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Forrester Research (Nasdaq: FORR) is one of the most influential research and advisory firms in the world. We work with business and technology leaders to develop customer-obsessed strategies that drive growth. Forrester’s unique insights are grounded in annual surveys of more than 675,000 consumers and business leaders worldwide, rigorous and objective methodologies, and the shared wisdom of our most innovative clients. Through proprietary research, data, custom consulting, exclusive executive peer groups, and events, the Forrester experience is about a singular and powerful purpose: to challenge the thinking of our clients to help them lead change in their organizations.

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Forrester Research Reports Preliminary Fourth-Quarter And Full-Year 2006 Financial Results

CAMBRIDGE, Mass.--(BUSINESS WIRE)--Feb. 14, 2007--Forrester Research, Inc. (Nasdaq: FORR) today announced its preliminary and unaudited fourth-quarter and full-year 2006 financial results.

    Preliminary Fourth-Quarter Financial Performance

    --  Total revenues increased 20.2 percent to $48.9 million,
        compared with $40.7 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 $5.5 million
        or $0.23 per diluted share, compared with net income of $3.6
        million, or $0.16 per diluted share, for the same period last
        year.

    --  On a pro forma basis, net income was $7.3 million or $0.31 per
        diluted share, for the fourth quarter of 2006, which excludes
        amortization of $462,000 of acquisition-related intangible
        assets, non-cash stock-based compensation expense of $2.5
        million, and net realized gains on non-marketable investments
        of $90,000 and reflects a pro forma effective tax rate of 37
        percent. This compares with pro forma net income of $4.8
        million, or $0.22 per diluted share, for the same period in
        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.

    Preliminary Full-Year 2006 Financial Performance

    --  Total revenues increased 19.9 percent to $181.5 million,
        compared with $151.4 million for 2005.

    --  On a GAAP-reported basis, which reflects an effective tax rate
        of 43 percent, Forrester reported net income of $16.2 million,
        or $0.70 per diluted share for 2006, compared with net income
        of $11.3 million or $0.52 per diluted share for 2005.

    --  On a pro forma basis, net income was $22.3 million or $0.97
        per diluted share for 2006, which excludes amortization of
        $2.1 million of acquisition-related intangible assets,
        non-cash stock-based compensation expense of $8.5 million, net
        marketable and non-marketable investment gains of $395,000,
        income from discontinued operations of $300,000, and gain on
        sale of discontinued operations of $1.4 million, and reflects
        a pro forma effective tax rate of 37 percent. This compares
        with pro forma net income of $15.1 million, or $0.69 per
        diluted share for the same period last year, 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 of
        $1.7 million, and reflects a pro forma effective tax rate of
        35 percent.

These results are preliminary and subject to possible adjustment as a result of an ongoing investigation into Forrester's stock option granting practices, which is discussed in more detail below. A reconciliation of preliminary and unaudited GAAP results to pro forma results may be found in the attached financial tables.

"We are extremely pleased with our Q4 and full-year 2006 performance," said George F. Colony, Forrester's chairman of the board, chief executive officer, and acting chief financial officer. "Forrester's top-line growth of 20 percent and the healthy increase in our operating margin indicate that we are on target for achieving our long-term performance plan. In 2006, we focused on leveraging our syndicated offerings, which proved to be successful."

Forrester Expands Role-Based Strategy For An Enhanced Client Experience

For the past several quarters, Forrester's fastest-growing business has been the Forrester Leadership Boards, the company's executive membership programs. Based on that success -- and input from more than 1,500 clients over the past 18 months -- Forrester has accelerated execution of a role-based strategy to focus attention on serving individual leaders in 18 roles across its client base.

Forrester's syndicated offering, now called RoleView(TM) and available today, provides clients with more relevant research, easier access to the insight that will make them successful, and new community tools to provide a consummate view of the problems they face.

"Our 2007 role-focused strategy simply means greater relevant content for our clients that's easier to use," said Colony. "Forrester's commitment to serve professional roles is both a natural evolution of our clients' current needs and an extension of what we've offered business professionals through our leadership boards for several years. We are in a strong position to make leaders successful every day."

