Forrester Research (FORR) Q4 2019 Earnings Call Transcript

Forrester Research (FORR -1.53%)
Q4 2019 Earnings Call
Feb 13, 2020, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon. Thank you for joining today's call. With me today are George Colony, Forrester's chairman of the board and CEO; Kelley Hippler, Forrester's chief sales officer; and Mike Doyle, Forrester's chief financial officer. George will open the call, Kelley will follow George to discuss sales, and Mike Doyle will discuss our financials.

We'll then open the call to Q&A. A replay of this call will be available until March 14, 2020, and can be accessed by dialing 1-888-883-7419, or internationally, 1-630-652-3042. Please reference the passcode 6135978#. 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. Some of the important factors that could cause actual results to differ are discussed in our reports and filings with the Securities and Exchange Commission. The company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

I will now hand the call over to George Colony.

George Colony -- Chairman of the Board and Chief Executive Officer

Thank you for joining the Forrester Q4 2019 call. Following my remarks, Kelley Hippler, Forrester's CSO, will update on sales. And then Mike Doyle will conclude with the financial review for the quarter. We will then take questions.

On many levels, 2019 was a watershed year for Forrester. We successfully integrated SiriusDecisions. We grew our legacy research business and we continue to enhance and extend new products, and we did all of this while executing on our financial plan, finishing the year at the upper end of revenue guidance and exceeding EPS targets. This marks two consecutive years of double-digit EPS growth, and we are expecting a third year in 2020.

Client retention was at 72%, one point above Q4 of 2018; and client enrichment, that's the average growth of client accounts, remained at healthy levels at 106%. In its first year, the SiriusDecisions acquisition was accretive to earnings. We are now a full year into the acquisition of SiriusDecisions and are excited about the opportunities that the deal is unlocking. As with all acquisitions, this one had its challenges highlighted by the changes we've made in sales in May when we brought the SiriusDecisions sales force under the leadership of Forrester's global sales team.

While this created short-term bookings gaps at midyear and higher-than-planned attrition in the Sirius sales force, it has set the company up to achieve its 2020 plan. We chose to address our challenges earlier rather than later. And I believe that that strategy will pay off. With the structural integration complete, we are now operating as one company.

In 2020, we are focused on three imperatives as an integrated operation. Number one, cross-sell. The Forrester and SiriusDecisions sales forces were fully integrated as of January 1 with all salespeople selling both portfolios, while we internally call everyone that sells everything. We made this decision because Forrester Research and SiriusDecisions Research are typically sold to the same buyer and budget center.

This positions salespeople to cross-sell the two research products, Forrester to SiriusDecisions clients and SiriusDecisions to Forrester clients. In 2019, we've reached $2.9 million in cross-sold deals. And in Kelley's remarks, she will describe the combined sales force in more detail. The second imperative is to expand the research staff for the SiriusDecisions product line.

While we experienced higher-than-expected attrition in the Sirius sales force in 2019, research organization attrition was below plan, which kept the product strong and moving forward as integration proceeded. In 2020, we will be expanding the SiriusDecisions research staff to increase the already strong value proposition for clients. And finally, we will continue to work to create a seamless portfolio of research that spans Forrester and SiriusDecisions. Now I described this architecture on the Q3 call, but I want to review it again on this call because it is fundamental to our go-forward positioning.

The value proposition of the new Forrester is simple but powerful. In the age of the customer, where companies must enhance the experience and operate differently to build customer obsession, they require help on three levels, all of which are now provided by Forrester. Number one, vision research. Companies must have the ability to see around the next corner, to see future opportunities, new external threats, and changing competitive dynamics.

An example of this would be our new tech research, which plugs our clients into emerging technology early so they can gain first-mover status. Vision research has been a traditional strength and focus of Forrester, and it's used by our clients to increase their speed. Secondly, strategy research. Once companies have a clear view of the future, Forrester works with them to plan the choices they should make, what technologies to invest in, how to organize, what skills to acquire, where to focus executive attention, and what markets to attack.

Forrester and SiriusDecisions have long track records of directing our clients toward the right strategic choices. And examples would be Forrester's extensive library of technology comparison waves and SiriusDecisions' demand waterfall framework. Having the right strategy enables companies to beat competitors. And finally, three, execution research.

