Exhibit 99.1
Forrester Research Announces First-Quarter 2006 Financial Results
Company Raises Full-Year 2006 Guidance
CAMBRIDGE, Mass., April 26, 2006 . . . Forrester Research, Inc. (Nasdaq: FORR) today announced its first-quarter ended March 31, 2006 financial results.
First-Quarter Financial Performance
| • | | Total revenues were $41.2 million, compared with $33.8 million for the first quarter of last year. |
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| • | | On a GAAP-reported basis, which reflects an effective tax rate of 50.1 percent, Forrester reported first-quarter net income of $1.5 million or $0.07 per diluted share, compared with net income of $2.7 million, or $0.13 per diluted share, for the same period last year. |
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| • | | On a pro forma basis, net income was $3.3 million or $0.15 per diluted share, for the first quarter of 2006, which excludes amortization of $652,000 of acquisition-related intangible assets, non-cash stock-based compensation of $1.7 million, $199,000 of realized gains on non-marketable investments, and reflects a pro forma effective tax rate of 37 percent. This compares with pro forma net income of $2.6 million, or $0.12 per diluted share, for the same period in 2005, which excludes amortization of $1.1 million of acquisition-related intangible assets, $1.7 million of realized gains on sales of securities, and reflects 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 first-quarter results exceeded expectations,” said George F. Colony, chairman of the board and chief executive officer. “Total revenues and pro forma earnings per share grew 22 percent and 25 percent, respectively, and ahead of the high end of our guidance. We made significant progress in growing the syndicated products, as research services revenues increased 16 percent. Deferred revenue, the best leading indicator of our business, improved by 20 percent over the first-quarter of 2005. We are pleased with our fast start to 2006 and to be raising full-year guidance at this time.”
Forrester is providing second-quarter 2006 financial guidance as follows:
Second-Quarter 2006 (GAAP):
| • | | Total revenues of approximately $45.5 million to $47.5 million. |
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| • | | Operating margin of approximately 7 percent to 9 percent. |
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| • | | Other income of approximately $900,000. |
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| • | | An effective tax rate of approximately 51 percent. |
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| • | | Diluted earnings per share of approximately $0.11 to $0.14. |
Second-Quarter 2006 (Pro Forma):
Pro forma financial guidance for the second-quarter of 2006 excludes amortization of acquisition-related intangible assets of approximately $500,000, non-cash stock-based compensation expense of approximately $2.0 million to $2.5 million, and does not include any estimate of gains or impairment charges related to non-marketable investments.
| • | | Pro forma operating margin of approximately 13 percent to 14 percent. |
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| • | | Pro forma effective tax rate of 37 percent. |
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| • | | Pro forma diluted earnings per share of approximately $0.19 to $0.21. |
Forrester is revising full-year 2006 guidance as follows:
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Forrester First-Quarter Fiscal 2006 Results / Page 2
Full-Year 2006 (GAAP):
GAAP financial guidance includes an estimate of $8.0 million to $10.0 million in non-cash stock-based compensation expense related to the adoption of SFAS 123R, Share-Based Payment, and its related estimated impact on the effective tax rate.
| • | | Total revenues of approximately $178.0 million to $183.0 million. |
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| • | | Operating margin of approximately 7 percent to 9 percent. |
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| • | | Other income of approximately $3.6 million. |
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| • | | An effective tax rate of approximately 51 percent. |
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| • | | Diluted earnings per share of approximately $0.45 to $0.56. |
Full-Year 2006(Pro Forma):
Pro forma financial guidance for full-year 2006 excludes amortization of acquisition-related intangible assets of approximately $2.1 million, non-cash stock-based compensation expense of approximately $8.0 million to $10.0 million, and excludes gains or impairment charges related to non-marketable investments.
| • | | Pro forma operating margin of approximately 14 percent to 15 percent. |
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| • | | Pro forma diluted earnings per share of approximately $0.83 to $0.89. |
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| • | | An effective tax rate of 37 percent. |
Forrester Research (Nasdaq: FORR) is an independent technology and market research company that provides pragmatic and forward-thinking advice about technology’s impact on business and consumers. For 22 years, Forrester has been a thought leader and trusted advisor, helping global clients lead in their markets through its 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 and operating targets for the second quarter of and full-year 2006. 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, 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.
| | | |
| Kimberly Maxwell | | Karyl Levinson |
| Director, Investor Relations | | Director, Corporate Communications |
| Forrester Research, Inc. | | Forrester Research, Inc. |
| +1 617/613-6234 | | +1 617/613-6262 |
| kmaxwell@forrester.com | | press@forrester.com |
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© 2006, Forrester Research, Inc. All rights reserved. Forrester is a trademark of Forrester Research, Inc.
