Forrester Research, Inc. (FORR) Bundle
Understanding Forrester Research, Inc. (FORR) Revenue Streams
Understanding Forrester Research, Inc.’s Revenue Streams
Forrester Research, Inc. generates revenue through several key sources, primarily categorized into research, consulting, and events. The following breakdown highlights the contributions from each segment for the nine months ended September 30, 2024.
| Revenue Source | Revenue (2024) | Revenue (2023) | Absolute Change | Percentage Change |
|---|---|---|---|---|
| Research Revenues | $237.3 million | $249.2 million | $(11.9) million | (5%) |
| Consulting Revenues | $71.3 million | $90.0 million | $(18.6) million | (21%) |
| Events Revenues | $15.8 million | $23.5 million | $(7.7) million | (33%) |
| Total Revenues | $324.4 million | $362.7 million | $(38.3) million | (11%) |
The research segment represents the largest portion of revenue, constituting approximately 73% of total revenues for the nine months ended September 30, 2024. The revenue from research products declined by 4% and 5% in the third quarter and year-to-date comparisons, respectively, primarily due to decreased demand for certain products such as reprints and other smaller offerings.
Consulting revenues experienced a significant drop, with a 17% decrease in the third quarter and a 21% decline year-to-date compared to the previous year. This decline is attributed to lower client bookings and reduced delivery of consulting services.
Event revenues saw the most substantial decrease, with a 54% drop in the third quarter and a 33% decrease over nine months. This decline was mainly due to reduced sponsorship and event ticket revenues.
Revenue generated from international customers remained stable, representing approximately 23% of total revenue, with a slight increase from 22% in the previous year.
Overall, the company faced challenges across all segments, leading to a 10% decrease in total revenues for the third quarter of 2024 compared to the same period in 2023.
A Deep Dive into Forrester Research, Inc. (FORR) Profitability
Profitability Metrics
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was 75.8%, compared to 73.0% for the same period in 2023. The gross profit for the nine months ended September 30, 2024 was $137.3 million on total revenues of $324.4 million, resulting in a gross profit margin of 42.4%.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024 was -0.7%, down from 4.5% in the prior year. For the nine months, the operating profit margin was 0.4%, compared to 2.3% for the same period in 2023.
Net Profit Margin: The net profit margin for the three months ended September 30, 2024 was -5.7%, while for the nine months it was -1.9%. In comparison, the net profit margin for the three months ended September 30, 2023 was 2.2%, and for the nine months, it was 1.0%.
Trends in Profitability Over Time
Comparing profitability over time, the gross profit margin has shown some resilience despite fluctuations in revenue. The operating and net profit margins have declined significantly, indicating increased operational challenges. The following table summarizes the profitability metrics over the last two years:
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 75.8% | 73.0% | 42.4% | 43.5% |
| Operating Profit Margin | -0.7% | 4.5% | 0.4% | 2.3% |
| Net Profit Margin | -5.7% | 2.2% | -1.9% | 1.0% |
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, the gross profit margin is relatively strong, as the average for the industry is approximately 70%. However, the operating profit margin is significantly lower than the industry average of about 10%, and the net profit margin is also below the average of 5%.
Analysis of Operational Efficiency
The decline in operating profit margin is attributed to increased expenses in selling and marketing, which rose to 37.3% of total revenues in Q3 2024 compared to 35.2% in Q3 2023. General and administrative expenses also increased to 15.4% from 13.3% during the same period. The following table highlights key expense categories vs. total revenues:
| Expense Category | Q3 2024 (%) | Q3 2023 (%) |
|---|---|---|
| Cost of Services and Fulfillment | 41.1% | 42.3% |
| Selling and Marketing | 37.3% | 35.2% |
| General and Administrative | 15.4% | 13.3% |
| Depreciation | 1.9% | 2.0% |
| Amortization of Intangible Assets | 2.3% | 2.7% |
Debt vs. Equity: How Forrester Research, Inc. (FORR) Finances Its Growth
Debt vs. Equity: How Forrester Research, Inc. Finances Its Growth
As of September 30, 2024, Forrester Research, Inc. reported total liabilities of $270.7 million. This includes both current and long-term obligations, which are crucial for understanding the company's financial leverage and risk profile.
Forrester's long-term debt stood at $17.9 million, while the short-term debt was $3.7 million. These figures indicate a manageable level of debt relative to the company's overall financial structure.
The company's debt-to-equity ratio is calculated to be 0.11, which is significantly lower than the industry average of approximately 0.5. This low ratio suggests that Forrester relies more on equity financing than on debt, positioning the company as less risky compared to its peers.
