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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(MARK ONE)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE QUARTERLY PERIOD ENDED March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

COMMISSION FILE NUMBER: 000-21433

 

FORRESTER RESEARCH, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

04-2797789

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

60 Acorn Park Drive

Cambridge, Massachusetts

 

02140

(Zip Code)

(Address of principal executive offices)

 

 

 

(617) 613-6000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

 

Trading Symbol(s)

 

Name of Each Exchange on Which Registered

Common Stock, $.01 Par Value

 

FORR

 

Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of April 29, 2024, 19,107,000 shares of the registrant’s common stock were outstanding.

 


 

FORRESTER RESEARCH, INC.

INDEX TO FORM 10-Q

 

 

Page

PART I

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

3

 

Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

3

 

Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023

4

 

Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2024 and 2023

5

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

6

 

Notes to Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

29

 

 

 

SIGNATURES

30

 

 

 

 

 


 

PART I.

ITEM 1. FINANCIAL STATEMENTS

FORRESTER RESEARCH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data, unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

61,379

 

 

$

72,909

 

Marketable investments

 

 

57,095

 

 

 

51,580

 

Accounts receivable, net of allowance for expected credit losses of $764 and $574 as
   of March 31, 2024 and December 31, 2023, respectively

 

 

54,717

 

 

 

58,999

 

Deferred commissions

 

 

21,498

 

 

 

23,207

 

Prepaid expenses and other current assets

 

 

23,892

 

 

 

9,305

 

Total current assets

 

 

218,581

 

 

 

216,000

 

Property and equipment, net

 

 

17,787

 

 

 

19,401

 

Operating lease right-of-use assets

 

 

34,380

 

 

 

39,722

 

Goodwill

 

 

243,028

 

 

 

244,257

 

Intangible assets, net

 

 

35,073

 

 

 

37,637

 

Other assets

 

 

6,821

 

 

 

7,157

 

Total assets

 

$

555,670

 

 

$

564,174

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,749

 

 

$

1,796

 

Accrued expenses and other current liabilities

 

 

44,698

 

 

 

81,482

 

Deferred revenue

 

 

193,664

 

 

 

156,798

 

Total current liabilities

 

 

241,111

 

 

 

240,076

 

Long-term debt

 

 

35,000

 

 

 

35,000

 

Non-current operating lease liabilities

 

 

34,472

 

 

 

37,673

 

Other non-current liabilities

 

 

14,156

 

 

 

11,160

 

Total liabilities

 

 

324,739

 

 

 

323,909

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value

 

 

 

 

 

 

Authorized - 500 shares; issued and outstanding - none

 

 

 

 

 

 

Common stock, $0.01 par value

 

 

 

 

 

 

Authorized - 125,000 shares

 

 

 

 

 

 

Issued - 24,881 and 24,684 shares as of March 31, 2024 and December 31, 2023,
   respectively

 

 

 

 

 

 

Outstanding - 19,242 and 19,248 shares as of March 31, 2024 and
   December 31, 2023, respectively

 

 

249

 

 

 

247

 

Additional paid-in capital

 

 

281,453

 

 

 

278,057

 

Retained earnings

 

 

171,008

 

 

 

177,681

 

Treasury stock - 5,639 and 5,437 shares as of March 31, 2024 and December 31, 2023,
respectively

 

 

(215,246

)

 

 

(211,149

)

Accumulated other comprehensive loss

 

 

(6,533

)

 

 

(4,571

)

Total stockholders’ equity

 

 

230,931

 

 

 

240,265

 

Total liabilities and stockholders’ equity

 

$

555,670

 

 

$

564,174

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data, unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

Research

 

$

76,581

 

 

$

80,906

 

Consulting

 

 

23,141

 

 

 

31,750

 

Events

 

 

355

 

 

 

1,014

 

Total revenues

 

 

100,077

 

 

 

113,670

 

Operating expenses:

 

 

 

 

 

 

Cost of services and fulfillment

 

 

44,690

 

 

 

49,292

 

Selling and marketing

 

 

39,422

 

 

 

41,532

 

General and administrative

 

 

14,059

 

 

 

21,227

 

Depreciation

 

 

2,060

 

 

 

2,104

 

Amortization of intangible assets

 

 

2,514

 

 

 

3,066

 

Restructuring costs

 

 

6,624

 

 

 

1,589

 

Total operating expenses

 

 

109,369

 

 

 

118,810

 

Loss from operations

 

 

(9,292

)

 

 

(5,140

)

Interest expense

 

 

(762

)

 

 

(793

)

Other income, net

 

 

1,274

 

 

 

550

 

Loss before income taxes

 

 

(8,780

)

 

 

(5,383

)

Income tax benefit

 

 

(2,107

)

 

 

(1,308

)

Net loss

 

$

(6,673

)

 

$

(4,075

)

Basic loss per common share

 

$

(0.35

)

 

$

(0.21

)

Diluted loss per common share

 

$

(0.35

)

 

$

(0.21

)

Basic weighted average common shares outstanding

 

 

19,285

 

 

 

19,108

 

Diluted weighted average common shares outstanding

 

 

19,285

 

 

 

19,108

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, unaudited)

 

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Net loss

$

(6,673

)

 

$

(4,075

)

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

Foreign currency translation

 

(1,968

)

 

 

1,206

 

Net change in market value of investments

 

6

 

 

 

33

 

Other comprehensive income (loss)

 

(1,962

)

 

 

1,239

 

Comprehensive loss

$

(8,635

)

 

$

(2,836

)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

$

(6,673

)

 

$

(4,075

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

Depreciation

 

2,060

 

 

 

2,104

 

Impairment of property and equipment

 

646

 

 

 

 

Amortization of intangible assets

 

2,514

 

 

 

3,066

 

Deferred income taxes

 

3,485

 

 

 

1,926

 

Stock-based compensation

 

3,574

 

 

 

3,165

 

Operating lease right-of-use assets amortization and impairments

 

5,679

 

 

 

2,886

 

Amortization of deferred financing fees

 

113

 

 

 

109

 

Amortization of discount on investments

 

(172

)

 

 

(63

)

Foreign currency losses

 

72

 

 

 

20

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

3,885

 

 

 

14,691

 

Deferred commissions

 

1,709

 

 

 

1,957

 

Prepaid expenses and other current assets

 

(14,617

)

 

 

(8,819

)

Accounts payable

 

970

 

 

 

64

 

Accrued expenses and other liabilities

 

(36,002

)

 

 

(37,416

)

Deferred revenue

 

36,998

 

 

 

36,041

 

Operating lease liabilities

 

(3,630

)

 

 

(3,374

)

Net cash provided by operating activities

 

611

 

 

 

12,282

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(1,426

)

 

 

(1,632

)

Purchases of marketable investments

 

(32,745

)

 

 

(964

)

Proceeds from maturities of marketable investments

 

23,900

 

 

 

4,000

 

Proceeds from sales of marketable investments

 

3,021

 

 

 

 

Other investing activity

 

14

 

 

 

(62

)

Net cash provided by (used in) investing activities

 

(7,236

)

 

 

1,342

 

Cash flows from financing activities:

 

 

 

 

 

Payments on borrowings

 

 

 

 

(15,000

)

Repurchases of common stock

 

(4,097

)

 

 

 

Proceeds from issuance of common stock under employee equity incentive plans

 

1,253

 

 

 

1,840

 

Taxes paid related to net share settlements of stock-based compensation awards

 

(1,429

)

 

 

(1,079

)

Net cash used in financing activities

 

(4,273

)

 

 

(14,239

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(652

)

 

 

1,249

 

Net change in cash, cash equivalents and restricted cash

 

(11,550

)

 

 

634

 

Cash, cash equivalents and restricted cash, beginning of period

 

75,042

 

 

 

105,654

 

Cash, cash equivalents and restricted cash, end of period

$

63,492

 

 

$

106,288

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

$

646

 

 

$

742

 

Cash paid for income taxes

$

3,195

 

 

$

1,620

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6


 

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 1 — Interim Consolidated Financial Statements

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. It is recommended that these financial statements be read in conjunction with the consolidated financial statements and related notes that appear in the Forrester Research, Inc. (“Forrester”) Annual Report on Form 10-K for the year ended December 31, 2023. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the financial position, results of operations, comprehensive loss, and cash flows as of the dates and for the periods presented have been included. The results of operations for the three months ended March 31, 2024 may not be indicative of the results for the year ending December 31, 2024, or any other period.

Presentation of Restricted Cash

The following table summarizes the end-of-period cash and cash equivalents from the Company's Consolidated Balance Sheets and the total cash, cash equivalents and restricted cash as presented on the accompanying Consolidated Statements of Cash Flows (in thousands).

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Cash and cash equivalents shown in balance sheets

$

61,379

 

 

$

104,217

 

Restricted cash classified in other assets (1):

 

2,113

 

 

 

2,071

 

Cash, cash equivalents and restricted cash shown in statement of cash flows

$

63,492

 

 

$

106,288

 

 

(1)
Restricted cash consists of collateral required for leased office space. The short-term or long-term classification regarding the collateral for the leased office space is determined in accordance with the expiration of the underlying leases.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The new standard enhances the disclosures of reportable segment information, primarily in regards to significant segment expenses. The new standard will be effective for the Company for the annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adoption of the standard on its consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The new standard enhances income tax disclosure requirements by requiring specified categories and greater disaggregation within the rate reconciliation table, disclosure of income taxes paid by jurisdiction, and providing clarification on uncertain tax positions and related financial statement impacts. The new standard will be effective for the Company on January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact of adoption of the standard on its consolidated financial statements.

