CAMBRIDGE, Mass., Feb. 13, 2020 /PRNewswire/ -- Forrester Research, Inc. FORR today announced its 2019 fourth-quarter and full-year financial results.
Fourth-Quarter Financial Performance
Total revenues were $124.3 million for the fourth quarter of 2019, compared with $98.6 million for the fourth quarter of 2018. Research revenues increased 28%, and advisory services and events revenues increased 23%, compared with the fourth quarter of 2018. Pro forma revenues, which exclude the fair value adjustment to deferred revenue from the acquisition of SiriusDecisions, were $125.1 million for the fourth quarter of 2019, with $80.1 million from research services and $45.0 million from advisory services and events.
On a GAAP basis, net income was $4.9 million, or $0.26 per diluted share, for the fourth quarter of 2019, compared with net income of $5.4 million, or $0.29 per diluted share, for the same period in 2018.
On a pro forma basis, net income was $10.7 million, or $0.57 per diluted share, for the fourth 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 $0.8 million, acquisition and integration costs of $1.1 million, and net investment gains of $0.1 million. This compares with pro forma net income of $9.6 million, or $0.52 per diluted share, for the same period in 2018, which reflects a pro forma tax rate of 31%. Pro forma net income for the fourth quarter of 2018 excludes stock-based compensation of $2.1 million, amortization of acquisition-related intangible assets of $0.4 million, acquisition and integration costs of $2.5 million, and net investment gains of $0.5 million.
"Forrester was at the upper end of revenue guidance and exceeded EPS guidance for the quarter and the full year," said George F. Colony, Forrester's chairman and chief executive officer. "This marks two consecutive years of double-digit EPS growth while we were integrating three acquisitions. We expect to grow EPS at double digits again in 2020. Now a full year into the acquisition of SiriusDecisions, we are set up well to deliver on our combined strategy in 2020 and beyond."
Year Ended December 31, 2019, Financial Performance
Total revenues were $461.7 million, compared with $357.6 million for the same period in 2018. Research revenues increased 31%, and advisory services and events revenues increased 26%, compared with 2018. Pro forma revenues, which exclude the fair value adjustment to deferred revenue from the acquisition of SiriusDecisions, were $473.0 million, with $307.4 million from research services and $165.6 million from advisory services and events.
On a GAAP basis, net loss was $9.6 million, or $0.52 per diluted share, for 2019, compared with net income of $15.4 million, or $0.84 per diluted share, for 2018.
On a pro forma basis, net income was $31.0 million, or $1.65 per diluted share, for 2019, which reflects a pro forma effective tax rate of 31%. Pro forma net income excludes stock-based compensation of $11.7 million, amortization of acquisition-related intangible assets of $22.6 million, acquisition-related deferred revenue fair value adjustment of $11.3 million, and acquisition and integration costs of $8.9 million. This compares with pro forma net income of $25.1 million, or $1.36 per diluted share, for 2018, which reflects a pro forma tax rate of 31%. Pro forma net income for 2018 excludes stock-based compensation of $8.3 million, amortization of acquisition-related intangible assets of $1.2 million, acquisition and integration costs of $3.8 million, and net investment gains of $0.4 million.
A reconciliation of GAAP results to pro forma results may be found in the attached financial tables.
2020 Guidance
Forrester is providing first-quarter 2020 financial guidance as follows:
First-Quarter 2020 (GAAP):
- Total revenues of approximately $107.8 million to $111.8 million.
- Operating margin of approximately (4.0)% to (2.0)%.
- Interest expense of approximately $1.6 million.
- An effective tax rate of 35%.
- Loss per share of approximately $0.13 to $0.19.
First-Quarter 2020 (Pro Forma):
Pro forma financial guidance for the first quarter of 2020 excludes the reduction in revenue from the fair value adjustment of pre-acquisition deferred revenue of approximately $0.2 million, stock-based compensation expense of $2.7 million to $2.9 million, amortization of acquisition-related intangible assets of approximately $4.7 million, integration costs of $0.9 million to $1.2 million, and any investment gains or losses.
