Forrester Research, Inc. (Nasdaq: FORR) today announced its financial results for the third quarter ended September 30, 2008.
Third-Quarter Financial Performance
- Total revenues were $59.5 million, compared with $51.1 million for the third quarter of last year.
- On a GAAP-reported basis, which reflects an effective tax rate of 37 percent, Forrester reported net income of $6.4 million or $0.27 per diluted share, compared with net income of $6.8 million, or $0.29 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 $7.4 million or $0.31 per diluted share for the third quarter of 2008. Pro forma net income excludes non-cash stock-based compensation of $1.3 million, amortization of acquisition-related intangible assets of $282,000, gains on non-marketable investments of $26,000, and expenses related to the stock option investigation and restatement of the Company’s historical financial statements of $487,000. For the third quarter of 2007, pro forma net income was $6.7 million, or $0.28 per diluted share, which excludes non-cash stock-based compensation of $1.4 million, amortization of acquisition-related intangible assets of $293,000, gains on non-marketable investments of $98,000, and expenses related to the stock option investigation and restatement of the Company’s historical financial statements of $808,000, and which reflects a pro forma effective tax rate of 39 percent.
Nine-Month Period Ended September 30, 2008 Financial Performance
- Total revenues were $178.0 million, compared with $153.6 million for the same period last year.
- On a GAAP-reported basis, which reflects an effective tax rate of 39 percent, Forrester reported net income of $20.1 million, or $0.85 per diluted share for the nine months ended September 30, 2008, compared with net income of $13.3 million or $0.56 per diluted share for the same period last year.
- On a pro forma basis, net income was $22.2 million or $0.94 per diluted share, for the nine months ended September 30, 2008. Pro forma net income excludes non-cash stock-based compensation of $4.0 million, amortization of acquisition-related intangible assets of $476,000, net gain on marketable and non-marketable investments of $2.1 million, and expenses related to the stock option investigation and restatement of the Company’s historical financial statements of $1.1 million, and which reflects a pro forma effective tax rate of 39 percent. For the same period in 2007, pro forma net income was $18.8 million, or $0.79 per diluted share, which excludes non-cash stock-based compensation of $5.8 million, amortization of acquisition-related intangible assets of $978,000, net impairments from non-marketable investments of $1.7 million, and expenses related to the stock option investigation and restatement of the Company’s historical financial statements of $3.6 million, and which reflects a pro forma effective tax rate of 39 percent.
“Forrester’s third-quarter financials were solid despite the economic slowdown,” said George F. Colony, Forrester’s chairman of the board and chief executive officer. “We achieved our revenue and profit goals and are cautiously optimistic about the rest of 2008. During the third quarter, we continued to add new clients while renewing and enriching our existing clients, an indication that our role-based strategy provides clients with sustained relevancy even during uncertain economic times.”
A reconciliation of GAAP results to pro forma results may be found in the attached financial tables.
Forrester is providing fourth-quarter 2008 financial guidance as follows:
Fourth-Quarter 2008 (GAAP):
- Total revenues of approximately $64 million to $70 million.
- Operating margin of approximately 14 percent to 18 percent.
- Other income of approximately $1.5 million.
- An effective tax rate of approximately 39 percent.
- Diluted weighted average shares outstanding of approximately 23.7 million.
- Diluted earnings per share of approximately $0.30 to $0.35.
Fourth-Quarter 2008 (Pro Forma):
Pro forma financial guidance for the fourth quarter of 2008 excludes non-cash stock-based compensation expense of approximately $1.2 million to $1.5 million, amortization of acquisition-related intangible assets of approximately $500,000, costs related to the stock option investigation and restatement of the Company’s historical financial statements of $100,000 to $400,000, and any gains or impairment charges related to non-marketable investments.
- Pro forma operating margin of approximately 18 percent to 21 percent.
- Pro forma effective tax rate of 39 percent.
- Pro forma diluted earnings per share of approximately $0.35 to $0.39.
Forrester is providing full-year 2008 guidance as follows:
Full-Year 2008 (GAAP):
- Total revenues of approximately $242 million to $248 million.
- Operating margin of approximately 14 percent to 16 percent.
- Other income of approximately $6.6 million.
- An effective tax rate of 39 percent.
- Diluted earnings per share of approximately $1.15 to $1.21.
Full-Year 2008 (Pro Forma):
Pro forma financial guidance for full-year 2008 excludes non-cash stock-based compensation expense of $5.1 million to $5.5 million, amortization of acquisition-related intangible assets of approximately $1 million, costs related to the stock option investigation and restatement of the Company’s historical financial statements of $1.1 million to $1.5 million, as well as any gains or impairment charges related to marketable and non-marketable investments.
- Pro forma operating margin of approximately 17.5 percent to 18.5 percent.
