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Forrester Research (Nasdaq: FORR) is a global research and advisory firm serving professionals in 13 key roles across three distinct client segments. Our clients face progressively complex business and technology decisions every day. To help them understand, strategize, and act upon opportunities brought by change, Forrester provides proprietary research, consumer and business data, custom consulting, events and online communities, and peer-to-peer executive programs. We guide leaders in technology management, marketing and strategy, and the technology industry through independent fact-based insight, ensuring their business success today and tomorrow.

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Forrester Research Reports Fourth-Quarter and Full-Year 2008 Financial Results
CAMBRIDGE, Mass., Feb 11, 2009 (BUSINESS WIRE) -- Forrester Research, Inc. (Nasdaq: FORR) today announced its financial results for the fourth quarter ended December 31, 2008 and full-year 2008.

Fourth-Quarter Financial Performance

  • Total revenues were $62.9 million, compared with $58.4 million for the fourth quarter of last year.
  • On a GAAP-reported basis, which reflects an effective tax rate of 23 percent, Forrester reported net income of $9.2 million or $0.39 per diluted share, compared with net income of $5.6 million, which reflects an effective tax rate of 50 percent or $0.24 per diluted share, for the same period last year.
  • On a pro forma basis, which reflects a pro forma effective tax rate of 39 percent, net income was $9.0 million or $0.38 per diluted share for the fourth quarter of 2008. Pro forma net income excludes stock-based compensation of $1.4 million, amortization of acquisition-related intangibles of approximately $1.0 million, net impairments of non-marketable investments of $663,000, and a net reimbursement of professional fees related to the stock option investigation and restatement of the Company's historical financial statements of $208,000. For the fourth quarter of 2007, pro forma net income was $8.7 million or $0.37 per diluted share, which excludes stock-based compensation of $2.6 million, amortization of acquisition-related intangible assets of $254,000, gains from short-term investments and non-marketable investments of $671,000, and expenses related to the stock option investigation and restatement of the Company's historical financial statements of $954,000 and which reflects a pro forma effective tax rate of 39 percent.

Year Ended December 31, 2008 Financial Performance

  • Total revenues were $240.9 million, compared with $212.1 million last year.
  • On a GAAP-reported basis, which reflects an effective tax rate of 35 percent, Forrester reported net income of $29.2 million or $1.24 per diluted share for 2008, compared with net income of $18.9 million or $0.80 per diluted share for the same period last year, which reflects an effective tax rate of 37 percent.
  • On a pro forma basis, net income was $31.1 million or $1.32 per diluted share for 2008, which reflects a pro forma effective tax rate of 39 percent and which also excludes stock-based compensation of $5.4 million, amortization of acquisition-related intangible assets of $1.4 million, a net gain of $1.5 million on the sale of short-term investments, and expenses related to the stock option investigation and restatement of the Company's financial statements of $877,000. For 2007, pro forma net income was $27.6 million or $1.16 per diluted share, which reflects a pro forma effective tax rate of 39 percent and which excludes stock-based compensation of $8.3 million, amortization of acquisition-related intangible assets of $1.2 million, net impairments from non-marketable investments of $1.0 million, and expenses related to the stock option investigation and restatement of the Company's historical financial statements of $4.6 million.

"The recession caused a slowdown in our business toward the end of 2008," said George F. Colony, Forrester's chairman of the board and chief executive officer. "The market conditions, however, did not prevent us from remaining profitable and achieving our EPS targets for the year. This is due in part to our role-based strategy, which resulted in a relatively strong retention of clients despite the tough economy."

A reconciliation of GAAP results to pro forma results may be found in the attached financial tables.

Fiscal Year 2009

Forrester recently announced a reduction of approximately 50 jobs or an estimated 5 percent of its workforce worldwide in response to the ailing economy. The company anticipates that it will incur pretax expenses of approximately $2.5 to $3 million in the first quarter of 2009, related principally to cash severance and related benefits costs. The company is also evaluating associated facilities-related costs.

"We are grateful for the contributions of all of our employees over the past year," said George F. Colony, Forrester's chairman of the board and chief executive officer. "We have made this difficult decision in response to challenging global economic conditions. Forrester has lived through tough economic times before. We are confident that with our role-based strategy and our current offerings, we are well poised to successfully deliver what our clients need today and in the long term."

Forrester is providing first quarter 2009 financial guidance as follows:

First-Quarter 2009 (GAAP)

  • Total revenues of approximately $52 million to $56 million.
  • Operating margin of approximately 0 percent to 5 percent.
  • Other income of approximately $800,000.
  • An effective tax rate of approximately 40 percent.
  • Diluted weighted average shares outstanding of approximately 23.4 million.
  • Diluted earnings per share of approximately $0.02 to $0.06.

First-Quarter 2009 (Pro Forma):

Pro forma financial guidance for the first quarter of 2009 excludes stock-based compensation expense of approximately $1.0 million to $1.3 million, amortization of acquisition-related intangible assets of approximately $600,000, costs associated with the reduction in workforce of $2.5 million to $3.0 million and any associated facilities-related costs, costs related to the stock option investigation and restatement of the Company's historical financial statements, and any gains or impairment charges related to marketable and non-marketable investments.