- Pro forma revenue of approximately $108.0 million to $112.0 million.
- Pro forma operating margin of approximately 4.0% to 6.0%.
- Pro forma effective tax rate of 31%.
- Pro forma diluted earnings per share of approximately $0.12 to $0.18.
Our full-year 2020 guidance is as follows:
Full-Year 2020 (GAAP):
- Total revenues of approximately $494.6 million to $506.6 million.
- Operating margin of approximately 4.5% to 5.5%.
- Interest expense of approximately $6.0 million.
- An effective tax rate of 35%.
- Diluted earnings per share of approximately $0.62 to $0.74.
Full-Year 2020 (Pro Forma):
Pro forma financial guidance for full-year 2020 excludes the reduction in revenue from the fair value adjustment of pre-acquisition deferred revenue of approximately $0.4 million, stock-based compensation expense of $10.5 million to $11.5 million, amortization of acquisition-related intangible assets of approximately $19.0 million, integration costs of $1.8 million to $2.2 million, and any investment gains or losses.
- Pro forma revenue of approximately $495.0 million to $507.0 million.
- Pro forma operating margin of approximately 11.0% to 12.0%.
- Pro forma effective tax rate of 31%.
- Pro forma diluted earnings per share of approximately $1.82 to $1.94.
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 drive customer-obsessed vision, strategy, and execution that accelerate growth. Forrester's unique insights are grounded in annual surveys of more than 690,000 consumers and business leaders worldwide, rigorous and objective methodologies, and the shared wisdom of our most innovative clients. Through proprietary research, data and analytics, custom consulting, exclusive peer groups, certifications, and events, we are revolutionizing how businesses grow in the age of the customer. Learn more at 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 for the first quarter of and full-year 2020, 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. 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.
Forrester Research, Inc. | ||||||||
Consolidated Statements of Income | ||||||||
(Unaudited, In thousands, except per share data) | ||||||||
Three Months Ended | Year Ended | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | 2019 | 2018 | |||||
Revenues: | ||||||||
Research services | $ 79,299 | $ 62,067 | $ 298,735 | $ 228,399 | ||||
Advisory services and events | 44,970 | 36,516 | 162,962 | 129,176 | ||||
Total revenues | 124,269 | 98,583 | 461,697 | 357,575 | ||||
Operating expenses: | ||||||||
Cost of services and fulfillment | 50,116 | 38,965 | 196,726 | 146,502 | ||||
Selling and marketing | 45,210 | 35,053 | 172,865 | 131,824 | ||||
General and administrative | 13,098 | 11,049 | 53,042 | 43,920 | ||||
Depreciation | 2,262 | 1,899 | 8,572 | 7,955 | ||||
Amortization of intangible assets | 5,656 | 392 | 22,619 | 1,162 | ||||
Acquisition and integration costs | 1,100 | 2,481 | 8,948 | 3,787 | ||||
Total operating expenses | 117,442 | 89,839 | 462,772 | 335,150 | ||||
Income (loss) from operations | 6,827 | 8,744 | (1,075) | 22,425 | ||||
Interest expense | (1,713) | — | (8,054) | — | ||||
Other income (expense), net | (286) | 202 | (515) | 674 | ||||
Gains on investments, net | 106 | 488 | 45 | 426 | ||||
Income (loss) before income taxes | 4,934 | 9,434 | (9,599) | 23,525 | ||||
Income tax expense (benefit) | 44 | 4,059 | (29) | 8,145 | ||||
Net income (loss) | $ 4,890 | $ 5,375 | $ (9,570) | $ 15,380 | ||||
