SEC Filing | Forrester Research, Inc

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------- FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended March 31, 2000. or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission File Number: 000-21433 ------------- FORRESTER RESEARCH, INC. (Exact name of registrant as specified in its charter) Delaware 04-2797789 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 400 Technology Square Cambridge, Massachusetts 02139 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (617) 497-7090 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] As of May 11, 2000, 20,791,826 shares of the registrant's common stock were outstanding.

2 FORRESTER RESEARCH, INC. INDEX TO FORM 10-Q PART I. FINANCIAL INFORMATION Page ---- ITEM 1. Financial Statements Consolidated Balance Sheets at March 31, 2000 and December 31, 1999 3 Consolidated Statements of Income for the Three Months Ended March 31, 2000 and 1999 4 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999 5 Notes to Consolidated Financial Statements 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 12 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 13 ITEM 2. Changes in Securities 13 ITEM 3. Defaults Upon Senior Securities 13 ITEM 4. Submission of Matters to a Vote of Security-Holders 13 ITEM 5. Other Information 13 ITEM 6. Exhibits and Reports on Form 8-K 13 2

3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS FORRESTER RESEARCH, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) ASSETS MARCH 31, DECEMBER 31, 2000 1999 CURRENT ASSETS: Cash and cash equivalents $ 38,587 $ 13,445 Marketable securities 121,109 85,342 Accounts receivable, net 28,615 36,988 Deferred commissions 5,590 4,850 Prepaid income taxes 1,187 1,187 Prepaid expenses and other current assets 5,703 4,142 --------- --------- Total current assets 200,791 145,954 --------- --------- Property and equipment, net 13,401 11,619 --------- --------- Deferred income taxes 7,042 -- --------- --------- Other assets 2,224 1,820 --------- --------- Total assets $ 223,458 $ 159,393 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 3,604 $ 2,702 Customer deposits 903 716 Accrued expenses 19,365 9,447 Accrued income taxes 27 617 Deferred revenue 76,760 66,233 Deferred income taxes -- 873 --------- --------- Total current liabilities 100,659 80,588 --------- --------- STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value Authorized--500,000 shares Issued and outstanding--none -- -- Common stock, $.01 par value Authorized--125,000,000 shares Issued and outstanding--20,715,144 and 19,408,064 shares at March 31, 2000 and December 31, 1999, respectively 207 194 Additional paid-in capital 95,312 54,771 Retained earnings 27,958 24,434 Accumulated other comprehensive income (678) (594) --------- --------- Total stockholders' equity 122,799 78,805 --------- --------- Total liabilities and stockholders' equity $ 223,458 $ 159,393 ========= ========= The accompanying notes are an integral part of these consolidated financial statements. 3

4 FORRESTER RESEARCH, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) THREE MONTHS ENDED MARCH 31, 2000 1999 REVENUES: Core research $23,759 $12,978 Advisory services and other 7,058 4,951 ------- ------- Total revenues 30,817 17,929 ------- ------- OPERATING EXPENSES: Cost of services and fulfillment 9,295 6,612 Selling and marketing 12,214 6,192 General and administrative 3,780 2,041 Depreciation and amortization 1,432 873 ------- ------- Total operating expenses 26,721 15,718 ------- ------- Income from operations 4,096 2,211 OTHER INCOME 1,454 860 ------- ------- Income before income tax provision 5,550 3,071 INCOME TAX PROVISION 2,081 1,167 ------- ------- Net income $ 3,469 $ 1,904 ======= ======= BASIC NET INCOME PER COMMON SHARE $ 0.17 $ 0.11 ======= ======= DILUTED NET INCOME PER COMMON SHARE $ 0.15 $ 0.10 ======= ======= BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 19,949 17,492 ======= ======= DILUTED WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 23,578 19,466 ======= ======= The accompanying notes are an integral part of these consolidated financial statements. 4

