Forrester Research, Inc. (FORR)

Q2 2010 Earnings Call

July 29, 2010 11:00 a.m. ET


Karyl Levinson - VP, Corporate Communications

Mike Doyle - CFO

George Colony - CEO

Charles Rutstein - COO


Laura Lederman - William Blair

Kevin Ciabattoni - Boenning & Scattergood

Brian Murphy - Sidoti & Company

Vincent Colicchio - Noble Financial

Mick Dobray - Robert W. Baird



Good day, ladies and gentlemen, and welcome to the Second Quarter 2010 Forrester Research Earnings Conference Call. My name is Saline; I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct the question-and-answer-session. (Operator instructions). As a reminder, this conference is being recorded for replay purposes.

I'd now like to turn the conference over to your host for today, Karyl Levinson, Vice President, Corporate Communications. Please proceed.

Karyl Levinson

Good morning, thank you for joining our second quarter call. With me today are George Colony, Forrester's Chairman of the Board and CEO, Charles Rutstein, Forrester's Chief Operating Officer, and Mike Doyle, Forrester's Chief Financial Officer.

Mike will open the call and provide detail on our financial results for the quarter. George will follow Mike and provide a strategic update on the business and our role-based strategy. After George completes his review, we'll open the call to Q&A.

A replay of this call will be available until August 5, 2010 and can be accessed by dialing 888-286-8010. Please reference the pass code 90149232. This call is also available via webcast, and will be archived in the investor section at

Before we begin, I'd like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expect, believe, anticipate, intend, plans, estimate, 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'll now hand the call over to Mike Doyle.

Mike Doyle

Thanks, Karyl. I will now begin my review of Forrester's second quarter financial performance, the balance sheet at June 30, our second quarter metrics and the outlook for the third quarter and full-year 2010.

Please note that the income statement numbers I'm reporting are pro forma and exclude the following items; amortization of intangibles, stock-based compensation expense, reorganization costs in 2009, acquisition related costs and credits and net realized gains and losses from investments.

Also, we continue to utilize an effective tax rate at 40% for pro forma purposes. The actual effective tax rate for the second quarter of 2010 is approximately 39%. For the second quarter, Forrester met its quarterly guidance for revenue, pro forma operating margin and earnings per share.

We're pleased with the continued improvement in our operating performance which reflects healthy revenue across all product segments, and excellent operating discipline, resulting in strong bottom-line performance.

We continue to see signs of an improving economy both with improved customer retention, which is now above historical averages and improved customer enrichment metrics. Cash flow performance was strong for the quarter and up versus prior year. Now, let me turn to more detailed review of our second quarter results.

Forrester second quarter revenue increased 5% to 64.7 million from 61.6 million in the second quarter of last year. Given our deferred revenue recognition model, we are continuing to see the positive revenue effects of our improved bookings performance over the last three quarters, despite the negative impact of foreign currency on our second quarter revenue. In addition, we continue to experience strong consulting delivery and increased events revenue.

Second quarter research services revenue increased 5% to 40.8 million from 39 million last year; research services revenue was 63% of total revenue for the quarter which was in line with the second quarter of 2009. Second quarter advisory services and other revenue increased 6% to 23.9 million from 22.6 million in the second quarter of 2009, and represented 37% of total revenue for the quarter.

Year-to-date advisory services increased 9% to 43.7 million from 39.9 million for the same period last year. Our international revenue mix declined to 27% for the second quarter 2010, compared to 30% in the second quarter last year, primarily due to the impact of foreign exchange rates. On a local currency basis, our international revenues grew at a slightly slower rate than our U.S. business. We would now like to take you to the activity behind our revenue, and review the results for each of our products starting with research.

In the second quarter, we added 387 new research documents; the top three research roles were the market research professional which was combined this past quarter. It previously was two separate roles, a consumer market research and a B2B Market Research Professionals. Technology product management and marketing professionals, 4,682 members with our second leading role, and the enterprise architecture professional with 4,398 members was our third leading role.

We hosted 63 teleconferences in the second quarter with a total attendance of 1,998. Forrester Leadership Boards are peer offering for senior executives continues to improve achieving year-over-year revenue growth of 4% in both the second quarter and on a year-to-date basis. The seven boards focused on IT roles now have a total of 963 members, technology industry boards now have a total membership of 282, and finally the marketing and strategy boards have a total membership of 398.

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