, the custom total economic impact and market impact reports that we produce for clients. We will continue to offer these 3 products as they have shown proven impact on driving NCVI.

The ongoing instability of our events portfolio has prompted us to make significant changes in that business. We've heard from event attendees that travel budgets have tightened and leaders often don't have the time to commit to 3- and 4-day events. Accordingly, we're moving away from longer multi-day events that require substantial travel for our clients, and we're shifting towards shorter, more intimate forums held closer to where our clients are based. In 2026, our new events format will include regional events in North America, EMEA and APAC. Our new event format will prioritize more intimate in-person connection and peer networking.

So to summarize, we are planning to return to CV growth in 2026, driven by improvements to our retention life cycle, our product portfolio, how we go to market, and our research. We are restructuring the business to more intensively focus it on growing research contract value, and we are increasing our investment in AI to ensure that our evolution to the AI research company continues apace. I will now turn the call over to Chris Finn, who will go into more detail about our financials. Chris?

Thanks, George, and good afternoon, everyone. As George discussed, we're starting to see some meaningful areas of improvement in the business. This includes early success with our new AI Access product, which had over $5 million of bookings since its launch in September, along with an increase in the portion of CV on multiyear contracts in the prior year. We also saw client retention improve throughout the year and client count increased sequentially in the fourth quarter for the first time since late 2021. Furthermore, we delivered strong free cash flow of approximately $18 million for the year. We are looking to continue this momentum in 2026 with ongoing expansion of our product offering, and enhanced focus on creating actionable all-seasons data-centric research and expanding Forrester AI capabilities.

Despite this momentum, we are disappointed with Q4 and full year 2025 results. Continued macro uncertainty, the impact of the U.S. government strategy consulting pullback, and the ongoing underperformance of our events business caused us to deliver full year 2025 results near the low end of our guidance. For the quarter, overall revenue was $101.1 million, representing a 6% decline from Q4 2024 revenues of $108 million. Overall revenue for the year came in at $396.9 million, representing an 8% decline from the $432.5 million we generated in 2024. As we've outlined earlier this week, we have taken action to focus the business on our higher-margin subscription research CV business and to better align our cost structure with our projected revenue. We believe these steps will help to accelerate our return to CV growth.

I'll now provide some additional details regarding these actions, which are mainly focused on changing the way we operate our consulting and events businesses. In consulting, we plan to sunset the strategy consulting business line in early 2026. This business line saw a major decline in its U.S. government business last year, along with other ongoing macro-related challenges, which resulted in a greater than 50% decline in strategy consulting bookings in 2025. We do not foresee the business environment for strategy consulting improving in the near term. We will continue to execute our existing backlog through 2026, but we will not sell new strategy consulting engagements going forward.

We are also making significant changes to how we deliver events in 2026, as George just outlined. In terms of headcount impact from these changes, along with other efficiency programs we're executing, we have reduced our workforce by approximately 8%. We expect to incur approximately $13.5 million to $14 million of costs for these actions, including $9.9 million that was recognized during the fourth quarter. We plan to use a portion of the cost savings to fund focused investments in AI to take advantage of our unique position in this growth opportunity. In terms of segment results for the quarter, please note that we have recast our CV metric for our 2026 planned foreign currency rates. We've included the historical recast CV metrics going back to Q4 of 2023 on the Investor Relations section of our website. For the research segment, CV came in at $292.4 million on December 31, 2025. This is a 6% decline from December 2024, which is a modest improvement from the prior quarter decline of 7%. The decrease in CV was largely due to low wallet retention, primarily driven by lower enrichment numbers. Wallet retention has slowly improved throughout the year and now sits at 87%. We have initiatives in place to accelerate this improvement in 2026. As George outlined, sales and customer success are laser-focused on the execution of the key client engagement steps needed to drive up retention. In addition, new business has seen some improvement from the prior year. We believe this improvement will continue based on the initial success of AI Access and additional product launches we have on the road map for 2026. We saw a 4-point improvement in client retention year-over-year. This helped increase client count in Q4. As discussed for new business, we see AI Access and other product enhancements contributing to ongoing improvements in client retention as we continue into 2026. The steady improvement in metrics and the initiatives we have in place gives us a positive outlook for CV performance in 2026. We expect CV to show modest growth as we exit the year.

From a revenue standpoint, our research business posted revenues of $76.6 million for the quarter and $295.6 million for the full year. This represents declines of 4% and 7%, respectively, versus the prior year periods. For the full year, revenue from our subscription research products was down approximately 4% as growth in Forrester Decisions was offset by declines in the final remaining cohorts of our legacy research products. Our consulting business posted revenues of $21.8 million for the fourth quarter and $88.2 million for the full year, representing declines of 16% and 9%, respectively, versus the prior year periods. Despite these declines, we saw some positive trends in our consulting services in 2025. This includes consistent performance from our advisory and content marketing businesses. However, the overall performance of the consulting business was significantly impacted by the declines in strategy consulting discussed earlier. And finally, our events business posted revenues of $2.7 million, representing a decline of 1% compared to the fourth quarter of 2024. The comparison between the prior year was impacted by the shift of an additional event into Q4 2025. For the full year, the segment declined by 29% to $13.1 million. This was driven materially by lower sponsorship revenue along with ticket sales.