  • Pro forma operating margin of approximately 10 percent to 13 percent.
  • Pro forma effective tax rate of 40 percent.
  • Pro forma diluted earnings per share of approximately $0.15 to $0.19.

Forrester is providing full-year 2009 guidance as follows:

Full-Year 2009 (GAAP):

  • Total revenues of approximately $215 million to $235 million.
  • Operating margin of approximately 10 percent to 13 percent.
  • Other income of approximately $3.0 million.
  • An effective tax rate of 40 percent.
  • Diluted earnings per share of approximately $0.64 to $0.84.

Full-Year 2009 (Pro Forma):

Pro forma financial guidance for full-year 2009 excludes stock-based compensation expense of $4.5 million to $5.5 million, amortization of acquisition-related intangible assets of approximately $1.7 million, costs associated with the reduction in workforce of $2.5 million to $3.0 million and any associated facilities-related costs, costs related to the stock option investigation and restatement of the Company's historical financial statements, and any gains or impairment charges related to marketable and non-marketable investments.

  • Pro forma operating margin of approximately 15 percent to 17 percent.
  • Pro forma diluted earnings per share of approximately $0.88 to $1.11.
  • An effective tax rate of 40 percent.

About Forrester Research

Forrester Research, Inc. (Nasdaq: FORR) is an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. Forrester works with professionals in 19 key roles at major companies providing proprietary research, consumer insight, consulting, events, and peer-to-peer executive programs. For more than 25 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. For more information, visit www.forrester.com.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, Forrester's financial and operating targets for the first quarter of and full-year 2009. These statements are based on Forrester's current plans and expectations and involve risks and uncertainties that could cause actual future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual future activities and results to differ include, among others, Forrester's ability to respond to business and economic conditions, particularly in light of the continuing global economic downturn, technology spending, market trends, competition, industry consolidation, the ability to attract and retain professional staff, possible variations in Forrester's quarterly operating results, risks associated with Forrester's ability to offer new products and services, and Forrester's dependence on renewals of its membership-based research services and on key personnel. Forrester undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. For further information, please refer to Forrester's reports and filings with the Securities and Exchange Commission.

The consolidated statements of income, consolidated balance sheets, and consolidated statements of cash flows are attached.

(C) 2009, Forrester Research, Inc. All rights reserved.

Forrester Research, Inc.          
Consolidated Statements of Income                  
(In thousands, except per share data)
  Three months ended Year ended
Dec 31, Dec 31, Dec 31, Dec 31,
2008   2007 2008   2007
           
(Unaudited) (Unaudited)
 
Revenues
Research services $ 41,203 $ 34,851 $ 155,339 $ 131,163
Advisory services and other   21,718     23,568   85,536   80,893  
 
Total revenues 62,921 58,419 240,875 212,056
 
Operating expenses
Cost of services and fulfillment 21,954 21,501 87,802 81,608
Selling and marketing 19,825 19,017 79,944 71,830
General and administrative 6,778 8,216 29,723 30,749
Depreciation 1,009 1,105 4,007 3,986
Amortization of intangible assets   959     254   1,435   1,232  
 
Total operating expenses 50,525 50,093 202,911 189,405
 
Income from operations 12,396 8,326 37,964 22,651
 
Other income, net (1) 152 2,219 5,373 8,372
(Impairments) gains from marketable and non-marketable investments, net   (663 )   671   1,473   (1,019 )
 
Income before income taxes 11,885 11,216 44,810 30,004
 
Income tax provision   2,731     5,601   15,595   11,061  
 
Net Income $ 9,154   $ 5,615 $ 29,215 $ 18,943  
 
 
Diluted income per share from net income $ 0.39   $ 0.24 $ 1.24 $ 0.80  
 
Diluted weighted average shares outstanding   23,377     23,670   23,585   23,729  
 
 
Basic income per share from net income $ 0.40   $ 0.24 $ 1.27 $ 0.82  
 
Basic weighted average shares outstanding   23,079     23,096   23,062   23,074  
 
 
 
 
Pro forma data (2):
 
Income from operations $ 12,396 $ 8,326 $ 37,964 $ 22,651
Amortization of intangible assets 959 254 1,435 1,232
 
Investigation related expenses (208 ) 954 877 4,583
 
Non-cash stock-based compensation included in the following
expense categories:
Cost of services and fulfillment 682 1,127 2,776 4,245
Selling and marketing 266 206 988 1,730
General and administrative   438     1,231   1,594   2,351  
 
Pro forma income from operations 14,533 12,098 45,634 36,792
 
Other income, net (1)   152     2,219   5,373   8,372  
Pro forma income before income taxes 14,685 14,317 51,007 45,164
 
Pro forma income tax provision   5,727     5,584   19,893   17,614  
 
Pro forma net income $ 8,958   $ 8,733 $ 31,114 $ 27,550  
 
Pro forma diluted earnings per share $ 0.38   $ 0.37 $ 1.32 $ 1.16  
Diluted weighted average shares outstanding   23,377     23,670   23,585   23,729  
 

(1)

During the fourth quarter, Forrester recorded a net foreign exchange loss of approximately $1.4 million ($1.1 million after tax) resulting primarily from
the remeasurement of certain intercompany payables and receivables. Previously, the remeasurement of these payables and receivables had been recorded in other
comprehensive income as part of cumulative translation adjustment. Of the net $1.4 million foreign exchange loss recorded, $1.9 million related to periods
prior to fiscal 2008.

