Forrester Research, Inc. (Nasdaq: FORR) today announced its fourth-quarter and year-end 2003 financial results, in line with its previous financial guidance.

Fourth-Quarter Financial Performance

  • Total revenues were $35.3 million, compared with $23.5 million for the fourth quarter of 2002.
  • On a GAAP-reported basis, which reflects an effective tax rate of 31 percent, Forrester reported fourth-quarter net income of $87,000, or $0.00 per diluted share, compared with net income of $3.5 million, or $0.15 per diluted share, for the same period in 2002.
  • On a pro forma basis, which excludes amortization of $2.6 million of acquisition-related intangible assets, costs of $117,000 related to the integration of Giga Information Group, Inc. (“Giga”), reorganization costs of $1.4 million, and impairments to certain non-marketable securities of $1.8 million, and which reflects a pro forma effective tax rate of 35 percent, net income was $3.9 million, or $0.17 per diluted share, for the fourth quarter of 2003. This compares with pro forma net income of $2.8 million, or $0.12 per diluted share, for the same period in 2002, which excludes amortization of acquisition-related intangible assets of $82,000 and impairments to certain non-marketable securities of $525,000.

Full-Year 2003 Financial Performance

  • Total revenues were $126.0 million, compared with $96.9 million for 2002.
  • On a GAAP-reported basis, which reflects an effective tax rate of 31 percent, Forrester reported net income of $2.2 million, or $0.10 per diluted share for 2003, compared with net income
  • On a pro forma basis, which excludes amortization of $8.8 million of acquisition-related intangible assets, costs of $1.1 million related to the integration of Giga, reorganization costs of $2.6 million, impairments to certain non-marketable securities of $2.4 million, and which reflects a pro forma effective tax rate of 35 percent, net income was $11.7 million, or $0.51 per diluted share, for 2003. This compares with pro forma net income of $11.8 million, or $0.50 per diluted share, for 2002, which excludes the amortization of acquisition-related assets of $328,000, reorganization charges of $12.2 million, and impairments to certain non-marketable securities of $4.1 million.

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

“Forrester’s fourth-quarter financial results continued to show signs of improvement and stabilization, including increases in deferred revenue and client retention rates,” said George F. Colony, chairman of the board and chief executive officer. “We were particularly pleased with the progress we made during the quarter because approximately 40 percent of our contracts were up for renewal at the same time we began selling WholeView 2™, our unified Forrester-Giga research product. The initial response to WholeView 2 has been favorable from both clients and prospects.

“Overall, 2003 was a very busy year for Forrester,” continued Colony. “After announcing and closing the acquisition of Giga early in the year, we moved quickly to integrate the research, sales, and operational groups. Based on significant client input, we developed WholeView 2 during the second half of the year, and rolled it out as technology budgets began to relax toward the end of 2003. The integration is now complete, and we believe we are well-positioned for 2004.”

In connection with the integration of the December 2003 acquisition of certain assets of European distributor, GigaGroup, S.A., Forrester has reduced its European headcount by 12 employees, or approximately 2 percent of its work force. For the first quarter of 2004, Forrester expects to record a charge in the range of $1.5 million to $2.5 million related to this reduction in force and the consolidation of European office space. On an annualized basis, associated savings are estimated to be approximately $2.5 million to $3.5 million.

Forrester is providing financial guidance as follows:
First-Quarter 2004 (GAAP):

  • Total revenues of approximately $29.0 million to $31.0 million.
  • Operating margin of approximately (2) percent to (6) percent.
  • Other income of approximately $650,000 to $750,000.
  • An effective tax rate of 33.5 percent.
  • Diluted earnings per share of approximately ($0.01) to ($0.05).

First-Quarter 2004 (Pro Forma):
Pro forma financial guidance for the first quarter of 2004 excludes amortization of acquisition-related intangible assets of approximately $2.3 million, a reorganization charge of approximately $1.5 million to $2.5 million, and any impairment charges related to non-marketable investments.

  • Pro forma operating margin of approximately 9 percent to 11 percent.
  • Pro forma effective tax rate of 35 percent, which varies from our actual effective tax rate of 33.5 percent because of our tax-free interest income decreasing as a percentage of our pro forma pre-tax income.
  • Pro forma diluted earnings per share of approximately $0.09 to $0.11.

Full-Year 2004 (GAAP):

  • Total revenues of approximately $133.0 million to $138.0 million.
  • Operating margin of approximately 4 percent to 8 percent, which assumes that no charges related to the San Francisco office lease are incurred during 2004.
  • Other income of approximately $2.7 million to $2.9 million.
  • An effective tax rate of 33.5 percent.
  • Diluted earnings per share of approximately $0.24 to $0.29, which assumes that no charges related to the San Francisco office lease are incurred during 2004.

Full-Year 2004 (Pro Forma):
Pro forma financial guidance for full-year 2004 excludes amortization of acquisition-related intangible assets of approximately $6.4 million, any impairment charges related to non-marketable investments, and a reorganization charge of approximately $1.5 million to $2.5 million.

  • Pro forma operating margin of approximately 11 percent to 13 percent.
  • Pro forma effective tax rate of 35 percent, which varies from our actual effective tax rate of 33.5 percent because of our tax-free interest income decreasing as a percentage of our pro forma pre-tax income.
  • Pro forma diluted earnings per share of approximately $0.52 to $0.57, which assumes that no charges related to the San Francisco office lease are incurred during 2004.

Separately, Forrester has hired Gail Mann as its new chief legal counsel. Mann brings 25 years of legal experience to Forrester and earned her J.D., magna cum laude, from Georgetown University Law Center.

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 first quarter of and full-year 2004, statements about the potential success of WholeView 2 and other product offerings, the amount of the charge and any cost savings related to the reduction in force, and the ability of Forrester to achieve success as the economy improves. 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, market trends, competition, 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, the actual amount of the charge and any cost savings related to the reduction in force, 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.