Continuing down our P&L on an adjusted basis, operating expenses for the fourth quarter decreased by 2%, primarily driven by ongoing cost management. Specifically on headcount, for the fourth quarter, we were down 6% compared to the same period in 2024. On a full year basis, operating expenses decreased by 7%, largely driven by labor reductions and the associated compensation and benefit savings, with additional savings from other categories, including facilities expenses related to the consolidation of our real estate footprint. Operating income decreased by 53% to $4.2 million or 4.1% of revenue in the current quarter compared to $8.9 million or 8.3% of revenue in the fourth quarter of 2024. On a full year basis, operating income decreased by 21% to $30.3 million or 7.6% of revenue compared with $38.5 million or 8.9% of revenue in 2024.

We continue to be committed to aligning our cost structure with our revenue outlook. Interest expense for the quarter was $0.7 million, which was consistent with the fourth quarter of 2024. On a full year basis, interest expense was $2.7 million, down from $3 million in 2024. Finally, net income and earnings per share both decreased 53% compared to Q4 of last year, with net income at $3.2 million and earnings per share at $0.17 for the current quarter, compared with net income of $6.8 million and earnings per share of $0.36 in the fourth quarter of 2024. On a full year basis, net income decreased 21% to $22.2 million and EPS decreased 21% to $1.16.

Looking at our capital structure. Cash flow from operating activities for 2025 was $21.1 million and capital expenditure was $3 million. The positive cash flow this year was driven by strong collections and improved vendor payment terms from our procurement team. We did not pay down any debt, nor did we repurchase any shares in the quarter. We have over $77 million of our stock repurchase authorization intact. Our balance sheet remains very strong with cash at the end of the quarter of approximately $127.7 million and debt of only $35 million.

Turning to guidance, starting with the top line. For 2026, we expect revenue to be $345 million to $360 million, or down 9% to 13% versus 2025. The revenue outlook is driven by last year's bookings decline, which hampers first half growth with better performance anticipated for the second half. As mentioned earlier, we are sunsetting our strategy consulting product line. This will have a negative impact on revenue. In addition, the reworking of our events business may pose an ongoing risk contemplated in the low end of our guidance. This guidance assumes the outlook for research to be a mid-single-digit decline, consulting to be a decline in the low 20s and events to be a decline in the high teens for the year. It should be noted that our revenue outlook puts the research portion of our business to be approaching 80% of total revenue. This is up from almost 75% in 2025. Given the actions we have taken to control costs, combined with the growth in AI investments we've highlighted, we would expect our operating margins to be in the range of 6% to 6.5% for 2026. Interest expense is expected to be $2.3 million for the year, and we are guiding to a full year tax rate of 29%. Taking all this into account, we would expect earnings per share to be in the range of $0.72 to $0.82 for the full year.

In summary, we experienced positive momentum as we exited 2025, with AI Access filling a crucial role in our product offering and additional product and Forrester AI enhancements coming in 2026, we've seen an improved outlook for our CV business. As we reshape consulting and events this year, we believe these 2 businesses will provide a more consistent catalyst of retention and new business for our core research offering. Our clients continue to grapple with the ever-evolving technology and AI landscape, and Forrester is uniquely positioned to meet our clients' needs because we bring a combination of proprietary ideas, data, and human experts to bear, all backed by a trusted relationship. Thank you all for taking the time today. And with that, I will hand the call back to George.

Thank you, Chris. To summarize, we are laser-focused on NCVI growth in 2026. Our 4 initiatives give us the best path to growth, and we will be diligently executing them throughout the year. The AI wave represents the biggest opportunity in the history of Forrester. We are on the side and by the side of our clients as they navigate these unchartered waters. It's a very exciting time at the company. Thank you for being on the call, and I'm going to hand it back to the operator for the Q&A session.

[Operator Instructions] And I show our first question comes from the line of Andrew Nicholas from William Blair.

First one I had or first line of question is just on the consulting restructure here. It sounds like you expect revenue to be down a little bit over 20% in '26. Can you just kind of bucket the different pieces of the business in terms of size that you are exiting versus continuing? And is that kind of mid- to high $60s million number a good base to think of for '27 and beyond? Any more color on those decisions and those numbers would be great.

Yes. It's Chris. Good question. Yes. So on the sunsetting and strategy consulting, the revenue impact is going to be about approximately $6 million. And as we go forward in '26, we've got a pretty decent sized backlog of approximately $8 million that we'll be servicing throughout the year, probably going to tail off sometime end of Q3, maybe beginning of Q4. So that's really the size of that bucket. And I think the range that you have, high 50s into low 60s is about right.

Got it. And in terms of -- just for my follow-up, in terms of contract value growth year-over-year, down 6%, can you just give me a sense or maybe add some color as to where you are seeing lower wallet retention, maybe what the reasons for cancellation are or any kind of tracking that you're doing there to figure out how much of it is macro sensitivity versus lower seats at your customers or any other reason for exiting?

Yes, Christophe speaking. Yes, we still see some volatility and uncertainties in the area of the U.S. government as well as in the U.S. business on the user side of the business. But we see also pockets of momentum in the international markets where I come from as well as a clear turnaround as well on the high-tech side.

Andrew, government is still having an impact for us.

I show our next question comes from the line of Anja Soderstrom from Sidoti.

So first, can you just elaborate a bit on the product pipeline you mentioned for the year?

