Forrester Research, Inc. (Nasdaq: FORR) today announced
fourth-quarter and full-year financial results for 2023, with
contract value (CV) down by 4%, at $332.1 million, compared with
the prior year.
Commenting on the results, George F. Colony, Forrester’s CEO and
chairman, stated, “2023 was a challenging year, with revenue down
11% and CV down by 4%. However, we made steady progress in 2023 on
multiple fronts, including improving the Forrester Decisions
platform, upskilling the sales organization, and readying our genAI
tool, Izola, for general release. Furthermore, we achieved our goal
of migrating two-thirds of our contract value into our new research
platform, Forrester Decisions.
“We see 2024 as the final transition year in the Forrester
Decisions migration, and this is reflected in our 2024 guidance. We
expect pressures throughout the year on CV, key retention metrics,
and revenue. However, we have built the product, go-to-market, and
organizational foundations to enable the company to return to CV
growth in 2025.”
Fourth-Quarter Consolidated
Results
Total revenues for the fourth quarter of 2023 were $118.1
million, compared with $136.9 million for the comparable quarter in
2022.
On a GAAP basis, net loss was $0.7 million, or $0.03 per diluted
share, for the fourth quarter of 2023, compared with a net loss of
$1.6 million, or $0.09 per diluted share, for the same period in
2022.
On an adjusted basis, net income was $4.8 million, or $0.25 per
diluted share, for the fourth quarter of 2023, reflecting an
adjusted effective tax rate of 29%. Adjusted net income excludes
stock-based compensation of $4.3 million, amortization of
acquisition-related intangible assets of $2.8 million,
restructuring costs of $1.1 million, and investment gains of $0.2
million. This compares with adjusted net income of $8.5 million, or
$0.45 per diluted share, for the same period in 2022, which
reflects an adjusted tax rate of 30%. Adjusted net income for the
fourth quarter of 2022 excludes stock-based compensation of $3.5
million, amortization of acquisition-related intangible assets of
$3.1 million, restructuring costs of $9.3 million, and investment
losses of $0.1 million.
Year Ended December 31, 2023, Financial Performance
Total revenues were $480.8 million, compared with $537.8 million
for the same period in 2022.
On a GAAP basis, net income was $3.1 million, or $0.16 per
diluted share, for 2023, compared with net income of $21.8 million,
or $1.14 per diluted share, for 2022.
On an adjusted basis, net income was $36.6 million, or $1.90 per
diluted share, for 2023, which reflects an adjusted effective tax
rate of 29%. Adjusted net income excludes stock-based compensation
of $15.5 million, amortization of acquisition-related intangible
assets of $12.0 million, restructuring costs of $13.3 million, a
legal settlement of $4.8 million, and gains on investments of $0.2
million. This compares with adjusted net income of $47.2 million,
or $2.46 per diluted share, for 2022, which reflects an adjusted
tax rate of 30%. Adjusted net income for 2022 excludes stock-based
compensation of $14.5 million, amortization of acquisition-related
intangible assets of $13.2 million, restructuring costs of $9.3
million, and investment gains of $0.3 million.
Additional details regarding key metrics can be found in the
investor presentation on the investor relations section of the
Company’s website.
A reconciliation of GAAP results to adjusted results may be
found in the attached financial tables.
2024 Guidance
Forrester is providing full-year 2024 financial guidance as
follows:
Full-Year 2024 (GAAP):
- Total revenues of approximately $430.0 million to $450.0
million, or a decline of 6% to 11% versus the prior year
- Operating margin of approximately 2.4% to 3.4%
- Interest expense of approximately $3.0 million
- An effective tax rate of 35%
- Diluted earnings per share of approximately $0.33 to $0.53
Full-Year 2024 (Adjusted):
Adjusted financial guidance for full-year 2024 excludes
stock-based compensation expense of $13.8 million to $14.8 million,
amortization of acquisition-related intangible assets of
approximately $10.0 million, restructuring costs of $6.6 million to
$7.0 million, and any investment gains or losses.