- Pro forma diluted earnings per share of approximately $1.29 to $1.33.
- An effective tax rate of 39 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 guidance for the fourth quarter of and full-year 2008. 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 anticipate business and economic conditions, 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.
© 2008, Forrester Research, Inc. All rights reserved.
| Forrester Research, Inc. | ||||||||||||||||
| Consolidated Statements of Income | ||||||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| Revenues | ||||||||||||||||
| Research services | $ | 40,326 | $ | 32,945 | $ | 114,136 | $ | 96,312 | ||||||||
| Advisory services and other | 19,180 | 18,190 | 63,818 | 57,325 | ||||||||||||
| Total revenues | 59,506 | 51,135 | 177,954 | 153,637 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Cost of services and fulfillment | 21,806 | 18,648 | 65,848 | 60,106 | ||||||||||||
| Selling and marketing | 20,282 | 17,913 | 60,119 | 52,813 | ||||||||||||
| General and administrative | 7,529 | 7,002 | 22,945 | 22,533 | ||||||||||||
| Depreciation | 1,012 | 1,026 | 2,998 | 2,881 | ||||||||||||
| Amortization of intangible assets | 282 | 293 | 476 | 978 | ||||||||||||
| Total operating expenses | 50,911 | 44,882 | 152,386 | 139,311 | ||||||||||||
| Income from operations | 8,595 | 6,253 | 25,568 | 14,326 | ||||||||||||
| Other income, net | 1,447 | 2,175 | 5,221 | 6,153 | ||||||||||||
| Realized gains (losses) from securities and non-marketable investments | 26 | 98 | 2,136 | (1,690 | ) | |||||||||||
| Income from operations before income taxes | 10,068 | 8,526 | 32,925 | 18,789 | ||||||||||||
| Income tax provision | 3,680 | 1,729 | 12,864 | 5,460 | ||||||||||||
| Net income | $ | 6,388 | $ | 6,797 | $ | 20,061 | $ | 13,329 | ||||||||
| Diluted income per share from net income | $ | 0.27 | $ | 0.29 | $ | 0.85 | $ | 0.56 | ||||||||
| Diluted weighted average shares outstanding | 23,793 | 23,667 | 23,655 | 23,749 | ||||||||||||
| Basic income per share from net income | $ | 0.28 | $ | 0.29 | $ | 0.87 | $ | 0.58 | ||||||||
| Basic weighted average shares outstanding | 23,163 | 23,072 | 23,056 | 23,067 | ||||||||||||
| Pro forma data (1): | ||||||||||||||||
| Income from operations | $ | 8,595 | $ | 6,253 | $ | 25,568 | $ | 14,326 | ||||||||
| Amortization of intangible assets | 282 | 293 | 476 | 978 | ||||||||||||
| Investigation related expenses | 487 | 808 | 1,085 | 3,635 | ||||||||||||
Non-cash stock-based compensation included in the following expense categories: | ||||||||||||||||
| Cost of services and fulfillment | 678 | 817 | 2,094 | 3,119 | ||||||||||||
| Selling and marketing | 247 | 313 | 723 | 1,524 | ||||||||||||
| General and administrative | 343 | 295 | 1,156 | 1,120 | ||||||||||||
| Pro forma income from operations | 10,632 | 8,779 | 31,102 | 24,702 | ||||||||||||
| Other income, net | 1,447 | 2,175 | 5,221 | 6,153 | ||||||||||||
| Pro forma income before income taxes | 12,079 | 10,954 | 36,323 | 30,855 | ||||||||||||
| Pro forma income tax provision | 4,711 | 4,272 | 14,166 | 12,033 | ||||||||||||
| Pro forma net income | $ | 7,368 | $ | 6,682 | $ | 22,157 | $ | 18,822 | ||||||||
| Pro forma diluted earnings per share | $ | 0.31 | $ | 0.28 | $ | 0.94 | $ | 0.79 | ||||||||
| Diluted weighted average shares outstanding | 23,793 | 23,667 | 23,655 | 23,749 | ||||||||||||
(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. Forrester uses pro forma financial information to manage its business, including use of pro forma results as the basis for setting targets for various compensation programs. Our pro forma presentation excludes amortization of acquisition-related intangible assets, non-cash stock-based compensation expense, net gains from securities 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. | |||||||||
| Consolidated Balance Sheets | |||||||||
| (In thousands) | |||||||||
| September 30, | December 31, | ||||||||
| 2008 | 2007 | ||||||||
| Assets: | |||||||||
| Cash and cash equivalents | $ | 124,869 | $ | 53,163 | |||||
| Available-for-sale securities | 83,258 | 195,811 | |||||||
| Accounts receivable, net | 37,352 | 69,865 | |||||||
| Deferred commissions | 8,497 | 10,631 | |||||||
