Forrester Research, Inc.

George F. Colony – Chairman of the Board & Chief Executive Officer Charles Rutstein – Chief Operating Officer Michael A.

Doyle – Chief Financial Officer& Treasurer

Laura Lederman – William Blair & Company Andrew Thut – BlackRock Advisors, Inc. Bill Sutherland

Good morning and thank you for joining our fourth quarter 2007 call. With me today are George Colony Forrester’s Chairman of the Board and Chief Executive Officer and Charles Rutstein Forrester’s Chief Operating Officer.

I will open the call and provide detail on our financial results for the quarter. George will follow me and provide a strategic update on the business and our role based strategy.

After George completes his review we will open up the call to Q&A. As Michelle mentioned a replay of this call will be available until February 20th and can be accessed by dialing 888-286-8010.

Please reference passcode number 80945093. This call is also available by web cast and will be archive din the investors section at Forrestor.com and I’ll remind you of the cautionary warning on the forward-looking statement that Michelle provided at the beginning of this all.

I will now begin my review of the financial performance for Forrester’s fourth quarter and full year results, the balance sheet at December 31, our fourth quarter and full year metrics and the outlook for our business in 2008. But, before I get started with the details, I would like to comment on a couple of important items I highlighted in our third quarter call regarding Forrester’s 2007 objectives.

When we started 2007 Forrester established three major objectives: first, complete the option investigation and restate the financial results. Second, move the company to a role based strategy to enhance our clients experience and finally deliver of 2007 revenues in the range of $207 to $212 million, pro forma operating margin in the range of 16.5 and 17.5 % and pro forma diluted earnings per share between $1.02 and $1.06.

As I mentioned on the third quarter call we completed the options investigation and filed our restated financials. We’re making good progress on role based strategy which George will talk about in greater detail in a few minutes.

With today’s release we are reporting full year 2007 revenues and margin at the upper end of guidance at $212 million in revenue and 17.4% in pro forma operating margins. In our third quarter call we raised our targeted pro forma diluted EPS range from $1.02 to $1.06 up to $1.09 to $1.12.

Our actual performance for the year is $1.16 well ahead of both our original and our revised guidance. Overall 2007, was a successful year, we achieved much of what we set out to accomplish delivering a strong financial performance and making excellent progress on our role based strategy.

2007 also highlighted the need for continued focus on growing our syndicated business which while growing at double digit rates fell somewhat short of our expectations. Now let me turn to the fourth quarter results.

Please note that that income statements I’m reporting are pro forma and excluded the following items: amortization of intangibles of $254,000, non-cash stock-based compensation expense of $2.6 million, cost related to the stock option investigation and restatement of the company’s historical financial statements of $1 million, and net gain from securities and non-marketable investments of $671,000. Also we continue to book an effective tax rate at 39% for pro forma purposes, the actual effective tax rates for 2007 is approximately 37%.

Forrester’s fourth quarter revenue increased 19% to $58.4 million from $48.9 million in the fourth quarter last year. Net income increased 17% to $8.7 million and earnings per share was up 19%% to $0.37 on diluted weighted average shares outstanding of $23.7 million compared with net income f $7.4 million and earnings per share of $0.31 on $23.8 million weighted average shares outstanding in the fourth quarter of last year.

Our fourth quarter research service revenue increased 14% to $34.8 million down $30.6 million last year. Research services revenue comprised 60% of total revenue for the quarter.

Fourth quarter advisory services and other revenue increased 28% to $23.6 million from $18.4 million in the fourth quarter of 2006 and represented 40% of total revenue for the quarter. The increase in advisory services and other revenue is primarily due to continued demand for our advisory services.

For the year ended December 31, 2007 advisory services and other revenue constituted 38% of total revenues up from 37% of total revenues during 2006. Our research services revenue totaled 62% of total revenue down from 63% in 2006.

This percentage of syndicate business which we call Q is an important driver of our profitability. We are targeting to accelerate the growth of our syndicated business in 2008 in order to increase that percentage of our total business.