5 FORRESTER RESEARCH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) THREE MONTHS ENDED MARCH 31, 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,469 $ 1,904 Adjustments to reconcile net income to net cash provided by operating activities -- Depreciation and amortization 1,432 873 Deferred income taxes 2,081 267 Accretion of discount on marketable securities 30 22 Changes in assets and liabilities Accounts receivable 8,372 3,294 Deferred commissions (740) (531) Prepaid expenses and other current assets (1,402) (1,067) Accounts payable 877 (545) Customer deposits 187 (38) Accrued expenses 9,882 40 Accrued income taxes -- 128 Deferred revenue 10,547 2,108 -------- -------- Net cash provided by operating activities 34,735 6,455 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (2,717) (521) Purchase of non-marketable investment (1,000) -- Increase in other assets (10) -- Purchase of marketable securities (85,721) (98,481) Proceeds from sales and maturities of marketable securities 49,913 87,756 -------- -------- Net cash used in investing activities (39,535) (11,246) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from the sale of common stock 22,647 -- Proceeds from issuance of common stock under stock option plan 7,328 2,506 -------- -------- Net cash provided by financing activities 29,975 2,506 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (33) (10) -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS 25,142 (2,295) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,445 10,414 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 38,587 $ 8,119 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for income taxes $ -- $ 755 ======== ======== SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES: Increase in additional paid-in capital and decrease in accrued income taxes related to the tax benefit on the exercises on stock options $ 10,587 $ 1,600 ======== ======== The accompanying notes are an integral part of these consolidated financial statements. 5

6 FORRESTER RESEARCH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - INTERIM CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. It is recommended that these financial statements be read in conjunction with the consolidated financial statements and related notes of Forrester Research, Inc. (the "Company") as reported in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position, results of operations, and cash flows at the dates and for the periods presented have been included. The consolidated balance sheet presented as of December 31, 1999 has been derived from the consolidated financial statements that have been audited by the Company's independent public accountants. The results of operations for the quarter ended March 31, 2000 may not be indicative of the results that may be expected for the year ended December 31, 2000, or any other period. NOTE 2 - NET INCOME PER COMMON SHARE Basic net income per common share was computed by dividing net income by the basic weighted average number of common shares outstanding during the period. Diluted net income per common share was computed by dividing net income by the diluted weighted average number of common shares outstanding during the period. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury-stock method. Common stock equivalents consist of common stock issuable on the exercise of outstanding options. Reconciliation of basic to diluted weighted average shares outstanding is as follows (in thousands): THREE MONTHS ENDED MARCH 31, 2000 1999 Basic weighted average common shares outstanding 19,949 17,492 Weighted average common equivalent shares 3,629 1,974 ------ ------ Diluted weighted average shares outstanding 23,578 19,466 ------ ------ As of March 31, 2000 and 1999, 165,000 and 1,129,314 stock options, respectively, were excluded from the calculation of diluted weighted average shares outstanding as the effect would have been anti-dilutive. All per share information gives effect to the two-for-one stock split effected as a 100% dividend on February 7, 2000. NOTE 3 - COMPREHENSIVE INCOME Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income, requires disclosure of comprehensive income and the components of comprehensive income. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The components of other comprehensive income for the three month periods ended March 31, 2000 and 1999 are as follows (in thousands): 6

7 THREE MONTHS ENDED MARCH 31, 2000 1999 Unrealized loss on marketable securities, net of taxes $ (10) $ (87) Cumulative translation adjustment (74) (109) ----- ----- Total other comprehensive income $ (84) $(196) ===== ===== NOTE 4 - NON-MARKETABLE INVESTMENTS In March 2000, the Company invested $1.0 million in the common stock of Doculabs, Inc. ("Doculabs"), an independent technology research firm, resulting in approximately a 3.9% ownership interest. This investment is being accounted for using the cost method and, accordingly, is being valued at cost unless a permanent impairment in its value occurs or the investment is liquidated. As of March 31, 2000, the Company has determined that a permanent impairment has not occurred. The Company also has an option to purchase an additional $2.0 million of Doculab's equity. The purchase price and the number of shares issuable upon exercise of the option may vary according to Doculabs' valuation as of December 31, 2000, as determined pursuant to the purchase documents. In May 1999, the Company invested $1.0 million in a holding company that is the majority shareholder of Greenfield Online, Inc. (Greenfield), an Internet-based marketing research firm. As a result of this investment, the Company effectively owns approximately a 3.4% ownership interest in Greenfield. This investment is being accounted for using the cost method and, accordingly, is being valued at cost unless a permanent impairment in its value occurs or the investment is liquidated. As of March 31, 2000, the Company has determined that a permanent impairment has not occurred. In March 2000, the holding company entered into a Note and Warrant Purchase Agreement with Greenfield. Pursuant to this agreement, the Company loaned the holding company $108,000 in exchange for a subordinated note, which bears interest at 10% per annum and is payable June 30, 2000. The value of this note is included in Other Current Assets in the accompanying Consolidated Balance Sheet as of March 31, 2000. In addition, the Company was issued warrants to obtain approximately 2,300 shares of Class A common stock at $7.15. The warrants are immediately exercisable and expire on March 3, 2005. NOTE 5 - NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 is effective for all periods beginning after June 15, 2000, and establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. Adoption of SFAS No. 133 is not expected to have a material impact on the Company's consolidated financial position or results from operations. NOTE 6 - SEGMENT AND ENTERPRISE WIDE REPORTING SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, establishes selected standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. SFAS No. 131 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are defined as components of an enterprise about which separate, discrete financial information is evaluated regularly by the chief operating decision maker, or 7