Recent Debt Issuances and Credit Ratings
In recent months, Forrester has not engaged in any new debt issuances. Its credit ratings remain stable, reflecting the company's solid financial health. As of the latest reports, no ratings have been downgraded, indicating confidence among credit agencies regarding the company's ability to meet its obligations.
Balancing Debt Financing and Equity Funding
Forrester has been strategically balancing its financing methods. The company has historically relied on equity funding, particularly through stock repurchase programs, which authorized up to $610 million for purchasing common stock. As of September 30, 2024, the company has repurchased approximately 17.8 million shares at a total cost of $527.1 million .
This strategic choice to favor equity over debt allows Forrester to maintain a lower debt burden, thus reducing interest expenses and financial risk. The company's focus on equity financing also supports its long-term growth strategy by providing flexibility in capital allocation.
| Financial Metric | Value |
|---|---|
| Total Liabilities | $270.7 million |
| Long-Term Debt | $17.9 million |
| Short-Term Debt | $3.7 million |
| Debt-to-Equity Ratio | 0.11 |
| Industry Average Debt-to-Equity Ratio | 0.5 |
| Stock Repurchase Authorization | $610 million |
| Total Shares Repurchased | 17.8 million shares |
| Total Cost of Repurchases | $527.1 million |
Assessing Forrester Research, Inc. (FORR) Liquidity
Assessing Forrester Research, Inc. (FORR) Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 2.33, indicating a strong liquidity position.
Quick Ratio: The quick ratio stands at 2.07, reflecting the company's ability to meet short-term obligations without relying on inventory.
Working Capital: For the nine months ended September 30, 2024, working capital was approximately $114.9 million, a decrease from $125.2 million in the prior year.
| Liquidity Metric | September 30, 2024 | September 30, 2023 |
|---|---|---|
| Current Ratio | 2.33 | 2.52 |
| Quick Ratio | 2.07 | 2.15 |
| Working Capital | $114.9 million | $125.2 million |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, cash used in operating activities was ($2.0 million), compared to $9.8 million generated in the same period in 2023.
Investing Cash Flow: Cash generated from investing activities was $4.8 million in 2024, primarily due to $6.0 million from the sale of the FeedbackNow product line.
Financing Cash Flow: Cash used in financing activities amounted to ($13.0 million), primarily due to $13.0 million for stock repurchases.
| Cash Flow Category | September 30, 2024 | September 30, 2023 |
|---|---|---|
| Operating Cash Flow | ($2.0 million) | $9.8 million |
| Investing Cash Flow | $4.8 million | $6.3 million |
| Financing Cash Flow | ($13.0 million) | ($18.2 million) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $114.4 million of available borrowing capacity on its credit facility, with a balance of $35.0 million drawn. The weighted average interest rate for the period was 6.66%.
Despite a decrease in cash flow from operations, the company maintains a solid liquidity position with a current ratio above 2.0 and a healthy quick ratio. The ongoing ability to generate cash from investing activities, along with available credit, supports the company’s liquidity profile.
Is Forrester Research, Inc. (FORR) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the financial health of Forrester Research, Inc. can be evaluated using key valuation metrics including the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The P/E ratio is calculated by dividing the current share price by the earnings per share (EPS). As of September 30, 2024, the stock price is approximately $17.63. The diluted EPS for the third quarter of 2024 was $(0.30), leading to a P/E ratio of N/A due to negative earnings.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated by dividing the share price by the book value per share. The total stockholders' equity as of September 30, 2024, was $234.334 million with 25.092 million shares outstanding, resulting in a book value per share of approximately $9.33. Therefore, the P/B ratio is approximately 1.89 ($17.63 / $9.33).
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio provides insight into the valuation of the business relative to its earnings. The enterprise value (EV) can be calculated as market capitalization plus total debt minus cash and cash equivalents. At the end of September 2024, Forrester had:
- Market Capitalization: $442.88 million (calculated from stock price and shares outstanding)
- Long-term Debt: $35 million
- Cash and Cash Equivalents: $62.754 million
Thus, the EV is calculated as follows:
EV = Market Capitalization + Long-term Debt - Cash
EV = $442.88 million + $35 million - $62.754 million = $415.126 million
The EBITDA for the trailing twelve months is approximately $12.76 million (calculated from the latest financial statements). Therefore, the EV/EBITDA ratio is approximately 32.5 ($415.126 million / $12.76 million).
Stock Price Trends
Over the last 12 months, Forrester's stock price has seen fluctuations:
- 12 months ago: $35.00
- Current Price: $17.63
- Percentage Decline: 49.5%
Dividend Yield and Payout Ratios
As of September 30, 2024, Forrester does not pay a dividend, resulting in a dividend yield of 0%. Consequently, the payout ratio is also N/A since no dividends are issued.