Can you repeat that?

Yes. Can you talk about the product pipeline?

Product pipelines for '26?

Yes.

Anja, it's Carrie. Sort of product development, upcoming product changes, etc?

Yes.

Sure. So George alluded to some of those primarily looking to provide our clients with more ways to buy from us and then also when they purchase from us, more ways that we can be embedded in where they work. So a lot of exciting offerings to come that we'll announce this year. I'm happy to talk in depth to you a little bit more about those. But primarily, like I said, looking to capitalize on this moment where clients need advice and trusted expertise from Forrester and making sure that we are offering them ways to work with Forrester and then embedded in their day-to-day work as well.

Anja, we have an AI -- we call it AI Surge, which is really scheduled for the first half of the year. So there's a good backlog here of product improvements and products.

Okay. And you talked about the conference changes to the conference schedule. What other initiatives are you taking to the conference business?

What was the second part of your question about conferences, Anja?

Yes. Yes, what other initiatives you're taking to improve the revenue stream from that.

I'm not sure we're getting the answer, but the question, but...

Yes. I think your question is around improvements that we've made to the conference and event -- the event strategy and also the performance. So there's 2 key areas where we've been focused. The first, as we discussed in prior calls, is about rebuilding the sponsorship sales organization, which is a major effort of ours, and we feel that we're in a really good place there. And the second is on a new event strategy. George and Chris both here talked about really aligning our events to -- better to align with sponsor and attendee needs. That primarily looks like smaller events closer to where our clients are. So -- and also smaller so that folks can interact with their peers with more engagement at those events. So smaller, more localized events essentially for the year.

I think the big innovation in 2025, Anja, was about workshops at the events, and that was -- they were massively successful in '25. You see a lot of that in 2026.

And I show our next question comes from the line of Vincent Colicchio from Barrington Research.

Yes, George, important question here, I think. So why the ongoing disconnect between the value of your research versus LLM models, and in terms of demand? And when do you think this may change?

Yes. So I'd like to give you some color here. I do not see churn as a result of AI replacements. Of course, it's come up into the sales process, but we spend a lot of time over the past months to train our sales organizations to demonstrate the value of Forrester AI Access against the large language model. And what we highlight is our Forrester AI solutions provide proprietary data, proprietary ideas supported by human experts. And when you train your sales organizations in this way, we do not see this churn as a result of that. On contrary, what we start to see on the marketplace is a mistrust of the content provided by some of the LLM. So we do see an opportunity for Forrester that we are going to size with our new product strategy.

So you said mistrust of the public models?

Yes. It's a fun narrative, Vince. It's an easy narrative. But your bank account is never going to end up in a public model. It's just never going to happen. And our proprietary research is never going to end up in a public model as well. And to get trusted data, to get trusted bank account, you're going to go to a private model. Like I said on the last call, but -- there's a very big misallocation of capital going on right now towards the public models. I believe 70%, when this is all done 10 years from now, you look back, 70% of all the revenue from these models will be made in private models, not in public models. So it's a fun native.

That's a helpful perspective. And with the new sales leadership, will there be any change in the sales process going forward?

Yes. So coming from the international sales organization where we had quite a strong H2 last year. I'm applying some of the learning we had over the -- in international to the North American sales organization. So the first thing what I'm doing is reorganize our go-to-market strategy in North America to be organized around 6 industries and focus on the high potential accounts.

I want also to ensure that we develop a business development mindset, not only with the AE, but with the AM and then really sharpen on our execution on what we call the retention life cycle with my colleague of the customer success teams in order to improve our retention. We have a lot of opportunities in improving our gross productivity here in North America and returning back to growth with our new AI Access services.

You want to talk about the balanced scorecard as well?

Yes. So it's also the way we measure the sales organization. So I really believe that the sales organization needs to be measured on both sides from a quantitative side, on the pipeline, the activity that they have, but also balance with qualitative elements like pipeline conversions, velocity of the sales, the quality of the sales. So I'm implementing a new way of measuring the quality of our sales activity in order to drive faster growth in the North American business.

Okay. And George, how did AI Access perform versus expectations in Q4? And how is it trending in the new year?

We had a meeting in September where we -- I looked at Carrie and said how many -- how much of this are we going to sell in Q4? I think we were off by 90%. We were quite conservative about it, and it was really quite surprising in Q4, the speed here. So it's interesting, Vince, because what we're finding is that companies want their executives using AI that increases the AIQ, the artificial intelligence quotient of those executives. So that's something that I didn't -- maybe you did, Carrie, but I never really calculated that as a benefit of AI Access. But the fact that they're using AI to use us is, again, improving their AIQ. And obviously, they're able to find our data and research much faster and to create something new and original from that data. So Carrie wants to say something, maybe she...

No, no, you -- that's exactly it. We're really very pleased with the performance of the product, exceeded our expectations and a very strong pipeline coming in the year.

I think what's awesome about this, Vince, is that we've been working with this for now 2.5 years. I mean this is like -- this is version 11. So...

Yes. I'd add one other thing, Vince, this is Chris. It's helping on deal cycle time as well, literally cutting it by almost 50%, which is great to see. And then the client count increase that we saw coming out of the year, it was really in 2 areas. First and foremost, it was with AI Access. That was really all new clients. And we've got a big win-back campaign coming up in the first half of the year here, which we're excited about. And then the retention improvements in the core FD business from the retention life cycle work, the stuff that Julie is working on, we're already seeing it really start to take hold, which is also exciting and one of the other reasons we feel pretty good about the outlook for this year.