Once companies see the future and have made the right choices, SiriusDecisions research directs them on how to operate, what models to deploy, how to make fact-based decisions and how to apply best practices and benchmarks to bring more precision to operations. The Sirius Way is a methodology for how to operate, enabling our clients to align B2B marketing, sales, and product to optimize their revenue engines. Companies that are able to achieve this alignment grow 19% faster than unaligned companies. In 2020, we will be building out all three levels of research, vision, strategy, and execution.

In addition, we will be creating a seamless experience across all three levels, aligning topics, technologies, and themes. So this portfolio is differentiated and unique, offering our clients a one-stop-shop that can make them faster, more competitive and able to grow at higher rates in the age of the customer. In addition to leveraging the SiriusDecisions acquisition, we plan to expand two other new products: certification and our real-time customer experience cloud what we call FeedbackNow. Both of these products experienced strong growth in 2019, and we expect that momentum to continue in 2020.

Now as a final note, I wanted to talk about Forrester's financial position as we move into the year. We continue to retire debt incurred with the SiriusDecisions acquisition. During 2019, we paid down $42 million of debt, including $36 million of discretionary payments on our revolver. We will continue to accelerate debt payments in 2020, clearing our financial decks for future acquisitions.

So to conclude, we are happy to have the integration of SiriusDecisions complete. We are excited about our prospects in 2020 and beyond. The vision, strategy, and execution portfolio that we have built resonate with our clients, and it points the company toward accelerated growth, intensified client engagement, and higher renewal rates. So now I'd like to pass the call over to Kelley Hippler, Forrester's chief sales officer.

Kelley?

Kelley Hippler -- Chief Sales Officer

Thank you, George. Our original plan for 2019 was to run the SiriusDecisions sales team separately from the Forrester sales organization. As George mentioned, in May, we accelerated the integration and moved the SiriusDecisions teams under Forrester sales leaders. While SiriusDecisions attrition remained in the mid-30s through year end, legacy Forrester attrition was down 3% over prior year.

Our ramped rep productivity on the legacy Forrester side increased for the 12th consecutive quarter. We also saw a double-digit improvement in sales productivity for our reps selling the SiriusDecisions portfolio. In the quarter, our 12-month rolling client retention improved over prior year, and thanks to our strong new business efforts we also saw an increase in total client count. Now turning to 2020.

In mid-January, we held a global sales kickoff in Boston. It was impressive to see the growth in our organization from 528 to just shy of 700 over the course of the past year. Sales kickoff marked a pivotal moment in our company's history as our sellers had an opportunity to meet as a fully integrated team in the customer engagement model. This also provided a great chance to network and share best practices with colleagues from across the globe.

There was a palpable excitement around the value that the new Forrester will bring to our clients across vision, strategy, and execution to help them drive growth. During the sales kickoff client panel, one of our largest healthcare clients expressed his excitement about working with the new Forrester in 2020 sharing that, "You have both sides that the modern organization needs, operational and aspirational, helping us to get ahead in the market. I show up every day to solve business problems, some are strategic, some are operational. Having people that you trust in the trenches with you solving these large problems is powerful." To ensure that our 2020 plan is met and that we continue to lay the groundwork for double-digit growth in future years, our priorities for 2020 will be to, number one, increase sales headcount.

Not only are we backfilling those individuals who left the organization with sales reps who have the traits and drivers that align to the customer engagement model, but we will also be expanding the sales force by 5% to start the year. Number two, deliver cross-product training. To help our clients reach their desired outcome, Forrester's training sales reps and our customer success organization on the Forrester and SiriusDecisions portfolios. We will also be leveraging our sales footprint to accelerate the growth of FeedbackNow.

Number three, improve the employee experience. Our own research tells us that customer experience and employee experience go hand in hand. We will continue to build out our sales training and enablement function to make sure that our teams are armed with the training, collateral, and tools needed to be effective in their roles and to allow them to maximize their time partnering with our clients. We will continue to update you on our progress against these three priorities throughout the course of 2020.

And with that, I'd like to turn the call over to Mike Doyle to review our Q4 and full-year financial results.

Mike Doyle -- Chief Financial Officer

Thanks, Kelley. I will now begin my review of Forrester's financial performance for the fourth quarter of 2019, including a look at our financial results, the balance sheet at December 31, our fourth-quarter metrics and the outlook for the first quarter and full-year 2020. Please note that the income statement numbers I'm reporting are pro forma and exclude the following items, impact on revenue from the acquisition-related fair value adjustment to deferred revenue; stock-based compensation expense; amortization of intangibles; acquisition and integration costs; and net gains and losses from investments. We continue to utilize an effective tax rate of 31% for pro forma purposes for 2019.