We have made the transition to rolls, launched FLB’s and changed our sales compensation structure to achieve this and are beginning to see the impact. However, due to our revenue recognition model we expect full year 2008 research revenue to comprise 61 to 62% of our total revenue.

But we should see improvements in the second half of 08 and into 09. International revenues were 29% for the fourth quarter compared to 29% in the fourth quarter last year.

International revenues represent 29% of the total revenues for 2007 which again is flat to year ago. I would now like to review progress for each of our products starting with research.

In the fourth quarter 533 new research documents were added to roll view, 55,187 clients have now chosen a roll. We hosted 88 teleconferences in the fourth quarter with a total attendance of 4,261 participants.

All 17 rolls were represented. Forrester’s leadership boards, our peer offering for senior executives continues to perform well.

The five boards focused on IT role now have a total of 705 members. Technology industry boards include the analysis relations and technology marketing counsel with a total membership of 287.

Finally, the marketing and strategy boards which includes the CMO group, database marketing counsel and the interactive marketing counsel now has a total membership of 191. At the end of the fourth quarter the Forrester leadership board had 1,183 members.

The FLB business achieved revenue growth of 72% in 2007. In our data business we continue to add an impressive list of clients.

The North American consumer techno graphics business added or renewed 91 1V plus company’s including Fidelity, Verizon, Blockbuster and Best Buy. European consumer techno graphics added or renewed 18 1V plus company’s including Cannon Europe, Lloyds TSB and Barclay’s Bank.

The Hispanic consumer techno graphic added 3 new clients for a total of 30 including Freddie Mac and Chrysler Financial. In our consulting business demand for our consulting services remain robust in the fourth quarter growing 28% year-over-year.

Consulting projects to the IT roles in Q4 centered on IT planning, vendor sourcing and security strategy. For marketing and strategy roles primary consulting topics were eBusiness strategy for eBusiness professionals, interactive marketing for interactive marketing professionals and web site transformation for customer experience professionals.

For technology industry roles projects centered on total economic impact studies, market assessments and market segmentations. Our events business continues to be strong with substantial growth in both sponsorship and attendee sales.

We hosted two IT and three marketing and strategy role based events in the fourth quarter. Marketing and strategy roles for the consumer forum in North America, the consumer marketing forum for [Amaya] and financial services forum for [Amaya], for the IT roles services and sourcing forum in North America and services and sourcing forum for [Amaya].

In the first quarter 2008 we will be hosting a new IT role based event enterprise architecture. Let me review Q4 expenses and operating income.

Operating expenses for the fourth quarter were $46.3 million up 19% from $38.9 million in the fourth quarter of last year. The operating expense increase was primarily driven by higher net headcount in both sales and research.

Operating income was $12.1 million or 21% of revenue compared with $10.1 million or 21% of revenue last year. The flat margin performance year-over-year reflects the slightly lower mix of syndicated revenues which generate higher margins in advisory services, the net addition of sales and research headcount offset by leverage in our corporate support costs which are growing at a slower rate than revenue.

Turning to Forrester’s full year results, 2007 total revenue increased 17% to $212.1 million from $181.5 million last year. Net income increased 23% to $27.6 million form $22.5 million last year and earnings per share for 2007 increased 18% to $1.16 on diluted weighted average shares outstanding of $23.7 million compared to $0.98 and $23 million weighted average shares outstanding last year.

2007 operating income was $36.8 million or 17.4% of revenue compared with operating income of $30 million or 16.5% of revenue in 2006. This is in line with our goal of targeting operating margin in the rage of 16.5% to 17.5% while growing revenues at the rate of 15% to 20% annually.

Now I’d like to review the balance sheet. Our balance sheet remains strong.

Our cash and marketable securities at December 31st were $249 million up $41.2 million from our year-end 2006 balances. We generated $37.4 million in cash from operations year-to-date which is down from prior year due primarily to cost related to the stock option investigation and restatement of our historical financial statements, foreign tax payments as well as an increase in the number of clients receiving payment terms on contracts which is due in part to a higher mix of consulting business.