To support this strategy, Forrester has undertaken a comprehensive re-organization into three client groups that broadly represent Forrester's global client base: IT, marketing and strategy, and technology industry professionals. Each of these client groups is led by a proven Forrester leader: Julie Meringer heads the IT client group; Dennis Van Lingen oversees the marketing and strategy client group; Mark Nemec leads the technology industry client group. Meringer, van Lingen -- both Forrester veterans -- and Nemec -- who last year managed the Forrester Leadership Boards for the Americas -- have all joined Forrester's executive management team, reporting to COO Charles Rutstein.

For a list of the specific job roles and more insight into Forrester's offerings, please visit www.forrester.com.

Investigation into Stock Option Granting Practices

Forrester also announced that the Audit Committee of its Board of Directors has reported to the Board of Directors certain findings of its investigation into the conduct of its officers, directors and former officers in connection with the granting of stock options, principally during the period between 1997 and 2003. The Committee was assisted in the investigation by the law firms of Ropes & Gray LLP and Skadden, Arps, Slate, Meagher & Flom LLP. The Committee's principal findings were:

    --  Historically, there was a lack of effective controls and
        documentation in the process of granting stock options,
        particularly during the 1997-2003 time period. There were also
        numerous instances in which approval processes were not
        properly followed and in which there were irregularities in
        setting the exercise price for certain options. These
        irregularities involved the selection of exercise prices
        different from, and usually lower than, the market value of
        the underlying common stock on the date the option grants were
        finalized. As a result, although Forrester has not yet
        established the correct measurement date for the option grants
        in question, it believes that the appropriate accounting may
        have required it to record additional stock-based compensation
        charges for certain options that were granted during this time
        period.

    --  The responsibility for issuing, and establishing controls
        over, option grants during this time period appears to have
        been shared between Forrester's finance and strategic growth
        (human resources) organizations. The individuals who led those
        organizations during this time period are no longer at the
        company.

    --  Although Forrester's chief executive officer and the two
        current directors who served on the Compensation Committee
        participated in some measure in approving stock option grants
        during this time period, the Committee has found no evidence
        to suggest that any of them was aware of improper practices
        with respect to stock options.

The investigation is ongoing and the Committee is being assisted by Huron Consulting Group in its efforts to evaluate whether Forrester used the correct accounting measurement date for its historical option grants. At this time, Forrester is not able to determine whether any material adjustments will be required to its previously issued financial statements or the preliminary and unaudited financial results disclosed in this release, or which periods may be affected. If adjustments are required that affect the 2006 period or prior periods, the actual results could be materially different from those in this press release or as previously reported.

As a result of the investigation, Forrester is unable at this time to predict whether it will be able to file on a timely basis its Annual Report on Form 10-K, which is due on March 16, 2007. When the Form 10-K is filed, the financial statements may differ from the results disclosed in this press release, not only as a result of any required stock-based compensation charges arising from prior periods, but also because judgments and estimates that management used in preparing the preliminary financial results reported in this press release will need to be updated to the date of the filing. These preliminary results also remain subject to review by the company's independent registered public accounting firm.

2007 Preliminary Business Outlook

Forrester is providing first-quarter 2007 financial guidance as follows:

First-Quarter 2007 (GAAP):

GAAP financial guidance includes an estimate of $2.5 million to $3.0 million in non-cash stock-based compensation expense.

    --  Total revenues of approximately $44.0 million to $46.0
        million.

    --  Operating margin of approximately 0 to 2 percent.

    --  Other income of approximately $1.8 million.

    --  An effective tax rate of 43 percent.

    --  Diluted earnings per share of approximately $0.03 to $0.05.

    First-Quarter 2007 (Pro Forma):

Pro forma financial guidance for the first quarter of 2007 excludes amortization of acquisition-related intangible assets of approximately $400,000, non-cash stock-based compensation expense of approximately $2.5 million to $3.0 million, and does not include any estimate of gains or impairment charges related to non-marketable investments or any professional service fees or other expenses associated with the ongoing investigation into Forrester's stock option practices.