| Deferred income taxes, net | 7,489 | 13,236 | |||||||
| Prepaid expenses and other current assets | 10,625 | 11,304 | |||||||
| Total current assets | 272,090 | 354,010 | |||||||
| Available-for-sale securities | 45,935 | - | |||||||
| Property and equipment, net | 6,932 | 6,834 | |||||||
| Goodwill, net | 69,253 | 53,677 | |||||||
| Intangible assets, net | 8,102 | 309 | |||||||
| Deferred income taxes, net | 6,831 | 2,274 | |||||||
| Non-marketable investments and other assets | 9,115 | 9,253 | |||||||
| Total assets | $ | 418,258 | $ | 426,357 | |||||
| Liabilities and stockholders’ equity: | |||||||||
| Accounts payable | $ | 3,458 | $ | 4,174 | |||||
| Accrued expenses | 18,734 | 28,891 | |||||||
| Deferred revenue | 98,128 | 111,418 | |||||||
| Total current liabilities | 120,320 | 144,483 | |||||||
| Non-current liabilities | 6,894 | 6,858 | |||||||
| Preferred stock | - | - | |||||||
| Common stock | 291 | 282 | |||||||
| Additional paid-in capital | 310,955 | 284,431 | |||||||
| Retained earnings | 101,539 | 81,478 | |||||||
| Treasury stock, at cost | (116,514 | ) | (90,428 | ) | |||||
| Accumulated other comprehensive loss | (5,227 | ) | (747 | ) | |||||
| Total stockholders’ equity | 291,044 | 275,016 | |||||||
| Total liabilities and stockholders’ equity | $ | 418,258 | $ | 426,357 | |||||
| Forrester Research, Inc. | |||||||||||
| Consolidated Statements of Cash Flows | |||||||||||
| (In thousands) | |||||||||||
| Nine months ended September 30, | |||||||||||
| 2008 | 2007 | ||||||||||
| (Unaudited) | (Unaudited) | ||||||||||
| Cash flows from operations: | |||||||||||
| Net income | $ | 20,061 | $ | 13,329 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities – | |||||||||||
| Depreciation | 2,998 | 2,881 | |||||||||
| Amortization of intangible assets | 476 | 978 | |||||||||
| Non-cash stock-based compensation | 3,973 | 5,763 | |||||||||
| Increase in provision for doubtful accounts | 494 | 380 | |||||||||
| Deferred income taxes | 2,961 | 3,991 | |||||||||
| (Gains) impairments from non-marketable investments, net | (79 | ) | 1,690 | ||||||||
| Gains on sales of available-for-sale securities | (2,057 | ) | - | ||||||||
| Amortization of premiums on available-for-sale securities | 626 | 473 | |||||||||
| Changes in assets and liabilities, net of acquisition – | |||||||||||
| Accounts receivable | 34,518 | 24,147 | |||||||||
| Deferred commissions | 2,134 | 2,216 | |||||||||
| Prepaid expenses and other current assets | 2,290 | (4,146 | ) | ||||||||
| Accounts payable | (1,056 | ) | (338 | ) | |||||||
| Accrued expenses | (10,035 | ) | (6,116 | ) | |||||||
| Deferred revenue | (16,951 | ) | (16,053 | ) | |||||||
| Net cash provided by operating activities | 40,353 | 29,195 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisition of Jupiter | (23,398 | ) | - | ||||||||
| Purchases of property and equipment | (2,730 | ) | (3,826 | ) | |||||||
| Proceeds from non-marketable investments | 250 | 1,058 | |||||||||
| Decrease in other assets | 344 | 26 | |||||||||
| Proceeds from sale of discontinued operations | - | 250 | |||||||||
| Purchases of available-for-sale securities | (966,671 | ) | (872,420 | ) | |||||||
| Proceeds from sales and maturities of available-for-sale securities | 1,028,902 | 845,631 | |||||||||
| Net cash provided by (used in) investing activities | 36,697 | (29,281 | ) | ||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of common stock under stock option plans and employee stock purchase plan | 17,246 | 811 | |||||||||
| Tax benefits related to stock options | 5,314 | - | |||||||||
| Acquisition of treasury shares | (26,086 | ) | - | ||||||||
| Net cash (used in) provided by financing activities | (3,526 | ) | 811 | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | (1,818 | ) | 938 | ||||||||
| Net increase in cash and cash equivalents | 71,706 | 1,663 | |||||||||
| Cash and cash equivalents, beginning of period | 53,163 | 39,157 | |||||||||
| Cash and cash equivalents, end of period | $ | 124,869 | $ | 40,820 | |||||||
Contacts:
Karyl Levinson, +1-617-613-6262
Vice
President, Corporate Communications
press@forrester.com
or
Forrester
Research, Inc
Michael A. Doyle,, +1-617-613-6234
Chief
Financial Officer
investor@forrester.com