 

7


 

Note 2 — Marketable Investments

The following table summarizes the Company’s marketable investments (in thousands):

 

 

As of March 31, 2024

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate obligations

 

$

21,989

 

 

$

 

 

$

(66

)

 

$

21,923

 

Federal agency obligations

 

 

2,000

 

 

 

 

 

 

(4

)

 

 

1,996

 

Money market funds

 

 

33,176

 

 

 

 

 

 

 

 

 

33,176

 

Total

 

$

57,165

 

 

$

 

 

$

(70

)

 

$

57,095

 

 

 

 

As of December 31, 2023

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate obligations

 

$

18,049

 

 

$

 

 

$

(72

)

 

$

17,977

 

Federal agency obligations

 

 

2,000

 

 

 

 

 

 

(7

)

 

 

1,993

 

Money market funds

 

 

31,610

 

 

 

 

 

 

 

 

 

31,610

 

Total

 

$

51,659

 

 

$

 

 

$

(79

)

 

$

51,580

 

Realized gains and losses on investments are included in earnings and are determined using the specific identification method. There were no realized gains or losses on marketable investments during the three months ended March 31, 2024 and 2023.

The following table summarizes the maturity periods of the marketable investments in the Company’s portfolio as of March 31, 2024 (in thousands).

 

 

FY 2024

 

 

FY 2025

 

 

Total

 

Corporate obligations

 

$

19,475

 

 

$

2,448

 

 

$

21,923

 

Federal agency obligations

 

 

1,996

 

 

 

 

 

 

1,996

 

Money market funds

 

 

33,176

 

 

 

 

 

 

33,176

 

Total

 

$

54,647

 

 

$

2,448

 

 

$

57,095

 

 

The following table shows the gross unrealized losses and market value of the Company’s available-for-sale securities with unrealized losses that are not deemed to be other-than-temporary, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

 

 

As of March 31, 2024

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

 

Market

 

 

Unrealized

 

 

Market

 

 

Unrealized

 

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

Corporate obligations

 

$

17,026

 

 

$

16

 

 

$

4,897

 

 

$

50

 

Federal agency obligations

 

 

 

 

 

 

 

 

1,996

 

 

 

4

 

Total

 

$

17,026

 

 

$

16

 

 

$

6,893

 

 

$

54

 

 

 

 

As of December 31, 2023

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

 

Market

 

 

Unrealized

 

 

Market

 

 

Unrealized

 

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

Corporate obligations

 

$

13,098

 

 

$

8

 

 

$

4,879

 

 

$

64

 

Federal agency obligations

 

 

 

 

 

 

 

 

1,993

 

 

 

7

 

Total

 

$

13,098

 

 

$

8

 

 

$

6,872

 

 

$

71

 

 

 

8


 

Note 3 — Goodwill and Other Intangible Assets

Goodwill

Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair values of the tangible and identifiable intangible net assets acquired. Goodwill is not amortized; however, it is required to be tested for impairment annually, which requires assessment of the potential impairment at the reporting unit level. Reporting units are determined based on the components of the Company's operating segments that constitute a business for which discrete financial information is available and for which operating results are regularly reviewed by segment management. Testing for impairment is also required on an interim basis if an event or circumstance indicates it is more likely than not an impairment loss has been incurred.

The Company performed its annual impairment testing as of November 30, 2023 utilizing a quantitative assessment to determine if the fair values of each of its reporting units was less than their respective carrying values and concluded that no impairments existed. Subsequent to completing the annual test and through March 31, 2024, there were no events or circumstances that required an interim impairment test. Accordingly, as of March 31, 2024, the Company had no accumulated goodwill impairment losses. Approximately $8.2 million of goodwill is allocated to the Company’s Consulting reporting unit, which had a negative carrying value as of the date of the last test.

 

The change in the carrying amount of goodwill for the three months ended March 31, 2024 is summarized as follows (in thousands):

 

Total

 

Balance at December 31, 2023

$

244,257

 

Translation adjustments

 

(1,229

)

Balance at March 31, 2024

$

243,028

 

Finite-Lived Intangible Assets

The carrying values of finite-lived intangible assets are as follows (in thousands):

 

 

March 31, 2024

 

 

Gross

 

 

 

 

 

Net

 

 

Carrying

 

 

Accumulated

 

 

Carrying

 

 

Amount

 

 

Amortization

 

 

Amount

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

Customer relationships

$

77,626

 

 

$

44,183

 

 

$

33,443

 

Technology

 

16,290

 

 

 

15,881

 

 

 

409

 

Trademarks

 

12,484

 

 

 

11,263

 

 

 

1,221

 

Total

$

106,400

 

 

$

71,327

 

 

$

35,073

 

 

 

December 31, 2023

 

 

Gross

 

 

 

 

 

Net

 

 

Carrying

 

 

Accumulated

 

 

Carrying

 

 

Amount

 

 

Amortization

 

 

Amount

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

Customer relationships

$

77,640

 

 

$

42,091

 

 

$

35,549

 

Technology

 

16,524

 

 

 

15,950

 

 

 

574

 

Trademarks

 

12,519

 

 

 

11,005

 

 

 

1,514

 

Total

$

106,683

 

 

$

69,046

 

 

$

37,637

 

 

Estimated intangible asset amortization expense for each of the five succeeding years is as follows (in thousands):

 

2024 (remainder)

$

7,401

 

2025

 

8,875

 

2026

 

8,392

 

2027

 

8,324

 

2028

 

2,081

 

Total

$

35,073

 

 

 

9


 

Note 4 — Debt

The Company has a credit facility that provides up to $150.0 million of revolving credit commitments and matures in December of 2026. The credit facility includes an expansion feature that permits the Company to increase the revolving credit commitments in an aggregate principal amount up to $50.0 million, subject to approval by the administrative agent and certain customary terms and conditions.

The credit facility contains certain customary restrictive loan covenants, including among others, financial covenants that apply a maximum leverage ratio, minimum interest coverage ratio, and maximum annual capital expenditures. The negative covenants limit, subject to various exceptions, the Company’s ability to incur additional indebtedness, create liens on assets, merge, consolidate, liquidate or dissolve any part of the Company, sell assets, change fiscal year, or enter into certain transactions with affiliates and subsidiaries. The Company was in full compliance with the covenants as of March 31, 2024.

The Company may voluntarily prepay revolving loans under the credit facility at any time and from time to time, without premium or penalty. No interim amortization payments are required to be made under the credit facility.

The credit facility provided that once LIBOR ceased to exist in 2023, the benchmark rate for the loans outstanding automatically transferred from LIBOR to the Secured Overnight Financing Rate (SOFR). In April 2023, the Company executed a second amendment to the credit facility to facilitate the conversion from LIBOR to SOFR and to set the base interest rate at SOFR plus 10 basis points.

Up to $5.0 million of the credit facility is available for the issuance of letters of credit, and any drawings under the letters of credit must be reimbursed within one business day. As of March 31, 2024, $0.6 million in letters of credit were issued under the credit facility.

Outstanding Borrowings

The following table summarizes the Company’s total outstanding borrowings as of the dates indicated (in thousands):

Description:

 

March 31, 2024

 

 

December 31, 2023

 

Credit facility

 

$

35,000

 

 

$

35,000

 

The contractual annualized interest rate as of March 31, 2024 was 6.68%.

The Company had $114.4 million of available borrowing capacity on the credit facility (not including the expansion feature) as of March 31, 2024. The weighted average annual effective interest rate for the three months ended March 31, 2024, was 6.6883%.

All obligations under the credit facility are unconditionally guaranteed by each of the Company’s existing and future, direct and indirect, material wholly-owned domestic subsidiaries, other than certain excluded subsidiaries, and are collateralized by a first priority lien on substantially all tangible and intangible assets, including intellectual property, and all of the capital stock of the Company's subsidiaries (limited to 65% of the voting equity of certain subsidiaries).

Note 5 — Leases

All of the Company’s leases are operating leases, the majority of which are for office space. Operating lease right-of-use (“ROU”) assets and non-current operating lease liabilities are included as individual line items in the Consolidated Balance Sheets, while short-term operating lease liabilities are recorded within accrued expenses and other current liabilities. Leases with an initial term of twelve months or less are not recorded in the Consolidated Balance Sheets and are not material.

