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Forrester (Nasdaq: FORR) is one of the most influential research and advisory firms in the world. We work with business and technology leaders to drive customer-obsessed vision, strategy, and execution that accelerate growth. Forrester’s unique insights are grounded in annual surveys of more than 690,000 consumers and business leaders worldwide, rigorous and objective methodologies, and the shared wisdom of our most innovative clients.

Through proprietary research, data and analytics, custom consulting, exclusive peer groups, certifications, and events, we are revolutionizing how businesses grow in the age of the customer.

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October 26
2016

Forrester Research Reports 2016 Third-Quarter Financial Results; Increases Share Repurchase Authorization By $25 Million

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Oct. 26, 2016-- Forrester Research, Inc. (Nasdaq: FORR) today announced its 2016 third-quarter financial results. The company also announced that its board of directors authorized a $25 million increase in the company’s stock repurchase program, bringing the total available repurchase authorization to approximately $62 million.

Third-Quarter Financial Performance

Total revenues were $77.4 million for the third quarter of 2016, compared with $74.8 million for the third quarter of 2015. Research revenues increased 1%, and advisory services and events revenues increased 10%, compared with the third quarter of 2015.

On a GAAP basis, net income was $3.1 million, or $0.17 per diluted share, for the third quarter of 2016, compared with net income of $4.5 million, or $0.25 per diluted share, for the same period in 2015.

On a pro forma basis, net income was $6.0 million, or $0.32 per diluted share, for the third quarter of 2016, which reflects a pro forma effective tax rate of 40%. Pro forma net income excludes stock-based compensation of $2.0 million, amortization of acquisition-related intangible assets of $0.2 million, and net investment losses of $1.1 million. This compares with pro forma net income of $5.5 million, or $0.30 per diluted share, for the same period in 2015, which reflects a pro forma tax rate of 38%. Pro forma net income for the third quarter of 2015 excludes stock-based compensation of $2.2 million, amortization of acquisition-related intangible assets of $0.2 million, reorganization costs of $0.9 million, and net investment gains of $0.2 million.

“We are pleased with our ongoing transition to the age of the customer strategy, but this voyage continues to be less predictable than we would like,” said George F. Colony, Forrester’s chairman and chief executive officer. “In Q3, the company’s EPS and margin exceeded guidance, while revenue fell short. Just as timing in nonsyndicated solutions helped us overperform in Q2, this factor attenuated revenue in Q3. We remain positive on short- and long-term growth as we ramp our sales teams and continue to refine our products to help clients thrive in the era of empowered customers.”

Forrester is providing fourth-quarter 2016 financial guidance as follows:

Fourth-Quarter 2016 (GAAP):

  • Total revenues of approximately $80.5 million to $84.5 million.
  • Operating margin of approximately 5.5% to 7.5%.
  • Other income (expense), net of zero.
  • An effective tax rate of 40%.
  • Diluted earnings per share of approximately $0.15 to $0.20.

Fourth-Quarter 2016 (Pro Forma):

Pro forma financial guidance for the fourth quarter of 2016 excludes stock-based compensation expense of $2.0 million to $2.4 million, amortization of acquisition-related intangible assets of approximately $0.2 million, and any investment gains or losses.

  • Pro forma operating margin of approximately 8.5% to 10.5%.
  • Pro forma effective tax rate of 40%.
  • Pro forma diluted earnings per share of approximately $0.22 to $0.27.

Our full-year 2016 guidance is as follows:

Full-Year 2016 (GAAP):

  • Total revenues of approximately $323.0 million to $327.0 million.
  • Operating margin of approximately 8.0% to 9.0%.
  • Other income, net of $0.4 million.
  • An effective tax rate of 43%.
  • Diluted earnings per share of approximately $0.80 to $0.85.

Full-Year 2016 (Pro Forma):

Pro forma financial guidance for full-year 2016 excludes stock-based compensation expense of $7.7 million to $8.1 million, reorganization costs of approximately $1.0 million, amortization of acquisition-related intangible assets of approximately $0.8 million, and any investment gains or losses.

  • Pro forma operating margin of approximately 11.0% to 12.0%.
  • Pro forma effective tax rate of 40%.
  • Pro forma diluted earnings per share of approximately $1.19 to $1.24.

Quarterly Dividend

Forrester also announced today that its board of directors has approved a quarterly cash dividend of $0.18 per share, payable December 21, 2016, to shareholders of record on December 7, 2016.

