EX-99.1 2 a4751867ex991.txt PRESS RELEASE EXHIBIT 99.1 Forrester Research Announces Third-Quarter 2004 Financial Results CAMBRIDGE, Mass.--(BUSINESS WIRE)--Oct. 27, 2004--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. 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 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. (C) 2004, Forrester Research, Inc. All rights reserved. Forrester and WholeView 2 are trademarks of Forrester Research, Inc. Forrester Research, Inc. Consolidated Statements of Income ---------------------------------------------------------------------- (In thousands, except per share data) Three months ended Nine months ended September 30, September 30, 2004 2003 2004 2003 ------------------ ------------------- (Unaudited) (Unaudited) Revenues Research services $ 23,544 $ 23,798 $ 69,579 $ 68,169 Advisory services and other 10,335 8,410 30,950 22,499 -------- -------- --------- -------- Total revenues 33,879 32,208 100,529 90,668 Operating expenses Cost of services and fulfillment 13,266 12,525 40,782 36,380 Selling and marketing 11,036 10,749 33,701 29,523 General and administrative 4,291 3,927 11,687 10,985 Depreciation and amortization 744 1,520 2,801 5,052 Amortization of intangible assets 1,384 2,608 5,112 6,140 Reorganization costs - 1,230 8,751 1,230 Integration costs - 167 - 938 -------- -------- --------- -------- Total operating expenses 30,721 32,726 102,834 90,248 Income (loss) from operations 3,158 (518) (2,305) 420 Other income, net 680 787 2,168 2,692 Gains on sales of marketable securities 678 - 678 509 Non-marketable investment gains (impairments) 313 - 370 (572) -------- -------- --------- -------- Income before income taxes 4,829 269 911 3,049 Income tax provision 1,618 83 305 945 -------- -------- --------- -------- Net income $ 3,211 $ 186 $ 606 $ 2,104 ======== ======== ========= ======== Diluted earnings per share $ 0.14 $ 0.01 $ 0.03 $ 0.09 ======== ======== ========= ======== Diluted weighted average shares outstanding 22,345 22,741 22,577 22,793 ======== ======== ========= ======== Basic earnings per share $ 0.15 $ 0.01 $ 0.03 $ 0.09 ======== ======== ========= ======== Basic weighted average shares outstanding 21,952 22,462 22,094 22,572 ======== ======== ========= ======== Pro forma data (1): Income (loss) from operations $ 3,158 $ (518) $ (2,305) $ 420 Amortization of intangible assets 1,384 2,608 5,112 6,140 Reorganization costs - 1,230 8,751 1,230 Integration costs - 167 - 938 -------- -------- --------- -------- Pro forma income from operations 4,542 3,487 11,558 8,728 Other income, net 680 787 2,168 2,692 -------- -------- --------- -------- Pro forma income before income taxes 5,222 4,274 13,726 11,420 Pro forma income tax provision 1,828 1,496 4,804 3,997 -------- -------- --------- -------- Pro forma net income $ 3,394 $ 2,778 $ 8,922 $ 7,423 ======== ======== ========= ======== Pro forma diluted earnings per share $ 0.15 $ 0.12 $ 0.40 $ 0.33 ======== ======== ========= ======== Diluted weighted average shares outstanding 22,345 22,741 22,577 22,793 ======== ======== ========= ======== (1) The pro forma data excludes amortization of intangibles and other integration costs related to acquisitions, reorganization costs and gains and impairments related to marketable and 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) September 30, December 31, 2004 2003 ---------- --------- (Unaudited) Assets: Cash and cash equivalents $ 36,621 $ 22,385 Marketable securities 91,779 104,348 Accounts receivable, net 25,113 40,013 Deferred commissions 5,150 5,999 Prepaid expenses and other current assets 7,325 7,079 ---------- --------- Total current assets 165,988 179,824 Property and equipment, net 6,025 8,266 Goodwill, net 56,894 57,006 Intangible assets, net 8,345 13,456 Deferred income taxes 39,709 40,159 Non-marketable investments and other assets 13,822 12,264 ---------- --------- Total assets $ 290,783 $ 310,975 ========== ========= Liabilities and stockholders' equity: Accounts payable $ 2,570 $ 2,566 Accrued expenses 27,363 31,457 Deferred revenue 60,769 68,630 ---------- --------- Total liabilities 90,702 102,653 Preferred stock - - Common stock 246 243 Additional paid-in capital 177,793 172,523 Retained earnings 67,551 66,945 Treasury stock, at cost (44,923) (30,300) Accumulated other comprehensive loss (586) (1,089) ---------- --------- Total stockholders' equity 200,081 208,322 ---------- --------- Total liabilities and stockholders' equity $ 290,783 $ 310,975 ========== ========= Forrester Research, Inc. Consolidated Statements Cash Flows ---------------------------------------------------------------------- (In thousands) Nine months ended September 30, 2004 2003 ------------------- (Unaudited) Cash flows from operations: Net income $ 606 $ 2,104 Adjustments to reconcile net income to net cash provided by operating activities - Depreciation 2,801 5,052 Amortization of intangible assets 5,112 6,140 Non-marketable investments (gains) impairments (370) 572 Realized gains on sales of marketable securities (678) (509) Tax benefit from stock options 256 239 Deferred income taxes (2) 747 Non-cash reorganization costs 1,844 - Increase in provision for doubtful accounts 224 - Accretion of premiums on marketable securities 635 618 Changes in assets and liabilities, net of acquisition - Accounts receivable 15,541 9,088 Deferred commissions 849 (434) Prepaid expenses and other current assets (296) 2,401 Accounts payable (116) (1,395) Accrued expenses (4,025) (4,714) Deferred revenue (8,770) (16,914) --------- --------- Net cash provided by operating activities 13,611 2,995 Cash flows from investing activities: Acquisition of Giga Information Group, Inc., net of cash acquired - (57,027) Purchases of property and equipment (2,423) (1,122) Purchase of non-marketable investments (2,263) (3,150) Decrease (increase) in other assets 842 (1,439) Purchase of marketable securities (107,478) (164,338) Proceeds from sales and maturities of marketable securities 121,623 230,641 --------- --------- Net cash provided by investing activities 10,301 3,565 Cash flows from financing activities: Proceeds from issuance of common stock under employee stock option plans and employee stock purchase plan 2,959 2,070 Acquisition of treasury shares (12,623) (6,796) Structured stock repurchase 54 (1,793) --------- --------- Net cash used in financing activities (9,610) (6,519) Effect of exchange rate changes on cash and cash equivalents (66) (178) --------- --------- Net increase (decrease) in cash and cash equivalents 14,236 (137) Cash and cash equivalents, beginning of period 22,385 11,479 --------- --------- Cash and cash equivalents, end of period $ 36,621 $ 11,342 ========= ========= CONTACT: Forrester Research, Inc. Kimberly Maxwell, 617-613-6234 Director, Investor Relations kmaxwell@forrester.com or Karyl Levinson, 617-613-6262 Director, Corporate Communications press@forrester.com