<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended June 30, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number: 000-21433
-------------
FORRESTER RESEARCH, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2797789
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1033 Massachusetts Avenue
Cambridge, Massachusetts 02138
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 497-7090
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [x] No [ ]
As of August 10, 1998, 8,553,012 shares of the registrant's common stock
were outstanding.
<PAGE> 2
FORRESTER RESEARCH, INC.
INDEX TO FORM 10-Q
Page
----
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements 3
Consolidated Balance Sheets at June 30,
1998 and December 31, 1997 3
Consolidated Statements of Income for the
Three and Six Months Ended June 30, 1998
and 1997 4
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
ITEM 3. Quantitative and Qualitative Disclosure About 8
Market Risk
PART II. OTHER INFORMATION 13
ITEM 1. Legal Proceedings 13
ITEM 2. Changes in Securities 13
ITEM 3. Defaults Upon Senior Securities 13
ITEM 4. Submission of Matters to a Vote of 13
Security-Holders
ITEM 5. Other Information 13
ITEM 6. Exhibits and Reports on Form 8-K 13
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FORRESTER RESEARCH, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,809 $ 7,742
Marketable securities 54,509 47,172
Accounts receivable, net 13,628 11,193
Deferred commissions 1,768 1,368
Prepaid income taxes 440 520
Prepaid expenses and other current assets 2,333 1,052
------- -------
Total current assets 75,487 69,047
------- -------
Property and equipment, net 7,341 4,489
------- -------
Total assets $82,828 $73,536
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,561 $ 1,273
Customer deposits 219 279
Accrued expenses 3,404 3,661
Accrued income taxes 623 623
Deferred revenue 30,851 27,074
Deferred income taxes 243 121
------- -------
Total current liabilities 36,901 33,031
------- -------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value
Authorized--500,000 shares
Issued and outstanding--none - -
Common stock, $.01 par value
Authorized--25,000,000 shares
Issued and outstanding--8,529,406 shares and 8,391,829
shares at June 30, 1998 and December 31, 1997,
respectively 85 84
Additional paid-in capital 36,783 34,353
Retained earnings 8,968 6,008
Unrealized gain on marketable securities 91 60
------- -------
Total stockholders' equity 45,927 40,505
------- -------
Total liabilities and stockholders' equity $82,828 $73,536
======= =======
See accompanying notes.
</TABLE>
3
<PAGE> 4
FORRESTER RESEARCH, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES:
Core research $11,202 $ 7,121 $ 21,671 $13,299
Advisory services and other 3,841 2,005 6,503 3,998
------- ------- -------- -------
Total revenues
15,043 9,126 28,174 17,297
------- ------- -------- -------
OPERATING EXPENSES:
Cost of services and fulfillment 5,782 3,081 10,610 5,998
Selling and marketing 5,078 3,298 9,845 6,426
General and administrative 1,642 1,014 3,199 1,835
Depreciation and amortization 648 272 1,179 505
------- ------- -------- -------
Total operating expenses 13,150 7,665 24,833 14,764
------- ------- -------- -------
Income from operations 1,893 1,461 3,341 2,533
OTHER INCOME 715 583 1,431 1,227
------- ------- -------- -------
Income before income tax provision 2,608 2,044 4,772 3,760
INCOME TAX PROVISION 991 829 1,812 1,527
------- ------- -------- -------
Net income $ 1,617 $ 1,215 $ 2,960 $ 2,233
======= ======= ======= =======
BASIC NET INCOME PER COMMON SHARE $ 0.19 $ 0.15 $ 0.35 $ 0.27
======= ======= ======= =======
DILUTED NET INCOME PER COMMON SHARE $ 0.17 $ 0.14 $ 0.32 $ 0.25
======= ======= ======= =======
BASIC WEIGHTED AVERAGE COMMON SHARES 8,496 8,310 8,466 8,305
OUTSTANDING ======= ======= ======= =======
DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 9,510 8,809 9,292 8,804
======= ======= ======= =======
</TABLE>
See accompanying notes.