About Forrester Research

Forrester Research is one of the most influential research and advisory firms in the world. We work with business and technology leaders to develop customer-obsessed strategies that drive growth. Forrester’s unique insights are grounded in annual surveys of more than 500,000 consumers and business leaders worldwide, rigorous and objective methodologies, and the shared wisdom of our most innovative clients. Through proprietary research, data, custom consulting, exclusive executive peer groups, and events, the Forrester experience is about a singular and powerful purpose: to challenge the thinking of our clients to help them lead change in their organizations. For more information, visit 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 2016, statements about the success of operational improvements, and statements about Forrester’s future financial performance and financial condition. 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, demand for advisory and consulting services, technology spending, Forrester’s ability to respond to business and economic conditions and market trends, Forrester’s ability to develop and offer new products and services, 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, Forrester’s ability to realize the anticipated benefits from recent internal reorganizations, the possibility of network disruptions and security breaches, Forrester’s ability to enforce and protect its intellectual property, the amount and timing of the repurchase of Forrester stock, and possible variations in Forrester’s quarterly operating results. Dividend declarations are at the discretion of Forrester’s board of directors, and plans for future dividends may be revised by the board at any time. 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 key financial data are attached.

© 2016, Forrester Research, Inc. All rights reserved. Forrester is a trademark of Forrester Research, Inc.

           
Forrester Research, Inc.
Consolidated Statements of Income                        
(Unaudited, In thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
 
Revenues:
Research services $ 52,727 $ 52,205 $ 160,998 $ 156,667
Advisory services and events   24,700   22,548   81,651   76,084
Total revenues 77,427 74,753 242,649 232,751
 
Operating expenses:
Cost of services and fulfillment 29,889 29,222 95,429 92,543
Selling and marketing 27,751 27,460 87,490 85,572
General and administrative 10,086 9,530 30,359 28,564
Depreciation 1,941 2,048 5,982 6,251
Amortization of intangible assets 208 224 627 669
Reorganization costs   -   928   1,026   4,433
Total operating expenses 69,875 69,412 220,913 218,032
 
Income from operations 7,552 5,341 21,736 14,719
 
Other income, net 229 159 374 342
Gains (losses) on investments, net   (1,085)   245   (1,139)   236
Income before income taxes 6,696 5,745 20,971 15,297
 
Income tax provision   3,584   1,295   9,110   5,321
Net income $ 3,112 $ 4,450 $ 11,861 $ 9,976
 
Diluted income per common share $ 0.17 $ 0.25 $ 0.65 $ 0.55
 
Diluted weighted average shares outstanding   18,435   18,065   18,168   18,231
 
Basic income per common share $ 0.17 $ 0.25 $ 0.66 $ 0.55
 
Basic weighted average shares outstanding   18,062   17,892   17,896   17,986
 
Pro forma data (1):
 
Income from operations $ 7,552 $ 5,341 $ 21,736 $ 14,719
Amortization of intangible assets 208 224 627 669
Reorganization costs - 928 1,026 4,433
Stock-based compensation included in the
following expense categories:
Cost of services and fulfillment 1,077 1,183 3,141 3,218
Selling and marketing 272 331 695 754
General and administrative   622   710   1,895   1,913
 
Pro forma income from operations 9,731 8,717 29,120 25,706
 
Other income, net   229   159   374   342
Pro forma income before income taxes 9,960 8,876 29,494 26,048
 
Pro forma income tax provision   3,984   3,373   11,798   9,898
 
Pro forma net income $ 5,976 $ 5,503 $ 17,696 $ 16,150
 
Pro forma diluted income per share $ 0.32 $ 0.30 $ 0.97 $ 0.89
Pro forma diluted weighted average shares outstanding   18,435   18,065   18,168   18,231
 
(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, and are also used by Forrester in
making compensation decisions. Our pro forma presentation excludes amortization of acquisition-related
intangible assets, stock-based compensation, reorganization costs 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.
Key Financial Data        
(Unaudited, dollars in thousands)
 
September 30, December 31,
2016 2015
Balance sheet data:
Cash, cash equivalents and marketable investments $ 133,240 $ 101,106
Accounts receivable, net $ 36,024 $ 67,355
Deferred revenue $ 126,178 $ 140,676
 
 
Nine Months Ended
September 30,
2016 2015
Cash flow data:
Net cash provided by operating activities $ 35,891 $ 28,218
Purchases of property and equipment $ (3,334 ) $ (2,316 )
Repurchases of common stock $ - $ (18,639 )
Dividends paid $ (9,696 ) $ (9,163 )
 
 
As of
September 30,
2016 2015
Metrics:
Agreement value $ 241,100 $ 233,300
Client retention 76 % 80 %
Dollar retention 88 % 91 %
Enrichment 95 % 97 %
Number of clients 2,482 2,482
 
As of
September 30,
2016 2015
Headcount:
Total headcount 1,332 1,321
Research and consulting staff 488 491
Sales staff 514 513

Source: Forrester Research, Inc.

Forrester Research, Inc.
Michael Doyle, +1 617-613-6000
Chief Financial Officer
mdoyle@forrester.com
or
Meaghan Madges, + 1 617-613-6070
Public Relations
press@forrester.com