EX-99.1 2 a4688841ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Forrester Research Announces Second-Quarter 2004 Financial Results CAMBRIDGE, Mass.--(BUSINESS WIRE)--July 27, 2004--Forrester Research, Inc. (Nasdaq: FORR) today announced its second-quarter ended June 30, 2004 financial results. Second-Quarter Financial Performance -- Total revenues were $34.9 million, compared with $34.0 million for the second quarter of last year. -- On a GAAP-reported basis, which reflects an effective tax rate of 33.5 percent, Forrester reported a second-quarter net loss of $2.3 million or $0.11 per diluted share, compared with net income of $141,000, 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, reorganization costs of $6.8 million related primarily to office space consolidations, and non-marketable investment gains of $57,000 and which reflects a pro forma effective tax rate of 35 percent, net income was $3.0 million, or $0.13 per diluted share, for the second quarter of 2004. This compares with pro forma net income of $2.5 million, or $0.11 per diluted share, for the same period in 2003, which excludes amortization of $2.6 million of acquisition-related intangible assets, costs of $740,000 related to the integration of Giga Information Group, Inc., and a net write-down of $272,000 related to impairments of certain non-marketable investments, and a pro forma effective tax rate of 35 percent. Six-Month Period Ended June 30, 2004, Financial Performance -- Total revenues were $66.7 million, compared with $58.5 million for the same period last year. -- On a GAAP-reported basis, which reflects an effective tax rate of 33.5 percent, Forrester reported a net loss of $2.6 million, or $0.12 per diluted share for the six months ended 2004, compared to net income of $1.9 million or $0.08 per diluted share for the same period last year. -- On a pro forma basis, which excludes amortization of $3.7 million of acquisition-related intangible assets, reorganization costs of $8.8 million related primarily to office space consolidations, non-marketable investment gains of $57,000 and which reflects a pro forma effective tax rate of 35 percent, net income was $5.5 million, or $0.24 per diluted share, for the six months ended 2004. This compares with pro forma net income of $5.0 million, or $0.22 per diluted share for the same period last year, which excludes amortization of $3.5 million of acquisition-related intangible assets, costs of $771,000 related to the integration of Giga Information Group, Inc., and a net write-down of $572,000 related to impairments of certain 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. "Forrester's financial performance continued to improve in the second quarter," said George F. Colony, chairman of the board and chief executive officer. "Our client and dollar retention rates are up, back to our target ranges. Product innovations and enhancements are gaining traction, and technology spending is increasing at a moderate pace. Overall, our second quarter results position us well for the second half of 2004." Forrester Debuts Two New Products Also today, the company announced Forrester's Ultimate Consumer Panel(TM) (Ultimate), an innovative, opt-in, highly secure consumer data panel. Ultimate electronically captures online and offline behavior from a representative group of more than 10,000 US households. Clients including MasterCard, Wells Fargo & Company, and Household Credit Card Services use Ultimate data and analysis to better understand current and prospective customers, tailor marketing strategies and messages, predict adoption for new products and services, and gain intelligence on their market landscapes. See separate press release at: http://www.forrester.com/ER/Press/Release/0,1769,931,FF.html The Forrester Oval Program(TM) (executive membership offering) today introduced three new membership groups for marketing professionals. The CMO Group, Database Marketing Council, and Email Marketing Council are designed for senior marketers at business-to-consumer (B2C) companies. Clients such as Charming Shoppes, Panasonic, and Thrifty Rental Car have joined Forrester's Marketing Ovals to ensure their strategies are aligned with consumer behavior. Through these specialized marketing membership programs, Forrester helps marketing executives thrive in a world in which technology increasingly