Forrester Research Reports Third-Quarter Financial Results; Board Of Directors Declares Special Dividend And Authorizes Additional Repurchase Of Common Stock
Forrester Research, Inc. (Nasdaq: FORR) today announced its third-quarter ended September 30, 2010 financial results. The company also announced that its board of directors has approved a special cash dividend of $3 per share and authorized the repurchase of up to an additional $60 million of its common stock.
- Total revenues were $59.8 million, compared with $53.9 million for the third quarter of last year.
- On a GAAP-reported basis, Forrester reported net income of $3.7 million, or $0.16 per diluted share, compared with net income of $4.3 million, or $0.19 per diluted share, for the same period last year. The effective tax rate for the third quarter of 2010 was 41 percent, compared with 44 percent for the same period last year.
- On a pro forma basis, net income was $4.4 million, or $0.19 per diluted share, for the third quarter of 2010, which reflects a pro forma effective tax rate of 40 percent. Pro forma net income excludes stock-based compensation of $1.2 million, amortization of $0.9 million of acquisition-related intangible assets, $0.4 million of duplicate lease costs, and net investment gains of $1.4 million. This compares with pro forma net income of $6.2 million, or $0.27 per diluted share, for the same period in 2009, which reflects a pro forma effective tax rate of 40 percent. Pro forma net income for the third quarter of 2009 excludes stock-based compensation of $1.4 million, amortization of $0.4 million of acquisition-related intangible assets, and net investment losses of $0.7 million.
“We had strong operating results in the third quarter,” said Michael A. Doyle, Forrester’s chief financial officer. “Revenue grew 11 percent to $59.8 million, and our pro forma operating margin was 13.8 percent, with revenue at the high end of our guidance and pro forma operating margin exceeding guidance. In addition, our key client metrics continue to trend upwards. Earnings per share in the quarter were negatively affected by $0.04 per share due to $1.5 million of foreign exchange translation losses. This resulted primarily from the euro strengthening against the dollar approximately 12 percent as compared with the end of the second quarter.”
Special Dividend
Forrester also announced today that its board of directors has approved a special dividend of $3 per common share payable on December 20, 2010 to shareholders of record on December 8, 2010. In addition, Forrester’s board of directors has authorized the repurchase of up to an additional $60 million of its common stock, bringing the total available authorization in excess of $100 million. The shares may be purchased from time to time in open market or privately negotiated transactions, and the shares purchased will be used for, among other things, Forrester’s employee and director stock plans. As of September 30, 2010, Forrester had approximately 22.3 million shares outstanding.
“Our board’s decision to pay a special dividend — Forrester’s first — reflects the strength of our business and our balance sheet,” said George F. Colony, Forrester’s chairman of the board and chief executive officer. “We continue to recover well from the recession with a strong operating performance, top-line growth approaching historical double-digit levels, and significant cash flow from operations. We remain confident that we have sufficient funds on hand to grow our business organically and through strategic acquisitions.”
Nine-Month Period Ended September 30, 2010, Financial Performance
- Total revenues were $183.6 million, compared with $171.9 million for the same period last year.
- On a GAAP-reported basis, Forrester reported net income of $16.4 million, or $0.71 per diluted share for the nine months ended September 30, 2010, compared with net income of $13.1 million, or $0.57 per diluted share, for the same period last year. The effective tax rate for the nine-month period of 2010 was 39 percent, compared with 45 percent for the same period last year.
- On a pro forma basis, net income was $18.9 million, or $0.82 per diluted share, for the nine months ended September 30, 2010, which reflects a pro forma effective tax rate of 40 percent. Pro forma net income excludes stock-based compensation of $3.7 million, amortization of $2.7 million of acquisition-related intangible assets, $0.3 million of acquisition-related credits, $0.4 million of duplicate lease costs, and net investment gains of $1.8 million. This compares with pro forma net income of $21.2 million, or $0.92 per diluted share, for the same period in 2009, which reflects a pro forma effective tax rate of 40 percent. Pro forma net income for the nine months ended September 30, 2009 excludes stock-based compensation of $4.9 million, amortization of $1.8 million of acquisition-related intangible assets, $3.1 million of reorganization costs, and net investment losses of $1.7 million.
A reconciliation of GAAP results to pro forma results may be found in the attached financial tables.
Forrester is providing fourth-quarter 2010 financial guidance as follows:
- Total revenues of approximately $65.0 million to $68.0 million.
- Operating margin of approximately 10.0 percent to 12.0 percent.
- Other income, on a net basis, is expected to be zero.
- An effective tax rate of 40 percent.
- Diluted earnings per share of approximately $0.16 to $0.22.
Fourth-Quarter 2010 (Pro Forma):
Pro forma financial guidance for the fourth quarter of 2010 excludes stock-based compensation of $1.1 million to $1.3 million, amortization of acquisition-related intangible assets of approximately $0.9 million, and any investment gains or losses.
- Pro forma operating margin of approximately 13.0 percent to 15.0 percent.
- Pro forma effective tax rate of 40 percent.
- Pro forma diluted earnings per share of approximately $0.21 to $0.27.
Forrester is providing full-year 2010 guidance as follows:
Full-Year 2010 (GAAP):
- Total revenues of approximately $247 million to $252 million.
- Operating margin of approximately 11.5 percent to 12.5 percent.
- Other income of approximately $1.3 million.
- An effective tax rate of 40 percent.
- Diluted earnings per share of approximately $0.87 to $0.93.
Full-Year 2010 (Pro Forma):
Pro forma financial guidance for full-year 2010 excludes stock-based compensation expense of approximately $5.0 million, amortization of acquisition-related intangible assets of approximately $3.6 million, and any investment gains or losses.
- Pro forma operating margin of approximately 15.0 percent to 16.0 percent.
- Pro forma effective tax rate of 40 percent.
- Pro forma diluted earnings per share of approximately $1.03 to $1.09.
The consolidated statements of income and the table of selected balance sheet and cash flow data are attached.
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 guidance for the fourth quarter of and full-year 2010. 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 respond to business and economic conditions, particularly in light of the global economic environment, technology spending, market trends, competition, industry consolidation, the ability to attract and retain professional staff, possible variations in Forrester’s quarterly operating results, any cost savings related to reductions in force and associated actions, 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 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.