Forrester Research Reports 2019 Third-Quarter Financial Results
CAMBRIDGE, Mass., Oct. 24, 2019 /PRNewswire/ -- Forrester Research, Inc. (Nasdaq: FORR) today announced its 2019 third-quarter financial results.
Third-Quarter Financial Performance
Total revenues were $108.6 million for the third quarter of 2019, compared with $84.9 million for the third quarter of 2018. Research revenues increased 32%, and advisory services and events revenues increased 19%, compared with the third quarter of 2018. Pro forma revenues, which exclude the fair value adjustment to deferred revenue from the acquisition of SiriusDecisions, were $110.3 million for the third quarter of 2019, with $76.2 million from research services and $34.1 million from advisory services and events.
On a GAAP basis, net loss was $2.7 million, or $0.15 per diluted share, for the third quarter of 2019, compared with net income of $4.0 million, or $0.21 per diluted share, for the same period in 2018.
On a pro forma basis, net income was $6.5 million, or $0.34 per diluted share, for the third quarter of 2019, which reflects a pro forma effective tax rate of 31%. Pro forma net income excludes stock-based compensation of $3.1 million, amortization of acquisition-related intangible assets of $5.7 million, acquisition-related deferred revenue fair value adjustment of $1.7 million, and acquisition and integration costs of $2.4 million. This compares with a pro forma net income of $6.0 million, or $0.33 per diluted share, for the same period in 2018, which reflects a pro forma tax rate of 31%. Pro forma net income for the third quarter of 2018 excludes stock-based compensation of $2.1 million, amortization of acquisition-related intangible assets of $0.4 million, and acquisition and integration costs of $1.0 million.
"Forrester was at the upper end of revenue guidance and exceeded our pro forma EPS targets for the quarter," said George F. Colony, Forrester's chairman and chief executive officer. "Q3 marked another solid quarter for us with growth across all geographic regions. We are on track to integrate with SiriusDecisions across the business and well-positioned for success as we head into the fourth quarter."
Forrester is providing fourth-quarter 2019 financial guidance as follows:
Fourth-Quarter 2019 (GAAP):
-- Total revenues of approximately $120.0 million to $125.0 million.
-- Operating margin of approximately 2.0% to 4.0%.
-- Interest expense of approximately $1.9 million.
-- An effective tax rate of 14% to 58%, driven by an estimated $0.4 million
(or 12% to 56%) charge to settle a foreign tax audit.
-- Diluted earnings per share of approximately $0.05 to $0.10.
Fourth-Quarter 2019 (Pro Forma):
Pro forma financial guidance for the fourth quarter of 2019 excludes the reduction in revenue from the fair value adjustment of pre-acquisition deferred revenue of approximately $0.8 million, stock-based compensation expense of $3.0 million to $3.2 million, amortization of acquisition-related intangible assets of approximately $5.7 million, acquisition and integration costs of $1.2 million to $1.5 million, and any investment gains or losses.
-- Pro forma revenue of approximately $121.0 million to $126.0 million.
-- Pro forma operating margin of approximately 11.0% to 13.0%.
-- Pro forma effective tax rate of 31%.
-- Pro forma diluted earnings per share of approximately $0.45 to $0.50.
Our full-year 2019 guidance is as follows:
Full-Year 2019 (GAAP):
-- Total revenues of approximately $458.0 million to $463.0 million.
-- Operating margin of approximately (1.0) % to 0.0%.
-- Interest expense of approximately $8.2 million.
-- An effective tax rate of 0% to 5%.
-- Diluted loss per share of approximately $0.63 to $0.68.
Full-Year 2019 (Pro Forma):
Pro forma financial guidance for full-year 2019 excludes the reduction in revenue from the fair value adjustment of pre-acquisition deferred revenue of approximately $11.3 million, stock-based compensation expense of $11.6 million to $11.8 million, amortization of acquisition-related intangible assets of approximately $22.7 million, acquisition and integration costs of $9.0 million to $9.3 million, and any investment gains or losses.
-- Pro forma revenue of approximately $469.0 million to $474.0 million.
-- Pro forma operating margin of approximately 10.5% to 11.5%.
-- Pro forma effective tax rate of 31%.
-- Pro forma diluted earnings per share of approximately $1.53 to $1.58.
About Forrester Research
Forrester 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, analytics, custom consulting, exclusive executive peer groups, learning offerings, 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. For more information, visit 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 for the fourth quarter of and full-year 2019, statements about the success of operational improvements, and statements about Forrester's future financial performance and financial condition. 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 retain and enrich memberships for its research products and services, technology spending, Forrester's ability to respond to business and economic conditions and market trends, the risks and challenges inherent in international business activities, competition and industry consolidation, the ability to attract and retain professional staff, Forrester's dependence on key personnel, Forrester's ability to successfully integrate businesses that it acquires, the impact of Forrester's outstanding debt obligations, the possibility of network disruptions and security breaches, and possible variations in Forrester's quarterly operating results. Financial guidance regarding shares outstanding and per-share amounts is based on certain assumptions that are subject to change, including with respect to an anticipated reduction in share repurchases subsequent to Forrester's acquisition of SiriusDecisions. While currently suspended, dividend declarations are at the discretion of Forrester's board of directors. 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 and the table of key financial data are attached.
