Forrester Research Reports Third-Quarter Financial Results

Forrester Research, Inc. (Nasdaq: FORR) today announced its third-quarter ended September 30, 2009 financial results.

Third-Quarter Financial Performance

-- Total revenues were $53.9 million, compared with $59.5 million for the third quarter of last year.

-- On a GAAP-reported basis, Forrester reported net income of $4.3 million, or $0.19 per diluted share, compared with net income of $6.4 million, or $0.27 per diluted share, for the same period last year.

-- On a pro forma basis, net income was $6.2 million, or $0.27 per diluted share, for the third quarter of 2009, which reflects a pro forma effective tax rate of 40 percent. Pro forma net income excludes stock-based compensation of $1.4 million, amortization of $439,000 of acquisition-related intangible assets, and impairments of non-marketable investments of $732,000. This compares with pro forma net income of $7.4 million, or $0.31 per diluted share, for the same period in 2008, which reflects a pro forma effective tax rate of 39 percent. Pro forma net income for the third quarter of 2008 excludes stock-based compensation of $1.3 million, amortization of $282,000 of acquisition-related intangible assets, net marketable and non-marketable investment gains of $26,000 and expenses related to the stock option investigation and restatement of the Company's historical financial statements of $487,000.

"Given the sluggish economy, we are pleased with Forrester's third-quarter performance," said George F. Colony, Forrester's chairman of the board and chief executive officer. "Deferred revenue was down at September 30, 2009, as expected; but client and dollar retention increased from last quarter, and our pro forma net income indicates that our expense control efforts are working. Overall, our results exceeded our guidance. As a result we are tightening our revenue range and raising our pro forma operating margin and diluted earnings per share guidance for the full year of 2009."

Nine-Month Period Ended September 30, 2009, Financial Performance

-- Total revenues were $171.9 million, compared with $178.0 million for the same period last year.

-- On a GAAP-reported basis, Forrester reported net income of $13.1 million, or $0.57 per diluted share for the nine months ended September 30, 2009, compared with net income of $20.1 million or $0.85 per diluted share for the same period last year.

-- On a pro forma basis, net income was $21.2 million or $0.92 per diluted share, for the nine months ended September 30, 2009, which reflects a pro forma effective tax rate of 40 percent. Pro forma net income excludes stock-based compensation of $4.9 million, amortization of $1.8 million of acquisition-related intangible assets, $3.1 million of reorganization costs, and impairments of non-marketable investments of $1.7 million. This compares with pro forma net income of $22.2 million, or $0.94 per diluted share, for the same period in 2008, which reflects a pro forma effective tax rate of 39 percent. Pro forma net income for the nine-month period ended September 30, 2008 excludes stock-based compensation of $4.0 million, amortization of $476,000 of acquisition-related intangible assets, net marketable and non-marketable investment gains of $2.1 million and expenses related to the stock option investigation and restatement of the Company's historical financial statements of $1.1 million.

A reconciliation of GAAP results to pro forma results may be found in the attached financial tables.

Forrester is providing fourth-quarter 2009 financial guidance as follows:

Fourth-Quarter 2009 (GAAP):

-- Total revenues of approximately $58 million to $61 million.

-- Operating margin of approximately 13% to 15%.

-- Other income of approximately $500,000.

-- An effective tax rate of 40 percent.

-- Diluted earnings per share of approximately $0.21 to $0.26.

Fourth-Quarter 2009 (Pro Forma):

Pro forma financial guidance for the fourth quarter of 2009 excludes stock based compensation of $1.2 million to $1.4 million, amortization of acquisition-related intangible assets of approximately $300,000, and any gains or impairment charges related to marketable and non-marketable investments.

-- Pro forma operating margin of approximately 16% to 18%.

-- Pro forma effective tax rate of 40%.

-- Pro forma diluted earnings per share of approximately $0.26 to $0.30.

Forrester is providing full-year 2009 guidance as follows:

Full-Year 2009 (GAAP):

-- Total revenues of approximately $230 million to $233 million.

-- Operating margin of approximately 13% to 14%.

-- Other income of approximately $2.7 million.

-- An effective tax rate of 44 percent.

-- Diluted earnings per share of approximately $0.80 to $0.87.