4
<PAGE> 5
FORRESTER RESEARCH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,960 $ 2,233
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization 1,179 505
Deferred income taxes 121 (160)
Accretion of discount on marketable securities (16) (325)
Unrealized loss on available-for-sale
securities 31 (71)
Changes in assets and liabilities-
Accounts receivable (2,435) (1,193)
Deferred commissions (400) 290
Prepaid expenses and other current assets (1,201) (638)
Accounts payable 288 (61)
Customer deposits (60) 75
Accrued expenses (256) (202)
Deferred revenue 3,777 3,538
------- --------
Net cash provided by operating
activities 3,988 3,991
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (4,031) (1,237)
Purchase of marketable securities (186,860) (120,371)
Proceeds from sales and maturities of
marketable securities 179,539 84,840
------- --------
Net cash used in investing
activities (11,352) (36,768)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Tax effect of stock options 748 -
Net proceeds of stock options exercised
and employee stock purchase plan 1,683 177
------- --------
Net cash provided by financing
activities 2,431 177
------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,933) (32,600)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,742 34,382
------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,809 $ 1,782
======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 280 $ 1,839
======= ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
FORRESTER RESEARCH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Interim Consolidated Financial Statements
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC) for reporting on Form 10-Q.
Accordingly, certain information and footnote disclosures required for complete
financial statements are not included herein. It is recommended that these
financial statements be read in conjunction with the consolidated financial
statements and related notes of Forrester Research, Inc. (the "Company") as
reported in the Company's Annual Report on Form 10-K for the year ended December
31, 1997. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of the
financial position, results of operations, and cash flows at the dates and for
the periods presented have been included. The consolidated balance sheet
presented as of December 31, 1997 has been derived from the consolidated
financial statements that have been audited by the Company's independent public
accountants. The results of operations for the quarter and six months ended June
30, 1998 may not be indicative of the results that may be expected for the year
ended December 31, 1998, or any other period.
Note 2 - Earnings Per Share
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. This
statement established standards for computing and presenting earnings per share
and applies to entities with publicly traded common stock or potential common
stock. This statement is effective for fiscal years ending after December 15,
1997. In February 1998, the SEC issued Staff Accounting Bulletin (SAB) No. 98.
This bulletin revises the SEC's guidance for calculating earnings per share with
respect to equity security issuances before an initial public offering (IPO) and
is effective for fiscal years ending after December 15, 1997. Accordingly, the
prior years' weighted average common shares outstanding and net income per
common share have been retroactively restated to reflect the adoption of SFAS
No. 128 and SAB No. 98.
Basic net income per common share was computed by dividing net income by the
basic weighted average number of common shares outstanding during the period.
Diluted net income per common share was computed by dividing net income by the
diluted weighted average number of common shares outstanding during the period.
The weighted average number of common equivalent shares outstanding has been
determined in accordance with the treasury-stock method. Common stock
equivalents consist of common stock issuable on the exercise of outstanding
options. Reconciliation of basic to diluted weighted average shares outstanding
are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Basic weighted average common shares
outstanding 8,496 8,310 8,466 8,305
Weighted average common equivalent
shares 1,014 499 826 499
----- ----- ----- -----
Diluted weighted average shares
outstanding 9,510 8,809 9,292 8,804
----- ----- ----- -----
</TABLE>
As of June 30, 1998 and 1997, 14,384 and 865 stock options, respectively, were
not included in diluted weighted average shares outstanding as the effect would
have been anti-dilutive.
6
<PAGE> 7
Note 3 - Comprehensive Income
Comprehensive income for the three-month periods ended June 30, 1998 and 1997
was approximately $1,623,000 and $1,336,000, respectively. The difference
between comprehensive income and net income relates to unrealized gains on
marketable securities.
Note 4 - New Accounting Pronouncements
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) No. 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP No. 98-1 requires
certain computer software costs associated with internal use software to be
expensed as incurred until certain capitalization criteria are met. The Company
will adopt SOP No. 98-1 prospectively beginning January 1, 1999. Adoption of
this Statement is not expected to have a material impact on the Company's
consolidated financial position or results of operations.