    --  Pro forma operating margin of approximately 7 percent to 9
        percent.

    --  Pro forma effective tax rate of 39 percent.

    --  Pro forma diluted earnings per share of approximately $0.12 to
        $0.15.

    Forrester is providing full-year 2007 guidance as follows:

    Full-Year 2007 (GAAP):

GAAP financial guidance includes an estimate of $10.0 million to $11.0 million in non-cash stock-based compensation expense.

    --  Total revenues of approximately $207.0 million to $212.0
        million.

    --  Operating margin of approximately 8 percent to 10 percent.

    --  Other income of approximately $7.0 million.

    --  An effective tax rate of 43 percent.

    --  Diluted earnings per share of approximately $0.67 to $0.71.

    Full-Year 2007(Pro Forma):

Pro forma financial guidance for full-year 2007 excludes amortization of acquisition-related intangible assets of approximately $1.3 million, non-cash stock-based compensation expense of approximately $10.0 million to $11.0 million, and does not include any estimate of gains or impairment charges related to non-marketable investments or any professional service fees or other expenses associated with the ongoing investigation into Forrester's stock option practices.

    --  Pro forma operating margin of approximately 16.5 percent to
        17.5 percent.

    --  Pro forma diluted earnings per share of approximately $1.02 to
        $1.06.

    --  An effective tax rate of 39 percent.

This guidance is similarly preliminary and subject to adjustment as a result of Forrester's investigation into its stock option granting practices.

Forrester Research, Inc. (Nasdaq: FORR) is an independent technology and market research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. For more than 23 years, Forrester has been making leaders successful every day through its proprietary research, consulting, events and peer-to-peer executive programs. For more information, visit www.forrester.com.

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 and operating targets for the first quarter of and full-year 2007 and the potential for adjustments to the financial results included in this press release or as previously reported. These statements are based on Forrester's current plans and expectations and involve risks and uncertainties that could cause actual activities and results to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual activities and results to differ include, among others, the outcome of the pending review of Forrester's stock option practices and the possible restatement of financial statements for prior periods, 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, 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.

(C) 2007, Forrester Research, Inc. All rights reserved. Forrester, RoleView and Forrester Leadership Boards are trademarks of Forrester Research, Inc.

Forrester Research, Inc.
Consolidated Statements of Income
----------------------------------------------------------------------
(In thousands, except per share data)

                              Three months ended   Year ended December
                                  December 31,             31,
                                 2006      2005      2006      2005
                              -------------------- -------------------
                                  (Unaudited)          (Unaudited)

Revenues
 Research services               $30,596  $25,641  $114,876  $ 96,699
 Advisory services and other      18,352   15,070    66,597    54,699
                              ----------- -------- --------- ---------

Total revenues                    48,948   40,711   181,473   151,398

Operating expenses
 Cost of services and
  fulfillment                     19,013   15,820    73,704    60,262
 Selling and marketing            15,597   13,418    59,945    50,974
 General and administrative        6,094    4,543    22,984    17,904
 Depreciation                        871      925     3,618     3,539
 Amortization of intangible
  assets                             462      782     2,060     3,527
                              ----------- -------- --------- ---------

Total operating expenses          42,037   35,488   162,311   136,206

 Income from continuing
  operations                       6,911    5,223    19,162    15,192

 Other income, net                 1,721      799     5,657     3,027
 Realized gains on sales of
  securities and non-
  marketable investments, net         90     (326)      395     1,695
                              ----------- -------- --------- ---------

 Income from continuing
  operations before income
  taxes                            8,722    5,696    25,214    19,914

 Income tax provision              3,229    2,097    10,742     8,247
                              ----------- -------- --------- ---------

 Income from continuing
  operations                       5,493    3,599    14,472    11,667

 Discontinued operations
 Income (loss) from
  discontinued operations,
  net of taxes                         -       (5)      300      (319)
 Gain on sale of discontinued
  operations, net of taxes             -        -     1,399         -