Why is the velocity so much faster, Christophe, for AI Access?

It's very simple. It's easier to buy and easier to sell. And I see it as an attractive value proposition, not only to grow within our existing customers, to win new customers, but we see also a very interesting change, which is winning back customers we lost over the last 3 years. And we win them against the competitions or against organizations, and also against organizations that want to build skills internally as opposed to outsourcing it to, for instance, consulting organizations.

Is it helping you win back some new old clients as you hoped?

Yes. And this is such -- and they are so happy when we come back with that type of value propositions, because what they are looking at is to get faster in the way they make decisions and to do it with more confidence. And this is the way we differentiate our large language model. So it's a very strong value proposition for Forrester.

And that concludes our Q&A session. At this time, I'd like to turn the conference back to Chris Finn, Chief Financial Officer, for closing remarks.

Yes. Thanks, everyone, for joining us today. Once again, any follow-up questions, please reach out to myself or Ed. Thank you.

Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good afternoon, and thank you for standing by. Welcome to Forrester's Third Quarter 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to Vice President of Corporate Development and Investor Relations, Ed Bryce Morris. Please go ahead.

Thank you, and hello, everyone. Thanks for joining today's call. Earlier this afternoon, we issued our press release for the third quarter of 2025. If you need a copy, you can find one on our website in the Investors section. Here with us today to discuss our results are George Colony, Forrester's Chief Executive Officer and Chairman; and Chris Finn, Chief Financial Officer. Carrie Johnson, our Chief Product Officer; and Nate Swan, our Chief Sales Officer, are also here with us for the Q&A section of the call.

Before we begin, I'd like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, believes, anticipates, intends, plans, estimates or similar expressions are intended to identify these forward-looking statements. These statements are based on the company's current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements. Factors that could cause actual results to differ are discussed in our reports and filings with the Securities and Exchange Commission, and the company undertakes no obligations to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

Lastly, consistent with our previous calls, today, we will be discussing our performance on an adjusted basis, which excludes items affecting comparability. While reporting on an adjusted basis is not in accordance with GAAP, we believe that reporting numbers on this adjusted basis provides a meaningful comparison and an appropriate basis for our discussion. You can find a detailed list of items excluded from these adjusted results in our press release.

And with that, I'll hand it over to George.

Good afternoon, and thank you for joining Forrester's 2025 Q3 Investor Call. Today, I'd like to cover the following topics: one, our Q3 performance; two, an update on our go-to-market approach; three, the launch of the new AI access product; four, the research business in the age of AI; and five, feedback from our Board of clients.

The macroeconomic environment continued to be challenging in Q3, highlighted by the rolling U.S. federal government pullback from consulting. Q3 is historically the largest bookings quarter for our government consulting business. We were well below our target and overall consulting revenue declined 8% from the prior year. In addition, research revenue declined 6% in the quarter, driven by bookings and challenges from previous quarters. Total revenue declined 8% from the prior year. Wallet retention was up 1 point to 86% and client retention held at 74% compared to Q2. Chris will give more detail on the quarter in a few moments.

In the Q1 and Q2 calls, I noted that the final step in the product transition is transforming our sales engine to consistently sign new Forrester Decisions clients and grow existing accounts. We made progress in the quarter on several fronts. One, average time to hire reps is running at 55 days, improving on our goal of 60 days, and there's very good sales talent available in the market. Two, the sales force continues to adopt the Forrester Agile Sales Technique or FAST sales methodology. We ended the quarter with the highest percentage of reps certified and with all managers now qualified to run fast deal clinics. And three, our demand marketing engine continues to improve, driven by stronger alignment between our sales and marketing teams.

The result has been increased prospect follow-up and a higher rate of opportunity creation from marketing efforts. Areas where we are focused in Q4 are: one, maintaining consistent sales activities; two, improving execution of our retention life cycle; and three, maintaining a rolling pipe of $550,000 per quota-bearing headcount.

Moving now to product changes. We announced AI Access, a self-service AI offering on September 9. As you know, Izola, our generative AI model, launched over 2 years ago. Clients use Izola on the Forrester Decisions platform as an alternative to search, enabling them to quickly get answers and to create custom content from Forrester's proprietary model. Izola has become one of the primary ways that clients use our research.

For clarity sake, Izola is a model built by Forrester that yields answers based on Forrester's research. This content is not available in any other generative model, including the public LLMs such as Claude from Anthropic, ChatGPT from OpenAI, and Gemini from Google. Unlike the public models, Forrester's private model is based on tens of thousands of Forrester Research artifacts, which include exclusive frameworks, ideas, data, product evaluations, best practices and benchmarks. The Forrester model yields answers that are proprietary and trusted.

So where does AI access fit in our product portfolio? The current Forrester Decisions portfolio includes three levels of research access: VIP, which is research plus a dedicated advisor; leader seats, which is research plus the ability to have unlimited guidance sessions with analysts; and team seats, which offer research plus the ability to attend leaders' guidance and inquiry sessions. Clients have told us that in addition to VIP leader and team users, they want more executives using Forrester's research without access to advisers, customer success or analysts. These executives are often part of the VIP or leaders' teams, but they don't yet need continuous guidance. So AI Access provides an entry level for executives within our client companies to use our research, accessing Forrester through an AI prompt and Izola homepage.