In April 1998, the AICPA issued SOP No. 98-5, Reporting on the Costs of Start-Up
Activities. SOP No. 98-5 requires all costs associated with pre-opening,
pre-operating and organization activities to be expensed as incurred. The
Company will adopt SOP No. 98-5 beginning January 1, 1999. Adoption of this
Statement is not expected to have a material impact on the Company's
consolidated financial position or results of operations.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Words such as "expects," "believes," "anticipates," "intends," "plans,"
"estimates," or similar expressions are intended to identify these
forward-looking statements. These statements are based on the Company'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. The Company undertakes
no obligation to update publicly any forward-looking statements, whether as a
result of new information, future events, or otherwise. Important factors that
could cause actual results to differ materially from those indicated by
forward-looking statements include, among others, the need to attract and retain
professional staff, the ability of the Company to manage growth, variability of
quarterly operating results, possible volatility of stock price, dependence on
renewals of membership-based research services, dependence on key personnel,
risks associated with anticipating market trends, the ability to develop and
offer successful new products and services, and competition.
Forrester Research, Inc. ("Forrester" or the "Company") is a leading
independent research firm offering products and services that help its clients
assess the effect of technology on their businesses. The Company provides
analysis and insight into a broad range of technology areas such as computing,
software, networking, the Internet, and telecommunications, and projects how
technology trends will impact businesses, consumers, and society. Forrester's
clients, which include senior management, business strategists, and information
technology ("IT") and marketing professionals within large enterprises, use
Forrester's prescriptive research to understand and benefit from current
developments in technology and as support for their development and
implementation decisions.
Memberships to Forrester's Strategy Research Services and Quantitative
Research Service ("Research Services") are renewable contracts, typically annual
and payable in advance. Accordingly, a substantial portion of the Company's
billings are initially recorded as deferred revenue. Strategy Research Services
revenues are recognized pro rata on a monthly basis over the contract period.
Quantitative Research Services revenues are recognized upon delivery of the
research. The Company's other revenues are derived from advisory services
rendered pursuant to Forrester's Partners Program and Strategy Review Program
and in conjunction with Quantitative Research and from Forrester Forums
("Forums"). The Company's advisory service clients purchase such services
together with core research memberships to Research Services, and the contracts
for such purchases are also generally payable in advance. Billings attributable
to advisory services are initially recorded as deferred revenue and recognized
as revenue when performed. Similarly, Forum billings are initially recorded as
deferred revenue and are recognized as revenue upon completion of each event.
The Company's operating expenses consist of cost of services and
fulfillment, selling and marketing expenses, general and administrative
expenses, and depreciation and amortization. Cost of services and fulfillment
represents the costs associated with production and delivery of the Company's
products and services, and include the costs of salaries, bonuses, and related
benefits for research personnel, and all associated editorial, travel, and
support services. Selling and marketing expenses include salaries, employee
benefits, travel expenses, promotional costs, sales commissions, and other costs
incurred in marketing and selling the Company's products and services. General
and administrative expenses include the costs of the finance, operations,
technology, and strategy groups, and other administrative functions of the
Company.
The Company believes that the "agreement value" of contracts to purchase
core research and advisory services provides a significant measure of the
Company's business volume. Forrester calculates agreement value as the
annualized fees payable under all core research and advisory service contracts
in effect at a given point in time, without regard to the remaining duration of
such contracts. Agreement value increased 20% to $56.0 million at June 30, 1998
from $46.6 million at December 31, 1997. No single client company accounted for
more than 2% of agreement value at June 30, 1998. The Company's experience is
that a substantial portion of client companies renew expiring contracts for an
equal or higher level of total core research and advisory service fees each
year. Approximately 78% of Forrester's client companies with memberships
expiring during the 12 month period ended June 30, 1998 renewed one or
8
<PAGE> 9
more memberships for the Company's products and services. This renewal rate is
not necessarily indicative of the rate of future retention of the Company's
revenue base.