 Net income                      $ 5,493  $ 3,594  $ 16,171  $ 11,348
                              =========== ======== ========= =========



 Diluted income per share
  from continuing operations     $  0.23  $  0.16  $   0.63  $   0.53
 Diluted income per share
  from discontinued
  operations                     $     -  $    (0) $   0.07  $  (0.01)
                              =========== ======== ========= =========
 Diluted income per share
  from net income                $  0.23  $  0.16  $   0.70  $   0.52
                              =========== ======== ========= =========

                              =========== ======== ========= =========
 Diluted weighted average
  shares outstanding              23,822   21,912    22,968    21,883
                              =========== ======== ========= =========

 Basic income per share from
  continuing operations          $  0.24  $  0.17  $   0.65  $   0.54
 Basic income per share from
  discontinued operations        $     -  $ (0.00) $   0.08  $  (0.01)
                              =========== ======== ========= =========
 Basic income per share from
  net income                     $  0.24  $  0.17  $   0.73  $   0.53
                              =========== ======== ========= =========

                              =========== ======== ========= =========
 Basic weighted average
  shares outstanding              22,970   21,246    22,195    21,413
                              =========== ======== ========= =========





Pro forma data (1):
 Income from continuing
  operations                     $ 6,911  $ 5,223  $ 19,162  $ 15,192
 Amortization of intangible
  assets                             462      782     2,060     3,527
                              ----------- -------- --------- ---------
 Non-cash stock-based
  compensation included in
  the following expense
  categories:
  Cost of services and
   fulfillment                     1,178      294     3,817       853
  Selling and marketing              645      117     2,354       338
  General and administrative         649      126     2,343       365
                              ----------- -------- --------- ---------



 Pro forma income from
  continuing operations            9,845    6,542    29,736    20,275

 Other income, net                 1,721      799     5,657     3,027
                              ----------- -------- --------- ---------
 Pro forma income before
  income taxes                    11,566    7,341    35,393    23,302

 Pro forma income tax
  provision                        4,279    2,569    13,095     8,156
                              ----------- -------- --------- ---------

 Pro forma net income            $ 7,287  $ 4,772  $ 22,298  $ 15,146
                              =========== ======== ========= =========

 Pro forma diluted earnings
  per share                      $  0.31  $  0.22  $   0.97  $   0.69
                              =========== ======== ========= =========
 Diluted weighted average
  shares outstanding              23,822   21,912    22,968    21,883
                              =========== ======== ========= =========
(1)Forrester believes that pro forma financial results provide
    investors with consistent and comparable information to aid in the
    understanding of Forrester's ongoing business. Our pro forma
    presentation excludes amortization of intangibles, non-cash stock-
    based compensation expense and gains or impairments of non-
    marketable investments, gains from sales of securities and gains
    and income from discontinued operations as well as their related
    tax effects. This does not purport to be prepared in accordance
    with Accounting Principles Generally Accepted in the United
    States.
Forrester Research, Inc.
Consolidated Balance Sheets
----------------------------------------------------------------------
(In thousands)

                                           December 31,  December 31,
                                              2006           2005
                                          -------------- -------------


Assets:
   Cash and cash equivalents                 $   39,157    $   48,538
   Available-for-sale securities                168,676        83,730
   Accounts receivable, net                      59,727        52,177
   Deferred commissions                          10,117         8,940
   Prepaid expenses and other current
    assets                                        7,610         5,126
                                          -------------- -------------
Total current assets                            285,287       198,511
   Property and equipment, net                    5,611         5,771
   Goodwill, net                                 53,073        53,034
   Intangible assets, net                         1,517         3,530
   Deferred income taxes                         28,450        36,941
   Non-marketable investments and other
    assets                                       13,630        13,915
                                          -------------- -------------
Total assets                                 $  387,568    $  311,702
                                          ============== =============