Contact:
Michael Doyle
Chief Financial Officer
Forrester Research, Inc.
+1 617-613-6000
mdoyle@forrester.com
Shweta Agarwal
Public Relations
Forrester Research, Inc.
+1 617-613-6805
sagarwal@forrester.com
© 2019, Forrester Research, Inc. All rights reserved. Forrester is a trademark of Forrester Research, Inc.
Forrester Research, Inc.
Consolidated Statements of Income
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(Unaudited, In thousands, except per share data)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2019 2018 2019 2018
Revenues:
Research services $74,548 $56,332 $219,436 $166,332
Advisory services and events 34,048 28,558 117,992 92,660
Total revenues 108,596 84,890 337,428 258,992
Operating expenses:
Cost of services and fulfillment 44,929 34,361 146,610 107,537
Selling and marketing 41,605 31,051 127,655 96,771
General and administrative 13,533 11,192 39,944 32,871
Depreciation 2,121 1,965 6,310 6,056
Amortization of intangible assets 5,654 402 16,963 770
Acquisition and integration costs 2,394 977 7,848 1,306
Total operating expenses 110,236 79,948 345,330 245,311
Income (loss) from operations (1,640) 4,942 (7,902) 13,681
Interest expense (1,904) (6,341)
Other income (expense), net 127 319 (229) 472
Losses on investments (17) (17) (61) (62)
Income (loss) before income taxes (3,434) 5,244 (14,533) 14,091
Income tax expense (benefit) (735) 1,294 (73) 4,086
Net income (loss) $(2,699) $3,950 $(14,460) $10,005
Basic income (loss) per common share $(0.15) $0.22 $(0.78) $0.55
Diluted income (loss) per common share $(0.15) $0.21 $(0.78) $0.55
Basic weighted average shares outstanding 18,546 18,088 18,448 18,030
Diluted weighted average shares outstanding 18,546 18,433 18,448 18,353
Pro forma data (1):
GAAP total revenues $108,596 $84,890 $337,428 $258,992
Deferred revenue fair value adjustment 1,657 10,467
Pro forma revenues $110,253 $84,890 $347,895 $258,992
Income (loss) from operations $(1,640) $4,942 $(7,902) $13,681
Amortization of intangible assets 5,654 402 16,963 770
Deferred revenue fair value adjustment 1,657 10,467
Acquisition and integration costs 2,394 977 7,848 1,306
Stock-based compensation included in the
following expense categories:
Cost of services and fulfillment 1,782 1,001 4,812 3,128
Selling and marketing 441 261 1,366 752
General and administrative 849 858 2,427 2,311
Pro forma income from operations 11,137 8,441 35,981 21,948
Interest expense (1,904) (6,341)
Other income (expense), net 127 319 (229) 472
Pro forma income before income taxes 9,360 8,760 29,411 22,420
Income tax expense (benefit) GAAP (735) 1,294 (73) 4,086
Tax effects of pro forma items (2) 3,128 1,292 10,896 2,423
Adjustment to tax expense to reflect pro forma tax rate (3) 509 130 (1,706) 441
Pro forma net income $6,458 $6,044 $20,294 $15,470
Pro forma diluted income (loss) per share $0.34 $0.33 $1.08 $0.84
Pro forma diluted weighted average shares outstanding 18,727 18,433 18,732 18,353
(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, and are also
used by Forrester in making compensation decisions. Our pro forma presentation excludes
amortization of acquisition-related intangible assets, acquisition-related deferred revenue fair value
adjustments, stock-based compensation, acquisition and integration costs, net gains or losses
from investments, as well as their related tax effects. We also utilized an assumed tax rate of 31%
in both 2019 and 2018, which excludes items such as any release of reserves for uncertain tax
positions established in prior years and the effect of any adjustments related to the filing of prior
year tax returns. The pro forma data does not purport to be prepared in accordance with Accounting
Principles Generally Accepted in the United States.
(2) The tax effect of adjusting items is based on the accounting treatment and rate for the
jurisdiction of each item.
(3) To compute pro forma net income, we apply a pro forma effective tax rate of 31%.
Forrester Research, Inc.
Key Financial Data
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(Unaudited, dollars in thousands)
September 30, December 31,
2019 2018
Balance sheet data:
Cash and cash equivalents $67,629 $140,296
Accounts receivable, net $54,612 $67,318
Deferred revenue $168,008 $135,332
Debt outstanding $134,313
$ -
Nine Months Ended
September 30,
2019 2018
Cash flow data:
Net cash provided by
operating activities $45,863 $37,432
Purchases of property and
equipment $(8,362) $(3,161)
Cash paid for
acquisitions $(237,684) $(9,250)
Repayments of debt $(40,688)
$ -
Repurchases of common
stock
$ - $(9,946)
Dividends paid
$ - $(10,839)
As of
September 30,
2019 2018
Metrics:
Agreement value $355,200 $257,500
Client retention 73% 71%
Dollar retention 90% 90%
Enrichment 111% 109%
Number of clients 2,867 2,357
As of
September 30,
2019 2018
Headcount:
Total headcount 1,785 1,418
Products and advisory
services staff 673 542
Sales force 699 519
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SOURCE Forrester Research, Inc.