influences consumer behavior. "Both of these new offerings - Ultimate and the Marketing Ovals -- are a natural progression for Forrester," said Colony. "For years, we have researched technology's impact on consumer behavior and advised marketing executives at our client companies. We are pleased that key $1 billion-plus companies have already become clients of Ultimate and the Marketing Ovals." Forrester is providing third-quarter and full-year 2004 guidance as follows: Third-Quarter 2004 (GAAP): -- Total revenues of approximately $32.0 million to $34.0 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 $0.09 to $0.12. Third-Quarter 2004 (Pro Forma): Pro forma financial guidance for the third quarter of 2004 excludes amortization of acquisition-related intangible assets of approximately $1.4 million, as well as all gains and impairment charges related to non-marketable securities. -- Pro forma operating margin of approximately 12 percent to 14 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 $0.13 to $0.15. 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. Forrester is an independent technology research company that provides pragmatic and forward-thinking advice about technology's impact on business. Business, marketing, and IT professionals worldwide collaborate with Forrester to align their technology investments with their business goals. Forrester offers products and services in four major areas: Research, Data, Consulting, and Community. Established in 1983, Forrester is headquartered in Cambridge, Mass. For additional 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 and operating targets for the second 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, the actual amount of the charge and 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. (C) 2004, Forrester Research, Inc. All rights reserved. Forrester, WholeView 2, Forrester Oval Program, and Ultimate Consumer Panel are trademarks of Forrester Research, Inc. Forrester Research, Inc. Consolidated Statements of Income ---------------------------------------------------------------------- (In thousands, except per share data) Three months ended Six months ended June 30, June 30, 2004 2003 2004 2003 -------------------- -------------------- (Unaudited) (Unaudited) Revenues Research services $23,046 $25,865 $46,035 $44,371 Advisory services and other 11,875 8,113 20,615 14,089 ----------- -------- ----------- -------- Total revenues 34,921 33,978 66,650 58,460 Operating expenses Cost of services and fulfillment 14,377 14,330 27,516 23,855 Selling and marketing 11,605 11,022 22,665 18,774 General and administrative 3,985 3,781 7,396 7,058 Depreciation and amortization 1,026 1,839 2,057 3,532 Amortization of intangible assets 1,384 2,608 3,728 3,532 Reorganization costs 6,794 - 8,751 - Integration costs - 740 - 771 ----------- -------- ----------- -------- Total operating expenses 39,171 34,320 72,113 57,522 (Loss) income from operations (4,250) (342) (5,463) 938 Other income, net 662 819 1,488 2,414 Non-marketable investment gains (impairments) 57 (272) 57 (572) ----------- -------- ----------- -------- (Loss) income before income taxes (3,531) 205 (3,918) 2,780 Income tax (benefit) provision (1,183) 64 (1,313) 862 ----------- -------- ----------- -------- Net (loss) income $(2,348) $141 $(2,605) $1,918 =========== ======== =========== ======== Diluted (loss) earnings per share $(0.11) $0.01 $(0.12) $0.08 =========== ======== =========== ======== Diluted weighted average shares outstanding 22,074 22,718 22,165 22,819 =========== ======== =========== ======== Basic (loss) earnings per share $(0.11) $0.01 $(0.12) $0.08 =========== ======== =========== ======== Basic weighted average shares outstanding 22,074 22,515 22,165 22,627 =========== ======== =========== ======== Pro forma data (1): (Loss) income from operations $(4,250) $(342) $(5,463) $938 Amortization of intangible assets 1,384 2,608 3,728 3,532 Reorganization costs 6,794 - 8,751 - Integration costs - 740 - 771 ----------- -------- ----------- -------- Pro forma income from operations 3,928 3,006 7,016 5,241 Other income, net 662 819 1,488 2,414 ----------- -------- ----------- -------- Pro forma income before income taxes 4,590 3,825 8,504 7,655 Pro forma income tax provision 1,607 1,339 2,977 2,679 ----------- -------- ----------- -------- Pro forma net income $2,983 $2,486 $5,527 $4,976 =========== ======== =========== ======== Pro forma diluted earnings per share $0.13 $0.11 $0.24 $0.22 =========== ======== =========== ======== Diluted weighted average shares outstanding 22,614 22,718 22,693 22,819 =========== ======== =========== ======== (1) The pro forma data excludes amortization of intangibles and other integration costs related to acquisitions, reorganization costs and gains and impairments related to non-marketable investments, as well as their related tax effects. This does not purport to be prepared in accordance with Generally Accepted Accounting Principles. Forrester Research, Inc. Consolidated Balance Sheets ---------------------------------------------------------------------- (In thousands) June 30, Dec. 31, 2004 2003 ----------- --------- (Unaudited) Assets: Cash and cash equivalents $46,068 $22,385 Marketable securities 79,025 104,348 Accounts receivable, net 26,059 40,013 Deferred commissions 5,451 5,999 Prepaid expenses and other current assets 8,206 7,079 ----------- --------- Total current assets 164,809 179,824 Property and equipment, net 5,618 8,266 Goodwill, net 56,894 57,006 Intangible assets, net 9,731 13,456 Deferred income taxes 40,590 40,159 Non-marketable investments and other assets 13,989 12,264 ----------- --------- Total assets $291,631 $310,975 =========== ========= Liabilities and stockholders' equity: Accounts payable $2,950 $2,566 Accrued expenses 25,976 31,457 Deferred revenue 63,891 68,630 ----------- --------- Total liabilities 92,817 102,653 Preferred stock - - Common stock 245 243 Additional paid-in capital 177,688 172,523 Retained earnings 64,340 66,945 Treasury stock, at cost (41,478) (30,300) Accumulated other comprehensive loss (1,981) (1,089) ----------- --------- Total stockholders' equity 198,814 208,322 ----------- --------- Total liabilities and stockholders' equity $291,631 $310,975 =========== ========= Forrester Research, Inc. Consolidated Statements Cash Flows ---------------------------------------------------------------------- (In thousands) Six months ended June 30, 2004 2003 --------------------- (Unaudited) Cash flows from operations: Net (loss) income $(2,605) $1,918 Adjustments to reconcile net (loss) income to net cash provided by operating activities - Depreciation 2,057 3,532 Amortization of intangible assets 3,728 3,532 Non-marketable investments (gains) impairments (57) 572 Loss on disposal of property and equipment - - Realized gain on sale of securities - (509) Tax benefit from stock options 238 155 Deferred income taxes (2) 793 Non-cash reorganization costs 1,844 - Increase in provision for doubtful accounts - - Accretion of premiums on marketable securities 404 413 Changes in assets and liabilities, net of acquisition - Accounts receivable 14,785 10,534 Deferred commissions 548 (1,260) Prepaid expenses and other current assets (717) 1,758 Accounts payable 279 (207) Accrued expenses (5,359) (7,649) Deferred revenue (5,481) (8,710) ----------- --------- Net cash provided by operating activities 9,662 4,872 Cash flows from investing activities: Acquisition of Giga Information Group, Inc., net of cash acquired - (56,066) Purchases of property and equipment (1,279) (1,017) Purchase of non-marketable investments (2,163) (2,150) Decrease in other assets 529 75 Purchase of marketable securities (67,735) (126,158) Proceeds from sales and maturities of marketable securities 91,549 188,766 ----------- --------- Net cash provided by investing activities 20,901 3,450 Cash flows from financing activities: Proceeds from issuance of common stock under employee stock option plans and employee stock purchase plan 2,350 1,457 Acquisition of treasury shares (9,178) (5,295) Structured stock repurchase 54 (1,892) ----------- --------- Net cash used in financing activities (6,774) (5,730) Effect of exchange rate changes on cash and cash equivalents (106) (190) ----------- --------- Net increase in cash and cash equivalents 23,683 2,402 Cash and cash equivalents, beginning of period 22,385 11,479 ----------- --------- Cash and cash equivalents, end of period $46,068 $13,881 =========== ========= CONTACT: Forrester Research, Inc. Kimberly Maxwell, 617-613-6234 Director, Investor Relations kmaxwell@forrester.com or Forrester Research, Inc. Karyl Levinson, 617-613-6262 Director, Corporate Communications press@forrester.com