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Forrester First-Quarter Fiscal 2006 Results / Page 4
Forrester Research, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
| | | | | | | | | |
| | | Three months ended | |
| | | March 31, | |
| | | 2006 | | | 2005 | |
| | | (Unaudited) | |
| | | | | | | | | |
Revenues | | | | | | | | |
| Research services | | $ | 27,203 | | | $ | 23,369 | |
| Advisory services and other | | | 13,994 | | | | 10,413 | |
| | | | | | | |
| | | | | | | | | |
Total revenues | | | 41,197 | | | | 33,782 | |
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Operating expenses | | | | | | | | |
| Cost of services and fulfillment | | | 17,627 | | | | 13,777 | |
| Selling and marketing | | | 14,545 | | | | 11,902 | |
| General and administrative | | | 5,600 | | | | 4,034 | |
| Depreciation | | | 884 | | | | 874 | |
| Amortization of intangible assets | | | 652 | | | | 1,123 | |
| | | | | | | |
| | | | | | | | | |
Total operating expenses | | | 39,308 | | | | 31,710 | |
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Income from operations | | | 1,889 | | | | 2,072 | |
| Other income, net | | | 958 | | | | 750 | |
| Realized gains on securities | | | 199 | | | | 1,668 | |
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| | | | | | | | | |
Income before income taxes | | | 3,046 | | | | 4,490 | |
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| Income tax provision | | | 1,526 | | | | 1,751 | |
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Net income | | $ | 1,520 | | | $ | 2,739 | |
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| Diluted income per share | | $ | 0.07 | | | $ | 0.13 | |
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| Diluted weighted average shares outstanding | | | 21,790 | | | | 21,840 | |
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| Basic income per share | | $ | 0.07 | | | $ | 0.13 | |
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| Basic weighted average shares outstanding | | | 21,186 | | | | 21,611 | |
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Pro forma data (1): | | | | | | | | |
| Income from operations | | $ | 1,889 | | | $ | 2,072 | |
| Amortization of intangible assets | | | 652 | | | | 1,123 | |
| Non-cash stock-based compensation included in the following expense categories: | | | | | | | | |
| Cost of services and fulfillment | | | 746 | | | | — | |
| Selling and marketing | | | 463 | | | | — | |
| General and administrative | | | 527 | | | | — | |
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Pro forma income from operations | | | 4,277 | | | | 3,195 | |
| Other income, net | | | 958 | | | | 750 | |
| Pro forma income before income taxes | | | 5,235 | | | | 3,945 | |
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| Pro forma income tax provision | | | 1,937 | | | | 1,381 | |
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Pro forma net income | | $ | 3,298 | | | $ | 2,564 | |
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| Pro forma diluted earnings per share | | $ | 0.15 | | | $ | 0.12 | |
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| Diluted weighted average shares outstanding | | | 21,790 | | | | 21,840 | |
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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 and any realized gains or impairments from our non-marketable investments, as well as their related tax effects. This does not purport to be prepared in accordance with Generally Accepted Accounting Principles.
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Forrester First-Quarter Fiscal 2006 Results / Page 5
Forrester Research, Inc.
