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FR

FORRESTER RESEARCH, INC. (FORR)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $108.0M, down 8.5% year over year; GAAP diluted EPS was $0.02, while adjusted diluted EPS was $0.36 and adjusted operating margin expanded to 8.3% from 5.8% in Q4 2023 .
  • Contract value (CV) declined 5% year over year to $307.6M; client retention held at 73% and wallet retention improved to 89%; the migration to Forrester Decisions is “essentially complete” with ~80% of CV on the platform .
  • Management implemented a ~6% workforce reduction in early January to align costs with revenue outlook; FY2025 guidance calls for revenue of $400–$415M (-7.5% to -4.0% YoY), GAAP EPS of $0.24–$0.34, and adjusted EPS of $1.20–$1.35, with adjusted operating margin of 8%–9% .
  • CFO said Q4 results were “in line with or better than the midpoint of our guidance and consensus estimates,” though exact Street estimates were not available via S&P Global for validation due to API limits . S&P Global estimates unavailable.

What Went Well and What Went Wrong

What Went Well

  • Forrester Decisions migration “essentially now complete” with ~80% of CV on the platform; simplifies the business and supports higher retention and cross-sell (“we are turning from the three-year product transition to operating the new Forrester model”) .
  • Adjusted profitability improved: Q4 adjusted operating income rose to $8.9M (8.3% of revenue) vs. $6.8M (5.8%) in Q4 2023; adjusted EPS rose to $0.36 vs. $0.25 .
  • Product traction and AI: Izola became the third most used feature; heavy users renewed at ~20% higher rates; major update to Forrester Wave increased engagement and value .

What Went Wrong

  • CV bookings attenuated late Q4; CV down 5% YoY; management cited execution challenges in small high-tech, the government sector (timing), and India in Q4 .
  • Events revenue fell 42% in Q4 and 34% for FY2024, driven by lower sponsorship and fewer non-client attendees; audience size impacted sponsorship (~70% of events revenue) .
  • Operating cash flow turned negative for FY2024 (-$3.9M) vs. +$21.7M in FY2023, influenced by declining bookings and litigation settlement payments earlier in the year .

Financial Results

Consolidated Income Metrics (USD Millions, EPS in USD; periods oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Total Revenues ($MM)$121.825 $102.527 $108.041
GAAP Diluted EPS$0.33 $(0.30) $0.02
Adjusted Diluted EPS$0.68 $0.29 $0.36
Adjusted Operating Margin %14.7% 8.0% 8.3%

Segment Revenues (USD Millions; periods oldest → newest)

SegmentQ2 2024Q3 2024Q4 2024
Research$83.663 $77.070 $79.425
Consulting$24.811 $23.369 $25.933
Events$13.351 $2.088 $2.683

KPIs and Operating Metrics (periods oldest → newest)

KPIQ2 2024Q3 2024Q4 2024
Contract Value ($MM)$323.0 $315.2 $307.6
Client Retention (%)73% 73% 73%
Wallet Retention (%)89% 89% 89%
Number of Clients2,220 2,002 1,942
Headcount1,656 1,608 1,571
Sales Force592 597 580

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenues (GAAP)FY2024$425–$435M $425–$435M (maintained) Maintained (Q3 vs Q2)
Operating Margin (GAAP)FY20241.2%–2.2% 0.5%–1.5% Lowered (Q3 vs Q2)
Interest ExpenseFY2024~$3.0M ~$3.0M Maintained
Effective Tax Rate (GAAP)FY2024~65%–80% ~135%–270% Raised (Q3 vs Q2)
Diluted EPS (GAAP)FY2024$0.06–$0.19 $(0.24)–$(0.04) (Loss/Share) Lowered (Q3 vs Q2)
Adjusted Operating MarginFY20248.5%–9.5% 8.5%–9.5% Maintained
Adjusted Effective Tax RateFY2024~29% ~29% Maintained
Adjusted Diluted EPSFY2024$1.37–$1.57 $1.37–$1.57 Maintained
Total Revenues (GAAP)FY2025N/A$400–$415M (-7.5% to -4.0% YoY) First Issued
Operating Margin (GAAP)FY2025N/A~1.8%–2.8% First Issued
Interest ExpenseFY2025N/A~$2.7M First Issued
Effective Tax Rate (GAAP)FY2025N/A45% First Issued
Diluted EPS (GAAP)FY2025N/A$0.24–$0.34 First Issued
Adjusted Operating MarginFY2025N/A~8%–9% First Issued
Adjusted Effective Tax RateFY2025N/A29% First Issued
Adjusted Diluted EPSFY2025N/A$1.20–$1.35 First Issued