Full-Year 2009 (Pro Forma):

Pro forma financial guidance for full-year 2009 excludes stock-based compensation expense of $6.1 million to $6.3 million, reorganization costs of $3.1 million, amortization of acquisition-related intangible assets of approximately $2.1 million, and any gains or impairment charges related to marketable and non-marketable investments.

-- Pro forma operating margin of approximately 18% to 19%.

-- Pro forma effective tax rate of 40 percent.

-- Pro forma diluted earnings per share of approximately $1.18 to $ 1.22.

About Forrester Research

Forrester Research (Nasdaq: FORR) is an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. Forrester works with professionals in 20 key roles at major companies providing proprietary research, customer insight, consulting, events, and peer-to-peer executive programs. For more than 26 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. 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 fourth quarter of and full-year 2009. 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 respond to business and economic conditions, particularly in light of the global economic environment, technology spending, market trends, competition, industry consolidation, the ability to attract and retain professional staff, possible variations in Forrester's quarterly operating results, any cost savings related to reductions in force and associated actions, 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.

(C) 2009, Forrester Research, Inc. All rights reserved. Forrester is a trademark of Forrester Research, Inc.

Forrester Research, Inc.
Consolidated Statements of Income
(In thousands, except per share data)
                                                             Three months ended September 30,  Nine months ended September 30,
                                                             2009            2008              2009             2008
                                                             (Unaudited)                       (Unaudited)
Revenues
Research services                                            $     38,893    $     40,326      $     116,968    $     114,136
Advisory services and other                                        14,988          19,180            54,898           63,818
Total revenues                                                     53,881          59,506            171,866          177,954
Operating expenses
Cost of services and fulfillment                                   19,234          21,806            63,306           65,848
Selling and marketing                                              18,084          20,282            56,536           60,119
General and administrative                                         7,099           7,529             20,468           22,945
Reorganization costs                                               -               -                 3,141            -
Depreciation                                                       1,075           1,012             3,311            2,998
Amortization of intangible assets                                  439             282               1,751            476
Total operating expenses                                           45,931          50,911            148,513          152,386
Income from operations                                             7,950           8,595             23,353           25,568
Other income, net                                                  460             1,447             2,182            5,221
Realized (losses) gains from marketable and non-marketable         (732   )        26                (1,683  )        2,136
investments
Income from operations before income tax provision                 7,678           10,068            23,852           32,925
Income tax provision                                               3,378           3,680             10,769           12,864
Net income                                                   $     4,300     $     6,388       $     13,083     $     20,061
Diluted net income per common share                          $     0.19      $     0.27        $     0.57       $     0.85
Diluted weighted average common shares outstanding                 22,809          23,793            22,953           23,655
Basic net income per common share                            $     0.19      $     0.28        $     0.58       $     0.87
Basic weighted average common shares outstanding                   22,561          23,163            22,736           23,056
Pro forma data (1):
Income from operations                                       $     7,950     $     8,595       $     23,353     $     25,568
Amortization of intangible assets                                  439             282               1,751            476
Reorganization costs                                               -               -                 3,141            -
Investigation related expenses                                     -               487               -                1,085
Stock-based compensation included in the following expense
categories:
Cost of services and fulfillment                                   733             678               2,481            2,094
Selling and marketing                                              274             247               884              723
General and administrative                                         423             343               1,556            1,156
Pro forma income from operations                                   9,819           10,632            33,166           31,102
Other income, net                                                  460             1,447             2,182            5,221
Pro forma income before income taxes                     10,279       12,079      35,348       36,323
Pro forma income tax provision                           4,112        4,711       14,139       14,166
Pro forma net income                                 $   6,167    $   7,368   $   21,209   $   22,157
Pro forma diluted net income per share               $   0.27     $   0.31    $   0.92     $   0.94
Diluted weighted average common shares outstanding       22,809       23,793      22,953       23,655
(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. Our pro forma
presentation excludes reorganization costs, amortization of
intangible assets, stock-based compensation, net gains or
impairments from marketable and non-marketable investments, costs
associated with the stock option investigation and restatement of
our historical financial statements, as well as their related tax
effects. The pro forma data does not purport to be prepared in
accordance with Accounting Principles Generally Accepted in the
United States.