RESULTS OF OPERATIONS
The following table sets forth certain financial data as a percentage of
total revenues for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Core research 74% 78% 77% 77%
Advisory services and other 26 22 23 23
--- --- --- ---
Total revenues 100 100 100 100
Cost of services and fulfillment 38 34 38 35
Selling and marketing 34 36 35 37
General and administrative 11 11 11 10
Depreciation and amortization 4 3 4 3
--- --- --- ---
Income from operations 13 16 12 15
Interest income 5 6 5 7
--- --- --- ---
Income before income tax provision 18 22 17 22
Provision for income taxes 7 9 6 9
--- --- --- ---
Net income 11% 13% 11% 13%
=== === === ===
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
REVENUES. Total revenues increased 65% to $15.0 million in the three
months ended June 30, 1998 from $9.1 million in the three months ended June 30,
1997. Revenues from core research increased 57% to $11.2 million in the three
months ended June 30, 1998 from $7.1 million in the three months ended June 30,
1997. Increases in total revenues and revenues from core research were primarily
attributable to an increase in the number of client companies to 1,113 at June
30, 1998 from 927 at June 30, 1997, the introduction of four new Strategy
Research Services and a Quantitative Research Service since June 30, 1997, and
sales of additional Strategy Research Services to existing clients. No single
client company accounted for more than 3% of revenues for the three months ended
June 30, 1998.
Advisory services and other revenues increased 92% to $3.8 million in the
three months ended June 30, 1998 from $2.0 million in the three months ended
June 30, 1997. This increase was primarily attributable to the addition of two
new Forum events held in April and May 1998 and demand for the Partners and
Strategy Review Programs.
Revenues attributable to customers outside the United States increased 50%
to $3.3 million in the three months ended June 30, 1998 from $2.2 million in the
three months ended June 30, 1997, and decreased as a percentage of total
revenues to 22% for the three months ended June 30, 1998 from 24% for the three
months ended June 30, 1997. The increase in revenues was due primarily to the
addition of direct international sales personnel. The decrease as a percentage
of total revenue resulted from additional
9
<PAGE> 10
domestic revenue derived from the two new forum events held in the United States
during the quarter. The Company invoices its international clients in U.S.
dollars.
COST OF SERVICES AND FULFILLMENT. Cost of services and fulfillment
increased as a percentage of total revenues to 38% in the three months ended
June 30, 1998 from 34% in the three months ended June 30, 1997. These expenses
increased 88% to $5.8 million in the three months ended June 30, 1998 from $3.1
million in the three months ended June 30, 1997. The expense increase and
increase as a percentage of total revenues in this period were principally due
to additional expenses associated with two new forum events in the quarter,
increased analyst staffing for Research Services and related compensation
expense, and the cost of survey services related to the Quantitative Research
Service.
SELLING AND MARKETING. Selling and marketing expenses decreased as a
percentage of total revenues to 34% in the three months ended June 30, 1998 from
36% in the three months ended June 30, 1997. These expenses increased 54% to
$5.1 million in the three months ended June 30, 1998 from $3.3 million in the
three months ended June 30, 1997. The increase in expenses was principally due
to the addition of direct salespersons and increased sales commission expense
associated with increased revenues. The decrease as a percentage of total
revenues was principally due to increased productivity of the Company's direct
sales force.
GENERAL AND ADMINISTRATIVE. General and administrative expenses remained
constant as a percentage of total revenues at 11% in the three months ended June
30, 1998 and 1997. These expenses increased 62% to $1.6 million in the three
months ended June 30, 1998 from $1.0 million in the three months ended June 30,
1997. The increase in expenses was principally due to staffing increases in the
Company's operations, finance, technology and strategy groups, and investment in
the Company's infrastructure.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 138% to $648,000 in the three months ended June 30, 1998 from $272,000
in the three months ended June 30, 1997. The increase in this expense was
principally due to purchases of computer equipment, software, office
furnishings, and leasehold improvements to support business growth.
OTHER INCOME. Other income, consisting primarily of interest income,
increased to $715,000 in the three months ended June 30, 1998 from $583,000 in
the three months ended June 30, 1997 due to an increase in the Company's cash
and marketable securities balances resulting from positive cash flows from
operations.
PROVISION FOR INCOME TAXES. During the three months ended June 30, 1998,
the Company recorded a tax provision of $991,000, reflecting an effective tax
rate of 38.0%. During the three months ended June 30, 1997, the Company recorded
a tax provision of $829,000, reflecting an effective tax rate of 40.6%. The
decrease in effective tax rate resulted from a reduction in the Company's
effective state tax rate and investments in tax-exempt instruments.
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
REVENUES. Total revenues increased 63% to $28.2 million in the six months
ended June 30, 1998 from $17.3 million in the six months ended June 30, 1997.