- Adjusted operating margin of approximately 9.5% to 10.5%
- Adjusted effective tax rate of 29%
- Adjusted diluted earnings per share of approximately $1.50 to
$1.70
About Forrester
Forrester (Nasdaq: FORR) is one of the most influential research
and advisory firms in the world. We help leaders across technology,
customer experience, digital, marketing, sales, and product
functions use customer obsession to accelerate growth. Through
Forrester’s proprietary research, consulting, and events, leaders
from around the globe are empowered to be bold at work — to
navigate change and put their customers at the center of their
leadership, strategy, and operations. Our unique insights are
grounded in annual surveys of more than 700,000 consumers, business
leaders, and technology leaders worldwide; rigorous and objective
research methodologies, including Forrester Wave™ evaluations; more
than 100 million real-time feedback votes; and the shared wisdom of
our clients. To learn more, 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 full-year 2024 and statements about the
performance of Forrester Decisions, Forrester’s sales force, and
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, including the migration of its existing clients into its
Forrester Decisions portfolio of services; Forrester’s ability to
fulfill existing or generate new consulting engagements and
advisory services; technology spending; the risks and challenges
inherent in international business activities; the impact of health
epidemics, including COVID-19, on Forrester’s business; Forrester’s
ability to offer new products and services; Forrester’s dependence
on key personnel; Forrester’s ability to attract and retain
professional staff; Forrester’s ability to respond to business and
economic conditions and market trends; the impact of Forrester’s
outstanding debt obligations; competition and industry
consolidation; possible variations in Forrester’s quarterly
operating results; concentration of ownership of Forrester; the
possibility of network disruptions and security breaches; any
failure to enforce and protect Forrester’s intellectual property
rights; compliance with privacy laws; taxation risks; any weakness
in Forrester’s system of internal controls; and the amount and
timing of the repurchase of Forrester stock. 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 operations and the table of key
financial data are attached.
© 2024, Forrester Research, Inc. All rights reserved. Forrester
is a trademark of Forrester Research, Inc.
Forrester Research, Inc. Consolidated Statements of
Operations (Unaudited, In thousands, except per share data)
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Revenues: Research
$
85,185
$
92,188
$
334,396
$
354,453
Consulting
28,271
37,512
118,228
152,587
Events
4,633
7,191
28,155
30,747
Total revenues
118,089
136,891
480,779
537,787
Operating expenses: Cost of services and fulfillment
52,600
56,814
204,484
223,773
Selling and marketing
44,272
48,691
167,352
181,940
General and administrative
16,847
19,758
68,497
67,655
Depreciation
1,895
2,277
8,452
9,269
Amortization of intangible assets
2,781
3,093
11,956
13,161
Restructuring costs
1,132
9,335
13,272
9,335
Total operating expenses
119,527
139,968
474,013
505,133
Income (loss) from operations
(1,438
)
(3,077
)
6,766
32,654
Interest expense
(774
)
(729
)
(3,060
)
(2,461
)
Other income, net
739
30
2,371
222
Gains (losses) on investments, net
208
(117
)
208
309
Income (loss) before income taxes
(1,265
)
(3,893
)
6,285
30,724
Income tax expense (benefit)
(602
)
(2,263
)
3,235
8,918
Net income (loss)
$
(663
)
$
(1,630
)
$
3,050
$
21,806
Basic income (loss) per common share
$
(0.03
)
$
(0.09
)
$
0.16
$
1.15
Diluted income (loss) per common share
$
(0.03
)
$
(0.09
)
$
0.16
$
1.14
Basic weighted average common shares outstanding
19,238
19,051
19,183
18,967
Diluted weighted average common shares outstanding
19,238
19,051
19,258
19,172
Adjusted data (1): Income (loss) from operations -
GAAP
$
(1,438
)
$
(3,077
)
$
6,766
$
32,654
Amortization of intangible assets
2,781
3,093
11,956
13,161
Restructuring costs
1,132
9,335
13,272
9,335
Legal settlement
—
—
4,800
—
Stock-based compensation included in the following expense
categories: Cost of services and fulfillment
2,563
2,038
9,068
8,435
Selling and marketing
849
646
2,943
2,774
