Forrester Research (FORR, Financial) is an independent technology research firm. Companies use its proprietary reports, events, real-time survey data, and consulting services to analyze key technology trends impacting businesses and determine the strategies and IT investments needed to stay competitive or harness those technologies to their advantage. We`ve known the company and its management for many years. We had a small position in Premier back in 2000, and Forrester is also a direct peer of Gartner (IT), a former holding in Premier`s portfolio.
Forrester Research (Nasdaq: FORR) 2020
Forrester is a high-return, strong free cash flow business model characterized by recurring revenues, with approximately two-thirds of sales in annual research subscriptions and a 90% renewal rate. It boasts high-margin sales by reselling the same information to different buyers with little incremental expense-an information services/publishing model. We also like that it`s a people-intensive-as opposed to capital intensive-business model. Forrester carries no inventory and collects subscription fees in advance of delivering its research. The company has been free cash flow positive every year since its IPO in 1996, and its free cash flow conversion averages about twice its net income. Reflecting these favorable business attributes, Forrester`s five-year average ROIC was 32.8% at the end of June. Finally, we see a number of key secular growth drivers, including the ongoing digital transformation of businesses as companies continue to invest in IT to expand e-commerce and work-from home capabilities, run their businesses more effectively and flexibly, and to differentiate through improved customer experiences.
From Royce Investment Partners' commentary on Small-Cap Premier quality holdings.