The components of lease expense were as follows (in thousands):

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating lease cost

 

$

3,094

 

 

$

3,314

 

Short-term lease cost

 

 

214

 

 

 

261

 

Variable lease cost

 

 

1,230

 

 

 

785

 

Sublease income

 

 

(130

)

 

 

(131

)

Total lease cost

 

$

4,408

 

 

$

4,229

 

 

 

10


 

 

Additional lease information is summarized in the following table (in thousands, except lease term and discount rate):

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash paid for amounts included in the measurement of operating
   lease liabilities

 

$

3,630

 

 

$

3,374

 

Operating lease ROU assets obtained in exchange for lease
   obligations

 

$

408

 

 

$

1,323

 

Weighted-average remaining lease term - operating leases (years)

 

 

4.1

 

 

 

4.9

 

Weighted-average discount rate - operating leases

 

 

4.2

%

 

 

4.3

%

 

Future minimum lease payments under non-cancelable leases and estimated future sublease cash receipts from non-cancelable arrangements as of March 31, 2024 are as follows (in thousands):

 

 

 

Operating Lease

 

 

Sublease

 

 

 

Payments

 

 

Cash Receipts

 

2024 (remainder)

 

$

12,209

 

 

$

471

 

2025

 

 

13,933

 

 

 

 

2026

 

 

12,325

 

 

 

 

2027

 

 

5,707

 

 

 

 

2028

 

 

2,875

 

 

 

 

Thereafter

 

 

6,024

 

 

 

 

Total lease payments and estimated sublease cash receipts

 

 

53,073

 

 

$

471

 

Less imputed interest

 

 

(4,515

)

 

 

 

Present value of lease liabilities

 

$

48,558

 

 

 

 

 

Lease balances as of March 31, 2024 are as follows (in thousands):

 

Operating lease ROU assets

 

$

34,380

 

 

 

 

 

Short-term operating lease liabilities (1)

 

$

14,086

 

Non-current operating lease liabilities

 

 

34,472

 

Total operating lease liabilities

 

$

48,558

 

 

(1)
Included in accrued expenses and other current liabilities in the Consolidated Balance Sheets.

The Company’s leases do not contain residual value guarantees, material restrictions, or covenants.

During the three months ended March 31, 2024, the Company recorded a $3.2 million ROU asset impairment and $0.6 million of leasehold improvements impairments related to closing the 11th floor of its offices located at 150 Spear Street, San Francisco, California. During the three months ended March 31, 2023, the Company recorded a $0.4 million ROU asset impairment related to closing the 10th floor of its offices located at 150 Spear Street, San Francisco, California. The impairments are included in restructuring and related costs in the Consolidated Statements of Operations. As a result of the impairments, the ROU assets were required to be recorded at their estimated fair values as Level 3 non-financial assets. The fair values of the asset groups were determined using a discounted cash flow model, which required the use of estimates, including projected cash flows for the related assets, the selection of a discount rate used in the model, and regional real estate industry data.

 

11


 

Note 6 – Revenue and Related Matters

Disaggregated Revenue

The Company disaggregates revenue as set forth in the following tables (in thousands):

Revenue by Geography

 

 

For the Three Months Ended March 31,

 

Revenues: (1)

 

2024

 

 

2023

 

North America

 

$

79,629

 

 

$

92,671

 

Europe

 

 

13,437

 

 

 

13,712

 

Asia Pacific

 

 

4,891

 

 

 

5,382

 

Other

 

 

2,120

 

 

 

1,905

 

Total

 

$

100,077

 

 

$

113,670

 

 

(1)
Revenue location is determined based on where the products and services are consumed.

Contract Assets and Contract Liabilities

Accounts Receivable

Accounts receivable includes amounts billed and currently due from customers. Since the only condition for payment of the Company’s invoices is the passage of time, a receivable is recorded on the date an invoice is issued. Also included in accounts receivable are unbilled amounts resulting from revenue exceeding the amount billed to the customer, where the right to payment is unconditional. If the right to payment for services performed was conditional on something other than the passage of time, the unbilled amount would be recorded as a separate contract asset. There were no contract assets as of March 31, 2024 or 2023.

The majority of the Company’s contracts are non-cancelable. However, for contracts that are cancelable by the customer, the Company does not record a receivable when it issues an invoice. The Company records accounts receivable on these contracts only up to the amount of revenue earned but not yet collected.

In addition, since the majority of the Company’s contracts are invoiced for annual periods, and payment is expected within one year from the transfer of products and services, the Company does not adjust its receivables or transaction prices for the effects of a significant financing component.

Deferred Revenue

The Company refers to contract liabilities as deferred revenue in the Consolidated Balance Sheets. Payment terms in the Company’s customer contracts vary, but generally require payment in advance of fully satisfying the performance obligation(s). Deferred revenue consists of billings in excess of revenue recognized. Similar to accounts receivable, the Company does not record deferred revenue for unpaid invoices issued on a cancelable contract.

 

During the three months ended March 31, 2024 and 2023, the Company recognized $62.5 million and $72.9 million of revenue, respectively, related to its deferred revenue balance at January 1 of each such period.

 

Approximately $378.4 million of revenue is expected to be recognized during the next 24 months from remaining performance obligations as of March 31, 2024.

Reserves for Credit Losses

The allowance for expected credit losses on accounts receivable for the three months ended March 31, 2024 is summarized as follows (in thousands):

 

 

Total
Allowance

 

Balance at December 31, 2023

 

$

574

 

Provision for expected credit losses

 

 

223

 

Write-offs

 

 

(33

)

Balance at March 31, 2024

 

$

764

 

When evaluating the adequacy of the allowance for expected credit losses, the Company makes judgments regarding the collectability of accounts receivable based, in part, on the Company’s historical loss rate experience, customer concentrations, management’s expectations of future losses as informed by current economic conditions, and changes in customer payment terms. If the expected financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make

 

12


 

payments, additional allowances may be required. If the expected financial condition of the Company’s customers were to improve, the allowances may be reduced accordingly.

Cost to Obtain Contracts

The Company capitalizes commissions paid to sales representatives and related fringe benefits costs that are incremental to obtaining customer contracts. These costs are included in deferred commissions in the Consolidated Balance Sheets. The Company accounts for these costs at a portfolio level as the Company’s contracts are similar in nature and the amortization model used closely matches the amortization expense that would be recognized on a contract-by-contract basis. Costs to obtain a contract are amortized to earnings over the initial contract term, which is the same period the related revenue is recognized. Amortization expense related to deferred commissions for the three months ended March 31, 2024 and 2023 was $7.9 million and $8.6 million, respectively. The Company evaluates the recoverability of deferred commissions at each balance sheet date and there were no impairments recorded during the three months ended March 31, 2024 and 2023.

Note 7 — Derivatives and Hedging

The Company enters into a limited number of foreign currency forward exchange contracts to mitigate the effects of adverse fluctuations in foreign currency exchange rates on transactions entered into in the normal course of business that are denominated in foreign currencies that differ from the local functional currency. These contracts generally have short durations and are recorded at fair value with both realized and unrealized gains and losses recorded in other income, net in the Consolidated Statements of Operations because the Company does not designate these contracts as hedges for accounting purposes.

During the three months ended March 31, 2024, the Company entered into three foreign currency forward exchange contracts, all of which settled by March 31, 2024. Accordingly, as of March 31, 2024, there is no amount recorded in the Consolidated Balance Sheets for these contracts. During the three months ended March 31, 2023, the Company entered into three foreign currency forward exchange contracts, all of which settled by March 31, 2023. Accordingly, as of March 31, 2023, there is no amount recorded in the Consolidated Balance Sheets for these contracts.

The Company’s derivative counterparties are investment grade financial institutions. The Company does not have any collateral arrangements with these counterparties and the derivative contracts do not contain credit risk-related contingent features. The table below provides information regarding amounts recognized in the Consolidated Statements of Operations for the derivative contracts for the periods indicated (in thousands):

 

 

Three Months Ended

 

 

 

March 31,

 

Amount recorded in:

 

2024

 

 

2023

 

Other income, net

 

$

(14

)

 

$

62

 

 

Note 8 — Fair Value Measurements

The carrying amounts reflected in the Consolidated Balance Sheets for cash, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term maturities. The Company’s financial instruments also include its outstanding variable-rate borrowings (refer to Note 4 – Debt). The Company believes that the carrying amount of its variable-rate borrowings reasonably approximate their fair values because the rates of interest on those borrowings reflect current market rates of interest.

Additionally, the Company measures certain financial assets and liabilities at fair value on a recurring basis including cash equivalents and marketable investments. The fair values of these financial assets and liabilities have been classified as Level 1, 2, or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements:

Level 1 — Fair value based on quoted prices in active markets for identical assets or liabilities.

Level 2 — Fair value based on inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Fair value based on unobservable inputs that are supported by little or no market activity and such inputs are significant to the fair value of the assets or liabilities.

 

13


 

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):

 

 

 

As of March 31, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

Money market funds (1)

 

$

43,726

 

 

$

 

 

$

43,726

 

Marketable investments (3)

 

 

 

 

 

23,919

 

 

 

23,919

 

Total Assets

 

$

43,726

 

 

$

23,919

 

 

$

67,645

 

 

 

 

As of December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

Money market funds (2)

 

$

55,128

 

 

$

 

 

$

55,128

 

Marketable investments (3)

 

 

 

 

 

19,970

 

 

 

19,970

 

Total Assets

 

$

55,128

 

 

$

19,970

 

 

$

75,098

 

(1)
U.S. based funds of $10.5 million are included in cash and cash equivalents and non-U.S. based funds of $33.2 million are included in marketable investments in the Consolidated Balance Sheets.
(2)
U.S. based funds of $23.5 million are included in cash and cash equivalents and non-U.S. based funds of $31.6 million are included in marketable investments in the Consolidated Balance Sheets.
(3)
Marketable investments have been initially valued at the transaction price and subsequently valued, at the end of the reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation methods, including both income and market-based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events.

During the three months ended March 31, 2024, the Company did not transfer assets or liabilities between levels of the fair value hierarchy. Additionally, there have been no changes to the valuation techniques for Level 2 assets and liabilities.