Consolidated Balance Sheets
(In thousands)
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| | | March 31, | | | December 31, | |
| | | 2006 | | | 2005 | |
| | | (Unaudited) | | | | | |
| | | | | | | | | |
Assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 80,070 | | | $ | 48,538 | |
| Marketable securities | | | 76,348 | | | | 83,730 | |
| Accounts receivable, net | | | 33,344 | | | | 52,177 | |
| Deferred commissions | | | 8,859 | | | | 8,940 | |
| Prepaid expenses and other current assets | | | 7,975 | | | | 5,126 | |
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| Total current assets | | | 206,596 | | | | 198,511 | |
| Property and equipment, net | | | 5,233 | | | | 5,771 | |
| Goodwill, net | | | 53,126 | | | | 53,034 | |
| Intangible assets, net | | | 2,888 | | | | 3,530 | |
| Deferred income taxes | | | 37,094 | | | | 36,941 | |
| Non-marketable investments and other assets | | | 14,246 | | | | 13,915 | |
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Total assets | | $ | 319,183 | | | $ | 311,702 | |
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Liabilities and stockholders’ equity: | | | | | | | | |
| Accounts payable | | $ | 1,276 | | | $ | 1,716 | |
| Accrued expenses | | | 24,857 | | | | 24,569 | |
| Deferred revenue | | | 87,460 | | | | 86,663 | |
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| Total liabilities | | | 113,593 | | | | 112,948 | |
| Preferred stock | | | — | | | | — | |
| Common stock | | | 258 | | | | 254 | |
| Additional paid-in capital | | | 200,469 | | | | 192,206 | |
| Retained earnings | | | 83,943 | | | | 82,425 | |
| Treasury stock, at cost | | | (76,462 | ) | | | (73,527 | ) |
| Accumulated other comprehensive loss | | | (2,618 | ) | | | (2,604 | ) |
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| Total stockholders’ equity | | | 205,590 | | | | 198,754 | |
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Total liabilities and stockholders’ equity | | $ | 319,183 | | | $ | 311,702 | |
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Forrester First-Quarter Fiscal 2006 Results / Page 6
Forrester Research, Inc.
Consolidated Statements of Cash Flows
(In thousands)
| | | | | | | | | |
| | | Three months ended | |
| | | March 31, | |
| | | 2006 | | | 2005 | |
| | | | | | | (Unaudited) | |
| | | | | | | | | |
Cash flows from operations: | | | | | | | | |
| Net income | | $ | 1,520 | | | $ | 2,739 | |
| Adjustments to reconcile net income to net cash provided by operating activities – Depreciation | | | 884 | | | | 874 | |
| Amortization of intangible assets | | | 652 | | | | 1,123 | |
| Non-cash stock-based compensation | | | 1,736 | | | | — | |
| Tax benefit from stock options | | | 8 | | | | 28 | |
| Deferred income taxes | | | (188 | ) | | | 574 | |
| Realized gains on securities | | | (199 | ) | | | (1,668 | ) |
| Amortization of premiums on marketable securities | | | 178 | | | | 297 | |
| Changes in assets and liabilities – Accounts receivable | | | 19,027 | | | | 10,037 | |
| Deferred commissions | | | 81 | | | | 164 | |
| Prepaid expenses and other current assets | | | (3,025 | ) | | | (915 | ) |
| Accounts payable | | | (431 | ) | | | (1,551 | ) |
| Accrued expenses | | | 333 | | | | (1,783 | ) |
| Deferred revenue | | | 456 | | | | 1,480 | |
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Net cash provided by operating activities | | | 21,032 | | | | 11,399 | |
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Cash flows from investing activities: | | | | | | | | |
| Purchases of property and equipment | | | (328 | ) | | | (1,590 | ) |
| Purchases of non-marketable investments | | | (300 | ) | | | — | |
| Proceeds from non-marketable investments | | | 137 | | | | — | |
| Decrease in other assets | | | 32 | | | | 230 | |
| Purchase of marketable securities | | | (74,886 | ) | | | (42,421 | ) |
| Proceeds from sales and maturities of securities | | | 82,181 | | | | 43,654 | |
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Net cash provided by (used in) investing activities | | | 6,836 | | | | (127 | ) |
| | | | | | | | | |
Cash flows from financing activities: | | | | | | | | |
| Proceeds from exercises of employee stock options | | | 6,522 | | | | 215 | |
| Acquisition of treasury shares | | | (2,935 | ) | | | (4,789 | ) |
| Structured stock repurchases | | | — | | | | — | |
| | | | | | | |
Net cash provided by (used in) financing activities | | | 3,587 | | | | (4,574 | ) |
| | | | | | | | | |
Effect of exchange rate changes on cash and cash equivalents | | | 77 | | | | (136 | ) |
| | | | | | | |
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Net increase in cash and cash equivalents | | | 31,532 | | | | 6,562 | |
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Cash and cash equivalents, beginning of period | | | 48,538 | | | | 37,328 | |
| | | | | | | |
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Cash and cash equivalents, end of period | | $ | 80,070 | | | $ | 43,890 | |
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