During 2008 Forrester expects to generate $45 to $50 million in cash from operations. As mentioned in our third quarter earnings call our board of directors authorized an additional $50 million to repurchase our common stock.

During the fourth quarter of 2007 we purchased 172,000 shares at a total cost of $4.6 million and will continue to be active with the buyback at selective price points. Accounts receivable at December 31st was $69.9 million compared with $59.7 million as of December 31st, 2006.

Our day sales outstanding December 31st was 66 days down slightly from 67 days last December and accounts receivable over 90 days was at 6% at December 31, 2007 consistent with last year end. Net property and equipment increased $6.8 million at December 31, 2007 from $5.6 million at the end of 2006.

Our capital spending for 2007 was approximately $5.1 million. Deferred revenue at December 31st was $111.4 million up 11.6% over last year end.

Our future AR balances which are amounts to be invoiced in the future with clients with multi-year deals or scheduled payment terms increased 11% to $46.8 million at 12/31/07 and $42 million at December 31, 2006. We viewed differed revenue and future AR as good leading indicators of expected business performance.

If you include future account receivables, differed revenue grew 12% year-over-year. And now I’ll review Forrester’s fourth quarter metrics providing both fourth quarter and year to date performance.

Agreement value or AV represents the total value of all contracts for research and advisory services in place without regard to the amount of revenue that has been already recognized or has yet to be recognized and was $197.2 million at December 31st a 14.1% increase from last year. At December 31st Forrester’s retention rate for client companies was 75% and our dollar retention rate during this same time period was 85%.

Our enrichment rate was 105% for the 12 month period ending December 31st. This performance while a slight improvement over the third quarter is not at the levels we expect.

The performance was adversely affected by the sales attrition the first half of 2007 and sales execution issues in Europe and Asia. We’ve taken steps to improve performance in these areas with additional staffing in the US and organizational changes internationally.

At the end of the fourth quarter company our total for client companies was 2468 up 61 from the prior quarter and 156 from the year end 2006. For headcount at the end of the fourth quarter Forrester had a total staff of 903 up 779 from year end.

Current headcount includes research staff of 336 up 38 from year end and sales staff of 308 up 38 from year end as well. This substantial portion of our headcount increase occurred in the third quarter.

The last topic I’d like to cover today is our business outlook for the first quarter of 2008 and full year. In summary 2007 was a solid year for us.

We have completed the restatement of our historical financials and made organizational changes to accelerate the growth of our syndicated business. This coupled with the strength of our balance sheet allows us to pursue strategic alternatives for our cash with the right opportunities.

Our pro forma guidance for the first quarter and full year 2008 excludes the following: amortization of intangible assets which we expect to be approximately 2000,000 for the first quarter and 400,000 for full year 2008, non-cash stock-based compensation expense between $5 and $6 million for 2008 and cost associated with the stock option investigation and restatement of the company’s historical financial statements and also gains and impairments on sales of marketable securities and non-marketable investments. For the first quarter we’re aiming to achieve total revenues of approximately $53.5 to $56.5 million and operating margin of 13 to 15%, interest income of approximately $2.3 million, a pro forma income tax rate of 39% and pro forma diluted earnings per share of approximately $0.24 to $0.28.

Our pro forma full year guidance is as follows: total revenues of approximately $240 to $248 million, a pro forma operating margin of approximately 17 to 18%, interest income of approximately $9.5 million, pro forma income tax rate of approximately 39% and pro forma diluted earnings per share between $1.28 to $1.36. We have provided guidance on a GAAP basis for Q1 and full year 2008 in our press release and 8K filed this morning.

Thanks very much and I’ll now turn the floor over to George.

I’d like to personally welcome investor to our 2007 Q4 call. My remarks are in five parts: comments on 2007, a review of Forrester’s three business imperatives, Forrester’s addressable market, tech spending forecast for 2008 and then finally acquisitions.

We accomplished a lot during 2007. We were able to navigate our restatement without disrupting our business.

