Forrester Research, Inc. (Nasdaq: FORR) today announced its fourth-quarter and full-year 2004 financial results.

Fourth-Quarter Financial Performance

  • Total revenues were $38.0 million, compared with $35.3 million for the fourth quarter of 2003.
  • On a GAAP-reported basis, which reflects an effective tax rate of 33.7 percent, Forrester reported fourth-quarter net income of $3.5 million or $0.16 per diluted share, compared with net income of $87,000, or $0.00 per diluted share, for the same period in 2003.
  • On a pro forma basis, which excludes amortization of $1.3 million of acquisition-related intangible assets, a reorganization cost revision of $355,000, and net gains resulting from sales of equity securities and non-marketable investments totaling $305,000, and which reflects a pro forma effective tax rate of 35 percent, net income was $3.9 million, or $0.18 per diluted share, for the fourth quarter of 2004. This compares with pro forma net income of $3.9 million, or $0.17 per diluted share, for the same period in 2003, which excluded non-marketable investment impairments of $1.8 million, amortization of $2.6 million of acquisition-related intangible assets, reorganization costs of $1.4 million, costs of $117,000 related to the integration of Giga Information Group, Inc., and a pro forma effective tax rate of 35 percent.

Full-Year 2004 Financial Performance

  • Total revenues were $138.5 million, compared with $126.0 million for 2003.
  • On a GAAP-reported basis, which reflects an effective tax rate of 33.7 percent, Forrester reported net income of $4.1 million, or $0.18 per diluted share for 2004, compared with net income of $2.2 million, or $0.10 per diluted share, for 2003.
  • On a pro forma basis, which excludes amortization of $6.5 million of acquisition-related intangible assets, reorganization costs of $8.4 million related primarily to office space consolidations, and gains resulting from sales of equity securities and non-marketable investments totaling $1.4 million, and which reflects a pro forma effective tax rate of 35 percent, net income was $12.8 million, or $0.57 per diluted share, for 2004. This compares with pro forma net income of $11.7 million, or $0.51 per diluted share for 2003, which excludes amortization of $8.8 million of acquisition-related intangible assets, reorganization costs of $2.6 million, costs of $1.1 million related to the integration of Giga Information Group, Inc., non-marketable investment impairments of $2.4 million, and 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 financial performance in 2004 was solid, with key indicators moving in the right direction,” said George F. Colony, chairman of the board and chief executive officer. “Revenues for the year came in above the high end of our guidance, and we generated $18 million in cash flows from operations. Forrester also accomplished several initiatives aimed at expanding its portfolio of products. Early in 2004, we completed the rollout of WholeView 2™, our enhanced research product. Forrester also launched new Data and Forrester Oval Program™ offerings, creating additional cross-sell and new business opportunities. In 2005, Forrester remains committed to growing its business.”

Forrester’s research forecasts a 7 percent increase in technology spending in 2005. “An improved technology spending environment usually bodes well for Forrester,” said Colony. “In addition, our expanded product portfolio enables us to target new clients and new budgets, particularly in the marketing departments of $1 billion-plus companies. We continue to leverage our core research business, which serves as the foundation for everything we offer our clients.”

Forrester also announced today that its board of directors has authorized the repurchase of up to $50 million of its common stock. The shares may be purchased from time to time in open market or privately negotiated transactions. The shares repurchased will be used, among other things, for Forrester’s employee stock option and stock purchase plans. As of December 31, 2004, Forrester had approximately 21,620,000 shares of common stock outstanding.

Forrester is providing first-quarter and full-year 2005 guidance as follows:

First-Quarter 2005 (GAAP):

  • Total revenues of approximately $32.0 million to $34.0 million.
  • Operating margin of approximately 4 percent to 7 percent.
  • Interest income of approximately $700,000.
  • An effective tax rate of 35 percent to 36 percent.
  • Diluted earnings per share of approximately $0.05 to $0.12.

First-Quarter 2005 (Pro Forma):

Pro forma financial guidance for the first quarter of 2005 excludes amortization of acquisition-related intangible assets of approximately $1.1 million, as well as all gains and impairment charges related to marketable securities and non-marketable investments.

  • Pro forma operating margin of approximately 8 percent to 10 percent.
  • Pro forma diluted earnings per share of approximately $0.10 to $0.12.

The following full-year 2005 guidance does not include an estimate for the costs of expensing options in the second half of the year.

Full-Year 2005 (GAAP):

  • Total revenues of approximately $148.0 million to $153.0 million.
  • Operating margin of approximately 10 percent to 12 percent.
  • Interest income of approximately $2.6 million to $3.0 million.
  • An effective tax rate of 35 percent to 36 percent.
  • Diluted earnings per share of approximately $0.52 to $0.62.

Full-Year 2005 (Pro Forma):

Pro forma financial guidance for full-year 2005 excludes amortization of acquisition-related intangible assets of approximately $3.5 million, as well as all gains and impairment charges related to non-marketable securities.

  • Pro forma operating margin of approximately 12 percent to 14 percent.
  • Pro forma diluted earnings per share of approximately $0.62 to $0.67.

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 2005, statements about the potential success of product offerings, the amount of the charge and any cost savings related to reductions in force and associated actions, 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, 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, any cost savings related to reductions in force and associated actions, 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 below.