In addition, we'll continue to highlight the impact of SiriusDecisions on our consolidated results by indicating year-over-year performance with and without the acquisition in the relevant sections of my comments. For the fourth quarter, Forrester delivered pro forma revenue at the upper end of guidance and earnings per share that exceeded guidance. Revenue grew by 27% for the quarter and by 6%, excluding SiriusDecisions. Expenses were favorable to expectations, driven by open sales headcount and bonus savings.

Our full-year earnings exceeded guidance by $0.07 per share and increased 21% versus prior year, while we were integrating the largest acquisition in Forrester's history. We did experience some increased turnover in sales, which impacted SiriusDecisions' performance in 2019 and will impact our growth rate in the first half of 2020. We are, however, very happy with the product performance and client satisfaction with the SiriusDecisions product line. And it's a big part of our growth plan for 2020.

Now let me turn to a more detailed review of our fourth-quarter results. Forrester's fourth-quarter revenue increased by 27% to $125.1 million from $98.6 million in the fourth quarter of 2018. SiriusDecisions impacted growth by approximately 21% in the quarter. Fourth-quarter research services revenue increased by 29% to $80.1 million from $62.1 million, and SiriusDecisions accounted for 26% of the growth in the quarter.

Research services revenue represented 64% of total revenue for the quarter. Fourth-quarter advisory services and events revenue increased by 23% to $45 million from $36.5 million. SiriusDecisions accounted for 14% of growth in the quarter. Advisory services and events revenue represented approximately 36% of the total revenue for the quarter.

The international revenue mix was flat to the fourth quarter of 2018. SiriusDecisions impacted international revenue mix by a negative 1% for the quarter. I would now like to take you through the product activity behind our revenue, starting with Forrester Research. Forrester's published research and decision tools enable clients to better anticipate and capitalize on the disruptive forces affecting their businesses and organizations.

We believe Forrester Research provides insights and frameworks, as well as operational tools to drive growth in a complex and dynamic market. Research services revenue increased by 36% for the fourth quarter of 2019, with the SiriusDecisions accounting for all of the growth for the quarter. On to our Connect offerings, which encompass our leadership boards, executive programs, and certification products. Leadership boards provide peer connections to allow clients to collaborate and create plans born from practical experience.

Executive programs pairs clients with former C-level executives, trusted partners whose clients can count on to help them make big calls. Our certification products provide companies with training and certification opportunities for their teams that combine hands-on activities with instruction from Forrester analysts. As of December 31, 2019, Forrester leadership boards and executive programs had a total of 1,459 members, down 1% compared to the prior quarter and down 2% compared to the prior year. Connect revenue increased by 7% for the fourth quarter of 2019, driven mainly by our certification offering.

SiriusDecisions accounted for 3% of the growth. Our analytics products help clients understand and anticipate dynamic and changing B2B and B2C customers. Our services provide a view on a potential future change and offer powerful measures and models to create a blueprint for growth. For the fourth quarter, revenue increased by 27%, driven by FeedbackNow, which accounted for 22% of the growth in the quarter.

Forrester's advisory and consulting offerings help clients apply Forrester's intellectual property to drive action across the enterprise, enabling them to act faster and smarter in a market that rewards customer obsession, speed, and agility. Revenue increased by 17% for the fourth quarter, driven by strong delivery and high utilization of our consultants and analysts. SiriusDecisions accounted for 7% of the growth in the quarter. Our events business provides leading content via immersive experiences focused on enabling professionals and customer experience, digital transformation, privacy and security, and sales and marketing.

In the fourth quarter, we held seven events. In North America, we held Customer Experience San Francisco; Data Strategies & Insights in Austin; SiriusDecisions Technology Exchange in Denver; and our Q4 SiriusDecisions roadshow. In London, we held both our CX Europe and SiriusDecisions Europe events. And in Singapore, we held our SiriusDecisions APAC Summit.

Fourth-quarter events revenue increased by 65%, with all growth being related to SiriusDecisions. Legacy Forrester events revenue remained flat year over year despite having one less event in the quarter compared to the prior year. I will now highlight the expense and income portions of the income statement. Operating expenses for the fourth quarter increased by 27% and were $107.6 million compared to $84.9 million in the prior year.