Note 9 — Income Taxes

Forrester provides for income taxes on an interim basis according to management’s estimate of the effective tax rate expected to be applicable for the full fiscal year. Certain items such as changes in tax rates, tax benefits or expense related to settlements of share-based awards, and foreign currency gains or losses are treated as discrete items and are recorded in the period in which they arise.

Income tax benefit for the three months ended March 31, 2024 was $2.1 million resulting in an effective tax rate of 24.0% for the period. Income tax benefit for the three months ended March 31, 2023 was $1.3 million resulting in an effective tax rate of 24.3% for the period.

The Company anticipates that its effective tax rate for the full year 2024 will be approximately 50%.

Note 10 — Accumulated Other Comprehensive Loss (“AOCL”)

The components of accumulated other comprehensive loss are as follows (net of tax, in thousands):

 

 

Marketable

 

 

Translation

 

 

 

 

 

 

Investments

 

 

Adjustment

 

 

Total AOCL

 

Balance at December 31, 2023

 

$

(60

)

 

$

(4,511

)

 

$

(4,571

)

Foreign currency translation (1)

 

 

 

 

 

(1,968

)

 

 

(1,968

)

Unrealized gain, net of tax of $(2)

 

 

6

 

 

 

 

 

 

6

 

Balance at March 31, 2024

 

$

(54

)

 

$

(6,479

)

 

$

(6,533

)

 

 

 

Marketable

 

 

Translation

 

 

 

 

 

 

Investments

 

 

Adjustment

 

 

Total AOCL

 

Balance at December 31, 2022

 

$

(159

)

 

$

(7,759

)

 

$

(7,918

)

Foreign currency translation (1)

 

 

 

 

 

1,206

 

 

 

1,206

 

Unrealized gain, net of tax of $(11)

 

 

33

 

 

 

 

 

 

33

 

Balance at March 31, 2023

 

$

(126

)

 

$

(6,553

)

 

$

(6,679

)

 

(1)
The Company does not record tax provisions or benefits for the net changes in foreign currency translation adjustments as it intends to permanently reinvest undistributed earnings of its foreign subsidiaries.

 

14


 

Note 11 — Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the basic weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the diluted weighted average number of common shares and common equivalent shares outstanding during the period. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury-stock method. Common equivalent shares consist of common stock issuable on the exercise of outstanding stock options and the vesting of restricted stock units.

Basic and diluted weighted average common shares are as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Basic weighted average common shares outstanding

 

 

19,285

 

 

 

19,108

 

Weighted average common equivalent shares

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

 

19,285

 

 

 

19,108

 

Options and restricted stock units excluded from diluted
   weighted average share calculation as effect would have
   been anti-dilutive

 

 

1,082

 

 

 

703

 

 

Note 12 — Stockholders’ Equity

The components of stockholders’ equity are as follows (in thousands):

 

Three Months Ended March 31, 2024

 

 

Common Stock

 

 

 

 

 

 

 

 

Treasury Stock

 

 

Accumulated

 

 

 

 

 

Number
of
Shares

 

 

$0.01ParValue

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings

 

 

Number
of
Shares

 

 

Cost

 

 

Other
Comprehensive
Loss

 

 

Total
Stockholders'
Equity

 

Balance at December 31, 2023

 

24,684

 

 

$

247

 

 

$

278,057

 

 

$

177,681

 

 

 

5,437

 

 

$

(211,149

)

 

$

(4,571

)

 

$

240,265

 

Issuance of common stock under
   stock plans, including tax effects

 

197

 

 

 

2

 

 

 

(178

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(176

)

Repurchases of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

202

 

 

 

(4,097

)

 

 

 

 

 

(4,097

)

Stock-based compensation expense

 

 

 

 

 

 

 

3,574

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,574

 

Net loss

 

 

 

 

 

 

 

 

 

 

(6,673

)

 

 

 

 

 

 

 

 

 

 

 

(6,673

)

Net change in marketable investments,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

6

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,968

)

 

 

(1,968

)

Balance at March 31, 2024

 

24,881

 

 

$

249

 

 

$

281,453

 

 

$

171,008

 

 

 

5,639

 

 

$

(215,246

)

 

$

(6,533

)

 

$

230,931

 

 

 

Three Months Ended March 31, 2023

 

 

Common Stock

 

 

 

 

 

 

 

 

Treasury Stock

 

 

Accumulated

 

 

 

 

 

Number
of
Shares

 

 

$0.01ParValue

 

 

Additional
Paid-in
Capital

 

 

Retained
Earnings

 

 

Number
of
Shares

 

 

Cost

 

 

Other
Comprehensive
Loss

 

 

Total
Stockholders'
Equity

 

Balance at December 31, 2022

 

24,367

 

 

$

244

 

 

$

261,766

 

 

$

174,631

 

 

 

5,305

 

 

$

(207,067

)

 

$

(7,918

)

 

$

221,656

 

Issuance of common stock under
   stock plans, including tax effects

 

128

 

 

 

1

 

 

 

760

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

761

 

Stock-based compensation expense

 

 

 

 

 

 

 

3,165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,165

 

Net loss

 

 

 

 

 

 

 

 

 

 

(4,075

)

 

 

 

 

 

 

 

 

 

 

 

(4,075

)

Net change in marketable investments,
   net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33

 

 

 

33

 

Foreign currency translation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,206

 

 

 

1,206

 

Balance at March 31, 2023

 

24,495

 

 

$

245

 

 

$

265,691

 

 

$

170,556

 

 

 

5,305

 

 

$

(207,067

)

 

$

(6,679

)

 

$

222,746

 

 

 

15


 

Equity Plans

 

Restricted stock unit activity for the three months ended March 31, 2024 is presented below (in thousands, except per share data):

 

 

 

 

 

Weighted-

 

 

 

 

 

 

Average

 

 

 

Number of

 

 

Grant Date

 

 

 

Shares

 

 

Fair Value

 

Unvested at December 31, 2023

 

 

999

 

 

$

37.66

 

Granted

 

 

163

 

 

 

25.34

 

Vested

 

 

(185

)

 

 

40.55

 

Forfeited

 

 

(37

)

 

 

37.64

 

Unvested at March 31, 2024

 

 

940

 

 

$

34.97

 

 

Stock option activity for the three months ended March 31, 2024 is presented below (in thousands, except per share data and contractual term):

 

 

 

 

 

Weighted -

 

 

Weighted -

 

 

 

 

 

 

 

 

 

Average

 

 

Average

 

 

 

 

 

 

 

 

 

Exercise

 

 

Remaining

 

 

Aggregate

 

 

 

Number

 

 

Price Per

 

 

Contractual

 

 

Intrinsic

 

 

 

of Shares

 

 

Share

 

 

Term (in years)

 

 

Value

 

Outstanding at December 31, 2023

 

 

201

 

 

$

33.93

 

 

 

 

 

 

 

Forfeited

 

 

(12

)

 

 

36.92

 

 

 

 

 

 

 

Outstanding at March 31, 2024

 

 

189

 

 

$

33.74

 

 

 

6.44

 

 

$

 

Exercisable at March 31, 2024

 

 

93

 

 

$

34.47

 

 

 

3.86

 

 

$

 

Vested and expected to vest at March 31, 2024

 

 

189

 

 

$

33.74

 

 

 

6.44

 

 

$

 

No stock options were granted or exercised during the three months ended March 31, 2024.

Stock-Based Compensation

Forrester recognizes the fair value of stock-based compensation over the requisite service period of the individual grantee, which generally equals the vesting period. Stock-based compensation was recorded in the following expense categories in the Consolidated Statements of Operations (in thousands):

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Cost of services and fulfillment

 

$

2,122

 

 

$

1,847

 

Selling and marketing

 

 

599

 

 

 

497

 

General and administrative

 

 

853

 

 

 

821

 

Total

 

$

3,574

 

 

$

3,165

 

 

Forrester utilizes the Black-Scholes valuation model for estimating the fair value of options granted under the equity incentive plans and shares subject to purchase under the employee stock purchase plan, which were valued using the following assumptions:

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

Employee Stock Purchase Plan

 

 

Equity Incentive Plans

 

 

Employee Stock Purchase Plan

 

Average risk-free interest rate

 

 

5.36

%

 

 

4.27

%

 

 

5.00

%

Expected dividend yield

 

 

0.0

%

 

 

0.0

%

 

 

0.0

%

Expected life

 

0.5 Years

 

 

4.75 Years

 

 

0.5 Years

 

Expected volatility

 

 

39

%

 

 

43

%

 

 

46

%

Weighted average fair value

 

$

5.46

 

 

$

14.24

 

 

$

9.47

 

 

 

16


 

Treasury Stock

As of March 31, 2024, Forrester’s Board of Directors had authorized an aggregate $585.0 million to purchase common stock under its stock repurchase program. The shares repurchased may be used, among other things, in connection with Forrester’s equity incentive and purchase plans. During the three months ended March 31, 2024, the Company repurchased approximately 0.2 million shares of common stock at an aggregate cost of approximately $4.1 million. During the three months ended March 31, 2023, the Company did not repurchase any shares of common stock. From the inception of the program through March 31, 2024, the Company repurchased 17.3 million shares of common stock at an aggregate cost of $518.2 million.

