Forrester Research Reports Third-Quarter Financial Results

Forrester Research, Inc. (Nasdaq: FORR) today announced its third-quarter-ended September 30, 2011, financial results.

Third-Quarter Financial Performance
  • Total revenues were $69.8 million, compared with $59.8 million for the third quarter of last year.
  • On a GAAP basis, net income was $5.7 million, or $0.25 per diluted share, for the third quarter of 2011, compared with net income of $3.7 million, or $0.16 per diluted share, for the same period last year.
  • On a pro forma basis, net income was $7.9 million, or $0.34 per diluted share, for the third quarter of 2011, which reflects a pro forma effective tax rate of 40%. Pro forma net income excludes stock-based compensation of $1.4 million, amortization of $0.7 million of acquisition-related intangible assets, $0.9 million of duplicate lease costs, and $0.1 million of acquisition and integration costs. This compares with pro forma net income of $4.4 million, or $0.19 per diluted share, for the same period in 2010, which reflects a pro forma tax rate of 40%. Pro forma net income for the third quarter of 2010 excludes stock-based compensation of $1.2 million, amortization of $0.9 million of acquisition-related intangible assets, $0.4 million of duplicate lease costs, and net investment gains of $1.4 million.

“Forrester met revenue guidance and exceeded operating margin and earnings per share for the third quarter,” said George F. Colony, Forrester’s chairman of the board and chief executive officer. “Our client- and dollar-retention rates continue to perform at the upper end of our historical range. Our good performance notwithstanding, we are taking a more conservative approach and reducing our revenue guidance for the year due to inconsistent performance in some of our markets and the continuing economic turmoil.”

Nine-Month-Period-Ended September 30, 2011, Financial Performance
  • Total revenues were $209.0 million, compared with $183.6 million for the same period last year.
  • On a GAAP basis, net income was $14.1 million, or $0.61 per diluted share, for the nine months ended September 30, 2011, compared with net income of $16.4 million, or $0.71 per diluted share, for the same period last year.
  • On a pro forma basis, net income was $20.2 million, or $0.87 per diluted share, for the nine months ended September 30, 2011, which reflects a pro forma effective tax rate of 40%. Pro forma net income excludes stock-based compensation of $3.1 million, amortization of $1.9 million of acquisition-related intangible assets, $3.9 million of duplicate lease costs, $1.0 million of acquisition and integration costs, and net investment gains of $0.6 million. This compares with pro forma net income of $18.9 million, or $0.82 per diluted share, for the same period in 2010, which reflects a pro forma tax rate of 40%. Pro forma net income for the nine months ended September 30, 2010, excludes stock-based compensation of $3.7 million, amortization of $2.7 million of acquisition-related intangible assets, $0.4 million of duplicate lease costs, $0.3 million of acquisition-related credits, and net investment gains of $1.8 million.

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

Forrester is providing fourth-quarter 2011 financial guidance as follows:

Fourth-Quarter 2011 (GAAP):
  • Total revenues of approximately $74.0 million to $78.0 million.
  • Operating margin of approximately 13.5% to 15.5%.
  • Other income, net of zero.
  • An effective tax rate of 42%.
  • Diluted earnings per share of approximately $0.26 to $0.30.

Fourth-Quarter 2011 (Pro Forma):

Pro forma financial guidance for the fourth quarter of 2011 excludes stock-based compensation expense of $1.3 million to $1.5 million, amortization of acquisition-related intangible assets of approximately $0.7 million, and any investment gains or losses.
  • Pro forma operating margin of approximately 16.5% to 18.5%.
  • Pro forma effective tax rate of 40%.
  • Pro forma diluted earnings per share of approximately $0.33 to $0.37.

Our full-year 2011 guidance is as follows:

Full-Year 2011 (GAAP):
  • Total revenues of approximately $283.0 million to $287.0 million.
  • Operating margin of approximately 12.0% to 13.0%.
  • Other income, net of $0.3 million.
  • An effective tax rate of 42%.
  • Diluted earnings per share of approximately $0.87 to $0.91.

Full-Year 2011 (Pro Forma):

Pro forma financial guidance for full-year 2011 excludes stock-based compensation expense of $4.4 million to $4.6 million, amortization of acquisition-related intangible assets of approximately $2.6 million, duplicate lease costs of $3.9 million, acquisition and integration costs of approximately $1.0 million, and any investment gains or losses.
  • Pro forma operating margin of approximately 16.0% to 17.0%.
  • Pro forma effective tax rate of 40%.
  • Pro forma diluted earnings per share of approximately $1.20 to $1.24.

