SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): July 26, 2006

FORRESTER RESEARCH, INC.

(Exact Name of Registrant Specified in Charter)

Delaware (State or Other Jurisdiction of Incorporation)		000-21433 (Commission File Number)		04-2797789 (I.R.S. Employer Identification No.)

400 Technology Square, Cambridge, Massachusetts (Address of Principal Executive Offices)		02139 (Zip Code)

Registrant’s telephone number, including area code: (617) 613-6000

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Page 1 of 5
Exhibit Index appears on Page 4
 

 

 

ITEM 2.02    RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

     The information contained in this current report on Form 8-K is furnished pursuant to Item 2.02 of Form 8-K “Results of Operations and Financial Condition”. This information and the exhibits hereto are being furnished and shall not be deemed to be “filed” for the purposes of Section 18 of, or otherwise regarded as filed under, the Securities Exchange Act of 1934, as amended. The information contained in this report shall not be incorporated by reference into any filing of Forrester Research, Inc. with the SEC, whether made before or after the date hereof, regardless of any general incorporation language in such filings.

     On July 26, 2006, Forrester Research, Inc. issued a press release announcing its financial results for the quarter ended June 30, 2006, the full text of which is attached hereto as Exhibit 99.1.

     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 the following, as well as their related tax effects:

     Amortization of acquisition-related intangibles — we exclude the non-cash effect of the amortization of acquisition-related intangibles from our pro forma results in order to more consistently present our ongoing results of operations.

     Impairments of and gains related to non-marketable securities and gains from sales of marketable securities — we have consistently excluded both one-time gains and one-time write-offs related to our investments in non-marketable securities and sales of marketable securities from our pro forma results in order to keep quarter over quarter and year over year comparisons consistent.

     Non-cash stock-based compensation expense — we exclude the stock-based compensation impact of APB Opinion 25 and SFAS 123R from our pro forma results in order to keep quarter over quarter and year over year comparisons consistent.

     However, these measures should be considered in addition to, not as a substitute for, or superior to, operating income or other measures of financial performance prepared in accordance with generally accepted accounting principles as more fully discussed in our financial statements and filings with the Securities and Exchange Commission.

ITEM 9.01    Financial Statements and Exhibits

     (c)    Exhibits

99.1    Press Release dated July 26, 2006

- 2 -

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: July 26, 2006

- 3 -

Exhibit Index

Exhibit		Description		Page
99.1		Press Release dated July 26, 2006.			5

- 4 -

FOR IMMEDIATE RELEASE
 

Forrester Research Reports Second-Quarter 2006 Financial Results
 

CAMBRIDGE, Mass., July 26, 2006 . . . Forrester Research, Inc. (Nasdaq: FORR) today announced its second-quarter ended June 30, 2006 financial results.

Second-Quarter Financial Performance

•		Total revenues were $48.5 million, compared with $39.2 million for the second quarter of last year.
•		On a GAAP-reported basis, which reflects an effective tax rate of 46 percent, Forrester reported net income of $3.9 million or $0.17 per diluted share, compared with net income of $2.5 million, or $0.11 per diluted share for the same period last year.
•		On a pro forma basis, net income was $5.9 million or $0.26 per diluted share for the second quarter of 2006, which excludes amortization of $472,000 of acquisition-related intangible assets, non-cash stock-based compensation expense of $1.8 million, net non-marketable investment gains of $8,000, and which reflects a pro forma effective tax rate of 37 percent. This compares with pro forma net income of $3.4 million, or $0.15 per diluted share, for the same period in 2005, which excludes amortization of $833,000 of acquisition-related intangible assets, non-cash stock-based compensation expense of $290,000 and non-marketable investment gains of $112,000, and which reflects a pro forma effective tax rate of 35 percent.

Six-Month Period Ended June 30, 2006 Financial Performance

•		Total revenues were $89.7 million, compared with $73.0 million for the same period last year.
•		On a GAAP-reported basis, which reflects an effective tax rate of 48 percent, Forrester reported net income of $5.4 million, or $0.24 per diluted share for the six months ended June 30, 2006, compared with net income of $5.2 million or $0.24 per diluted share for the same period last year.
•		On a pro forma basis, net income was $9.2 million or $0.41 per diluted share, for the six months ended June 30, 2006, which excludes amortization of $1.1 million of acquisition-related intangible assets, non-cash stock-based compensation expense of $3.5 million, non-marketable investment gains of $207,000, and which reflects a pro forma effective tax rate of 37 percent. This compares with pro forma net income of $5.9 million, or $0.27 per diluted share for the same period last year, which excludes amortization of $2.0 million of acquisition-related intangible assets, non-cash stock-based compensation expense of $290,000, non-marketable investment gains of $1.8 million, and which reflects a pro forma effective tax rate of 35 percent.