Note 13 — Restructuring and Related Costs

In January 2023, the Company implemented a reduction in its workforce of approximately 4% across various geographies and functions to streamline operations. The Company recorded $4.3 million of severance and related costs for this action during the fourth quarter of 2022, and $0.6 million during the first quarter of 2023. The Company also recorded a restructuring charge of $5.0 million during the fourth quarter of 2022 related to closing one floor of its offices located at 150 Spear Street, San Francisco, California, of which $3.7 million related to an impairment of a right-of-use asset and $1.3 million related to an impairment of leasehold improvements. In the first quarter of 2023, the Company recorded an incremental $0.4 million impairment to its California office and a $0.6 million charge for the write-off of a previously capitalized software project.

The following table rolls forward the activity in the restructuring accrual for the January 2023 action for the three months ended March 31, 2024 (in thousands):

Accrual at December 31, 2023

$

48

 

Additional restructuring and related costs

 

14

 

Cash payments

 

(62

)

Accrual at March 31, 2024

$

 

In May 2023, the Company implemented a reduction in its workforce of approximately 8% across various geographies and functions to better align its cost structure and to streamline its sales and consulting organizations. The Company recorded $7.5 million of severance and related costs for this action during the second quarter of 2023. In addition, the Company closed certain of its smaller offices both inside and outside the U.S. in order to reduce facility costs and better match its facilities to its hybrid work strategy. As a result of closing the offices, the Company recorded restructuring costs of $2.3 million, which included $1.3 million related to right-of-use asset impairments and accelerated amortization and $0.6 million related to impairments of leasehold improvements. In addition, the Company incurred $0.7 million in contract termination costs. The accrued restructuring and related costs as of March 31, 2024 will be fully paid by the end of 2024.

The following table rolls forward the activity in the restructuring accrual for the May 2023 action for the three months ended March 31, 2024 (in thousands):

Accrual at December 31, 2023

$

1,282

 

Additional restructuring and related costs

 

39

 

Cash payments

 

(820

)

Accrual at March 31, 2024

$

501

 

In February 2024, the Company implemented a reduction in force of approximately 3% of its workforce across various geographies and functions to better align its cost structure with the revenue outlook for the year. The Company recorded $0.7 million of severance and related costs for this action during the fourth quarter of 2023, and $2.8 million during the first quarter of 2024. The Company also recorded a restructuring charge of $3.8 million during the first quarter of 2024 related to closing one floor of its offices located at 150 Spear Street, San Francisco, California, of which $3.2 million related to an impairment of a right-of-use asset and $0.6 million related to an impairment of leasehold improvements. The accrued restructuring and related costs as of March 31, 2024 will be fully paid by the end of 2024.

The following table rolls forward the activity in the restructuring accrual for the February 2024 action for the three months ended March 31, 2024 (in thousands):

Accrual at December 31, 2023

$

732

 

Additional restructuring and related costs

 

6,571

 

Non-cash charge (included above)

 

(3,806

)

Cash payments

 

(1,256

)

Accrual at March 31, 2024

$

2,241

 

 

 

17


 

Note 14 — Operating Segments

The Company's chief operating decision-maker (used in determining the Company's segments) is the chief executive officer and the chief financial officer. The Company operates in three segments: Research, Consulting, and Events. These segments, which are also the Company's reportable segments, are based on the management structure of the Company and how the chief operating decision maker uses financial information to evaluate performance and determine how to allocate resources. The Company’s products and services are delivered through each segment as described below.

The Research segment includes the revenues from all of the Company’s research products as well as consulting revenues from advisory services (such as speeches and advisory days) delivered by the Company’s research organization. Research segment costs include the cost of the organizations responsible for developing and delivering these products in addition to the costs of the product management organization responsible for product pricing and packaging, and the launch of new products.

The Consulting segment includes the revenues and the related costs of the Company’s project consulting organization. The project consulting organization delivers a majority of the Company’s project consulting revenue and certain advisory services.

The Events segment includes the revenues and the costs of the organization responsible for developing and hosting in-person and virtual events.

The Company evaluates reportable segment performance and allocates resources based on segment revenues and expenses. Segment expenses include the direct expenses of each segment organization and exclude selling and marketing expenses, general and administrative expenses, stock-based compensation expense, depreciation expense, adjustments to incentive bonus compensation from target amounts, amortization of intangible assets, restructuring and related costs, interest expense, and other income. The accounting policies used by the segments are the same as those used in the consolidated financial statements.

The Company provides information by reportable segment in the tables below (in thousands):

 

 

 

Research Segment

 

 

Consulting Segment

 

 

Events Segment

 

 

Consolidated

 

Three Months Ended March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Research revenues

 

$

76,581

 

 

$

 

 

$

 

 

$

76,581

 

Consulting revenues

 

 

4,643

 

 

 

18,498

 

 

 

 

 

 

23,141

 

Events revenues

 

 

 

 

 

 

 

 

355

 

 

 

355

 

Total segment revenues

 

 

81,224

 

 

 

18,498

 

 

 

355

 

 

 

100,077

 

Segment expenses

 

 

(33,514

)

 

 

(10,097

)

 

 

(1,486

)

 

 

(45,097

)

Selling, marketing, administrative and other expenses

 

 

 

 

 

 

 

 

 

 

 

(55,134

)

Amortization of intangible assets

 

 

 

 

 

 

 

 

 

 

 

(2,514

)

Restructuring costs

 

 

 

 

 

 

 

 

 

 

 

(6,624

)

Interest expense and other income

 

 

 

 

 

 

 

 

 

 

 

512

 

Loss before income taxes

 

 

 

 

 

 

 

 

 

 

$

(8,780

)

 

 

 

Research Segment

 

 

Consulting Segment

 

 

Events Segment

 

 

Consolidated

 

Three Months Ended March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Research revenues

 

$

80,906

 

 

$

 

 

$

 

 

$

80,906

 

Consulting revenues

 

 

7,919

 

 

 

23,831

 

 

 

 

 

 

31,750

 

Events revenues

 

 

 

 

 

 

 

 

1,014

 

 

 

1,014

 

Total segment revenues

 

 

88,825

 

 

 

23,831

 

 

 

1,014

 

 

 

113,670

 

Segment expenses

 

 

(35,507

)

 

 

(12,353

)

 

 

(1,631

)

 

 

(49,491

)

Selling, marketing, administrative and other expenses

 

 

 

 

 

 

 

 

 

 

 

(64,664

)

Amortization of intangible assets

 

 

 

 

 

 

 

 

 

 

 

(3,066

)

Restructuring costs

 

 

 

 

 

 

 

 

 

 

 

(1,589

)

Interest expense and other income

 

 

 

 

 

 

 

 

 

 

 

(243

)

Loss before income taxes

 

 

 

 

 

 

 

 

 

 

$

(5,383

)

 

Note 15 — Contingencies

From time to time, the Company may be subject to legal proceedings and civil and regulatory claims that arise in the ordinary course of its business activities. Regardless of the outcome, legal proceedings and claims can have a material adverse effect on the Company because of defense and settlement costs, diversion of management resources, and other factors. It is the Company's policy to record accruals for legal contingencies to the extent that it has concluded that it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated, and to expense costs associated with loss contingencies, including any related legal

 

18


 

fees, as they are incurred. The Company reviews its loss contingencies at least quarterly and adjusts its accruals and/or disclosures to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, or other new information, as deemed necessary. Once established, a provision may change in the future due to new developments or changes in circumstances and could increase or decrease the Company’s earnings in the period that the changes are made. Following an April 2023 mediation in a wage-related matter that resulted in a settlement agreement, the Company accrued $4.8 million of expense in the quarter ended March 31, 2023 that is classified in general and administrative expense in the Consolidated Statement of Operations. This claim was fully paid in the first quarter of 2024.

Note 16 — Subsequent Events

On April 30, 2024, the Company announced that its Board of Directors has authorized a $25.0 million increase in the Company’s stock repurchase program, bringing the total available authorization to approximately $89.0 million as of April 30, 2024. The shares may be purchased in the open market or privately negotiated transactions.

 

19


 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “intends,” “plans,” “estimates,” or similar expressions are intended to identify these forward-looking statements. Reference is made in particular to our statements about changing stakeholder expectations, migration of our clients into our Forrester Decisions products, product development, holding hybrid events, possible acquisitions, future dividends, future share repurchases, future growth rates, operating income and cash from operations, future deferred revenue, future compliance with financial covenants under our credit facility, future interest expense, anticipated increases in, and productivity of, our sales force and headcount, the adequacy of our cash, and cash flows to satisfy our working capital and capital expenditures, and the anticipated impact of accounting standards. These statements are based on our current plans and expectations and involve risks and uncertainties. Important factors that could cause actual future activities and results to differ include, among others, our ability to retain and enrich subscriptions to, and licenses of, our Research products and services, our ability to fulfill existing or generate new consulting engagements and advisory services, our ability to generate and increase demand for the Events we host, any adverse economic conditions that result in a reduction in technology spending or demand for our products and services, our international operations expose us to a variety of operational risks which could negatively impact us, our ability to offer new products and services, the use of Generative AI in our business and by our clients and competitors, our dependence on key personnel, our ability to attract and retain qualified professional staff, our ability to respond to business and economic conditions and market trends, the impact of our outstanding debt, competition and industry consolidation, possible variations in our quarterly operating results, concentration of our stock ownership, the possibility of network disruptions and security breaches, our ability to enforce and protect our intellectual property rights, compliance with privacy laws, taxation risks, and any weakness identified in our system of internal controls. These risks are described more completely in our Annual Report on Form 10-K for the year ended December 31, 2023. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

We derive revenues from subscriptions to our Research products and services, licensing electronic “reprints” of our Research, performing consulting projects and advisory services, and hosting events. We offer contracts for our Research products as either multi-year contracts or annual contracts, which are typically payable in advance on an annual basis. Subscription products are recognized as revenue over the term of the contract. Accordingly, a substantial portion of our billings are initially recorded as deferred revenue. Reprints include an obligation to deliver a customer-selected research document and certain usage data provided through an on-line platform, which represents two performance obligations. We recognize revenue for the performance obligation for the data portion of the reprint ratably over the license term. We recognize revenue for the performance obligation for the research document at the time of providing access to the document. Billings for licensing of reprints are initially recorded as deferred revenue. Clients purchase consulting projects and advisory services independently and/or to supplement their access to our subscription-based products. Consulting project revenues, which are based upon fixed-fee agreements, are recognized as the services are provided. Advisory service revenues, such as speeches and advisory days, are recognized when the service is complete or the customer receives the agreed upon deliverable. Billings attributable to consulting projects and advisory services are initially recorded as deferred revenue. Events revenues consist of ticket and sponsorship sales for a Forrester-hosted event. Billings for events are also initially recorded as deferred revenue and are recognized as revenue upon completion of each event.