We introduced the product for three reasons: one, to attract new clients. AI Access will widen our client base and enable more executives to use Forrester; two, enrichment, AI Access provides streamlined self-service in a fast, trusted way for clients to get answers; and three, win backs. We will use AI Access to reintroduce former clients to Forrester Decisions. With the advent of AI Access, we have widened the Forrester Decisions portfolio, enabling us to land and expand with a wider group of executives and helping them align their initiatives and thinking. We are democratizing access to our research, making it easier for larger teams to get the answers they need to make collective decisions.

AI Access is our entry-level research product. Volume pricing is available based on the number of seats acquired. Since the mid-September launch, we have seen significant interest with a multimillion dollar fast-growing sales pipeline. In Q3, we secured one of the largest research deals in Forrester's history with a large government agency that is modernizing their organization and is pushing toward fully AI-enabled decision-making. Our ability to offer this client an enterprise-wide pricing model via AI Access was a key differentiator, enabling thousands of users to gain access to our research in that account. We are off to a great start with AI Access and believe that the product will quickly become an important part of the Forrester Decisions portfolio.

Now before I leave the topic of AI, I want to say a few words about Forrester's place in the AI future. I know that there have been many questions about the value of research in a world in which public large language models are becoming more adept at answering questions. In that future, what will Forrester's role be? Generative AI is good at enabling people to converse with broad data sets. In the case of the public language models like ChatGPT, that data set is built from what is called the common crawl, publicly available information scraped from websites. But as you know, that information does not include private data from sources like Bloomberg, Dun & Bradstreet, FactSet or Forrester. And of course, the public models do not include information like your bank account. To converse with that data in the future, you'll have to go to a private AI model built by Bank of America or Barclays as examples.

Public AI will never be able to construct trusted data from thin air, just as it will not be able to conjure your bank balances without access to your bank. So in the age of AI, Forrester will be akin to a private research bank, creating and curating four proprietary assets: one, data. We will construct protected data sets and analyze them against longitudinal studies that the company has built over the last 3 decades; two, original ideas and frameworks like our Zero Trust security model; three, complex analysis that combines ideas and data. An example would be our total experience score that marries customer experience data with brand data; and four, proprietary information that forms the basis of the client Forrester relationship. Client priorities and initiatives would be an example.

Of course, Forrester will leverage AI as we do with Izola to help our clients use these assets, but this information will not be available in public models. Also, while we believe that the future will be driven by AI, there will continue to be HI, human intelligence, driving knowledge and thought in society. This is not a robot moment when the Androids arrived to take all of our jobs. It is rather an Ironman moment when humans will put on suits of Generative and Agentic AI and become more powerful for their customers.

Yes, there's a lot of AI at work, but inside the suit, it's still a human being that is able to channel AI to deliver the highest value. That's exactly what Forrester is doing with Izola and AI access, using AI to become more powerful and more useful to its clients and to the world, while also offering access to the analysts that created the research in our model. The word hovering over any discussion of AI is the word trust. When executives are making important business and public policy decisions, they must trust the information to train the AI model and that the model yields accurate answers backed by trusted data and trusted people.

Forrester serves executives at some of the world's largest companies and government agencies. These clients are making decisions that will have long-term impact on the futures of their organizations. Yes, they will use AI to make those decisions, but they will rely on trusted AI, and that is what Forrester provides. Forrester executive team met with the company's Board of Clients in September. For many years, this Board has advised us on strategy, product and research direction. The members are trusted advisors to Forrester and Forrester is a trusted advisor to their companies. The Board is comprised of client executives who serve for 3 years. Current companies represented include Air France, AG Insurance, Ameritas, IBM, Nationwide, Travelers and SAP Concur.

I'm not going to go through a full summary of the Board meeting, but I wanted to give you a few quotes in the members when we ask them, why do you use Forrester? Here are a few responses that I thought were illustrative of our value to clients. You challenge my thinking and help me define a new strategy. I use you for two things: knowledge of technical intricacies and bold advice. You give me backup and justification to move forward on projects. I love the benchmarks and associated future data mapping strategies that helps me develop. You're in it with us, setting us up for success, helping us pressure test solutions, breaking down our company silos. As a final quote, "I don't make a major decision without checking in with Forrester. It's a privilege to work with you. The Board of clients was very supportive of the launch of AI Access, and much of the meeting was devoted to Board members guiding us on pricing, positioning and packaging of the new product.

So to conclude, we continue to work through the economic moment by: one, staying focused on improving our go-to-market motion; two, improving the Forrester Decisions platform; and three, carefully controlling expenses. We are very excited to be introducing AI Access. And we look forward to using AI to democratize access to our research and to further establish Forrester as the AI research company.

Thank you for listening to the call. And I'd now like to hand it over to Chris. Chris?

Thanks, George, and good afternoon, everyone. The third quarter saw an exciting product launch with AI Access. We experienced immediate market validation with bookings and a landmark large enterprise deal incorporating this new product just weeks after its release. Although the ongoing dynamics in the marketplace continue to negatively impact all three lines of business, we delivered operating margin and EPS above consensus. And we continue to see stabilization in the research business with research revenue down 4%, excluding the divestiture of FeedbackNow, an improvement on the last quarter's performance. It is early in the sales cycle, but we are anticipating our new AI Access product to have a positive impact on Q4 and 2026 CV performance.

