Forrester Research Reports 2023 Fourth-Quarter And Full-Year Financial Results
- Steady progress made in improving Forrester Decisions platform, upskilling the sales organization, and readying genAI tool, Izola, for release.
- Forrester expects pressures throughout 2024 on CV, key retention metrics, and revenue, but has laid the foundations for CV growth in 2025.
- Total revenues for Q4 2023 were $118.1 million, with a net loss of $0.7 million on a GAAP basis.
- For the full year 2023, total revenues were $480.8 million, with a net income of $3.1 million on a GAAP basis.
- Revenue down 11% and contract value (CV) down by 4% in 2023.
- Full-year financial guidance for 2024 indicates a decline of 6% to 11% in total revenues versus the prior year.
Insights
The reported financial results from Forrester Research, Inc. indicate a contraction in contract value and a decrease in revenue year-over-year. Such a performance can be attributed to various strategic changes and market conditions. The contraction in CV by 4% and the revenue decrease by 11% reflect a challenging operational environment. However, the reduction in net loss from $1.6 million to $0.7 million suggests some cost management measures may have been effective.
From an investment perspective, the company's guidance for 2024 implies further pressure on financial metrics, projecting a revenue decline of 6% to 11% and an operating margin much lower than typical S&P 500 averages, which often hover around 10-11%. The company's transition to the Forrester Decisions platform is a strategic move aimed at long-term growth, though it is causing short-term disruptions. Investors should consider the potential for recovery in 2025, as indicated by the company's expectations for CV growth.
The transition to the Forrester Decisions platform represents a significant shift in the company's product offering, which is likely to have a considerable impact on customer retention and acquisition. The migration of two-thirds of the contract value to this new platform is a critical milestone. However, the anticipated pressures on key retention metrics in 2024 suggest that the market may not have fully embraced this change. The readiness of the genAI tool, Izola, for general release could foster innovation and competitive advantage, potentially offsetting some of the adverse effects in the long term.
Understanding the industry's response to such technological advancements is crucial. As Forrester Research is a prominent player in the market research and advisory sector, their performance can serve as a barometer for the industry's health and the adoption of AI tools in strategic decision-making processes.
The financial performance of Forrester Research, Inc. must be contextualized within the broader economic landscape. The company's declining revenue and contract value suggest a potential slowdown in the market research industry, which could be reflective of broader economic headwinds. The strategic investment into the Forrester Decisions platform and the development of the genAI tool, Izola, are forward-looking measures that may position the company for recovery when economic conditions improve.
Furthermore, the adjusted operating margin guidance for 2024 is indicative of the company's efficiency measures. However, the projected effective tax rate of 35% is above the current U.S. corporate tax rate, which could imply a more conservative approach to fiscal planning or the impact of non-deductible expenses. The company's long-term growth prospects hinge on the successful integration of new technologies and platforms amidst an uncertain economic climate.
Commenting on the results, George F. Colony, Forrester’s CEO and chairman, stated, “2023 was a challenging year, with revenue down
“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
On a GAAP basis, net loss was
On an adjusted basis, net income was
Year Ended December 31, 2023, Financial Performance
Total revenues were
On a GAAP basis, net income was
On an adjusted basis, net income was
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 $450.0 million 6% to11% versus the prior year -
Operating margin of approximately
2.4% to3.4% -
Interest expense of approximately
$3.0 million -
An effective tax rate of
35% -
Diluted earnings per share of approximately
$0.33 $0.53
Full-Year 2024 (Adjusted):
Adjusted financial guidance for full-year 2024 excludes stock-based compensation expense of
-
Adjusted operating margin of approximately
9.5% to10.5% -
Adjusted effective tax rate of
29% -
Adjusted diluted earnings per share of approximately
$1.50 $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 |
| (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 |
| 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 |
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
Source: Forrester Research, Inc.
FAQ
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