General and administrative
905
823
3,475
3,334
Adjusted income from operations
$
6,792
$
12,858
$
52,280
$
69,693
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Amount
Per Share
Amount
Per Share
Amount
Per Share
Amount
Per Share
Net income (loss) - GAAP
$
(663
)
$
(0.03
)
$
(1,630
)
$
(0.09
)
$
3,050
$
0.16
$
21,806
$
1.14
Amortization of intangible assets
2,781
0.14
3,093
0.16
11,956
0.62
13,161
0.68
Restructuring costs
1,132
0.06
9,335
0.49
13,272
0.69
9,335
0.49
Legal settlement
—
—
—
—
4,800
0.25
—
—
Stock-based compensation
4,317
0.22
3,507
0.18
15,486
0.80
14,543
0.76
(Gains) losses on investments
(208
)
(0.01
)
117
0.01
(208
)
(0.01
)
(309
)
(0.02
)
Tax effects of items above (2)
(1,994
)
(0.10
)
(4,261
)
(0.22
)
(11,111
)
(0.58
)
(9,748
)
(0.51
)
Adjustment to tax expense for adjusted tax rate (3)
(568
)
(0.03
)
(1,649
)
(0.08
)
(616
)
(0.03
)
(1,570
)
(0.08
)
Adjusted net income
$
4,797
0.25
$
8,512
$
0.45
$
36,629
1.90
$
47,218
$
2.46
Diluted weighted average shares outstanding
19,314
19,110
19,258
19,172
(1) Forrester believes that adjusted 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 adjusted
presentation excludes amortization of acquisition-related
intangible assets, stock-based compensation, restructuring costs, a
legal settlement, and net gains or losses from investments, as well
as their related tax effects. We also utilized an assumed tax rate
of 29% in 2023 and 30% in 2022, which excludes items such as the
settlement of prior year tax audits and the effect of any
adjustments related to the filing of prior year tax returns. The
adjusted data does not purport to be prepared in accordance with
Generally Accepted Accounting Principles 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 adjusted net income, we apply an adjusted effective tax
rate of 29% in 2023 and 30% in 2022.
Forrester Research,
Inc. Key Financial Data (Unaudited, dollars in
thousands)
December 31,
December 31,
2023
2022
Balance sheet data: Cash, cash equivalents, and marketable
investments
$
124,489
$
123,317
Accounts receivable, net
$
58,999
$
73,345
Deferred revenue
$
156,798
$
178,021
Debt outstanding
$
35,000
$
50,000
Year Ended
December 31,
2023
2022
Cash flow data: Net cash provided by operating activities
$
21,673
$
39,425
Purchases of property and equipment
$
(5,495
)
$
(5,663
)
Repayments of debt
$
(15,000
)
$
(25,000
)
Repurchases of common stock
$
(4,082
)
$
(15,112
)
As of
December 31,
2023
2022
Metrics: Contract value
$
332,100
$
345,400
(a) Client retention
73
%
74
%
Wallet retention
87
%
94
%
(a) Number of clients
2,449
2,778
As of
December 31,
2023
2022
Headcount: Total headcount
1,744
2,033
Sales force
601
709
(a) Effective for the fourth quarter of
2023, we made a slight modification to the calculation of contract
value (“CV”) based on the increasing percentage of multi-year
contracts we are signing with our clients, and to more closely
align CV with the trends in the related bookings and revenue
performance. Historically, we have annualized the ratable revenue
portion of our CV subscription products, while the entitlements
included in the subscriptions (representing approximately 10% of
the subscription) have been included in CV at their total value, as
all entitlements in the contract are available for use during an
annual period. The revised calculation annualizes the entitlements
for contracts greater than one year. In addition, we update CV each
year for the foreign currency rates used for internal planning
purposes. We have updated the CV metric for our 2024 plan rates.
For comparative purposes, we have recast historical CV and wallet
retention for both the currency rate update and the annualization
of entitlements. We have included the recast CV and wallet
retention metrics for the period ended December 31, 2022 in this
table, and we have also provided recast CV and wallet retention
amounts dating back to the fourth quarter of 2021 on the investor
relations section of our website.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240208409175/en/
Ed Bryce Morris Vice President, Corporate Development &
Investor Relations Forrester Research, Inc. +1 617-613-6565
ebrycemorris@forrester.com
Shweta Agarwal Senior Director, Public Relations Forrester
Research, Inc. +1 617-613-6805 sagarwal@forrester.com
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