The cost of services and fulfillment increased by 28%, with all of the growth related to SiriusDecisions. Selling and marketing expenses increased by 29% with 21% of the growth due to SiriusDecisions and the remainder due mainly to higher headcount, merit, and commissions. General and administrative costs increased by 17%, with 12% of the growth related to SiriusDecisions and the remainder due to higher facilities and services costs. Overall headcount increased by 25% compared to the fourth quarter of 2018 with 21% of the growth due to SiriusDecisions.

At the end of the fourth quarter, we had a total staff of 1,795 people, including products and advisory services staff of 688 and a total sales force of 698. Products and advisory services headcount increased by 23% year over year with 18% due to SiriusDecisions. Total sales force increased by 32% year over year with 29% due to SiriusDecisions. Operating income was $17.5 million or 14% of revenue compared to operating income of $13.7 million or 13.9% of revenue in the fourth quarter of 2018.

Interest expense for the quarter was $1.7 million as compared to no interest expense in the fourth quarter of 2018. Net income for the quarter was $10.7 million and earnings per share was $0.57 on diluted weighted average shares outstanding of 18.7 million compared with net income of $9.6 million and earnings per share of $0.52 on 18.5 million diluted weighted average shares outstanding in the fourth quarter of 2018. And now I'll review Forrester's fourth-quarter metrics to provide more perspective on the operating results for the quarter. These metrics are inclusive of acquisitions when appropriate.

Agreement value. This represents the total value of all contracts for research and advisory services in place without regard to the amount of revenue that has already been recognized. As of December 31, 2019, the agreement value was $358 million, up 34% from the fourth quarter of 2018. SiriusDecisions impacted Q4 agreement value growth by 25%.

As compared to December 31, 2019, our total for client companies was 2,880, up 22% compared to last year and essentially flat compared to the third quarter. SiriusDecisions impacted Q4 client count growth by approximately 17%. Client count, unlike our retention and enrichment metrics, is a point-in-time metric at the end of each quarter. As we mentioned in the second quarter, we've updated the methodology we use to calculate client retention, dollar retention, and enrichment to focus on account level activity as opposed to contract level activity.

Additionally, we have broadened the products and services included in the calculation, which better reflects our solutions-oriented approach to serving our clients. Historical values have been restated to allow for appropriate comparisons. The retention and enrichment metrics reflect legacy Forrester performance and exclude the impact of our recent acquisitions. Forrester's client retention rate was 72% for the fourth quarter, down one point compared to last quarter, and up one point compared to last year.

Our dollar retention rate was 90%, unchanged compared to last quarter and prior year. Forrester's enrichment rate was 106% for the fourth quarter, down five points compared to last quarter and down three points compared to last year. We calculate client and dollar retention rates and enrichment rates on a rolling 12-month basis due to the fluctuations, which can occur between quarters with deals that close early or slip into the next quarter. The rolling 12-month methodology captures the proper trend information.

Now I'd like to review the balance sheet. Our cash at December 31, 2019, was $67.9 million, which is a decrease of $72.4 million from $140.3 million at the end of 2018. The decrease in cash was due to the funding of the SiriusDecisions acquisition, which I will explain in more detail. Cash paid for Sirius, net of cash acquired, was $237.7 million, of which $175 million was funded with debt and $62.7 million was funded with cash on hand.

We also paid $4.6 million of debt issuance cost as a part of the transaction. Cash from operations was $2.8 million for the quarter as compared to $1 million in the fourth quarter last year. For the full year, cash from operations was $48.4 million, which is an increase of 26% from 2018. Debt payments were $1.6 million during the quarter and $42.3 million for the year, including $36 million of discretionary payments on our revolver.

Debt outstanding at December 31, 2019, was $132.8 million. We received $700,000 in cash from options exercised in the quarter as compared to $1.8 million in the fourth quarter of last year. Accounts receivable at December 31, 2019, was $84.6 million compared to $67.3 million as of December 31, 2018. Our days sales outstanding at December 31, 2019, was 63 days, consistent with the prior year, and accounts receivable over 90 days was 6% at December 31, 2019, compared to 4% as of December 31, 2018.

Deferred revenue at December 31, 2019, was $179.2 million, an increase of 32% compared to December 31, 2018. In closing, we had a very good quarter and year. Pro-forma revenue performed at the upper end of expectations, earnings per share exceeded guidance and cash flow was up 26% for the full year, which allowed us to continue to pay down our debt. To date, we have paid down $42.3 million, bringing our debt outstanding to $132.8 million, leaving the balance sheet in excellent shape.

