Forrester Research, Inc. (Nasdaq: FORR) today announced its fourth-quarter and full-year 2005 financial results.

Fourth-Quarter Financial Performance

  • Total revenues increased 9 percent to $41.2 million, compared with $38.0 million for the fourth quarter of last year.
  • On a GAAP-reported basis, which reflects an effective tax rate of 37 percent, Forrester reported net income of $3.6 million or $0.16 per diluted share, compared with net income of $3.5 million, or $0.16 per diluted share, for the same period last year.
  • On a pro forma basis, net income was $4.8 million or $0.22 per diluted share for the fourth quarter of 2005, which excludes amortization of $782,000 of acquisition-related intangible assets, non-cash stock-based compensation expense of $537,000, and net realized losses and impairments of non-marketable investments of $326,000, and reflects a pro forma effective tax rate of 35 percent. This compares with pro forma net income of $3.9 million, or $0.18 per diluted share, for the same period in 2004, which excludes amortization of $1.3 million of acquisition-related intangible assets, a reversal of reorganization costs of $355,000, and net marketable and non-marketable investment gains of $305,000, and reflects a pro forma effective tax rate of 35 percent.

Full-Year 2005 Financial Performance

  • Total revenues increased 11 percent to $153.2 million, compared with $138.5 million for 2004.
  • On a GAAP-reported basis, which reflects an effective tax rate of 41 percent, Forrester reported net income of $11.3 million, or $0.52 per diluted share for 2005, compared with net income of $4.1 million or $0.18 per diluted share for 2004.
  • On a pro forma basis, net income was $14.8 million or $0.68 per diluted share for 2005, which excludes amortization of $3.5 million of acquisition-related intangible assets, non-cash stock-based compensation expense of $1.6 million, net marketable and non-marketable investment gains and impairments of $1.7 million, and reflects a pro forma effective tax rate of 35 percent. This compares with pro forma net income of $12.8 million, or $0.57 per diluted share for the same period last year, which excludes amortization of $6.5 million of acquisition-related intangible assets, reorganization costs of $8.4 million primarily due to office space consolidations, and net marketable and non-marketable investment gains of $1.4 million, and reflects 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 made important gains in 2005,” said George F. Colony, chairman of the board and chief executive officer. “Full-year revenues grew 11 percent, marking the first organic double-digit growth rate for the company since 2000. Cash flows from operations increased 33 percent to $23.9 million for 2005. Client and dollar retention rates remained high at 78 percent and 87 percent, respectively.”

“During the past year, Forrester made progress on its goal to stabilize and increase sales of its core research product, WholeView 2™,” said Colony. “In addition, we posted healthy growth in other products including consulting, data, and Forrester Leadership Boards, formerly known as the Forrester Oval Program. In 2006, we will maintain our primary focus to drive sales of syndicated products, particularly WholeView 2.”

Forrester is providing first-quarter 2006 financial guidance as follows:

Full-Year 2006 (GAAP):

GAAP financial guidance includes an estimate of $8.0 million to $10.0 million in non-cash stock-based compensation expense related to the adoption of SFAS 123R, Share-Based Payment, and its related estimated impact on the effective tax rate. The Company continues to review the impact of SFAS 123R and intends to update guidance when more precise data is available.

  • Total revenues of approximately $175.0 million to $180.0 million.
  • Operating margin of approximately 7 percent to 9 percent.
  • Other income of approximately $3.2 million.
  • An effective tax rate of 44 percent.
  • Diluted earnings per share of approximately $0.46 to $0.54.

Full-Year 2006 (Pro Forma):

Pro forma financial guidance for full-year 2006 excludes amortization of acquisition-related intangible assets of approximately $2.1 million, non-cash stock-based compensation expense of approximately $8.0 million to $10.0 million, and it does not include any estimate of gains or impairment charges related to non-marketable investments.

  • Pro forma operating margin of approximately 14 percent to 15 percent.
  • Pro forma diluted earnings per share of approximately $0.80 to $0.86.
  • An effective tax rate of 37 percent.