We made big progress in the transition to becoming a role based company. We landed a great CFO in Mike Doyle and finally and perhaps most importantly Charles Rutstein COO, and our three managing directors Julie Meringer, Dennis van Lingen and Mark Nemec made great strides as a management team.

Forrester’s operations are in the hands of an innovative and maturing group of leaders and that bodes very well for the future of the company. So overall we are pleased with our 2007 performance.

As I talked about on the Q3 call Forrester has three business imperatives: number one, completing the build out of role based; two, growing our sales platform; and three increasing the quotient of syndicated business, what we call Q. Turning first to role based; since the beginning of 2007 Forrester has been going to market by the 17 roles of our clients: eight IT roles, five marketing and strategy roles, and four roles in the technology industry.

All we do including research, forwards, events, consulting and data is directed towards making our clients in these 17 roles successful. We are role based because it enables Forrester to have high relevancy with our clients, enhanced differentiation form our competitors and deeper client relationships.

We believe that these advantages will result of higher ratable rates and increased new business win rates. Now how has our progress been in roles?

As Mike has noted beginning in 2008 we will measure our success in roles through a simple metric average roles per accounts. This is essentially a measurement of client penetration.

Mike will report this metric to investors beginning on the Q1 call. In 2007 research reorganized into discrete teams each focused on the specific role.

Beginning in 2008 these teams are goaled on the profitability and client satisfaction of their respected roles. Sales is now organized into three groups each focused on a set of roles.

This has increased the knowledge, specialization and efficiency of the sales force. In February of 2007 a year ago we launched 17 web sites, one for each role.

In January of 2008 last month the company upgraded the sites, organizing content around the success imperatives, essentially the business goals of each of the roles. Feedback has been very positive.

Our second business imperative is to expand our sales platform and to this end we grew our sales force by 14% in 2007. We expect to increase the size of the sales force by between 15 to 20% yearly over the next three years while simultaneously increasing sales productivity.

A major change in 2008 is the placement of multiple sales teams in single accounts. We will approach IT and marketing strategy roles in large companies with distinct specialized sales groups, this move effectively doubles our sales territory.

Our final business imperative is to increase our quotient of syndicated business, again what we call Q. Our Q products are role view, forms and data.

Non-Q products are events and consulting. Q products are the most profitable and renewable in our product portfolio.

Although we are pleased with the performance of some our syndicated products, notably Forrester leadership boards our overall Q revenue did not meet our plan for 2007. In 2008 we are making a concerted effort to move Q sales higher as a percentage of our total business and our goal is to increase Q every year for the next three years.

We have several efforts to drive Q. The first is to make our research more roles based and therefore more relevant increasing its value for clients.

The second is a sales compensation change for 2008 that will appreciable increase incentives for selling syndicated services. And finally we are continually working to enhance the web experience of Q clients.

In future calls we will continue to update you on our progress in the three business imperatives. Now how large is our potential market as we become role based?

We believe that there are approximately 25,000 organizations worldwide in our target market. Within those entities we estimate our addressable market at 4 million executives and $9 billion.

Our penetration to date within this target market is less than 5%, clearly we have excellent future growth potential. I know that many investors are tracking technology’s spending and I’d like to give Forrester’s latest estimates.

On December 27th Forrester published it’s US IT market outlook and summary. The report projects that US IT spending will grow at 5.2% in 2008 and by the way that’s on par with the growth we saw in spending in 2007.

If there is a slow down or recession in 2008 we believe that Forrester’s role based approach should continue to have value with clients. We recently held a well attended conference call for CIOs advising them on tactics they can use in the event of a recession.

A new report outlined advertising strategies for interactive marketers if they face budget cuts in the coming months. Before we conclude I would like to say a few words about acquisitions a primary use of the company’s cash reserves.

We are looking for acquisitions that meet six criteria: one they bring more roles to our portfolio, two they bring more content to existing roles, three good people, four a cultural fit, five a habit of profit and then finally six attractive financial terms. With our restatement complete our development group is now actively reviewing and analyzing acquisition candidates.

