Forrester Research Announces Third-Quarter 2003 Financial Results
Forrester Research, Inc. (Nasdaq: FORR) today announced financial results for the third quarter ended September 30, 2003, in line with its previous financial guidance.
Third-Quarter Financial Performance
- Total revenues were $32.2 million, compared with $21.9 million for the third quarter of last year.
- On a GAAP-reported basis, which reflects an effective tax rate of 31 percent, Forrester reported third-quarter net income of $186,000, or $0.01 per diluted share compared to a net loss of $307,000, or ($0.01) per diluted share for the same period last year.
- On a pro forma basis, which excludes amortization of acquisition-related intangible assets of $2.6 million, costs of $167,000 related to the integration of Giga Information Group, Inc., and reorganization costs of $1.2 million, and which reflects a pro forma effective tax rate of 35 percent, net income was $2.8 million, or $0.12 per diluted share, for the third quarter of 2003. This compares with pro forma net income of $2.6 million, or $0.11 per diluted share for the same period last year, which excludes amortization of acquisition-related intangible assets of $82,000, impairments of certain non-marketable securities of $859,000, and reorganization costs of $3.1 million.
Nine-Month Period Ended September 30, 2003 Financial Performance
- Total revenues were $90.7 million, compared with $73.4 million for the same period last year.
- On a GAAP-reported basis, which reflects an effective tax rate of 31 percent, Forrester reported net income of $2.1 million, or $0.09 per diluted share for the nine months ended 2003, compared to a net loss of $2.9 million or ($0.12) per diluted share for the same period last year.
- On a pro forma basis, which excludes amortization of acquisition-related intangible assets of $6.1 million, costs of $938,000 related to the integration of Giga Information Group, Inc., reorganization costs of $1.2 million, and a write-down of $572,000 related to impairments of certain non-marketable securities, and which reflects a pro forma effective tax rate of 35 percent, net income was $7.8 million, or $0.34 per diluted share, for the nine months ended 2003. This compares with pro forma net income of $9.0 million, or $0.38 per diluted share for the same period last year, which excludes a reorganization charge of $12.2 million, amortization of acquisition-related intangible assets of $246,000, and impairments of certain non-marketable securities of $3.6 million.
A reconciliation of GAAP results to pro forma results may be found in the attached financial tables.
“The third quarter showed modest improvement in Forrester’s business,” said George F. Colony, chairman of the board and chief executive officer. “New business as well as cross-sell business between legacy Forrester and Giga accounts increased. Companies began to emerge from their hibernation to become more engaged in technology projects and technology spending. I’m cautiously optimistic about our business based on the slight improvement we saw in the third quarter.”
Forrester also continued to make major progress toward finalizing the integration of Giga. “During the third quarter, we completed the final steps in the organizational integration of the two companies,” said Colony. “We are one team across Forrester. Now early in the fourth quarter, we are rolling out a significantly enhanced research offering called WholeView 2™ that combines the best of Forrester and Giga. WholeView 2 is a comprehensive, collaborative view of technology from deep IT issues to broad business issues. WholeView 2, developed after extensive research and planning that included input from numerous clients, is being marketed and sold during the fourth quarter.”
The Forrester Oval Program™, comprising five technology boards, continued to gain traction during the third quarter. The CIO Group added 18 new CIOs from large corporations. The four technology Councils — boards for non-CIO technology professionals — gained 17 new members for a total Oval membership of 190.
Forrester is providing financial guidance as follows:
Fourth-Quarter 2003 (GAAP):
- Total revenues of approximately $32.0 million to $35.0 million.
- Operating margin of approximately 5 percent to 8 percent, which assumes that no charges related to the San Francisco office lease are incurred during 2003.
- Other income of approximately $700,000 to $800,000.
- An effective tax rate of 31 percent.
- Diluted earnings per share of approximately $0.06 to $0.10, which assumes that no charges related to the San Francisco office lease are incurred during 2003.
Fourth-Quarter 2003 (Pro Forma):
Pro forma financial guidance for the fourth quarter 2003 excludes amortization of acquisition-related intangible assets of approximately $2.6 million and any impairment charges related to non-marketable investments.
- Pro forma operating margin of approximately 14 percent to 16 percent.
- Pro forma effective tax rate of 35 percent, which varies from our actual effective tax rate of 31 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 $0.15 to $0.17.
Full-Year 2003 (GAAP):
- Total revenues of approximately $120.0 million to $125.0 million.
- Operating margin of approximately (1) percent to 4 percent, which assumes that no charges related to the San Francisco office lease are incurred during 2003.
- Other income of approximately $3.8 million to $4.2 million.
- An effective tax rate of 31 percent.
- Diluted earnings per share of approximately $0.12 to $0.20, which assumes that no charges related to the San Francisco office lease are incurred during 2003.
Full-Year 2003 (Pro Forma):
Pro forma financial guidance for the full-year 2003 excludes amortization of acquisition-related intangible assets of approximately $8.7 million, impairment charges related to non-marketable investments, and reorganization and integration charges of approximately $2.2 million.
- Pro forma operating margin of approximately 10 percent to 12 percent.
- Pro forma effective tax rate of 35 percent, which varies from our actual effective tax rate of 31 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 $0.47 to $0.53.
Separately, Forrester General Counsel Timothy J. Moynihan is leaving the company at the end of 2003. A search for a new general counsel is under way.
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 fourth quarter of and full-year 2003, statements about the potential success of WholeView™ and other product offerings, Forrester’s ability to successfully integrate Giga, 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 successfully integrate Giga into Forrester’s operations, 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, and Forrester’s dependence on renewals of its membership-based research services and on key personnel. Forrester Research 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.