We enter 2020 having integrated three acquisitions in less than two years, while sustaining double-digit earnings-per-share growth. As Kelley mentioned, we've opened up the sale of SiriusDecisions product to the entire sales force, which will drive the SiriusDecisions product growth to double-digit growth levels. The first half of 2020, we'll focus on training existing reps, beginning the broader sales rollout of the SiriusDecisions product and accelerating the hiring of new sales reps. As we do this, growth will gradually accelerate throughout the year.

In addition, we will see continued growth in products we invested in during 2019, FeedbackNow and our certification product. Both achieved double-digit growth in 2019, and we expect a continuation of that trend in 2020. Our guidance reflects the growth in these products, as well as modest growth in events and leadership boards as we enhance the value proposition for these products during 2020. Our guidance shows continued top-line growth and a continuation of double-digit earnings-per-share growth.

Let me take you through the specifics of our guidance for the first quarter and full year of 2020. Our guidance excludes the following. Amortization of intangible assets of approximately $4.7 million for the first quarter and $19 million for the full year of 2020; stock-based compensation expense of $2.7 million to $2.9 million for the first quarter and $10.5 million to $11.5 million for the full-year 2020; integration costs of $0.9 million or based on $900,000 to $1.2 million for the first quarter and $1.8 million to $2.2 million for the full-year 2020; fair value adjustment to the acquired deferred revenue from the Sirius acquisitions of approximately $200,000 for the first quarter and $400,000 for the full year of 2020; and any investment gains and losses. Forrester is providing first quarter 2020 financial guidance as follows: pro forma revenues of $108 million to $112 million; pro forma operating margin of 4% to 6%; pro forma effective tax rate of 31%; pro forma earnings per share of $0.12 to $0.18.

Our full-year 2020 guidance is as follows. Pro-forma revenues of $495 million to $507 million; pro forma operating margin of 11% to 12%; pro forma effective tax rate of 31%; and pro forma diluted earnings per share of $1.82 to $1.94. We provided guidance on a GAAP basis for the first-quarter and full-year 2020 in our press release and 8-K filed today. Thanks very much.

And I'm now going to turn the call over to the operator for the Q&A portion of the call.

Questions & Answers:

Operator

[Operator instructions] And we have a question from Andrew Nicholas. You can go ahead with your question, Andrew.

Trevor Romeo -- Analyst

Hi. This is actually Trevor Romeo in for Andrew. First of all, very strong margin performance in the quarter relative to your guidance. Looked like G&A expense showed some good leverage as a percentage of revenue.

Just wondering if you had any more details on what drove the upside there? And then given the strong margin improvement in 2019, could you see any upside to your margin guidance in 2020 which I think implies only about 20 basis points of improvement at the midpoint if I'm looking at that correctly?

Mike Doyle -- Chief Financial Officer

Yes, Trevor. This is Mike Doyle. We did have good improvement in the fourth quarter. A couple of things, as I mentioned in my comments, one was open headcount.

And then on the G&A side, I think we had bonus savings. So essentially, we had an aggressive bonus target that we fell a little short of. So we made an adjustment to our bonus matrix in the fourth quarter. That brought favorability, if you will, into G&A.

I think that's the primary reason for that. In terms of opportunity for margin expansion, I think the key is, for us, and it's a little bit that we had originally had an expectation, probably something a little higher. A lot depends on how quickly we can hire, train and ramp reps and book business. So I think that, as Kelley mentioned, we had attrition that sustained itself at a higher level on the SD side.

I think that as we staff up, also as we train our existing Forrester legacy reps to be selling this SD product, those factors, if they move ahead of what we expect, will drive greater top-line growth, which then will expand margins. That's where the energy is. It's really how do we grow both our bookings faster and then ultimately, revenue faster. So I think if it comes anywhere, it will be that we get out of the gate a little bit quicker than we anticipate, we can ramp quicker.

And that will drive better top-line growth.

Trevor Romeo -- Analyst

OK. Great. That's helpful. And then, Mike, I think you had also said that all of the growth in the research revenue line came from SiriusDecisions in the quarter, which I guess implies that the legacy was kind of flat.

Just, I guess, anything you'd call out there in the quarter? I know you saw a little acceleration in legacy Forrester Research last quarter. So just any thoughts on what drove the deceleration there?