Basic income (loss) per common share | $ 0.26 | $ 0.29 | $ (0.52) | $ 0.85 | ||||
Diluted income (loss) per common share | $ 0.26 | $ 0.29 | $ (0.52) | $ 0.84 | ||||
Basic weighted average common shares outstanding | 18,624 | 18,274 | 18,492 | 18,091 | ||||
Diluted weighted average common shares outstanding | 18,720 | 18,459 | 18,492 | 18,380 | ||||
Pro forma data (1): | ||||||||
GAAP total revenues | $ 124,269 | $ 98,583 | $ 461,697 | $ 357,575 | ||||
Deferred revenue fair value adjustment | 790 | — | 11,257 | — | ||||
Pro forma revenues | $ 125,059 | $ 98,583 | $ 472,954 | $ 357,575 | ||||
Income (loss) from operations | $ 6,827 | $ 8,744 | $ (1,075) | $ 22,425 | ||||
Amortization of intangible assets | 5,656 | 392 | 22,619 | 1,162 | ||||
Deferred revenue fair value adjustment | 790 | — | 11,257 | — | ||||
Acquisition and integration costs | 1,100 | 2,481 | 8,948 | 3,787 | ||||
Stock-based compensation included in the | ||||||||
following expense categories: | ||||||||
Cost of services and fulfillment | 1,815 | 1,201 | 6,627 | 4,329 | ||||
Selling and marketing | 402 | 313 | 1,768 | 1,065 | ||||
General and administrative | 862 | 595 | 3,289 | 2,906 | ||||
Pro forma income from operations | 17,452 | 13,726 | 53,433 | 35,674 | ||||
Interest expense | (1,713) | — | (8,054) | — | ||||
Other income (expense), net | (286) | 202 | (515) | 674 | ||||
Pro forma income before income taxes | 15,453 | 13,928 | 44,864 | 36,348 | ||||
Income taxes under GAAP | 44 | 4,059 | (29) | 8,145 | ||||
Tax effects of pro forma items (2) | 4,166 | 601 | 15,062 | 3,024 | ||||
Adjustment to tax expense to reflect pro forma tax rate (3) | 580 | (342) | (1,125) | 99 | ||||
Pro forma net income | $ 10,663 | $ 9,610 | $ 30,956 | $ 25,080 | ||||
Pro forma diluted income per share | $ 0.57 | $ 0.52 | $ 1.65 | $ 1.36 | ||||
Pro forma diluted weighted average shares outstanding | 18,720 | 18,459 | 18,720 | 18,380 | ||||
(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, the settlement of prior year tax audits, 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 | ||||
(Unaudited, dollars in thousands) | ||||
December 31, | December 31, | |||
2019 | 2018 | |||
Balance sheet data: | ||||
Cash and cash equivalents | $ 67,904 | $ 140,296 | ||
Accounts receivable, net | $ 84,605 | $ 67,318 | ||
Deferred revenue | $ 179,194 | $ 135,332 | ||
Debt outstanding | $ 132,750 | $ — | ||
Year Ended | ||||
December 31, | ||||
2019 | 2018 | |||
Cash flow data: | ||||
Net cash provided by operating activities | $ 48,406 | $ 38,418 | ||
Purchases of property and equipment | $ (11,890) | $ (5,049) | ||
Cash paid for acquisitions | $ (237,684) | $ (9,250) | ||
Repayments of debt | $ (42,250) | $ — | ||
Repurchases of common stock | $ — | $ (9,946) | ||
Dividends paid | $ — | $ (14,502) | ||
As of | ||||
December 31, | ||||
2019 | 2018 | |||
Metrics: | ||||
Agreement value | $ 358,000 | $ 266,300 | ||
Client retention | 72% | 71% | ||
Dollar retention | 90% | 90% | ||
Enrichment | 106% | 109% | ||
Number of clients | 2,880 | 2,353 | ||
As of | ||||
December 31, | ||||
2019 | 2018 | |||
Headcount: | ||||
Total headcount | 1,795 | 1,432 | ||
Products and advisory services staff | 688 | 559 | ||
Sales force | 698 | 528 | ||
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
© 2020, Forrester Research, Inc. All rights reserved. Forrester is a trademark of Forrester Research, Inc.
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SOURCE Forrester
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