Our Consulting and Events businesses continue to face headwinds in a tough selling environment. The consulting business has been meaningfully impacted by the cost-cutting measures enacted in the U.S. federal government, and we see these challenges continuing next year. The shift in the timing of one of our larger events negatively impacted results this quarter, and we see ongoing impediments for that business over the medium term as new leadership is evolving our offering and go-to-market motion. The fourth quarter is our largest bookings period, and we are positive of our pipeline. However, we are downward adjusting our revenue guidance based on the performance of Consulting and Events. This revenue adjustment flows through to a modestly lower margin and EPS guide for the year.

Q3 saw a 7% CV decline. This is a continuation of the last 2 quarters' performance. We anticipate improved performance in the fourth quarter to come from the growing pipeline for the new AI access product. Therefore, even with the continuing uncertainty in the market, we are expecting CV to improve to a low single-digit decline for the year. For the total company, we generated $94.3 million in revenue for the quarter compared to $102.5 million in the prior year period, which is an overall revenue decrease of 8%.

In terms of our revenue breakdown for the quarter, research revenue was $72.7 million, down from $77.1 million in 2024. This was a decrease of 6% compared to the third quarter of 2024, with revenue from our subscription research products down 5%. Excluding the impact of FeedbackNow, which we divested last year, research revenue declined by 4% year-over-year. Client retention of 74% was flat from the prior quarter. However, wallet retention was up 1 point to 86%. As discussed in recent quarters, wallet retention is being affected by enrichment challenges. This trend directly reflects the uncertain budgetary and macroeconomic environment we are experiencing.

Our Consulting business posted revenues of $21.5 million, which was down 8% compared to the prior year. We are continuing to see uneven performance in the business by each product line. This year, Strategy Consulting has been negatively impacted by its degrading government business, but advisory grew double digits this quarter. We are expecting this mixed performance to continue for the remainder of the year and into next year.

And finally, regarding our events business, we shifted one of our three major North American events, technology innovation into Q4, which resulted in insignificant events revenue this quarter. As noted last quarter, the outlook for the events business remains challenged, specifically the outlook for sponsorship revenues. The events team continues its work in addressing these issues.

Continuing down our P&L on an adjusted basis, operating expenses for the third quarter decreased by 11%, primarily driven by lower compensation and related costs. Specifically on headcount for the third quarter, we were down 8% compared to the same period in 2024. We continue to monitor costs very closely with particular attention focused on headcount, hiring, and attrition. Operating income increased by 21% to $9.9 million or 10.5% of revenue in the current quarter compared to $8.2 million or 8% of revenue in the third quarter of 2024. Higher operating income and margin were in part driven by the shift in event timing and also by very careful cost management in the quarter.

Interest expense for the quarter was $0.7 million, down slightly from the $0.8 million in the third quarter of 2024. Finally, net income and earnings per share increased 30% and 28%, respectively, compared to Q3 of last year, with net income at $7.2 million and earnings per share of $0.37 for the current quarter compared with net income of $5.6 million and earnings per share of $0.29 in the third quarter of 2024.

Looking at our capital structure, year-to-date cash flow from operating activities was $24.3 million and capital expenditures were $1.9 million. We did not pay down any debt in the quarter. We did repurchase approximately $2.4 million worth of shares in the period. We have over $77 million of our stock repurchase authorization intact. Our balance sheet remains strong with cash at the end of the quarter of approximately $132 million and debt of only $35 million. As mentioned earlier, we are modestly lowering our guidance range for the year. For 2025, we now expect revenue to be $395 million to $405 million or down 6% to 9% versus 2024. The reduction in the range by $5 million is driven by ongoing headwinds in the consulting and events businesses.

The outlook for the Research business remains a mid-single-digit decline for the year. The consulting business is now a high single-digit to low double-digit decline and the Events business is now a decline in the high 20% range. We now expect our operating margins to be in the range of 7.5% to 8.5% for 2025, and interest expense is expected to be $2.7 million for the year, and we are guiding to a full year tax rate of 29%. Taking all of this into account, we now expect EPS to be in the range of $1.15 to $1.25 for the full year.

This quarter, we took a significant step on our continuing journey with the AI research company. The release of the AI Access product and the first major contract win associated with the new offering has shown we have a differentiated product in the marketplace. As George discussed, we continue to believe Forrester will play a key role in the age of AI. Our research and analysts will offer trusted, proprietary, strategic and actionable advice. This type of trusted guidance is now ever more important in both an uncertain world and a world impacted by AI.

Thank you all for taking the time to join us today. And with that, I will hand the call back to George.

Thank you, Chris. To summarize, the company is excited to be introducing the AI Access product, and we are pleased with the early market reaction. It widens the Forrester Decisions portfolio, makes it easier for our clients to get trusted advice fast and it democratizes access to our research. Thank you for joining the call, and we will now take questions.

[Operator Instructions] And I show our first question comes from the line of Andrew Nicholas from William Blair.