Mike Doyle -- Chief Financial Officer

Yes. It's interesting. In the legacy research, we actually had some growth. We actually had, for us, which is unusual, our reprint business, which typically grows at a pretty healthy rate, actually declined in the fourth quarter.

So that's unusual. We think it's a onetime anomaly. And since that is bucketed with the broader legacy Forrester Research, that is what's driving it down. So no, in the quarter for legacy research, we feel like we had a good quarter, particularly on the user research that was good.

We're pretty happy with that. And again, we are hoping that's going to compound itself as we go into the year and I do think the reprint revenue will sort itself out. That was just, again, a onetime thing in the fourth quarter.

Trevor Romeo -- Analyst

OK. Got it. That's very helpful. Thank you.

Mike Doyle -- Chief Financial Officer

Thanks, Trevor.

George Colony -- Chairman of the Board and Chief Executive Officer

Thanks, Trevor.

Operator

And our next question comes from Vincent Colicchio. Go ahead, Vincent.

Vincent Colicchio -- Analyst

Yes. Kelley, I apologize if I missed it. What was the SiriusDecisions attrition in this quarter versus the prior quarter?

Kelley Hippler -- Chief Sales Officer

So attrition on the SiriusDecisions side has been running between 35% and 37% the last couple of quarters.

Vincent Colicchio -- Analyst

OK. So it was consistent this quarter with the prior quarter, is that right?

Kelley Hippler -- Chief Sales Officer

That is correct.

Vincent Colicchio -- Analyst

OK. And is the level of seniority in terms of the turnover, was that consistent as well?

Kelley Hippler -- Chief Sales Officer

Yes. Pretty much.[Audio gap]

Operator

Excuse me. We seem to have lost the speaker line. Did you perhaps mute yourself?

Vincent Colicchio -- Analyst

No. I did not.

Operator

No. I'm asking the speaker line. Hold on just a sec, and hold on just a sec while we try to reconnect the speakers. And once again, please stand by while we try to reconnect the host.[Technical difficulty]Thank you for standing by.

We have our speakers reconnected.

Mike Doyle -- Chief Financial Officer

Vince, this is Mike Doyle. If you're still online, I know you have one question for Kelley. I didn't know if you had a follow-up question on that.

Operator

[Operator instructions] And we do have a question from Allen Klee.

Allen Klee -- Analyst

Yeah. Hi. So can you talk about how you think about the overall demand environment, maybe now versus a year ago? And if you think that has any difference on your general longer-term thoughts of annual pricing power and any abilities to kind of lower cost of generating research, such as surveys.

George Colony -- Chairman of the Board and Chief Executive Officer

Yes. I'd say that this is a general account of the economy. From our standpoint, Allen, all is moving very quickly, very fast, very healthy. I mean, coronavirus aside, our analysts and our economists here are trying to factor that all in.

But generally, our demand is very strong. We will have a price increase in July, and we believe we can justify that price increase. Cost of surveys has not dropped. I would say that the fact that we now have a real-time source of survey material through FeedbackNow, that is a very low-cost way to gather survey and research information.

So we see it in the real-time side, but not on the typical traditional survey side. So I would say cost staying flat. Nothing is increasing unexpectedly on us, and demand is strong for the company and our products.

Mike Doyle -- Chief Financial Officer

And our numbers, Allen, do not reflect any sort of potential impact of, to George's point, things that may tip the economy, like the coronavirus, like Brexit. Our FX rates are pretty much roughly the same year over year in terms of our assumptions. So that obviously could change if there's a disruption in the economy. You probably don't see a strengthening of the dollar, and that would impact, obviously, our businesses outside the U.S.

But to George's point, we're not seeing anything yet. Therefore, our numbers don't reflect anything.

George Colony -- Chairman of the Board and Chief Executive Officer

And by the way, our business in China is small. I don't have the number right in my head. Did you guys have that number?

Mike Doyle -- Chief Financial Officer

Yes. Well, our Asia Pac business is decent in size. But China as a piece of business, well, is relatively small.

George Colony -- Chairman of the Board and Chief Executive Officer

Yes.

Allen Klee -- Analyst

Maybe just following up on what you said with FeedbackNow. It seems like it can be very powerful. Could you maybe talk a little more, maybe give an example of like as this scales up of how you see customers using this and what this can turn into?