Our primary operating expenses consist of cost of services and fulfillment, selling and marketing expenses, and general and administrative expenses. Cost of services and fulfillment represents the costs associated with the production and delivery of our products and services, including salaries, bonuses, employee benefits, and stock-based compensation expense for all personnel that produce and deliver our products and services, including all associated editorial, travel, and support services. Selling and marketing expenses include salaries, sales commissions, bonuses, employee benefits, stock-based compensation expense, travel expenses, promotional costs, and other costs incurred in marketing and selling our products and services. General and administrative expenses include the costs of the technology, operations, finance, and human resources groups and our other administrative functions, including salaries, bonuses, employee benefits, and stock-based compensation expense. Overhead costs such as facilities, net of sublease income, and annual fees for cloud-based information technology systems are allocated to these categories according to the number of employees in each group.

Our key metrics focus on our contract value ("CV") products. We are focusing on CV products as these products are our most profitable products and historically our contracts for CV products have renewed at high rates (as measured by our client retention and wallet retention metrics).

 

20


 

We calculate CV at the foreign currency rates used for internal planning purposes each year. For comparative purposes, we have recast historical CV at the current year foreign currency rates and using the updated methodology as described on the investor relations section of our website. We have included the recast CV metric below for the three months ended March 31, 2023, and we have also provided recast CV amounts dating back to the first quarter of 2022, on the investor relations section of our website.

Contract value, client retention, wallet retention, and number of clients are metrics that we believe are important to understanding our research business. We define these metrics as follows:

Contract value (CV) — is defined as the value attributable to all of our recurring research-related contracts. Contract value is calculated as the annualized value of all contracts in effect at a specific point in time, without regard to how much revenue has already been recognized. Contract value primarily consists of subscription-based products for which revenue is recognized on a ratable basis, except for the entitlements embedded in our subscription products, such as event tickets and advisory sessions, for which the revenue is recognized when the item is delivered. Contract value also includes our reprint products, as these products are used throughout the year by our clients and are typically renewed.
Client retention — represents the percentage of client companies (defined as all clients that buy a CV product) at the prior year measurement date that have active contracts at the current year measurement date.
Wallet retention — represents a measure of the CV we have retained with clients over a twelve-month period, including increases or decreases in retained client CV during the period. Wallet retention is calculated on a percentage basis by dividing the annualized contract value of our current clients, who were also clients a year ago, by the total annualized contract value from a year ago.
Clients — is calculated at the enterprise level as all clients that have an active CV contract.

Client retention and wallet retention are not necessarily indicative of the rate of future retention of our revenue base. A summary of our key metrics is as follows (dollars in millions):

 

 

As of

 

 

Absolute

 

 

Percentage

 

 

 

March 31,

 

 

Increase

 

 

Increase

 

 

 

2024

 

 

2023

 

 

(Decrease)

 

 

(Decrease)

 

Contract value

 

$

323.1

 

 

$

337.9

 

 

$

(14.8

)

 

 

(4

%)

Client retention

 

 

72

%

 

 

74

%

 

(2) points

 

 

 

 

Wallet retention

 

 

88

%

 

 

90

%

 

(2) points

 

 

 

 

Number of clients

 

 

2,308

 

 

 

2,678

 

 

 

(370

)

 

 

(14

%)

Contract value at March 31, 2024 decreased by 4% compared to the prior year period due to lower enrichment of retained customers and a decrease in the number of clients. Client retention and wallet retention decreased by 2 percentage points, respectively, at March 31, 2024 compared to the prior year period. However, wallet retention increased by 1 percentage point compared to the prior quarter and client retention was consistent compared to the prior quarter. The decrease in our retention rates and number of clients from the prior year period is primarily attributable to 1) macroeconomic conditions affecting our client base including a) funding and budget pressure on our smaller technology clients and the technology industry in general, and b) the uncertain economic conditions caused by inflation, increased interest rates, and geopolitical turbulence, and 2) the ongoing transition of our client base to our Forrester Decisions product platform that was launched in August 2021. As of March 31, 2024, approximately 70% of our overall CV was in our Forrester Decisions product platform. In the longer term, we anticipate that approximately 80% of our CV will be in our Forrester Decisions product platform. The remaining approximate 20% of CV represents non-Forrester Decisions CV products, primarily reprints. The ongoing macroeconomic conditions and product transition are anticipated to pressure our key metrics through 2024.

Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including but not limited to, those related to our revenue recognition, goodwill, intangible and other long-lived assets, and income taxes. Management bases its estimates on historical experience, data available at the time the estimates are made, and various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting estimates are described in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

21


 

Results of Operations

The following table sets forth our statement of operations as a percentage of total revenues for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

Research revenues

 

 

76.5

%

 

 

71.2

%

Consulting revenues

 

 

23.1

 

 

 

27.9

 

Events revenues

 

 

0.4

 

 

 

0.9

 

Total revenues

 

 

100.0

 

 

 

100.0

 

Operating expenses:

 

 

 

 

 

 

Cost of services and fulfillment

 

 

44.7

 

 

 

43.4

 

Selling and marketing

 

 

39.4

 

 

 

36.5

 

General and administrative

 

 

14.0

 

 

 

18.7

 

Depreciation

 

 

2.1

 

 

 

1.9

 

Amortization of intangible assets

 

 

2.5

 

 

 

2.7

 

Restructuring costs

 

 

6.6

 

 

 

1.3

 

Loss from operations

 

 

(9.3

)

 

 

(4.5

)

Interest expense

 

 

(0.8

)

 

 

(0.7

)

Other income, net

 

 

1.3

 

 

 

0.5

 

Loss before income taxes

 

 

(8.8

)

 

 

(4.7

)

Income tax benefit

 

 

(2.1

)

 

 

(1.1

)

Net loss

 

 

(6.7

%)

 

 

(3.6

%)

Three Months Ended March 31, 2024 and 2023

Revenues

 

 

 

Three Months Ended

 

 

Absolute

 

 

Percentage

 

 

 

March 31,

 

 

Increase

 

 

Increase

 

 

 

2024

 

 

2023

 

 

(Decrease)

 

 

(Decrease)

 

 

 

(dollars in millions)

 

 

 

 

 

 

 

Total revenues

 

$

100.1

 

 

$

113.7

 

 

$

(13.6

)

 

 

(12

%)

Research revenues

 

$

76.6

 

 

$

80.9

 

 

$

(4.3

)

 

 

(5

%)

Consulting revenues

 

$

23.1

 

 

$

31.8

 

 

$

(8.6

)

 

 

(27

%)

Events revenues

 

$

0.4

 

 

$

1.0

 

 

$

(0.7

)

 

 

(65

%)

Revenues attributable to customers outside of
   the U.S.

 

$

23.5

 

 

$

25.2

 

 

$

(1.7

)

 

 

(7

%)

Percentage of revenue attributable to customers
   outside of the U.S.

 

 

23

%

 

 

22

%

 

1 point

 

 

 

 

Research revenues are recognized as revenue primarily on a ratable basis over the term of the contracts, which are generally 12 or 24-month periods. Research revenues decreased 5% during the three months ended March 31, 2024 compared to the prior year period primarily due to the decrease in CV, as discussed above. From a product perspective, the decrease in revenues was primarily due to a decline in revenue from our reprint product and our other smaller and discontinued products. In addition, revenue from our subscription research products declined 3%.

Consulting revenues decreased 27% during the three months ended March 31, 2024 compared to the prior year period. The decrease in revenues was due to a decrease in delivery of both advisory and consulting services due to lower client bookings.

Events revenues were insignificant during the three months ended March 31, 2024 and 2023 as no events were held during either period.

Refer to the “Segments Results” section below for a discussion of revenues and expenses by segment.