8 decision-making group, in deciding how to allocate resources and assess performance. The Company's chief decision-making group, as defined under SFAS No. 131, is its Executive Team, consisting of its executive officers. To date, the Company has viewed its operations and managed its business principally as one segment, research services. As a result, the financial information disclosed herein materially represents all of the financial information related to the Company's principal operating segment. Foreign assets represented approximately 4% and 2% of total consolidated assets as of March 31, 2000 and December 31, 1999, respectively. Net revenues by geographic destination and as a percentage of total revenues are as follows (in thousands): THREE MONTHS ENDED MARCH 31, 2000 1999 United States $22,851 $14,193 United Kingdom 2,629 957 Europe (excluding United Kingdom) 2,454 1,285 Canada 1,463 755 Other 1,420 739 ------- ------- $30,817 $17,929 ======= ======= United States 74% 79% United Kingdom 9 6 Europe (excluding United Kingdom) 8 7 Canada 5 4 Other 4 4 ------- ------- 100% 100% ------- ------- 8

9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects," "believes," "anticipates," "intends," "plans," "estimates," 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 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 results to differ materially from those indicated by forward-looking statements include, among others, the need to attract and retain professional staff, management of growth, variability of quarterly operating results, possible volatility of stock price, dependence on renewals of membership-based core research, dependence on key personnel, the ability to integrate acquisitions effectively, risks associated with anticipating market trends, new products and services, and competition. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. Unless the context otherwise requires, references in this Quarterly Report to "we", "us", and "our" refer to Forrester Research, Inc. and our Subsidiaries. We are a leading independent Internet research firm that conducts research and analysis on the impact of the Internet and emerging technologies on business strategy, consumer behavior and society. Our clients, which include senior management, business strategists and marketing and technology professionals within large enterprises use our prescriptive, actionable research to understand and capitalize on the Internet and emerging business models and technologies. We derive revenues from memberships to our core research and from our advisory services and Forum events. We offer contracts for our products and services that are typically renewable annually and payable in advance. Accordingly, a substantial portion of our billings are initially recorded as deferred revenue. Research revenues are recognized pro rata on a monthly basis over the term of the contract. Our advisory services clients purchase such services together with memberships to our research. Billings attributable to advisory services are initially recorded as deferred revenue and recognized as revenue when performed. Similarly, Forum billings are initially recorded as deferred revenue and are recognized upon completion of each event. Our operating expenses consist of cost of services and fulfillment, selling and marketing expenses, general and administrative expenses and depreciation and amortization. Cost of services and fulfillment represent the costs associated with the production and delivery of our products and services, and include the costs of salaries, bonuses and related benefits for research personnel and all associated editorial, travel and support services. Selling and marketing expenses include salaries, employee benefits, travel expenses, promotional costs, sales commissions and other costs incurred in marketing and selling our products and services. General and administrative expenses include the costs of the operations, technology, finance and strategy groups and our other administrative functions. We believe that the "agreement value" of contracts to purchase research and advisory services provides a significant measure of our business volume. We calculate agreement value as the total revenues recognizable from all research and advisory service contracts in force at a given time, without regard to how much revenue has already been recognized. Agreement value increased 71% to $128.7 million at March 31, 2000 from $75.3 million at March 31, 1999. No single client accounted for more than 2% of agreement value at March 31, 2000. Our experience is that a substantial portion of client companies renew expiring contracts for an equal or higher level of total research and advisory service fees each year. Approximately 74% of our client companies with memberships expiring during the twelve-months ended March 31, 2000 renewed one or more memberships for our products and services. This renewal rate is not necessarily indicative of the rate of future retention of our revenue base. 9