George Colony -- Chairman of the Board and Chief Executive Officer

Yes. So just to give you some context here, we were currently logging about 450,000 votes per day now through FeedbackNow. I would expect to go well over 500,000 next year, probably in the 600,000 range. But the value model here, Allen, is this is not survey-based customer experience.

And we've been doing this for many, many years where we would survey within a company, understand the level of their customer experience months later and then they would strategically change their customer experience. This is about giving our clients the ability to monitor experience in real time, and given them the ability to then improve experience in real time. So it's very different than the traditional model and very well received. I mean, our presence is first in the physical side soon and I would say, if I had to pick a number here, we're 85% physical, 15% digital.

But as we go deeper into 2020, that digital is going to grow.

Mike Doyle -- Chief Financial Officer

I think the other piece that's happening now and in the fourth quarter, we landed the largest deal we've ever had. And that was sourced by one of Kelley's sales players. So prior to that, I've been working pretty much with the existing FeedbackNow sales reps. Their model has been lots of smaller deals, some maybe decent-sized deals, but a lot of small deals.

We're going to shift to bigger deals, and that should help us accelerate, partnering with Kelley's sales organization, accelerate the growth of FeedbackNow both in 2020 and beyond.

George Colony -- Chairman of the Board and Chief Executive Officer

That deal was north of $1 million.

Allen Klee -- Analyst

That's great. And then maybe just one more thing on the SiriusDecisions sales force attrition. I'm trying to speculate that if I was a salesperson at SiriusDecisions, why would I be one of those people attritioning? And the first choice I would say is if I thought I was going to make less money, potentially, my accounts would go down or I'm getting a lower payout. Can you respond to that or do you think that whatever that issue is that something is going on that maybe that won't be an issue going forward?

Kelley Hippler -- Chief Sales Officer

Sure, Allen. So to that point, I think one of the things that we learned after the acquisition was that rep success rates in the prior year were below industry standards. And any time you have a sales force that is not, by and large, hitting its number, you're going to suffer attrition because people aren't getting to their goals and their objectives. So I think, unfortunately, we've dealt with some of the ramifications of things that had happened before we stepped on the scene.

With that said, we have actually just gone through a process right now to level all the SiriusDecisions reps to make sure that we have looked at their skill sets, looked at their quotas, location, etc., and making sure that they map appropriately to the same level at Forrester. So we've made quite a bit of investment there with that sales force to make sure that they're at the proper level with the Forrester sales organization. So unfortunately, a lot of it were driven by things that happened before the acquisition. And again, it's also unfortunate that a lot of the conversation has been about the folks that have left and not some of the individuals that have stayed.

We have some fantastic folks that are now part of the Forrester organization who originated with SiriusDecisions who are going to be big contributors for us as we move forward here, including folks on my leadership team and our management ranks that we're really excited about.

Allen Klee -- Analyst

OK. Thank you so much.

George Colony -- Chairman of the Board and Chief Executive Officer

Thanks, Allen.

Operator

And we have a follow-up question from Vincent Colicchio. Go ahead.

Vincent Colicchio -- Analyst

Yeah. Kelley, when I got cut off, I was asking if the seniority level of the people leaving at SiriusDecisions was consistent with the prior quarter.Kelley HipplerYes. I'm sorry. I thought it was something I had said, Vince.

So I'm glad there was a technical glitch. So, yes. With that, we've continued to see pretty much steady attrition numbers across different populations. Again, I think, typically, with the sales force, Q1 is there's some seasonality to attrition.

I think once we get through this quarter, things are definitely going to stabilize. But it's been pretty consistent across job levels and geographies as we worked our way through 2019, and we expect it to stabilize shortly here in 2020.

And I'm not sure who this one is for. But how conservative is the 5% growth rate for the sales force for 2020? May that increase a bit if we come in with better-than-expected performance in the first half?

Kelley Hippler -- Chief Sales Officer

Sure, Vince. I'll take that one. So we are starting off with 5%, and then the work that we have ahead of us is to reevaluate and reassess the territory scoring model that we developed as part of our move into the customer engagement model to figure out what the optimal size territory is. So there is a possibility that we will add more as we go throughout the year once we do that work, but we also want to be thoughtful about making sure that we have adequate territories for our sellers to be able to get to their quotas.

But I would not be surprised if by midyear, we are continuing to add to that number.

Vincent Colicchio -- Analyst

So that's it for me. Nice quarter, guys.

