Forrester Research, Inc. (Nasdaq: FORR) today announced its third-quarter ended September 30, 2004 financial results.

Third-Quarter Financial Performance

  • Total revenues were $33.9 million, compared with $32.2 million for the third quarter of last year.
  • On a GAAP-reported basis, which reflects an effective tax rate of 33.5 percent, Forrester reported third-quarter net income of $3.2 million or $0.14 per diluted share, compared with net income of $186,000, or $0.01 per diluted share, for the same period last year.
  • On a pro forma basis, which excludes amortization of $1.4 million of acquisition-related intangible assets, gains resulting from sales of marketable securities and non-marketable investments totaling $1.0 million, and which reflects a pro forma effective tax rate of 35 percent, net income was $3.4 million, or $0.15 per diluted share, for the third quarter of 2004. This compares with pro forma net income of $2.8 million, or $0.12 per diluted share, for the same period in 2003, which excluded amortization of $2.6 million of acquisition-related intangible assets, reorganization costs of $1.2 million, costs of $167,000 related to the integration of Giga Information Group, Inc., and a pro forma effective tax rate of 35 percent.

Nine-Month Period Ended September 30, 2004, Financial Performance

  • Total revenues were $100.5 million, compared with $90.7 million for the same period last year.
  • On a GAAP-reported basis, which reflects an effective tax rate of 33.5 percent, Forrester reported net income of $606,000, or $0.03 per diluted share for the nine months ended 2004, compared to net income of $2.1 million or $0.09 per diluted share for the same period last year.
  • On a pro forma basis, which excludes amortization of $5.1 million of acquisition-related intangible assets, reorganization costs of $8.8 million related primarily to office space consolidations, gains resulting from sales of marketable securities and non-marketable investments totaling $1.0 million, and which reflects a pro forma effective tax rate of 35 percent, net income was $8.9 million, or $0.40 per diluted share, for the nine months ended 2004. This compares with pro forma net income of $7.4 million, or $0.33 per diluted share for the same period last year, which excludes amortization of $6.1 million of acquisition-related intangible assets, reorganization costs of $1.2 million, costs of $938,000 related to the integration of Giga Information Group, Inc., a net loss of $63,000 resulting from sales of marketable securities and non-marketable investments, 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.

“The second half of the year got off to a good start in the third quarter,” said George F. Colony, chairman of the board and chief executive officer. “Dollar retention significantly improved to 86 percent, up from 73 percent a year ago. Forrester’s key financial metrics were positive during the third quarter: renewals and enrichment were strong, cross-sell opportunities increased, and client company retention continued on the upswing. In the fourth quarter, we will remain focused on our busiest season for renewals while attracting more new business before the end of the year.”

Forrester is providing fourth-quarter and reaffirming full-year 2004 guidance as follows:

Fourth-Quarter 2004 (GAAP):

  • Total revenues of approximately $35.0 million to $37.0 million.
  • Operating margin of approximately 8 percent to 10 percent.
  • Interest income of approximately $650,000.
  • An effective tax rate of 33.5 percent.
  • Diluted earnings per share of approximately $0.10 to $0.12.

Fourth-Quarter 2004 (Pro Forma):

  • Pro forma financial guidance for the fourth quarter of 2004 excludes amortization of acquisition-related intangible assets of approximately $1.3 million, as well as all gains and impairment charges related to marketable securities and non-marketable investments.
  • Pro forma operating margin of approximately 13 percent to 15 percent.
  • Pro forma effective tax rate of 35 percent, which varies from our actual effective tax rate of 33.5 percent due to 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 2004 (GAAP):

  • Total revenues of approximately $133.0 million to $138.0 million.
  • Operating margin of approximately 0 percent to 2 percent.
  • Interest income of approximately $2.7 million to $2.8 million.
  • An effective tax rate of 33.5 percent.
  • Diluted earnings per share of approximately $0.10 to $0.14.

Full-Year 2004 (Pro Forma):

  • Pro forma financial guidance for full-year 2004 excludes amortization of acquisition-related intangible assets of approximately $6.5 million, all gains and impairment charges related to non-marketable securities, and reorganization and integration charges of approximately $8.8 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 due to 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.

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 2004, statements about the potential success of product offerings, the ability to achieve all of the anticipated benefits from the acquisition of Giga Information Group, 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, 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, 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 attached.