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
AI/Technology Initiatives (Izola; FD for Data/AI/Analytics)Izola launched to all FD clients; 91% single-prompt answer rate; Interactive Wave tool released; FD for Data/AI/Analytics launched Izola UX improved; access to survey data/models/Wave baselines; heavy users renew at ~20% higher; Izola third most-visited destination Strengthening product engagement and potential retention benefits
Sales Motion & Retention LifecycleFAST methodology rollout; retention lifecycle adoption; pipelines improving (30%); targeting C-level buyers Continued focus on execution; retention lifecycle institutionalized; aim to improve retention, growth, events as CV driver Ongoing execution focus; improving systems/process
Events BusinessQ2 sponsorship declines; revenue -25% YoY; strong content scores Q4 -42% YoY; FY -34%; plan to “supercharge” events; shift marketing spend; incentivize sales; expand experience Weak revenue; investment planned to stabilize/grow
CV & Client MixQ2/Q3 CV down 3%/5%; migration 73%→78% of CV on FD; deemphasize sub-$50M vendors CV down 5% YoY to $307.6M; 80% CV on FD; CV/client +10%; multiyear contracts 69% vs 62% Stabilizing metrics with higher CV/client and multiyear mix
Macro & End MarketsConsulting/events headwinds; tech vendor layoffs stabilizing; government pipeline Small high-tech, government timing, India execution issues in Q4; Big Tech larger vendors recovered Mixed; large tech improving; small tech/government timing issues
Capital AllocationOpportunistic buybacks planned in 2H 2024; cash/investments ~$110.8M FY2024 buybacks ~$15.9M; cash/investments $104.7M; ~$80M authorization remaining Continuing opportunistic repurchases

Management Commentary

  • CEO: “The Forrester Decisions migration is essentially now complete, with 80% of CV in the new platform… We are turning from the three-year product transition to being laser-focused on operating the new Forrester model.”
  • CFO: “Fourth quarter and full year financial results were in line with or better than the midpoint of our guidance and consensus estimates.”
  • CEO on growth path: “We are planning for flat contract value growth in the year… and expect cash flow to return to historical levels in the year.”
  • Chief Product Officer on AI: “Izola… is client-facing, but we’re leveraging it for internal efficiency… automation to decrease the time analysts conduct calls… auto summarization and GenAI to update records.”
  • CEO on client mix: “We have pivoted from a 60% CV, 40% non-CV ratio to 73% CV and 27% non-CV… CV per client and multiyear contracts continue to expand.”

Q&A Highlights

  • Bookings softness: Late Q4 attenuation tied to execution challenges in small high‑tech, government budget timing (continuing resolution), and India; Big Tech (large vendors) performed better in 2H .
  • Sales execution: Focus on reaching senior economic buyers, standardizing sales activities, and scaling FAST methodology; early renewal program shows ~30% growth when engaging C‑suite .
  • AI utilization: Izola heavy users show ~20% higher renewal rates; internal automation improves customer success and analyst productivity .
  • Client mix shift: Deemphasizing sub‑$50M vendors largely complete; emerging tech segment targeted at >$50M vendors .
  • Events plan: Additional investments, new leadership, and emphasis on sponsorships and client/prospect attendance to stabilize business .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 were unavailable due to API request limits. Management stated Q4 results were “in line with or better than the midpoint of our guidance and consensus estimates,” but exact Street figures could not be validated here . Values retrieved from S&P Global were unavailable.

Key Takeaways for Investors

  • The product transition is effectively complete; 80% of CV now on Forrester Decisions, with higher CV per client (+10% YoY to $158K) and more multiyear contracts (69%), positioning for improved retention and operating leverage over time .
  • Q4 adjusted margin expansion (8.3%) alongside lower revenue suggests disciplined cost control; FY2025 guidance implies revenue decline but sustained adjusted margins (8%–9%) and EPS resilience ($1.20–$1.35) .
  • Events remains a headwind; management’s planned investments and sales incentives are a near-term catalyst—watch sponsorship recovery and attendance mix for CV uplift .
  • Sales execution is the swing factor: successful penetration of senior economic buyers and retention lifecycle cadence correlates with better renewal and enrichment outcomes; monitor CV stabilization/inflection in 2H 2025 per management .
  • AI differentiation (Izola) and interactive Wave upgrades deepen client engagement; early data show improved renewal rates among heavy users—consider this as a potential driver of retention and cross‑sell .
  • Cash/investments at $104.7M and ongoing buybacks (~$80M authorization remaining) provide support; 2024 operating cash flow negative due to bookings decline and litigation settlement—management expects return to positive free cash flow in 2025 .
  • Risk factors: softness in small high‑tech, government timing, and regional execution (India), plus macro/political uncertainties cited by management; guidance embeds cautious first half and better second half .