Kelley Hippler -- Chief Sales Officer

Thanks, Vince.

Operator

Our next question comes from Anja Soderstrom. Go ahead.

Anja Soderstrom -- Analyst

Yeah. Hi, everyone. Thank you for taking my question. So I just had a follow-up on Allen's question about the FeedbackNow.

So you are monitoring the customer experience in real time. And then are you already now able to act on that or is that something that's coming in the future to respond to --

George Colony -- Chairman of the Board and Chief Executive Officer

Are you talking about the clients being able to act on that?

Anja Soderstrom -- Analyst

Yes. I mean, when the customer are giving feedback, they are able to act on it in a real-time sort of?

George Colony -- Chairman of the Board and Chief Executive Officer

Yes. The customers have real-time connection to that data through website, but also through mobile apps. And in fact, that's primarily how it's being used by our clients today. This is the current FeedbackNow.

It is being used to respond quickly to problems, to dirty bathrooms, to any area that's being monitored that goes red. So yes, it is being used today to monitor in real time and to improve in real time. Now there are some clients who are better at improving real time and some who are less better. So I would say this is a growing muscle in the part of these clients.

This concept, that experience can, in fact, be moved, can be improved in real time.

Anja Soderstrom -- Analyst

OK. OK. That was helpful. And then in terms of the other certificates.

You launched one in the third quarter. So you have two, three now. Right?

George Colony -- Chairman of the Board and Chief Executive Officer

Certification. Yes.

Anja Soderstrom -- Analyst

Yes. Yeah. OK. How do you see that portfolio building out in terms of --

Mike Doyle -- Chief Financial Officer

We actually are very happy with that business. I mean, we literally have just got going with that and we've had really healthy growth. And we inherited the business also from SiriusDecisions, but we've essentially moved forward with that business, we expect it's also going to grow double digits again in 2020. We like the product.

We've got a good team running it. And we're pretty bullish on what that can do for us. So we're feeling good about it, Anja.

George Colony -- Chairman of the Board and Chief Executive Officer

And Anja, the two primary certification spaces, the first, of course, is customer experience. And there are, I believe, about three levels of customer experience certifications. That's the first. And the second is B2B marketing.

And that's coming directly from SiriusDecisions. There's lots of opportunity in certification to ride on the SiriusDecisions Research and to build, as an example, in demand marketing, in marketing operations, in sales operations. So lots of new areas to be launched in certification, primarily running off the execution research or SiriusDecisions Research.

Anja Soderstrom -- Analyst

OK. And what sort of ramp do you foresee having on that like a set figure per year?

Mike Doyle -- Chief Financial Officer

Yes. From my perspective, look, I think those businesses are going to grow and accelerate. And the intent of talking about them both in this call and as it relates to the year was, in terms of dollars, they are not huge yet. But I think the point we were trying to make is we are continuing to invest in a broad array of products within Forrester in addition to managing through the SiriusDecisions acquisition integration.

But I think that these are integral parts of our business and that they're going to grow at a pretty healthy clip over the next five years. I think FeedbackNow has a tremendous amount of upside. To George's point, we're really in, I would say, stage one in the physical form, but there's more to come. And certification, as George described, has a lot of opportunities to take this business into other areas in addition to the ones we currently service.

Anja Soderstrom -- Analyst

OK. Thank you. That was all for me.

Mike Doyle -- Chief Financial Officer

Thanks. Appreciate it. Thank you.

Operator

We have no more questions in the queue at this time. Would you like to make some final statements?

Mike Doyle -- Chief Financial Officer

Yes. First, everyone, thanks for the patience. I apologize for the minor technological glitch, it does periodically happen. We have already put some dates out there with folks.

We're looking forward to getting out on the road and talking about the story and look forward to a very exciting 2020 for Forrester. So thank you very much for joining the call. Appreciate it.

George Colony -- Chairman of the Board and Chief Executive Officer

Thank you all for joining us. Thank you.

Kelley Hippler -- Chief Sales Officer

Thank you.

Operator

[Operator signoff]

Duration: 58 minutes

Call participants:

George Colony -- Chairman of the Board and Chief Executive Officer

Kelley Hippler -- Chief Sales Officer

Mike Doyle -- Chief Financial Officer

Trevor Romeo -- Analyst

Vincent Colicchio -- Analyst

Allen Klee -- Analyst

Anja Soderstrom -- Analyst

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