Liabilities and stockholders' equity:
   Accounts payable                          $    2,878    $    1,716
   Accrued expenses                              29,313        24,569
   Deferred revenue                              99,875        86,663
                                          -------------- -------------
Total liabilities                               132,066       112,948
   Preferred stock                                    -             -
   Common stock                                     279           254
   Additional paid-in capital                   245,073       192,209
   Retained earnings                             98,596        82,425
   Treasury stock, at cost                      (85,834)      (73,530)
   Accumulated other comprehensive loss          (2,612)       (2,604)
                                          -------------- -------------
Total stockholders' equity                      255,502       198,754
                                          -------------- -------------
Total liabilities and stockholders'
 equity                                      $  387,568    $  311,702
                                          ============== =============
Forrester Research, Inc.
Consolidated Statements Cash Flows
----------------------------------------------------------------------
(In thousands)

                                               Year ended December 31,
                                                  2006        2005
                                               -----------------------
                                                     (Unaudited)

Cash flows from continuing operations:
 Net Income                                         16,171     11,348
 Income from discontinued operations                  (300)       319
 Gain on disposal of discontinued operations,
  net                                               (1,399)         -
                                               ------------ ----------

 Income from continuing operations                  14,472     11,667

 Adjustments to reconcile net income to net
  cash provided by operating activities -
  Depreciation                                       3,551      3,539
  Amortization of intangible assets                  2,060      3,527
  Non-cash stock-based compensation                  8,515      1,556
  Tax benefit from exercises of employee stock
   options                                               -      1,387
  Excess tax benefits from non-cash stock-
   based compensation                               (1,854)         -
  Non-marketable investments gains, net               (348)      (206)
  Realized gain on sale of securities                    -     (1,489)
  Deferred income taxes                              8,781      5,261
  Increase in provision for doubtful accounts          353        100
  Loss on disposal of fixed assets                      67          -
  Accretion of premiums on marketable
   securities                                          852      1,080
  Changes in assets and liabilities -
   Accounts receivable                              (7,765)   (14,307)
   Deferred commissions                             (1,267)    (2,084)
   Prepaid expenses and other current assets        (1,906)      (545)
   Accounts payable                                  1,171     (2,063)
   Accrued expenses                                  4,457       (412)
   Deferred revenue                                 12,751     16,508
                                               -----------------------
Net cash provided by continuing operations          43,890     23,519
Net cash provided by discontinued operations           326        413
                                               ------------ ----------
Net cash provided by operating activities           44,216     23,932

Cash flows from investing activities:
 Purchases of property and equipment                (3,334)    (3,012)
 Purchase of non-marketable investments               (300)      (700)
 Proceeds from non-marketable investments              555        741
 Proceeds from sale of discontinued operations       1,642          -
 Decrease in other assets                              391        995
 Purchase of available-for-sale securities        (565,495)  (260,362)
 Proceeds from sales and maturities of
  available-for-sale securities                    480,166    264,626
                                               ------------ ----------
Net cash (used in) provided by investing
 activities                                        (86,375)     2,288

Cash flows from financing activities:
 Proceeds from issuance of common stock under
  employee stock option plans and employee
  stock purchase plan                               42,526      8,963
 Excess tax benefits from non-cash stock-based
  compensation                                       1,854          -
 Acquisition of treasury shares                    (12,304)   (23,474)
                                               ------------ ----------
Net cash provided by (used in) financing
 activities                                         32,076    (14,511)

Effect of exchange rate changes on cash and
 cash equivalents                                      702       (499)
                                               ------------ ----------

Net (decrease) increase in cash and cash
 equivalents                                        (9,381)    11,210

Cash and cash equivalents, beginning of period      48,538     37,328
                                               ------------ ----------

Cash and cash equivalents, end of period         $  39,157  $  48,538
                                               ============ ==========

    CONTACT: Forrester Research, Inc.
             Phyllis Paparazzo, +1-617-613-6234
             Director, Investor Relations
             ppaparazzo@forrester.com
             or
             Karyl Levinson, +1-617-613-6262
             Vice President, Corporate Communications
             press@forrester.com

    SOURCE: Forrester Research, Inc.
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