10 RESULTS OF OPERATIONS The following table sets forth selected financial data as a percentage of total revenues for the periods indicated: THREE MONTHS ENDED MARCH 31, 2000 1999 Core research 77% 72% Advisory services and other 23 28 --- --- Total revenues 100 100 Cost of services and fulfillment 30 37 Selling and marketing 40 35 General and administrative 12 11 Depreciation and amortization 5 5 --- --- Income from operations 13 12 Other income 5 5 --- --- Income tax provision 18 17 Provision for income taxes 7 6 --- --- Net income 11% 11% === === THREE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999 REVENUES. Total revenues increased 72% to $30.8 million in the three months ended March 31, 2000 from $17.9 million in the three months ended March 31, 1999. Revenues from core research increased 83% to $23.8 million in the three months ended March 31, 2000 from $13.0 million in the three months ended March 31, 1999. The increase in revenues from core research was attributable primarily to an increase in the number of client companies to 1,926 at March 31, 2000 from 1,340 at March 31, 1999, an increase in the sales organization to 183 employees at March 31, 2000 from 113 at March 31, 1999, and sales of additional core research to existing clients. No single client company accounted for more than 2% of revenues for the three months ended March 31, 2000. Advisory services and other revenues increased 43% to $7.1 million in the three months ended March 31, 2000 from $5.0 million in the three months ended March 31, 1999. This increase was attributable primarily to increased demand for our advisory services programs. Revenues attributable to customers outside the United States increased 113% to $8.0 million in the three months ended March 31, 2000 from $3.7 million in the three months ended March 31, 1999, and increased as a percentage of total revenues to 26% for the three months ended March 31, 2000 from 21% for the same period in 1999. The increase in international revenues is attributable primarily to the Company's continued expansion of its European headquarters in Amsterdam, the Netherlands, the acquisition of United Kingdom-based Fletcher Research Limited in November 1999, and an increase in international sales personnel. We invoice our international clients in U.S. dollars, except for those billed by our subsidiary Fletcher Research Limited, which invoices its clients in British Pounds Sterling. COST OF SERVICES AND FULFILLMENT. Cost of services and fulfillment decreased as a percentage of total revenues to 30% in the three months ended 10

11 March 31, 2000 from 37% in the three months ended March 31, 1999. These expenses increased 41% to $9.3 million in the three months ended March 31, 2000 from $6.6 million in the three months ended March 31, 1999. The decrease in expense as a percentage of total revenues reflects a larger revenue base in 2000, a decrease in the number of events held during the quarter to two in 2000 from three in 1999, and lower production costs resulting from the leverage of our eResearch platform. The expense increase in the current period reflects increased research analyst staffing and related compensation expense. SELLING AND MARKETING. Selling and marketing expenses increased as a percentage of total revenues to 40% in the three months ended March 31, 2000 from 35% in the three months ended March 31, 1999. These expenses increased 97% to $12.2 million in the three months ended March 31, 2000 from $6.2 million in the three months ended March 31, 1999. The increases in expense and expense as a percentage of total revenues were principally due to the addition of direct salespeople and related commission and travel expenses. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased as a percentage of total revenues to 12% in the three months ended March 31, 2000 from 11% in the three months ended March 31, 1999. These expenses increased 85% to $3.8 million in the three months ended March 31, 2000 from $2.0 million in the three months ended March 31, 1999. The increases in expense and expense as a percentage of total revenues were principally due to increased staffing in the Company's operations, finance, and technology groups and related compensation and recruiting expenses. DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense increased 64% to $1.4 million in the three months ended March 31, 2000 from $873,000 in the three months ended March 31, 1999. The increase in these expenses was principally due to purchases of computer equipment, software, office furnishings and leasehold improvements to support business growth. OTHER INCOME, NET. Other income, consisting primarily of interest income, increased 69% to $1.5 million in the three months ended March 31, 2000 from $860,000 in the three months ended March 31, 1999. The increase was due to additional interest income from higher cash and marketable securities balances resulting from positive cash flows from operations, proceeds of $22.6 million from our offering of common stock in February 2000 and $7.3 million for exercises of stock options by employees. PROVISION FOR INCOME TAXES. During the three months ended March 31, 2000, we recorded a tax provision of $2.1 million, reflecting an effective tax rate of 37.5%. During the three months ended March 31, 1999, we recorded a tax provision of $1.2 million, which reflected an effective tax rate of 38%. The decrease in our effective tax rate resulted from a reduction in our effective state tax rate and an increase in our investments in tax-exempt marketable securities. LIQUIDITY AND CAPITAL RESOURCES We have financed our operations during these periods primarily through funds generated from operations. Memberships for core research, which constituted approximately 77% of our revenues for the three months ended March 31, 2000, are annually renewable and are generally payable in advance. We generated $34.8 million and $6.5 million in cash from operating activities during the three-month periods ended March 31, 2000 and 1999, respectively. During the three-months ended March 31, 2000, we used $39.5 million of cash in investing activities, consisting of $2.7 million for purchases of property and equipment, $1.0 million for a minority investment in an independent industry analyst research firm and $35.8 million for net purchases of marketable securities. We regularly invest excess funds in short- and intermediate-term interest-bearing obligations of investment grade. During the three-months ended March 31, 2000, we generated $30.0 million from financing activities, consisting of $22.6 million of net proceeds from our public offering of common stock and $7.3 million in proceeds from exercises of employee stock options. As a result of these option exercises during the three-months ended March 31, 2000, we will receive a tax benefit in the form of a tax deduction 11