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

“Forrester’s second quarter exceeded expectations for revenue, operating profit, and EPS due to three sold-out events in the quarter and the strengthening of our syndicated sales in the past three quarters,” said George F. Colony, chairman of the board and chief executive officer. “As we look forward to the second half of the year, we remain cautiously optimistic about the business and are pleased with our progress, particularly with the role-focused Forrester Leadership Boards. As a result of our financial performance in the first half of the year, we are raising our guidance today for the full year.”

Forrester is providing third-quarter 2006 financial guidance as follows:

Third-Quarter 2006 (GAAP):

Forrester Second-Quarter Fiscal 2006 Results/Page 2  

•		Total revenues of approximately $44.0 million to $46.0 million.
•		Operating margin of approximately 9 percent to 11 percent.
•		Other income of approximately $1.5 million.
•		An effective tax rate of approximately 50 percent.
•		Diluted weighted average shares outstanding of approximately 23.5 million.
•		Diluted earnings per share of approximately $0.13 to $0.16.

Third-Quarter 2006 (Pro Forma):
Pro forma financial guidance for the third quarter of 2006 excludes amortization of acquisition-related intangible assets of approximately $500,000, non-cash stock-based compensation expense of approximately $2.0 million to $2.5 million, and any gains or impairment charges related to non-marketable investments.

•		Pro forma operating margin of approximately 14 percent to 16 percent.
•		Pro forma effective tax rate of 37 percent.
•		Pro forma diluted earnings per share of approximately $0.21 to $0.23.

Forrester is revising full-year 2006 guidance as follows:

Full-Year 2006 (GAAP):

•		Total revenues of approximately $182 million to $187 million.
•		Operating margin of approximately 8 percent to 10 percent.
•		Other income of approximately $5 million.
•		An effective tax rate of approximately 50 percent.
•		Diluted weighted average shares outstanding of approximately 23 million.
•		Diluted earnings per share of approximately $0.48 to $0.59.

Full-Year 2006 (Pro Forma):
Pro forma financial guidance for full-year 2006 excludes amortization of acquisition-related intangible assets of approximately $2.1 million, non-cash stock-based compensation expense of approximately $7.0 million to $9.0 million, and any gains or impairment charges related to non-marketable investments.

•		Pro forma operating margin of approximately 15 percent.
•		Pro forma diluted earnings per share of approximately $0.86 to $0.92.
•		An effective tax rate of 37 percent.

Forrester Research (Nasdaq: FORR) is an independent technology and market research company that provides pragmatic and forward-thinking advice about technology’s impact on business and consumers. For 23 years, Forrester has been a thought leader and trusted advisor, helping global clients lead in their markets through its research, consulting, events, and peer-to-peer executive programs. 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 third quarter of and full-year 2006, statements about the potential success of product offerings, and the ability of Forrester to achieve success in the current economy. 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

Forrester Second-Quarter Fiscal 2006 Results/Page 3  

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.

Warren Hadley		Karyl Levinson
Chief Financial Officer		Vice President, Corporate Communications
Forrester Research, Inc.		Forrester Research, Inc.
+1 617/613-5886		+1 617/613-6262
whadley@forrester.com		press@forrester.com

^© 2006, Forrester Research, Inc. All rights reserved. Forrester is a trademark of Forrester Research, Inc.

Forrester Second-Quarter Fiscal 2006 Results/Page 4  

Forrester Research, Inc.
Consolidated Statements of Income

(In thousands, except per share data)  