So to conclude we made great progress in 2007 and expect that our transition to being fully role based will be completed in 2008. We are laser focused in 2008 on three operation imperatives: one, roles; two, growing the sales platform; and three, increasing our quoting of syndicated business.

We hope to see many of you as we visit with investors in February and March. We are traveling in Kansas City, Minneapolis, Cleveland, Dallas, Houston, San Francisco, Los Angeles, New York and Boston.

Please let us know if you would like to get together. Thank you for listening to the call.

I’d now like to welcome Charles Rutstein Forrester’s COO to join Mike and me for questions. We will now take questions.

A few questions obviously with the stock market and fears of the economy wanted to talk a little bit about what the CIO’s are saying, do they expect to get budget cuts? So that’s kin of part A of the question, part B is when if there talking about budget cuts what do they say about which pieces of your business would remain the strongest?

Thank you.

I’ll go first here Laura and what I’ll tell you is that I’ve been with a number of CIO’s over the last month and a half and their all worried but none of them see it in their businesses in fact none of them have had communications form there CFO’s saying get ready. We don’t see it in the actual business of our clients.

That all being said, if you watch the recession five or six years ago what happens to the budgets would be cut in May or June, they typically happen after Q1 and sometimes in Q2 but like I said we don’t see it at this point.

Following along with the second part of that when they talk to you about your business what do they view as the most critical and what would they view as maybe a little less critical or more discretionary in terms of the business that you provide them?

The pattern that we saw in the last economic slow down was that they elected to do a little bit more consulting with us perhaps and a little bit less of the syndicated work. That being said we’ve made a material change in our product portfolio since that time, most notable the introduction of the leadership boards and a lot of the discussion that the leadership board members are having now is of course of how they are dealing together with the challenges that they are seeing.

So it’s our belief that we may see a slightly different pattern this time around.

Also one final question from me then I’ll pass it on. Can you talk a little bit what core research grew in other words if you take out boards and you take out data you mentioned that syndicated in total was a little weaker, can you talk a little bit about syndicated just core research and how that did?

And what your expectations are for 2008?

We don’t break out the detail around that so typically we just give the broader research numbers. So from our perspective obviously we said research grew at about 14% and we’re anticipating as we try and shift that mix just because of the way differed or basically our accounting booking syndicated deals occurs then what’s going to happen as we build our business next year we’ll get the benefit both in the second half and then roll into 2009.

It’s just when we anticipate our mix of research business to grow considerably but we don’t anticipate that the mix is going to change year-over-year for 2008.

Laura if I can just speak in generalities we talked about Q was not meeting our plans for revenue in 2007, one of the reasons was we had a little bit weaker performance in research tan what we were looking for.

Good to see contract failure re-accelerate there. Where is sales force turn-over rate now in the quarter?

And how has that been trending year-to-date?

So we saw a sequential drop in Q3 and a sequential pop back up in Q4. So we saw a pattern through the year that was a little bit volatile.

The overall turnover rate I guess I would say is not where we want it to be it is one of our focuses here for 2008.

So when you popped back up in Q4 what was that on an annualized rate?

I don’t actually have that number in front I don’t know if we have it. I think we have to get back with him offline.

We will have to. We have just an aggregate but we will have to get back with you on total.

What do you think is causing that?

Well I did do a little bit of a diag, Andrew and we’re still assessing here but the quick diag that I did on that suggests that a little bit over half of that was involuntary attrition which means that we are still continuing to be aggressive about pushing low performers out of the organization. The balance of course would be voluntary so I can actually feel pretty good about the involuntary we’re keeping the standards high.

It’s the involuntary piece that we need to continue to focus on, or rather the other way around, the voluntary piece we need to continue to focus on.

Let it be said Andrew this is an area we’re going to work on a lot in the first half of the year.

Is there a bonus payment that happens early this year that people are waiting for or no?

No. There is no annual component to the plan at this point.

Okay. And it’s also nice to see client adds.