Forrester Research, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
                                                         September 30,       December 31,
                                                         2009                2008
                                                         (Unaudited)
Assets:
Cash and cash equivalents                                $    108,177        $    129,478
Short-term investments                                        162,055             83,951
Accounts receivable, net                                      36,404              64,226
Deferred commissions                                          6,365               9,749
Deferred income taxes                                         9,037               7,947
Prepaid expenses and other current assets                     10,112              15,553
Total current assets                                          332,150             310,904
Long-term investments                                         9,950               46,500
Property and equipment, net                                   6,957               6,759
Deferred income taxes                                         7,460               8,523
Goodwill and intangible assets, net                           73,463              74,562
Non-marketable investments and other long term assets         5,612               7,703
Total assets                                             $    435,592        $    454,951
Liabilities and stockholders' equity:
Accounts payable                                         $    1,952          $    3,532
Accrued expenses                                              23,892              27,527
Deferred revenue                                              93,541              113,844
Total current liabilities                                     119,385             144,903
Non-current liabilities                                       6,552               6,551
Total liabilities                                             125,937             151,454
Preferred stock                                               -                   -
Common stock                                                  293                 291
Additional paid-in capital                                    322,707             315,149
Retained earnings                                             123,776             110,693
Treasury stock, at cost                                       (136,084 )          (120,851 )
Accumulated other comprehensive loss                          (1,037   )          (1,785   )
Total stockholders' equity                                    309,655             303,497
Total liabilities and stockholders' equity               $    435,592        $    454,951

Forrester Research, Inc.
Consolidated Statements of Cash Flows
(In thousands)
                                                                     Nine months ended September 30,
                                                                     2009               2008
                                                                     (Unaudited)        (Unaudited)
Cash flows from operations:
Net income                                                           $   13,083         $   20,061
Adjustments to reconcile net income to net cash provided by
operating activities -
Depreciation                                                             3,311              2,998
Amortization of intangible assets                                        1,751              476
Non-cash stock-based compensation                                        4,921              3,973
Increase in provision for doubtful accounts                              320                494
Unrealized loss on foreign currency and other, net                       125                -
Deferred income taxes                                                    225                2,961
Impairments (gains) from non-marketable investments, net                 1,683              (79       )
Gains on sales of marketable investments                                 -                  (2,057    )
Amortization of premiums on marketable investments                       838                626
Changes in assets and liabilities -
Accounts receivable                                                      28,401             34,518
Deferred commissions                                                     3,385              2,134
Prepaid expenses and other current assets                                5,611              2,290
Accounts payable                                                         (2,050   )         (1,056    )
Accrued expenses                                                         (3,797   )         (10,035   )
Deferred revenue                                                         (21,338  )         (16,951   )
Net cash provided by operating activities                                36,469             40,353
Cash flows from investing activities:
Acquisition of JupiterResearch                                           -                  (23,398   )
Acquisition of Forrester Middle East FZ-LLC                              (752     )         -
Purchases of property and equipment                                      (3,464   )         (2,730    )
Proceeds from non-marketable investments                                 -                  250
Decrease in other assets                                                 438                344
Purchases of marketable investments                                      (530,345 )         (966,671  )
Proceeds from sales and maturities of marketable investments             487,339            1,028,902
Net cash (used in) provided by investing activities                      (46,784  )         36,697
Cash flows from financing activities:
Proceeds from issuance of common stock under stock option plans and      2,721              17,246
employee stock purchase plan
Tax benefits related to stock options                                    -                  5,314
Acquisition of treasury shares                                           (15,233  )         (26,086   )
Net cash used in financing activities                                    (12,512  )         (3,526    )
Effect of exchange rate changes on cash and cash equivalents             1,526              (1,818    )
Net (decrease) increase in cash and cash equivalents                     (21,301  )         71,706
Cash and cash equivalents, beginning of period                           129,478            53,163
Cash and cash equivalents, end of period                             $   108,177        $   124,869

SOURCE: Forrester Research, Inc.

Forrester Research, Inc. 
Michael Doyle, +1 617-613-6000 
Chief Financial Officer 
mdoyle@forrester.com 
or 
Forrester Research, Inc. 
Karyl Levinson, +1 617-613-6262 
Vice President, Corporate Communications 
press@forrester.com

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