		Three months ended								Six months ended
		June 30,								June 30,
		2006				2005				2006				2005
		(Unaudited)								(Unaudited)
Revenues
Research services		$	28,323			$	23,847			$	55,526			$	47,216
Advisory services and other			20,161				15,399				34,155				25,812
Total revenues			48,484				39,246				89,681				73,028
Operating expenses
Cost of services and fulfillment			20,282				16,673				37,909				30,450
Selling and marketing			15,442				13,065				29,987				24,967
General and administrative			5,526				4,484				11,126				8,518
Depreciation			916				882				1,800				1,756
Amortization of intangible assets			472				833				1,124				1,956
Total operating expenses			42,638				35,937				81,946				67,647
Income from operations			5,846				3,309				7,735				5,381
Other income, net			1,326				754				2,277				1,504
Realized gains on sales of securities and non-marketable investments, net			8				112				207				1,780
Income before income taxes			7,180				4,175				10,219				8,665
Income tax provision			3,330				1,718				4,856				3,469
Net income		$	3,850			$	2,457			$	5,363			$	5,196
Diluted income per share		$	0.17			$	0.11			$	0.24			$	0.24
Diluted weighted average shares outstanding			22,844				21,847				22,317				21,843
Basic income per share		$	0.18			$	0.11			$	0.25			$	0.24
Basic weighted average shares outstanding			21,988				21,511				21,587				21,561
Pro forma data (1):
Income from operations		$	5,846			$	3,309			$	7,735			$	5,381
Amortization of intangible assets			472				833				1,124				1,956
Non-cash stock-based compensation included in the following expense categories:
Cost of services and fulfillment			828				159				1,574				159
Selling and marketing			524				63				987				63
General and administrative			436				68				963				68
Pro forma income from operations			8,106				4,432				12,383				7,627
Other income, net			1,326				754				2,277				1,504
Pro forma income before income taxes			9,432				5,186				14,660				9,131
Pro forma income tax provision			3,490				1,815				5,424				3,196
Pro forma net income		$	5,942			$	3,371			$	9,236			$	5,935
Pro forma diluted earnings per share		$	0.26			$	0.15			$	0.41			$	0.27
Diluted weighted average shares outstanding			22,844				21,847				22,317				21,843

Forrester Second-Quarter Fiscal 2006 Results/Page 5  

Forrester Research, Inc.
Consolidated Balance Sheets

(In thousands)

		June 30,				December 31,
		2006				2005
		(Unaudited)
Assets:
Cash and cash equivalents		$	84,558			$	48,538
Available-for-sale securities			97,581				83,730
Accounts receivable, net			32,187				52,177
Deferred commissions			7,784				8,940
Prepaid expenses and other current assets			7,679				5,126
Total current assets			229,789				198,511
Property and equipment, net			5,707				5,771
Goodwill, net			53,279				53,034
Intangible assets, net			2,434				3,530
Deferred income taxes			37,187				36,941
Non-marketable investments and other assets			14,043				13,915
Total assets		$	342,439			$	311,702
Liabilities and stockholders’ equity:
Accounts payable		$	3,103			$	1,716
Accrued expenses			27,033				24,569
Deferred revenue			80,344				86,663
Total liabilities			110,480				112,948
Preferred stock			—				—
Common stock			270				254
Additional paid-in capital			223,035				192,206
Retained earnings			87,788				82,425
Treasury stock, at cost			(76,462	)			(73,527	)
Accumulated other comprehensive loss			(2,672	)			(2,604	)
Total stockholders’ equity			231,959				198,754
Total liabilities and stockholders’ equity		$	342,439			$	311,702

Forrester Second-Quarter Fiscal 2006 Results/Page 6  

Forrester Research, Inc.
Consolidated Statements Cash Flows

(In thousands)

		Six months ended
		June 30,
		2006				2005
		(Unaudited)
Cash flows from operations:
Net income		$	5,363			$	5,196
Adjustments to reconcile net income to net cash provided by operating activities –
Depreciation			1,800				1,756
Amortization of intangible assets			1,124				1,956
Non-cash stock-based compensation			3,524				290
Excess tax benefits from non-cash stock-based compensation			(369	)			(400	)
Non-marketable investments gains, net			(161	)			(291	)
Realized gain on sale of marketable securities			—				(1,489	)
Deferred income taxes			(339	)			598
Accretion of premiums on marketable securities			406				577
Changes in assets and liabilities -
Accounts receivable			20,603				10,114
Deferred commissions			1,156				173
Prepaid expenses and other current assets			(2,367	)			(531	)
Accounts payable			1,426				(1,286	)
Accrued expenses			2,317				(123	)
Deferred revenue			(7,447	)			(415	)
Net cash provided by operating activities			27,036				16,125
Cash flows from investing activities:
Purchases of property and equipment			(1,676	)			(1,983	)
Purchase of non-marketable investments			(300	)			—
Proceeds from non-marketable investments			188				—
Decrease in other assets			153				538
Purchase of marketable securities			(229,887	)			(103,222	)
Proceeds from sales and maturities of marketable securities			215,821				115,567
Net cash (used in) provided by investing activities			(15,701	)			10,900
Cash flows from financing activities:
Proceeds from issuance of common stock under employee stock option plans and employee stock purchase plan			26,952				2,202
Excess tax benefits from non-cash stock-based compensation			369				400
Acquisition of treasury shares			(2,937	)			(11,187	)
Net cash provided by (used in) financing activities			24,384				(8,585	)
Effect of exchange rate changes on cash and cash equivalents			301				(551	)
Net increase in cash and cash equivalents			36,020				17,889
Cash and cash equivalents, beginning of period			48,538				37,328
Cash and cash equivalents, end of period		$	84,558			$	55,217