This is Tom Roesch on for Andrew Nicholas. I really appreciate the color you guys gave on AI during the prepared remarks. But I was just wondering if you could expand on your thoughts on the perceived disruption from AI, specifically as it relates to the -- just the research part of the business of like without the guide access like those type of licenses. And also, I'm just curious like what is the typical customer demographic that chooses to go with just the research access and not the guide level? Or like what's the reasoning usually behind it when that's kind of like the sale that you do?

It's probably a little bit too early, Tom, to make that call. I mean AI Access has only been available for a couple of weeks. So I would expect the demographic to be lower, to be a younger demographic for AI Access, but it's really too early if that was your question. What I would say is if you don't have AI Access to your product, you're going to have a hard time attracting that younger demographic. So another good reason why we like having the product.

Got you. And then switching gears, I was wondering if you could kind of expand on what you're seeing in the sales pipeline in the fourth quarter. And then also, I believe last quarter, you had mentioned kind of underperforming on conversion rates. So it sounds like you guys have been making strides in your go-to-market strategy. So I was wondering if you've seen any improvement on conversion as well.

Yes. Great question, Tom. So we are seeing some improvement, specifically our emerging tech team. We just did a global call with our sales organization today where we called out their conversion rates dropping by 27% year-over-year -- sorry, their time to conversion. That was a misstatement on there, time to conversion dropping 27%. So they are seeing really good conversion.

And what they're doing is what we call a social contract, where they are confirming with the buyer early on in the sales cycle that they would like to be evaluating Forrester. It's an opportunity to hold the client accountable, hold ourselves accountable to the steps to walk through a sales process and seeing really, really good process -- progress with that. Time to close one for that team in particular, dropped from roughly 80 days down to about 59 days, so a significant decrease. And the rest of our teams are also in that rough 80 days. Now they are working with some larger clients typically in some other teams. So we don't expect to have those type of dramatic results, but we do expect to see some pipeline acceleration as our teams are really coaching in this type of methodology to drive faster conversion.

As far as size of pipeline, we are roughly the same size year-over-year, so plus about a couple of percent on there. But we're seeing a better conversion. So we're very hopeful that in Q4, we will see continued improvement in conversion, one, speed; two, and I think to echo both George and Chris' comments on AI Access. AI Access is opening doors for us. So we're seeing more clients respond. They want alternatives out there. They want to be able to spread research out to larger parts of the organization. Not every person in an organization needs to have the guidance that we give. But if they have guidance at the top of the organization and access to the same research throughout, that really creates alignment for our clients and has been really well received. So not just on our large government deal, we're seeing it around the world. The international team has done a fantastic job securing winbacks from clients that like this model. And so we think there's a lot of momentum from that. We're very hopeful that Q4 will drive some more business.

If I could just slip in one quick follow-up. Just on like the large language models, have they come up at all in customer conversations you guys have had? Or have you gotten any pushbacks from clients that have tried to use maybe one of the public -- switch the public one or a different type of large language model?

Yes, absolutely. I think a lot of customers bring it up and say, I can use things like ChatGPT or Claude, et cetera, and I get really good answers. And while I say they get really good answers, do you really trust where they're coming from? I am certainly not an analyst. I'd let George and Carrie probably answer more on that. But a lot of that information is not coming from reliable sources that have models, data and research that Forrester has. In fact, none of them have what Forrester has. So just to be clear about that, they're not backed by those things. And so if you're going to make million dollar, multimillion or $100 million decisions, going out there and trusting ChatGPT or other sources, while that is good information to get, I really don't think that's a reliable way to make a decision for your business model. And so you're going to need a trusted source like Forrester to be able to do that.

If I could -- this is Carrie. If I could add one thing on to Nate's comments. For every pushback or client or prospect conversation that we have asking to compare us to the public models, we have more than that asking to actually put our data and insights into their employee environment where they're getting trusted insights to empower their employees. That's actually where most of our conversations are happening, where they're seeing this opportunity to say, "Hey, we've been tasked with providing a world-class set of insights to our employees to make decisions, to go win deals. How can we make sure that Forrester data and insights are in our protected environments because we don't want our employees relying on the public models to make business decisions. So more opportunity than threat on this front because we think that companies understand the impact and the importance of trusted data sources.

Just to add on to Carrie, as she brings up an excellent point. I've been involved in several conversations. I know Carrie has, I know George has with clients that are looking to do exactly that, and they're very excited when they see what the previous Izola feature and now AI Access does and allows them to do. The reaction has been incredible. I mean, I've sat in a meeting with a Chief Digital Officer from a large brand agency and they were -- they wanted to go to commercials almost immediately as they saw this. So we are seeing some very good response from clients. So we're excited about that.

I mean, there's going to be a lot of AI used just as there's a lot -- the moment reminds me a little bit of 2002 when people would say, well, we don't need Forrester anymore. We're going to use Google. And my come back with that was always great, glad that's your plan. You're going to make a $100 million technology decision. Tell me how that board meeting is going to go. When you tell them the research I did to make this decision was made on Google. So obviously, Internet search helps a lot. AI search will help a lot. But at the end of the day, when these are critical decisions which will require critical data and trusted data, and that's where Forrester, as I described, that will be our place in this future.

And I show our next question comes from the line of Michael Mathison from Sidoti & Company.

My first question is whether there are any particular verticals or industries where you're seeing better success at gaining new clients or deepening client relationships?