I mean I know from talking to Mike it’s sort of a metric that we’re focused on that you guys aren’t particularly focused on but you know that client adds dipped in Q2o of this year and if started to pick back up meaningfully. Any color you can give there?

I think that we as we get into the Q1 call Andrew we’re going to have two metrics for you here on this one, one is clients and the other is the roles per client and what we’re seeing is as we become a more role based company we’re tending to get deeper relationships in the existing clients. That means probably not going to see client count move as fast as it did in example in 06 but more depth in those clients.

So I think you’re going to have to look at the depth and the width of the client base, we are certainly doing that.

George I was curious as you look at the expansion potentially of roles perhaps through acquisition what are some of the just broadly speaking just kind of categories that we should think about?

The categories? By the way we don’t need more roles to grow this company fast, just to be very clear about that.

As I said we have 4 million executives and $9 billion in the currently 17 roles. But in the acquisition side what we’d be looking for potentially supply chain and manufacturing, potentially in the finance areas of roles and also in the HR spaces.

Those are the ones that come quickly to me but any other ideas Charles?

Sure I mean I think George’s point is well taken. Those acquisitions that we’re looking at are not all about expanding the footprint of roles many of them are about expanding our depth within the roles we already serve.

Any characterization you can put on the size of the some of the candidates in the platform?

Size of companies? Anywhere from $1 million to $100 million.

Okay. I figured it was wide.

And then last as you push up the research quotient I guess this is sort of a little vague but you know looking out a few years do you have a sense kind of where the operating margin can go either GAAP or pro forma?

I think what we’ve said Bill is that we in the near term we were going to stay in the range of 16.5 to 17.5, but when we look at the model we believe that long term we can be 17 to 19% and still be growing the top line at double digits. You know I think George on the last call mentioned we could push the margin well above 20% if we chose to and grow the business as fast but we feel that in the near term it’s a good balance to target 16.5 to 17.5 with double digit revenue growth and we think you know in a few years out as we leverage the model more 17 to 19 is certainly doable with still double digit revenue growth.

And our recent experience suggests that that’s absolutely the case.

And so Mike, that would be a combination of scale and the increasing Q?

That’s correct. I think if you move Q as high as 17% which that’s a possible target for us you might in fact see margins grow even higher than 17 to 19% and growth even higher as well.

That’s a long term stretch curve.

Just two quick follow-up questions, one is as you work to accelerate the syndicated research by increasing the pay out on that what is the risk that the other business doesn’t grow as much and that they’d lose a little bit of focus on that?

I mean at some level, it’s a zero sum gain, if they’re going to hit their number at some level of performance their going to sale one or the other. So you’re trading off one against the other.

I think what we’ve really done is we have a aligned the rewards that we give sales people in terms of the commission rates with the benefit to Forrester. So the syndicated business pays out at a much higher rate and that’s because as you know is much more profitable for us.

So I think it’s inevitable that there is probably some trade off between the two, if somebody is busy pursuing a syndicated deal that time is not available for them to pursue a consulting deal. Now that being said, let me be clear about one point which is that we still intend to grow the consulting business at material double digit rates here in 2008 and beyond.

All we’re looking to do is shift a few percentage points of the mix at the margin.

And what we found over time Laura is that clients who consult with us tend to renew the Q products at much higher rates. So there’s various synergy between those two sets.

Final question which is in the past you’ve talked about price increases is that something you would not do this year based on economic concerns or just kind of thoughts on price increases?

So as we’ve talked about in the past Laura, we look at kind of three things there. We look at product demand, we look at the value that we’re delivering and we look at the competitive landscape.

We will typically institute a price increase in mid-year for most of our products which is what we did last year in July. We did a very modest price increase here in January.

Which is sort of an off cycle one for us, not for any of the core products but we did increase prices slightly for consumer data for business data and for some of the larger user group packages. But I think as we get into 2008 here we will follow the same pattern.

We will look at the competitive landscape, the demand and the value delivered an as you know the economic stances. So I would say we are not ruling out any changes at this point.

Thanks very much for being on the call and please give us a call if you want to see us while we’re on the road. Thank you very much.