 

22


 

Cost of Services and Fulfillment

 

 

 

Three Months Ended

 

 

Absolute

 

 

Percentage

 

 

 

March 31,

 

 

Increase

 

 

Increase

 

 

 

2024

 

 

2023

 

 

(Decrease)

 

 

(Decrease)

 

Cost of services and fulfillment (dollars in millions)

 

$

44.7

 

 

$

49.3

 

 

$

(4.6

)

 

 

(9

%)

Cost of services and fulfillment as a percentage of
   total revenues

 

 

45

%

 

 

43

%

 

2 points

 

 

 

 

Service and fulfillment employees
   (at end of period)

 

 

747

 

 

 

873

 

 

 

(126

)

 

 

(14

%)

Cost of services and fulfillment expenses decreased 9% during the three months ended March 31, 2024 compared to the prior year period. The decrease was primarily due to (1) a $4.1 million decrease in compensation and benefit costs due to a decrease in headcount and incentive bonus costs, partially offset by an increase in benefit costs (due to a benefit during 2023 resulting from the introduction of the flexible vacation and personal paid time off policy in the United States) and (2) a $0.6 million decrease in professional services costs primarily due to a decrease in contractor costs.

Selling and Marketing

 

 

 

Three Months Ended

 

 

Absolute

 

 

Percentage

 

 

 

March 31,

 

 

Increase

 

 

Increase

 

 

 

2024

 

 

2023

 

 

(Decrease)

 

 

(Decrease)

 

Selling and marketing expenses (dollars in millions)

 

$

39.4

 

 

$

41.5

 

 

$

(2.1

)

 

 

(5

%)

Selling and marketing expenses as a percentage of
   total revenues

 

 

39

%

 

 

37

%

 

2 points

 

 

 

 

Selling and marketing employees (at end of period)

 

 

679

 

 

 

788

 

 

 

(109

)

 

 

(14

%)

Selling and marketing expenses decreased 5% during the three months ended March 31, 2024 compared to the prior year period. The decrease was primarily due to a $2.4 million decrease in compensation and benefit costs due to a decrease in headcount, commissions expense, and incentive bonus costs, partially offset by an increase in benefit costs (due to a benefit during 2023 resulting from the introduction of the flexible vacation and personal paid time off policy in the United States). This decrease was partially offset by a $0.5 million increase in professional services costs primarily due to an increase in consulting fees.

General and Administrative

 

 

 

Three Months Ended

 

 

Absolute

 

 

Percentage

 

 

 

March 31,

 

 

Increase

 

 

Increase

 

 

 

2024

 

 

2023

 

 

(Decrease)

 

 

(Decrease)

 

General and administrative expenses (dollars in
   millions)

 

$

14.1

 

 

$

21.2

 

 

$

(7.2

)

 

 

(34

%)

General and administrative expenses as a percentage
   of total revenues

 

 

14

%

 

 

19

%

 

(5) points

 

 

 

 

General and administrative employees (at end of
   period)

 

 

264

 

 

 

304

 

 

 

(40

)

 

 

(13

%)

General and administrative expenses decreased 34% during the three months ended March 31, 2024 compared to the prior year period. The decrease was primarily due to (1) a $5.5 million decrease in legal costs, due primarily to a $4.8 million provision for a legal settlement recorded in 2023 for a wage-related matter and related legal services and (2) a $1.6 million decrease in compensation and benefit costs due to a decrease in headcount and incentive bonus costs, partially offset by an increase in benefit costs (due to a benefit during 2023 resulting from the introduction of the flexible vacation and personal paid time off policy in the United States).

Depreciation

The fluctuation for depreciation expense was immaterial during the three months ended March 31, 2024 compared to the prior year period.

Amortization of Intangible Assets

Amortization expense decreased by $0.6 million during the three months ended March 31, 2024 compared to the prior year period due to a decrease in the amortization of trademark and technology intangible assets.

 

23


 

Restructuring and Related Costs

In January 2023, we implemented a reduction in our workforce of approximately 4% across various geographies and functions to streamline operations. We recorded $4.3 million of severance and related costs for this action during the fourth quarter of 2022, and $0.6 million during the first quarter of 2023. We recorded a restructuring charge of $5.0 million during the fourth quarter of 2022 related to closing one floor of our offices in California, of which $3.7 million related to an impairment of a right-of-use asset and $1.3 million related to an impairment of leasehold improvements. During the first quarter of 2023, we recorded an incremental $0.4 million impairment to our California office. We also recorded a $0.6 million charge during the first quarter of 2023 for the write-off of a previously capitalized software project. Essentially all of the severance and related costs for this plan were paid during 2023.

In May 2023, we implemented a reduction in our workforce of approximately 8% across various geographies and functions to better align our cost structure with our revised revenue outlook for the year, and to streamline our sales and consulting organizations to more efficiently go to market in support of driving contract value growth in the future. We recorded $7.5 million of severance and related costs for this action during the second quarter of 2023. In addition, we closed certain of our smaller offices both inside and outside the U.S. in order to reduce facility costs and better match our facilities to our hybrid work strategy. As a result of closing the offices, we recorded restructuring costs of $2.3 million, which included $1.3 million related to right-of-use asset impairments and accelerated amortization and $0.6 million related to impairments of leasehold improvements. We also incurred $0.7 million in contract termination costs. The remaining $0.5 million of the severance and related costs for this plan, as of March 31, 2024, will be paid during 2024.

In February 2024, we implemented a reduction in our workforce of approximately 3% across various geographies and functions to better align our cost structure with the revenue outlook for the year. We recorded $0.7 million of severance and related costs for this action during the fourth quarter of 2023, and $2.8 million during the first quarter of 2024. We recorded a restructuring charge of $3.8 million during the first quarter of 2024 related to closing one floor of our offices in California, of which $3.2 million related to an impairment of a right-of-use asset and $0.6 million related to an impairment of leasehold improvements. We expect all of the severance and related costs for this plan to be paid during 2024.

Interest Expense

Interest expense consists of interest on our borrowings. The fluctuation for interest expense was immaterial during the three months ended March 31, 2024 compared to the prior year period.

Other Income, Net

Other income, net primarily consists of interest income, gains and losses on foreign currency, and gains and losses on foreign currency forward contracts. Other income, net increased $0.7 million during the three months ended March 31, 2024 compared to the prior year period primarily due to an increase in interest income.

Income Tax Benefit

 

 

 

Three Months Ended

 

 

Absolute

 

 

Percentage

 

 

 

March 31,

 

 

Increase

 

 

Increase

 

 

 

2024

 

 

2023

 

 

(Decrease)

 

 

(Decrease)

 

Benefit from income taxes (dollars in millions)

 

$

(2.1

)

 

$

(1.3

)

 

$

0.8

 

 

 

61

%

Effective tax rate

 

 

24

%

 

 

24

%

 

 

 

 

 

 

Income tax benefit increased by $0.8 million during the three months ended March 31, 2024 compared to the prior year period primarily due to the increase in loss from operations. For the full year 2024, we anticipate that our effective tax rate will be approximately 50%.

Segment Results

We operate in three segments: Research, Consulting, and Events. These segments, which are also our reportable segments, are based on our management structure and how management uses financial information to evaluate performance and determine how to allocate resources. Our products and services are delivered through each segment as described below.

The Research segment includes the revenues from all of our research products as well as consulting revenues from advisory services (such as speeches and advisory days) delivered by our research organization. Research segment costs include the cost of the organizations responsible for developing and delivering these products in addition to the cost of the product management organization that is responsible for product pricing and packaging and the launch of new products.

The Consulting segment includes the revenues and the related costs of our project consulting organization. The project consulting organization delivers a majority of our project consulting revenue and certain advisory services.

 

24


 

The Events segment includes the revenues and the costs of the organization responsible for developing and hosting in-person and virtual events.

We evaluate reportable segment performance and allocate resources based on segment revenues and expenses. Segment expenses include the direct expenses of each segment organization and exclude selling and marketing expenses, general and administrative expenses, stock-based compensation expense, depreciation expense, adjustments to incentive bonus compensation from target amounts, amortization of intangible assets, restructuring and related costs, interest expense, and other income. The accounting policies used by the segments are the same as those used in the consolidated financial statements.

 

 

 

Research Segment

 

 

Consulting Segment

 

 

Events Segment

 

 

Consolidated

 

 

 

(dollars in thousands)

 

Three Months Ended March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Research revenues

 

$

76,581

 

 

$

 

 

$

 

 

$

76,581

 

Consulting revenues

 

 

4,643

 

 

 

18,498

 

 

 

 

 

 

23,141

 

Events revenues

 

 

 

 

 

 

 

 

355

 

 

 

355

 

Total segment revenues

 

 

81,224

 

 

 

18,498

 

 

 

355

 

 

 

100,077

 

Segment expenses

 

 

(33,514

)

 

 

(10,097

)

 

 

(1,486

)

 

 

(45,097

)

Year over year revenue change

 

 

(9

%)

 

 

(22

%)

 

 

(65

%)

 

 

(12

%)

Year over year expense change

 

 

(6

%)

 

 

(18

%)

 

 

(9

%)

 

 

(9

%)

 

 

 

Research Segment

 

 

Consulting Segment

 

 

Events Segment

 

 

Consolidated

 

 

 

(dollars in thousands)

 

Three Months Ended March 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Research revenues

 

$

80,906

 

 

$

 

 

$

 

 

$

80,906

 

Consulting revenues

 

 

7,919

 

 

 

23,831

 

 

 

 

 

 

31,750

 

Events revenues

 

 

 

 

 

 

 

 

1,014

 

 

 

1,014

 

Total segment revenues

 

 

88,825

 

 

 

23,831

 

 

 

1,014

 

 

 

113,670

 

Segment expenses

 

 

(35,507

)

 

 

(12,353

)

 

 

(1,631

)

 

 

(49,491

)

Research segment revenues decreased 9% during the three months ended March 31, 2024 compared to the prior year period. Research product revenues within this segment decreased 5% primarily due to the decrease in CV, as discussed above. From a product perspective, the decrease in revenue was primarily due to a decline in revenue from our reprint product and our other smaller and discontinued products. In addition, revenue from our subscription research products declined 3%. Consulting product revenues within this segment decreased 41% primarily due to decreased delivery of consulting and advisory services by our research analysts due primarily to lower client bookings for these services.