Revenues from core research increased 63% to $21.7 million in the six months
ended June 30, 1998 from $13.3 million in the six months ended June 30, 1997.
Increases in total revenues and revenues from core research were primarily
attributable to an increase in the number of client companies to 1,113 at June
30, 1998 from 927 at June 30, 1997, the introduction of two new Strategy
Research Services and a Quantitative Research Service since June 30, 1997, and
sales of additional Strategy Research Services to existing clients. No single
client company accounted for more than 3% of revenues for the six months ended
June 30, 1998.
10
<PAGE> 11
Advisory services and other revenues increased 63% to $6.5 million in the
six months ended June 30, 1998 from $4.0 million in the six months ended June
30, 1997. This increase was primarily attributable to the addition of two new
Forum events held in April and May 1998 and demand for the Partners and
Strategy Review Programs.
Revenues attributable to customers outside the United States increased 48%
to $5.9 million in the six months ended June 30, 1998 from $4.0 million in the
six months ended June 30, 1997. Revenues attributable to customers outside the
United States decreased as a percentage of total revenues to 21% for the six
months ended June 30, 1998 from 22% for the six months ended June 30, 1997. The
increase in revenues was due primarily to the addition of direct international
sales personnel. The decrease as a percentage of total revenue resulted from
additional domestic revenues derived from the two new U.S. forum events held
during the six-month period ended June 30, 1998. The Company invoices its
international clients in U.S. dollars.
COST OF SERVICES AND FULFILLMENT. Cost of services and fulfillment
increased as a percentage of total revenues to 38% in the six months ended June
30, 1998 from 35% in the six months ended June 30, 1997. These expenses
increased 77% to $10.6 million in the six months ended June 30, 1998 from $6.0
million in the six months ended June 30, 1997. The expense increase and increase
as a percentage of total revenues in this period were principally due to
expenses associated with two new events in the quarter, increased analyst
staffing for Research Services and related compensation expense, and the cost of
survey services related to the Quantitative Research Service.
SELLING AND MARKETING. Selling and marketing expenses decreased as a
percentage of total revenues to 35% in the six months ended June 30, 1998 from
37% in the six months ended June 30, 1997. These expenses increased 53% to $9.8
million in the six months ended June 30, 1998 from $6.4 million in the six
months ended June 30, 1997. The increase in expenses was principally due to the
addition of direct salespersons and increased sales commission expense
associated with increased revenues. The decrease as a percentage of total
revenues was principally due to increased productivity of the Company's direct
sales force.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
as a percentage of total revenues to 11% in the six months ended June 30, 1998
from 10% in the six months ended June 30, 1997. These expenses increased 74% to
$3.2 million in the six months ended June 30, 1998 from $1.8 million in the six
months ended June 30, 1997. The increase in expenses and expense as a percentage
of total revenue was principally due to staffing increases in the Company's
operations, finance, technology, and strategy groups, and investment in the
Company's infrastructure, including new financial systems.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 133% to $1.2 million in the six months ended June 30, 1998 from
$505,000 in the six months ended June 30, 1997. The increase in this expense was
principally due to purchases of computer equipment, software, office
furnishings, and leasehold improvements to support business growth.
OTHER INCOME. Other income, consisting primarily of interest income,
increased to $1.4 million in the six months ended June 30, 1998 from $1.2
million in the six months ended June 30, 1997, due to an increase in the
Company's cash balances resulting from positive cash flows from operations.
PROVISION FOR INCOME TAXES. During the six months ended June 30, 1998, the
Company recorded a tax provision of $1.8 million, reflecting an effective tax
rate of 38.0%. During the six months ended June 30, 1997, the Company recorded a
tax provision of $1.5 million, reflecting an effective tax rate of 40.6%. The
decrease in effective tax rate resulted from a reduction in the Company's
effective state tax rate and investments in tax-exempt instruments.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date through funds generated
from operations. Memberships for core research, which constituted approximately
74% of the Company's revenues for the three months ended June 30, 1998, are
annually renewable and are generally payable in advance. The Company generated
$4.0 million in cash from operating activities during the six-month periods
ended June 30, 1998 and 1997.