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, customer insight, consulting, events, and peer-to-peer executive programs. For more than 28 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 guidance for the fourth quarter of and full-year 2011. 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 retain and enrich memberships for its research products and services, technology spending, Forrester’s ability to respond to business and economic conditions and market trends, the risks and challenges inherent in international business activities, competition and industry consolidation, the ability to attract and retain professional staff, Forrester’s dependence on key personnel, and possible variations in Forrester’s quarterly operating results. 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 and the table of selected balance sheet and cash flow data are attached.

       
Forrester Research, Inc.
Consolidated Statements of Income
(Unaudited, In thousands, except per share data)
    Three months ended Nine months ended
September 30, September 30,
2011   2010 2011   2010
 
Revenues:
Research services $ 49,242 $ 42,895 $ 141,130 $ 123,063
Advisory services and other   20,532   16,882     67,836   60,547  
Total revenues   69,774   59,777     208,966   183,610  
 
Operating expenses:
Cost of services and fulfillment 25,071 22,399 78,593 69,026
Selling and marketing 24,927 20,228 76,401 61,036
General and administrative 7,928 9,489 25,176 24,413
Depreciation 1,420 943 3,335 2,740
Amortization of intangible assets   679   905     1,898   2,715  
Total operating expenses   60,025   53,964     185,403   159,930  
 
Income from operations 9,749 5,813 23,563 23,680
Other income (expense), net 378 (945 ) 273 1,278
Gains from investments, net   8   1,377     648   1,829  
 
Income before income taxes 10,135 6,245 24,484 26,787
Income tax provision   4,403   2,541     10,371   10,409  
Net income $ 5,732 $ 3,704   $ 14,113 $ 16,378  
 
Diluted income per share $ 0.25 $ 0.16   $ 0.61 $ 0.71  
 
Diluted weighted average shares outstanding   23,082   23,107     23,179   23,040  
 
Basic income per share $ 0.25 $ 0.16   $ 0.62 $ 0.73  
 
Basic weighted average shares outstanding   22,620   22,462     22,672   22,456  
 
Pro forma data (1):
Income from operations $ 9,749 $ 5,813 $ 23,563 $ 23,680
Amortization of intangible assets 679 905 1,898 2,715
Duplicate lease costs 864 388 3,850 388
Acquisition and integration costs (credits) 87 - 986 (326 )

Stock-based compensation included in the following expense categories:
Cost of services and fulfillment 678 531 1,325 1,587
Selling and marketing 294 238 686 709
General and administrative   440   388     1,082   1,390  
 
Pro forma income from operations 12,791 8,263 33,390 30,143
Other income (expense), net   378   (945 )   273   1,278  
Pro forma income before income taxes 13,169 7,318 33,663 31,421
Pro forma income tax provision   5,268   2,927     13,466   12,568  
Pro forma net income $ 7,901 $ 4,391   $ 20,197 $ 18,853  
 
Pro forma diluted income per share $ 0.34 $ 0.19   $ 0.87 $ 0.82  
Diluted weighted average shares outstanding   23,082   23,107     23,179   23,040  
 

(1) 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 acquisition-related intangible assets, duplicate lease costs, costs or (credits) associated with acquisition and integration activities, stock-based compensation and net gains or losses from investments, 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.
Consolidated Balance Sheet and Cash Flow Data
(Unaudited, In thousands)
  September 30, December 31,
2011 2010
Balance sheet data:
Cash, cash equivalents and marketable investments $ 222,158 $ 216,034
Accounts receivable, net $ 43,159 $ 73,574
Deferred revenue $ 117,547 $ 131,521
 
Nine months ended
September 30,
2011 2010
Cash flow data:
Net cash provided by operating activities $ 46,507 $ 37,688
Cash used for acquisitions $ (7,164 ) $ (1,660 )
Purchases of property and equipment $ (33,194 ) $ (6,248 )
Repurchases of common stock $ (18,405 ) $ (13,951 )

© 2011, Forrester Research, Inc. All rights reserved. Forrester is a trademark of Forrester Research, Inc.

Copyright Business Wire 2010

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