Forrester Research ((FORR)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Forrester’s latest earnings call balanced tough near‑term numbers with growing strategic traction. Management acknowledged revenue decline, negative earnings and consulting headwinds, but highlighted record Forrester AI usage, stronger retention, steady cash generation and early sales momentum. Leadership sounded more confident in guidance, arguing these trends set up a gradual CV recovery.
Improving Retention Metrics
Wallet retention improved to 89%, up 2 points sequentially and 3 points year over year, signaling clients are maintaining or expanding spend. Client retention rose to 78%, up 1 point sequentially and 5 points year over year, reflecting better onboarding and stronger engagement with Forrester’s core research platform.
Forrester AI Adoption and Product Advances
Forrester AI usage reached an all‑time high in Q1, with overall usage up 55% and prompt volume up 65% year over year. The company rolled out a new AI model with conversational features, transparent reasoning and support for 197 languages, and launched integrations with Microsoft Teams and Copilot to embed insights where clients work.
Strong Cash Generation and Balance Sheet
The company produced $19 million of free cash flow in Q1, or about $25 million excluding a one‑time $5.4 million headquarters capital spend. Forrester ended the quarter with more than $145 million of cash against just $35 million of debt, and it extended its credit facility maturity to March 2029, preserving balance sheet flexibility.
Productivity and Sales Momentum
Q1 contract value productivity per rep was 6% higher than a year ago, suggesting improving sales effectiveness despite a soft top line. AI Access is gaining traction, now just under 5% of CV and expected to approach about 10% by year‑end, while 40% of reps have sold AI Access and B2B event attendance rose 10%.
Research Output and Practical Offerings
Forrester delivered more than 420 research reports and datasets in Q1, underscoring the depth of its core product. It also produced 70 initiative blueprints and launched a Forrester AI Use Case Catalog with over 900 use cases, designed to guide clients on prioritizing and executing AI investments in a pragmatic way.
Portfolio and Go‑to‑Market Execution
Management highlighted progress on strategic initiatives, including a revamped retention life cycle and faster client onboarding to deepen adoption. The sales organization was restructured around growth industries in North America, and the company expanded product optionality through AI Access while embedding AI into everyday client workflows.
Cost Discipline and Leaner Operating Base
Adjusted operating expenses fell 1% in Q1, helped by an 8% reduction in headcount and lower real estate costs to rightsize the footprint. These moves are designed to improve operating leverage over time, even as the company absorbs certain one‑time costs and invests in AI and product upgrades.
Revenue Decline in Q1
Total Q1 revenue fell 5% year over year to $85.5 million from $89.9 million, showing continued top‑line pressure. Research revenue slipped 2% while consulting revenue dropped 13%, reflecting both softer demand and the strategic reshaping of the consulting portfolio.
Consulting Business Headwinds and Strategic Exit
Consulting revenue came in at $18.6 million, down 13% year over year, primarily because Forrester chose to exit its strategy consulting business and stopped actively selling it early in the quarter. Management expects consulting revenue to decline in the low‑20% range for the full year as this transition runs through the numbers.
Q1 Profitability and Earnings Pressure
Adjusted operating income swung to a loss of $0.9 million, or negative 1% of revenue, versus a $2.5 million profit a year ago, a 135% decline. Net income was negative $7 million and EPS was negative $0.04, reflecting weaker revenue, consulting exits and one‑time items that weighed on margins.
Events Revenue Still Recovering
Events revenue was minimal in Q1 because no major events were held during the period, leaving this line item still in recovery mode after recent disruptions. Management expects events revenue to decline in the mid‑ to high‑teens for the full year, even as sponsorship bookings and attendee metrics show improvement.
Near‑Term Revenue Guidance Still Below Prior Year
Despite increased confidence, the full‑year revenue outlook of $350 million to $360 million implies a 9% to 12% decline versus the prior year. Research is expected to be down mid‑single digits while consulting and events face steeper declines, underscoring that 2026 remains a reset year rather than a growth year.
One‑Time and Litigation‑Related Costs
Q1 results absorbed a $5.4 million one‑time headquarters capital expenditure as well as one‑time costs tied to now‑concluded litigation. These items reduced reported free cash flow and operating income, though management noted underlying free cash flow would have been nearer $25 million excluding the HQ spend.
Contract Value Still Declining in Near Term
Contract value declined 3% in Q1, an improvement on the 6% decline seen in the prior year but still a headwind for future revenue. Management expects CV to turn slightly positive for the full year, suggesting stabilization but only a gradual return to consistent growth.
No Share Buybacks or Debt Paydown
Forrester chose not to repurchase shares or reduce debt during the quarter, even with a strong cash balance, opting to preserve capital for strategic investments and HQ buildout. Some investors may see this as a missed opportunity, but management appears focused on reinforcing the operating model and AI initiatives first.
Forward‑Looking Guidance and Outlook
For the full year, Forrester guided to $350 million to $360 million of revenue, down about 9% to 12% with research declining mid‑single digits and consulting and events down more sharply. The company still targets operating margins of 6% to 6.5% and EPS of $0.72 to $0.82, while expecting CV to be slightly up, AI Access to near 10% of mix and free cash flow to remain solid.
Forrester’s earnings call painted a picture of a business in transition, trading short‑term profit and revenue growth for a leaner model and heavier AI focus. Investors will need patience as consulting and events reset, but improving retention, stronger AI adoption and a cash‑rich balance sheet suggest the foundation for a gradual recovery in contract value and earnings is being laid.