During the six-month period ended June 30, 1998, the Company used $11.4
million of cash in investing activities, consisting of $4.0 million for
purchases of property and equipment and $7.4 million for net purchases of
marketable securities. The significant increase in purchases of property and
equipment was primarily due to computer equipment purchases to support
additional headcount, investment in infrastructure, and leasehold improvements
to support business growth, including the Amsterdam, Netherlands office. The
Company regularly invests excess funds in short- and intermediate-term
interest-bearing obligations of investment grade.
As of June 30, 1998, the Company had cash and cash equivalents of $2.8
million and $54.5 million in marketable securities. The Company does not have a
line of credit and does not anticipate the need for one in the foreseeable
future. The Company has recently opened an office in Amsterdam, Netherlands. The
Company plans to introduce new Strategy Research Services and events, and to
continue to invest in its infrastructure and personnel over the next three to 12
months. The Company believes that its current cash balance, marketable
securities, and cash flows from operations will satisfy working capital,
financing activities, and capital expenditure requirements for at least the next
two years.
Management is currently assessing the extent to which its computer
systems, software applications, and product offerings are year 2000 compliant.
The Company expects to incur internal staff costs as well as consulting and
other expenses related to systems enhancements for the year 2000 compliance. The
Company currently expects to have all systems prepared and tested for year 2000
by January 1999. The total costs to be incurred for all year 2000-related
projects are not expected to have a material impact on future results from
operations.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Annual Meeting of Stockholders ("Meeting") was held on May 12, 1998. At such
meeting, the stockholders elected the following persons as Class II Directors of
the Board of Directors by the following votes:
Total Vote For Total Vote Withheld
Each Director From Each Director
------------- ------------------
George R. Hornig 8,281,431 4,912
Henk W. Broeders 8,281,431 4,912
George F. Colony's term of office as a Class I Director continued after the
meeting. Robert M. Galford and Michael H. Welles' terms of office as Class III
Directors continued after the meeting.
ITEM 5. OTHER INFORMATION
Under the Company's By-laws, stockholders who wish to make a proposal at the
1999 Annual Meeting - other than one that will be included in the Company's
proxy materials - must notify the Company no earlier than 90 days before the
1999 Annual Meeting and no later than 60 days prior to the 1999 Annual Meeting.
Under recent changes to the Federal proxy rules, if a stockholder who wishes to
present such a proposal fails to notify the Company by 60 days prior to the 1999
Annual Meeting, then the proxies that management solicits for the 1999 Annual
Meeting will include discretionary authority to vote on the stockholder's
proposal in the event it is properly brought before the meeting notwithstanding
the Company's By-laws.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Forrester Research, Inc.
By: /s/ GEORGE F. COLONY
--------------------
George F. Colony
Chairman of the Board, President, and
Chief Executive Officer
Date: August 14, 1998
By: /s/ SUSAN M. WHIRTY
-------------------
Susan M. Whirty
Chief Financial Officer, Vice President,
Operations (principal financial and
accounting officer)
Date: August 14, 1998
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORRESTER
RESEARCH INC'S JUNE 30, 1998 CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED IN FORM
10-K.
</LEGEND>
<CIK> 0001023313
<NAME> FORRESTER RESEARCH, INC.
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 2,809,348
<SECURITIES> 54,509,167
<RECEIVABLES> 13,977,542
<ALLOWANCES> 350,000
<INVENTORY> 0
<CURRENT-ASSETS> 75,487,515
<PP&E> 10,582,116
<DEPRECIATION> 3,241,433
<TOTAL-ASSETS> 82,828,198
<CURRENT-LIABILITIES> 36,901,100
<BONDS> 0
0
0
<COMMON> 85,284
<OTHER-SE> 45,841,804
<TOTAL-LIABILITY-AND-EQUITY> 82,828,198
<SALES> 0
<TOTAL-REVENUES> 15,043,432
<CGS> 0
<TOTAL-COSTS> 5,781,744
<OTHER-EXPENSES> 7,368,339
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,608,435
<INCOME-TAX> 991,205
<INCOME-CONTINUING> 1,617,230
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 1,617,230
<EPS-PRIMARY> .19
<EPS-DILUTED> .17
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