Research segment expenses decreased 6% during the three months ended March 31, 2024 compared to the prior year period. The decrease in expenses during the three months ended March 31, 2024 was primarily due to a $1.8 million decrease in compensation and benefit costs primarily due to a decrease in headcount.

Consulting segment revenues decreased 22% during the three months ended March 31, 2024 compared to the prior year period. The decrease in revenues during the three months ended March 31, 2024 was primarily due to a decrease in delivery of consulting services due to lower client bookings.

Consulting segment expenses decreased 18% during the three months ended March 31, 2024 compared to the prior year period. The decrease in expenses during the three months ended March 31, 2024 was primarily due to (1) a $1.8 million decrease in compensation and benefit costs primarily due to a decrease in headcount and (2) a $0.4 million decrease in professional services primarily due to a decrease in contractor costs.

Event segment revenues and expenses were insignificant during the three months ended March 31, 2024 and 2023 as no events were held during either period.

Liquidity and Capital Resources

We have historically financed our operations primarily through funds generated from operations. Research revenues, which constituted approximately 77% of our revenues during the three months ended March 31, 2024, are generally renewable and are typically payable in advance. We generated cash from operating activities of $0.6 million and $12.3 million during the three months ended March 31, 2024 and 2023, respectively. The $11.7 million decrease in cash provided from operations for the three months ended March 31, 2024 compared to the prior year period was primarily due to a $9.8 million decrease in cash generated from accounts receivable and deferred revenue due to a decrease in contract bookings and a $5.8 million increase in prepaid expenses and other current assets, which was primarily due to the timing of payments in each period.

 

25


 

During the three months ended March 31, 2024, we used cash in investing activities of $7.2 million primarily from $5.8 million in net purchases of marketable investments and $1.4 million of purchases of property and equipment, primarily consisting of computer software. During the three months ended March 31, 2023, we generated cash from investing activities of $1.3 million primarily from $3.0 million in net maturities of marketable investments partially offset by $1.6 million of purchases of property and equipment, primarily consisting of computer software.

We used $4.3 million of cash from financing activities during the three months ended March 31, 2024 primarily due to $4.1 million for purchases of our common stock and $1.4 million in taxes paid related to net share settlements of restricted stock units, partially offset by $1.3 million of net proceeds from the issuance of common stock under our stock-based incentive plans. We used $14.2 million of cash in financing activities during the three months ended March 31, 2023 primarily due to $15.0 million of discretionary repayments of our revolving credit facility, as well as $1.1 million in taxes paid related to net share settlements of restricted stock units, partially offset by $1.8 million of net proceeds from the issuance of common stock under our stock-based incentive plans. As of March 31, 2024, our remaining stock repurchase authorization was approximately $66.8 million.

The Company has a credit facility that provides up to $150.0 million of revolving credit commitments. The credit facility has a balance of $35.0 million at March 31, 2024 and matures in December of 2026. The credit facility permits the Company to increase the revolving credit commitments in an aggregate principal amount up to $50.0 million, subject to approval by the administrative agent and certain customary terms and conditions.

The credit facility contains certain customary restrictive loan covenants, including among others, financial covenants that apply a maximum leverage ratio, minimum interest coverage ratio, and maximum annual capital expenditures. The negative covenants limit, subject to various exceptions, our ability to incur additional indebtedness, create liens on assets, merge, consolidate, liquidate or dissolve any part of the company, sell assets, change fiscal year, or enter into certain transactions with affiliates and subsidiaries. We were in full compliance with the covenants as of March 31, 2024 and expect to continue to be in compliance through the next 12 months.

Additional future contractual cash obligations extending over the next 12 months and beyond primarily consist of operating lease payments. We lease office space under non-cancelable operating lease agreements (refer to Note 5 – Leases in the Notes to Consolidated Financial Statements for additional information). The remaining duration of non-cancelable office space leases ranges from less than 1 year to 7 years. As of March 31, 2024, remaining non-cancelable lease payments are due as follows: $12.2 million in 2024, $26.3 million within 2025 and 2026, $8.6 million within 2027 and 2028, and $6.0 million beyond 2028.

In addition to the contractual cash commitments included above, we have other payables and liabilities that may be legally enforceable but are not considered contractual commitments.

As of March 31, 2024, we had cash, cash equivalents, and marketable investments of $118.5 million. This balance includes $77.8 million held outside of the U.S. If the cash outside of the U.S. is needed for operations in the U.S., we would be required to accrue and pay U.S. state taxes and may be required to pay withholding taxes to foreign jurisdictions to repatriate these funds. However, our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate these funds for our U.S. operations. We believe that our current cash balance and cash flows from operations will satisfy working capital, financing activities, and capital expenditure requirements for the next twelve months and to meet our known long-term cash requirements.

Recent Accounting Pronouncements

Refer to Note 1 – Interim Consolidated Financial Statements in the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements including the expected dates of adoption and effects on results of operations and financial condition.

Critical Accounting Policies and Estimates

For information regarding our critical accounting policies and estimates, please refer to Note 1, "Summary of Significant Accounting Policies" and Item 7, “Critical Accounting Estimates” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no material changes to the critical accounting policies and estimates previously disclosed in that report.

 

26


 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our assessment of our sensitivity to market risk since our presentation set forth in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, 2023.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined under Securities Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2024. Based upon their evaluation and subject to the foregoing, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance as of that date.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) of the Exchange Act) that occurred during the quarter ended March 31, 2024, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

27


 

PART II. OTHER INFORMATION

The information set forth in the "Note 15 - Contingencies", in Part I, Item 1 of this Quarterly Report is incorporated herein by reference.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A: Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, which could materially affect our business, financial condition or future results. The risk factors described in our Annual Report on Form 10-K remain applicable to our business. The risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Through March 31, 2024, our Board of Directors authorized an aggregate $585.0 million to purchase common stock under our stock repurchase program. In April 2024, our Board of Directors increased our stock repurchase authorization by an additional $25.0 million. During the quarter ended March 31, 2024, we purchased the following shares of our common stock under the stock repurchase program:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maximum Approximate Dollar

 

 

 

 

 

 

 

 

 

Total Number of Shares

 

 

Value of Shares that May

 

 

 

Total Number of

 

 

Average Price

 

 

Purchased as Part of Publicly

 

 

Yet be Purchased

 

 

 

Shares Purchased

 

 

Paid per Share

 

 

Announced Plans or Programs

 

 

Under the Plans or Programs

 

Period

 

(#)

 

 

($)

 

 

(#)

 

 

(In thousands)

 

Jan 1 - Jan 31

 

 

 

 

$

 

 

 

 

 

$

70,885

 

Feb 1 - Feb 29

 

 

30,000

 

 

$

20.14

 

 

 

30,000

 

 

$

70,280

 

Mar 1 - Mar 31

 

 

172,000

 

 

$

20.31

 

 

 

172,000

 

 

$

66,787

 

   Total for the quarter

 

 

202,000

 

 

 

 

 

 

202,000

 

 

 

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

 

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ITEM 6. EXHIBITS

 

    3.1

 

Restated Certificate of Incorporation of Forrester Research, Inc. (see Exhibit 3.1 to Registration Statement on Form S-1A filed on November 5, 1996)

 

 

 

    3.2

 

Certificate of Amendment of the Certificate of Incorporation of Forrester Research, Inc. (see Exhibit 3.1 to Annual Report on Form 10-K for the year ended December 31, 1999)

 

 

 

    3.3

 

Certificate of Amendment to Restated Certificate of Incorporation of Forrester Research, Inc. (see Exhibit 3.1 to Form 8-K filed on May 25, 2017)

 

 

 

    3.4

 

Amended and Restated By-Laws of Forrester Research, Inc. (see Exhibit 3.4 to Annual Report on Form 10-K for the year ended December 31, 2022)

 

 

 

    4.1

 

Specimen Certificate for shares of Common Stock, $.01 par value, of Forrester Research, Inc. (see Exhibit 4 to Registration Statement on Form S-1A filed on November 5, 1996)

 

 

 

  31.1

 

Certification of the Principal Executive Officer. (filed herewith)

 

 

 

  31.2

 

Certification of the Principal Financial Officer. (filed herewith)

 

 

 

  32.1

 

Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith)

 

 

 

  32.2

 

Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith)

 

 

 

101.INS

 

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. (filed herewith)

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document With Embedded Linkbase Documents. (filed herewith)

 

 

 

104

 

Cover Page Interactive Data File (embedded within the Inline XBRL Document). (filed herewith)

 

 

29


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

FORRESTER RESEARCH, INC.

 

 

 

By:

/s/ L. CHRISTIAN FINN

L. Christian Finn

Chief Financial Officer

(Principal financial officer)

 

Date: May 3, 2024

 

30