 

(2)

Forrester believes that pro forma financial results provide investors with consistent and comparable information to aid in the understanding of
Forrester's ongoing business. Our pro forma presentation excludes amortization of intangibles, stock-based compensation expense,
net gains or impairments from marketable and non-marketable investments, costs associated with the stock option investigation and
restatement of our historical financial statements, as well as their related tax effects. The pro forma data does not purport to be prepared in
accordance with Accounting Principles Generally Accepted in the United States.

Forrester Research, Inc.    
Condensed Consolidated Balance Sheets        
(In thousands)
 
December 31, December 31,
2008 2007
(Unaudited)
 
Assets:
Cash and cash equivalents $ 129,478 $ 53,163
Short-term investments 90,838 195,811
Accounts receivable, net 64,226 69,865
Deferred commissions 9,749 10,631
Deferred income taxes 7,947 13,236
Prepaid expenses and other current assets   15,553     11,304  
Total current assets 317,791 354,010
 
Long-term investments 39,613 -
Property and equipment, net 6,759 6,834
Deferred income taxes 8,523 2,274
Goodwill and intangible assets, net 74,563 53,986
Non-marketable investments and other long term assets   7,702     9,253  
Total assets $ 454,951   $ 426,357  
 
Liabilities and stockholders' equity:
Accounts payable $ 3,532 $ 4,174
Accrued expenses 27,527 28,891
Deferred revenue   113,844     111,418  
Total current liabilities 144,903 144,483
 
Deferred income tax liability and other non-current accrued
income tax liability   6,551     6,858  
Total liabilities 151,454 151,341
 
Preferred stock - -
Common stock 291 282
Additional paid-in capital 315,149 284,431
Retained earnings 110,693 81,478
Treasury stock, at cost (120,851 ) (90,428 )
Accumulated other comprehensive loss   (1,785 )   (747 )
Total stockholders' equity   303,497     275,016  
Total liabilities and stockholders' equity $ 454,951   $ 426,357  
Forrester Research, Inc.    
Consolidated Statements of Cash Flows
(In thousands)
  Year ended
December 31, December 31,
2008   2007
(Unaudited)
 
Cash flows from operations:
Net income $ 29,215 $ 18,943

Adjustments to reconcile net income to net cash provided by
operating activities -

Depreciation

4,007

3,986
Amortization of intangible assets

1,435

1,232
Non-cash stock-based compensation 5,358 8,326
Impairments from non-marketable investments, net

584

1,622
Realized net gains and impairments on sales of investments (2,057 ) (603 )
Increase in provision for doubtful accounts 594 480
Excess tax benefits from stock-based compensation (8,476 ) 101
Deferred income taxes (156 )

6,878

Accretion of premiums on investments 870 607
Changes in assets and liabilities -
Accounts receivable 6,806 (9,966 )
Deferred commissions 881 (514 )
Prepaid expenses and other current assets (4,184 ) (3,552 )
Accounts payable (893 ) 1,171
Accrued expenses

9,449

(1,122

)
Deferred revenue   211     9,841  
Net cash provided by operating activities 43,644 37,430
 
Cash flows from investing activities:
Acquisition of Jupiter (22,398 ) -
Purchases of property and equipment (3,698 ) (5,106 )
Proceeds from non-marketable investments 493 2,640
Proceeds from sale of discontinued operations - 250
Decrease in other assets 444 146
Purchases of short-term investments (1,224,793 ) (1,240,584 )
Proceeds from sales and maturities of short-term investments   1,288,532     1,217,367  
Net cash provided by (used in) investing activities 38,580 (25,287 )
 
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock
option plans and employee stock purchase plan 18,577 4,896
Tax benefits related to stock options 8,476 807
Acquisition of treasury shares   (30,423 )   (4,594 )
Net cash (used in) provided by financing activities (3,370 ) 1,109
 
Effect of exchange rate changes on cash and cash equivalents   (2,539 )   754  
 
Net increase in cash and cash equivalents 76,315 14,006
 
Cash and cash equivalents, beginning of period   53,163     39,157  
 
Cash and cash equivalents, end of period $ 129,478   $ 53,163  

SOURCE: Forrester Research, Inc.

Forrester Research, Inc.
Karyl Levinson, + 1-617-613-6262
Vice President, Corporate Communications
press@forrester.com
or
Michael A. Doyle, + 1-617-613-6234
Chief Financial Officer
investor@forrester.com
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