12 that will offset approximately $10.6 million of our taxable income. This tax benefit is reflected as an increase in our Shareholders' Equity. As of March 31, 2000, we had cash and cash equivalents of $38.6 million and $121.1 million in marketable securities. We do not have a line of credit and do not anticipate the need for one in the foreseeable future. We plan to continue to introduce new products and services and to invest in our infrastructure over the next twelve months. We believe that our current cash balance, marketable securities, and cash flows from operations will satisfy working capital, financing activities, and capital expenditure requirements for at least the next two years. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The following discussion about our market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We do not use derivative financial instruments for speculative or trading purposes. INTEREST RATE SENSITIVITY. We maintain an investment portfolio consisting mainly of corporate obligations, federal agency obligations, state and municipal bonds, and U.S. Treasury notes with a weighted average maturity of less than one year. These held-to-maturity securities are subject to interest rate risk and will fall in value if market interest rates increase. If market interest rates were to increase immediately and uniformly by 10% from levels at March 31, 2000, the fair market value of the portfolio would decline by an immaterial amount. We have the ability to hold our fixed income investments until maturity. Therefore, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on our securities portfolio. The following table provides information about our investment portfolio. For investment securities, the table presents principal cash flows and related weighted average interest rated by expected maturity dates. Principal amounts by expected maturity in U.S. Dollars (in thousands, except interest rates): FAIR VALUE AT FY 2003 MARCH 31, AND 2000 FY 2000 FY 2001 FY 2002 THEREAFTER Cash equivalents $ 36,188 $36,188 $ -- $ -- $ -- Weighted average interest rate 5.55% 5.55% --% --% --% Investments $121,109 $62,918 $ 26,256 $11,063 $ 20,872 Weighted average interest rate 4.73% 4.31% 6.19% 4.71% 4.15% Total portfolio $157,297 $99,106 $ 26,256 $11,063 $ 20,872 Weighted average interest rate 4.91% 4.76% 6.19% 4.71% 4.15% FOREIGN CURRENCY EXCHANGE. On a global level, we face exposure to adverse movements in foreign currency exchange rates. This exposure may change over time as business practices evolve and could have a material adverse impact on our financial results. Historically, our primary exposure has been related to non-dollar-denominated operating expenses in Europe, Canada, and Asia, where we sell primarily in U.S. dollars. The introduction of the Euro as a common currency for members of the European Monetary Union has taken place in our fiscal year 2000. We have not determined what impact, if any, the Euro will have on foreign exchange exposure. We are prepared to hedge against fluctuations in the Euro if this exposure becomes material. As of March 31, 2000, the total assets related to non-dollar-denominated currencies was approximately $10.0 million. 12

13 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not currently a party to any material legal proceedings. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS On February 7, 2000 a Special Meeting of Stockholders was held to approve an amendment to the Company's Restated Certificate of Incorporation to increase the authorized number of shares of Common Stock from 25 million to 125 million shares. The proposal passed with the following vote: - -------------------------------------------------------------------------------- For: 6,543,419 Against or withheld: 1,449,572 Abstentions and Broker Non-Votes: 150 - -------------------------------------------------------------------------------- ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K None. 13

14 SIGNATURES 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 thereunto duly authorized. Forrester Research, Inc. By: /s/ George F. Colony --------------------------------------- George F. Colony Chairman of the Board and Chief Executive Officer Date: May 12, 2000 By: /s/ Susan Whirty Maffei --------------------------------------- Susan Whirty Maffei Chief Financial Officer and Vice President, Operations (principal financial and accounting officer) Date: May 12, 2000 14

5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORRESTER RESEARCH, INC.'S DECEMBER 31, 2000 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED IN FORM 10-K. U.S. DOLLARS 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 1 38,586,449 121,109,199 29,199,851 585,248 0 200,791,316 22,293,492 8,892,970 223,458,259 100,658,990 0 0 0 207,135 122,592,134 122,799,269 0 30,817,400 0 9,294,572 17,426,561 0 0 5,549,704 2,081,000 3,468,704 0 0 0 3,468,704 .17 .15