Analyst Consensus
According to recent analyst reports, the consensus rating for Forrester Research, Inc. is classified as:
- Buy: 2 Analysts
- Hold: 5 Analysts
- Sell: 1 Analyst
| Valuation Metric | Value |
|---|---|
| P/E Ratio | N/A |
| P/B Ratio | 1.89 |
| EV/EBITDA Ratio | 32.5 |
| Current Stock Price | $17.63 |
| Market Capitalization | $442.88 million |
| Dividend Yield | 0% |
| Analyst Consensus | Buy: 2, Hold: 5, Sell: 1 |
Key Risks Facing Forrester Research, Inc. (FORR)
Key Risks Facing Forrester Research, Inc. (FORR)
Overview of Internal and External Risks
Forrester Research, Inc. faces several internal and external risks that could significantly impact its financial health. The competitive landscape in the research and consulting industry is intense, with numerous players vying for market share. Regulatory changes affecting data privacy and security could impose additional compliance costs. Furthermore, macroeconomic factors such as inflation and shifts in client budgets may adversely affect demand for the company's services.
Operational, Financial, or Strategic Risks
Recent earnings reports highlighted several operational risks, including a decline in consulting revenues, which decreased by 17% in Q3 2024 compared to Q3 2023. The company also reported a 54% decrease in event revenues during the same period, primarily due to reduced sponsorship and ticket sales. Financially, the company recorded a net loss of $(5.8 million) for Q3 2024, compared to a net income of $2.5 million in Q3 2023. The effective tax rate has also fluctuated, reaching 461% for the nine months ended September 30, 2024.
Mitigation Strategies
To address these risks, Forrester has implemented several mitigation strategies. The company has been actively managing its operating expenses, with total operating expenses decreasing by 5% year-over-year. Additionally, the firm is diversifying its service offerings to reduce reliance on any single revenue stream. The company also maintains a robust cash position, with cash and cash equivalents of $62.8 million as of September 30, 2024.
| Risk Factor | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | Intense competition from other research and consulting firms | Pressure on pricing and market share | Diversification of services |
| Regulatory Changes | Potential new regulations on data privacy | Increased compliance costs | Investment in compliance infrastructure |
| Market Conditions | Economic downturns affecting client budgets | Reduced demand for services | Cost management and service innovation |
| Operational Risks | Decline in consulting and event revenues | Negative impact on overall revenues | Focus on client engagement and retention |
| Financial Performance | Net loss reported in recent quarters | Impact on stock performance and investor confidence | Expense reduction and strategic investments |
Future Growth Prospects for Forrester Research, Inc. (FORR)
Future Growth Prospects for Forrester Research, Inc.
Analysis of Key Growth Drivers
Forrester Research, Inc. is exploring multiple avenues for growth, including product innovations, market expansions, and strategic acquisitions. The company's recent divestiture of the FeedbackNow product line for approximately $17.6 million demonstrates its focus on core competencies while generating cash for reinvestment.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total revenues were $324.4 million, reflecting a decrease of 11% compared to the same period in 2023. Research revenues decreased by 5% to $237.3 million, while consulting revenues fell by 21% to $71.3 million. As the company navigates through its strategic initiatives, projections suggest a potential rebound in revenue, contingent on successful execution of its growth strategies.
Strategic Initiatives or Partnerships That May Drive Future Growth
Forrester is actively pursuing partnerships to enhance its service offerings and expand into new markets. The company has allocated resources towards enhancing its research capabilities and consulting services, with a focus on digital transformation and customer experience insights, which are critical in today's market landscape.
Competitive Advantages That Position the Company for Growth
Forrester maintains a strong brand reputation and a loyal customer base, which provides a competitive edge. The company has a robust portfolio of market research and advisory services, allowing it to adapt to changing market demands. Additionally, Forrester's access to a wealth of data and analytics positions it favorably against competitors in the research sector.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Total Revenues | $102.5 million | $113.4 million | -10% |
| Research Revenues | $77.1 million | $80.6 million | -4% |
| Consulting Revenues | $23.4 million | $28.2 million | -17% |
| Events Revenues | $2.1 million | $4.6 million | -54% |
| Revenue from Non-U.S. Customers | $23.6 million | $25.8 million | -9% |
As Forrester Research, Inc. progresses through 2024, its focus on strategic initiatives, market adaptability, and leveraging competitive advantages will be crucial in driving future growth.
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Updated on 16 Nov 2024
Resources:
- Forrester Research, Inc. (FORR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Forrester Research, Inc. (FORR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Forrester Research, Inc. (FORR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.