Well, yes, absolutely. So number one, while it's been a challenging opportunity in the government, we actually think there's a massive opportunity in the U.S. federal government. So retention challenges this year as agencies were having those come in and cut budgets. But the response to how Forrester is making our offerings available to people and the support that we've gotten from Forrester to go out in front of the government and talk about what we're doing specifically with AI Access, we've had a number of agencies very interested in what we're doing. So we've seen really good success there in the U.S.

Again, coming back to the international markets, we're seeing really good success in the international markets on the end user side. So growing that end user business, which is really our goal is to grow the end user business even stronger. We're seeing great success in the international markets, capturing clients from the CPG industry, manufacturing, financial services. So lots of success there. And we're starting to see some breakthroughs as well as some manufacturing opportunities in North America as well. Our end user new business team really struggled for about 6 months, starting to see some raise of sunshine from them as they go into the fourth quarter. We're seeing some net new logo opportunities in financial services as well as manufacturing and CPG.

Okay. Great. Second question, your effort to increase the contract value per client is a major strategic goal. You were still down here a couple of percent this quarter. Can you comment on when you feel like that effort would bear a little bit more fruit?

Yes. Thanks for the question. This is Chris. Yes, look, I think as we move forward here, we're seeing some traction, obviously, with the new product in AI Access and a stabilization of retention rates. And so I think as we move forward, our expectation is we've got a big quarter in front of us in Q4. But as we get into next year, we should start to see some improvement there in the first half, especially as the new product gains traction, and we continue to see stabilization on retention.

Average CV per client has -- just looking at up 5% in the year. Did you get that, Michael? So average CV per client up 5% in the year.

I'm sorry, I didn't have it in front of me, but I'll take your correction.

Yes. So we're up to $162,000 per client.

And I show our next question comes from the line of Vincent Colicchio from Barrington Research.

Yes, Nate, on the better conversion this quarter, can you attribute that to something in particular? Or is that too difficult to do?

No. As I was mentioning, this emerging tech team has been working what we call our social contract for the better part of 9 months, and they're really starting to see some success. And I think the team is gaining confidence in it, Vince. When you first started, it might feel a little bit awkward to you as you go through a sales process.

But now that team is really clicking and they're doing it every single time. Anytime they get engaged with a new prospect, they are saying, "Hey, it seems like there's genuine interest. I think we can help you." This is what this process looks like over the next 6 to 8 weeks. Is this something you're interested in doing? This will be something that would cost money, clearly to invest in Forrester. Typically, the budgets would be between X and Y for something like this, although we don't want to predetermine what it would be. And is this something that you're interested in and can provide access to your team who has the initiatives to execute that are part of your priorities for the business.

If you are interested in doing that, we are interested in working with you to see if that works. You can disengage at any time. That it's not a commitment to buy. And I think they've gotten really good at that talk track. And we had, as I said, a global call earlier today, really encouraging the rest of the team that you need to do this. This is working. They are having success. They are seeing their -- not just their close won get better, but they're closed lost. Even when a client agrees to go through a social contract, you still don't have the 100% conversion of your Stage 1 opportunities. You're just entering the pipeline. It's just a commitment to look and view and it allows the sales rep to hold the client accountable and the client to hold the sales rep accountable and hold Forrester accountable.

So we've seen really good luck in it. And I think that we'll start seeing more of that. When you marry that with our Forrester Agile selling technique, I think it's calling high, making sure that we understand the value sweet spot that we are looking for from our -- for our clients, making sure that there is alignment. And that -- at the end of the day, they don't want to waste their time. We don't want to waste their time. And we believe that we can really drive a better conversion. So dropping our close loss from -- in that group from 130 days to about 105 days is significant. You're not wasting time on opportunities that are never going to close.

And then, George, one for you. Any -- what are your thoughts on the Carahsoft partnership? When do you expect it to start contributing? And what makes you optimistic?

Yes. George -- sorry, Vince, I'll jump in for George because that is part of a sales play. One of my sales leader for the government team, Dana Barnes has done a really nice job. So he has worked with Carahsoft in the past with the government teams. What that allows us to do is in previous software companies that he was with. And what that allows us to do is open up markets. They help with marketing and opening doors and contract vehicles that we might not be able to get on. So we've just gotten started with them. We're starting to see a lot of traction in the government space.

And so while it's been really tough sledding in the government market, we had a big win, number one. We've been in front of over 200 buyers at one of the -- I can't remember.

I think through Carahsoft.

Not through Carahsoft, but through a event called FedTalk that we were at when our CTO was there. And Carahsoft is getting us into states that we haven't been doing business in and agencies that we haven't been doing business in. So we haven't seen a return yet, but I expect that we will relatively soon. That was signed in the middle of Q3.

Are there other partnerships like this that may be useful to other parts of your business?

It's a great question. I think we want to see what success looks like. We have our -- where Forrester doesn't have a direct presence, we have our IVD model, and we have gone through partners there. And that business has been really successful. That's been in markets that Forrester is not in, in Latin America and other countries, Middle East, et cetera. So pretty successful on that side. I'm sure that we could explore other partnerships. To start, we thought Carahsoft was a good place for us to go. And they've been really responsive to us.

That concludes our Q&A session. At this time, I would like to turn the conference back to Chris Finn, Chief Financial Officer, for closing remarks.

Yes. Thanks, everyone, for joining today. As always, if you have any questions or follow-up, please reach out to Ed or myself. Thank you.

Thank you very much.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.