Forrester Research, Inc. (NASDAQ:FORR) is a leading global research and advisory firm that empowers leaders across technology, customer experience, digital, marketing, sales, and product functions to accelerate growth through customer obsession. With a rich history spanning over three decades, Forrester has established itself as a trusted partner, providing organizations with the insights and guidance needed to navigate the ever-evolving business landscape.

Financials

In the fiscal year 2023, Forrester reported annual revenue of $480,779,000 and net income of $30,500,000. The company's annual operating cash flow stood at $21,673,000, while its free cash flow reached $16,178,000. These financial metrics demonstrate Forrester's ability to generate consistent and sustainable returns for its shareholders.

During the first quarter of 2024, Forrester reported mixed results, with its Research segment performing in line with expectations, while the Consulting segment faced challenges due to the broader macroeconomic environment and its impact on the technology industry. Total revenue for the quarter decreased by 12% to $100,077,000, compared to $113,670,000 in the same period of the prior year. The decline in revenue was primarily driven by a 5% decrease in Research revenues and a 27% decrease in Consulting revenues.

Despite the revenue decline, Forrester's key metrics have shown signs of stabilization. Contract value (CV), a critical metric for the company, decreased by 4% in the first quarter, in alignment with the company's plan. Wallet retention, a measure of the CV retained with clients over a 12-month period, improved slightly to 88% from the prior quarter, while Forrester Decisions client retention remained flat at 82%. The company's focus on migrating its client base to the Forrester Decisions platform, which now accounts for 70% of total CV, is a strategic priority as it aims to drive long-term growth and improve retention.

Outlook

Forrester's management team remains optimistic about the company's long-term prospects, despite the near-term challenges. The company's Chief Executive Officer, George Colony, highlighted the fundamental drivers of demand for Forrester's services, including the need for large corporations to navigate technology changes and shifts in customer behavior. The Forrester Decisions platform, which provides a more strategic and continuous research and advisory partnership, is expected to be a key driver of the company's future growth.

Recent Developments

One of the notable developments during the quarter was Forrester's investment in Generative AI (GenAI) capabilities. The company recently made its proprietary GenAI tool, Izola, available to all of its Forrester Decisions clients. Izola can rapidly synthesize Forrester's research, data, and insights, enabling clients to access solutions more efficiently. This investment in cutting-edge technology underscores Forrester's commitment to staying at the forefront of industry trends and providing its clients with innovative tools to drive their business success.

Forrester's geographic diversification is another strength, as the company has seen stronger performance in Europe and Asia compared to the United States. This global footprint allows Forrester to capitalize on growth opportunities in different markets and mitigate the impact of regional economic fluctuations.

Looking ahead, Forrester has maintained its guidance for the full year 2024, with revenue expected to be in the range of $430 million to $450 million and operating margins anticipated to be between 9.5% and 10.5%. The company expects to see ongoing headwinds in its Consulting business, while the Research segment is expected to experience a mid-single-digit decline. Forrester remains focused on returning to contract value growth, driven by its flagship Forrester Decisions product, as it navigates the challenges posed by the current macroeconomic environment.

Conclusion

Forrester's commitment to innovation, global diversification, and its strategic transition to the Forrester Decisions platform position the company well to weather the current headwinds and capitalize on the long-term growth opportunities in the research and advisory services market. As the company continues to evolve and adapt to the changing needs of its clients, Forrester's unique insights and customer-centric approach are likely to remain in high demand, making it a compelling investment opportunity for those seeking exposure to the technology and research sectors.