10-Q
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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 June 30, 2021

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)

 

 

 

(617613-6000

(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 checkmark 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 August 2, 2021, 19,168,000 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 June 30, 2021 and December 31, 2020

3

 

Consolidated Statements of Income for the three and six months ended June 30, 2021 and 2020

4

 

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020

5

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020

6

 

Notes to Consolidated Financial Statements

7

Item 2.

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

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.

Defaults Upon Senior Securities

31

Item 4.

Mine Safety Disclosures

31

Item 5.

Other Information

31

Item 6.

Exhibits

32

 

 

 

SIGNATURES

33

 

 

 

 

 

2


 

PART I.

ITEM 1. FINANCIAL STATEMENTS

FORRESTER RESEARCH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data, unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

146,387

 

 

$

90,257

 

Accounts receivable, net of allowance for expected credit losses of $792 and $708 as
   of June 30, 2021 and December 31, 2020, respectively

 

 

63,397

 

 

 

84,695

 

Deferred commissions

 

 

19,244

 

 

 

23,620

 

Prepaid expenses and other current assets

 

 

15,923

 

 

 

18,588

 

Total current assets

 

 

244,951

 

 

 

217,160

 

Property and equipment, net

 

 

28,645

 

 

 

27,032

 

Operating lease right-of-use assets

 

 

70,756

 

 

 

69,296

 

Goodwill

 

 

246,235

 

 

 

247,211

 

Intangible assets, net

 

 

69,990

 

 

 

77,995

 

Other assets

 

 

7,873

 

 

 

5,524

 

Total assets

 

$

668,450

 

 

$

644,218

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,037

 

 

$

657

 

Accrued expenses and other current liabilities

 

 

63,735

 

 

 

76,620

 

Current portion of long-term debt

 

 

12,500

 

 

 

12,500

 

Deferred revenue

 

 

210,288

 

 

 

179,968

 

Total current liabilities

 

 

287,560

 

 

 

269,745

 

Long-term debt, net of deferred financing fees

 

 

89,342

 

 

 

95,299

 

Non-current operating lease liabilities

 

 

71,577

 

 

 

70,323

 

Other non-current liabilities

 

 

18,469

 

 

 

23,085

 

Total liabilities

 

 

466,948

 

 

 

458,452

 

Commitments and contingencies (Note 4, 13)

 

 

 

 

 

 

Stockholders' Equity (Note 11):

 

 

 

 

 

 

Preferred stock, $0.01 par value

 

 

 

 

 

 

Authorized - 500 shares; issued and outstanding - none

 

 

 

 

 

 

Common stock, $0.01 par value

 

 

 

 

 

 

Authorized - 125,000 shares

 

 

 

 

 

 

Issued - 23,780 and 23,648 shares as of June 30, 2021 and December 31, 2020,
   respectively

 

 

 

 

 

 

Outstanding - 19,086 and 19,017 shares as of June 30, 2021 and
   December 31, 2020, respectively

 

 

238

 

 

 

236

 

Additional paid-in capital

 

 

237,485

 

 

 

230,128

 

Retained earnings

 

 

140,280

 

 

 

127,981

 

Treasury stock - 4,694 and 4,631 shares as of June 30, 2021 and
   December 31, 2020, respectively

 

 

(174,562

)

 

 

(171,889

)

Accumulated other comprehensive loss

 

 

(1,939

)

 

 

(690

)

Total stockholders’ equity

 

 

201,502

 

 

 

185,766

 

Total liabilities and stockholders’ equity

 

$

668,450

 

 

$

644,218

 

 

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

 

3


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data, unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Research

 

$

81,002

 

 

$

75,034

 

 

$

155,970

 

 

$

149,301

 

Consulting

 

 

40,960

 

 

 

33,475

 

 

 

79,510

 

 

 

65,463

 

Events

 

 

6,708

 

 

 

5,032

 

 

 

6,971

 

 

 

5,122

 

Total revenues

 

 

128,670

 

 

 

113,541

 

 

 

242,451

 

 

 

219,886

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services and fulfillment

 

 

52,258

 

 

 

43,964

 

 

 

99,735

 

 

 

87,317

 

Selling and marketing

 

 

42,556

 

 

 

39,117

 

 

 

81,835

 

 

 

79,390

 

General and administrative

 

 

14,334

 

 

 

11,456

 

 

 

27,512

 

 

 

23,461

 

Depreciation

 

 

2,255

 

 

 

2,448

 

 

 

4,545

 

 

 

4,854

 

Amortization of intangible assets

 

 

3,968

 

 

 

4,713

 

 

 

7,871

 

 

 

9,425

 

Integration costs

 

 

216

 

 

 

612

 

 

 

334

 

 

 

3,487

 

Total operating expenses

 

 

115,587

 

 

 

102,310

 

 

 

221,832

 

 

 

207,934

 

Income from operations

 

 

13,083

 

 

 

11,231

 

 

 

20,619

 

 

 

11,952

 

Interest expense

 

 

(1,066

)

 

 

(1,307

)

 

 

(2,195

)

 

 

(2,845

)

Other income (expense), net

 

 

(201

)

 

 

(201

)

 

 

(671

)

 

 

109

 

Gain on investments, net

 

 

 

 

 

2,352

 

 

 

 

 

 

2,365

 

Income before income taxes

 

 

11,816

 

 

 

12,075

 

 

 

17,753

 

 

 

11,581

 

Income tax expense

 

 

3,473

 

 

 

238

 

 

 

5,454

 

 

 

257

 

Net income

 

$

8,343

 

 

$

11,837

 

 

$

12,299

 

 

$

11,324

 

Basic income per common share

 

$

0.44

 

 

$

0.63

 

 

$

0.64

 

 

$

0.60

 

Diluted income per common share

 

$

0.43

 

 

$

0.63

 

 

$

0.64

 

 

$

0.60

 

Basic weighted average common shares outstanding

 

 

19,126

 

 

 

18,759

 

 

 

19,094

 

 

 

18,732

 

Diluted weighted average common shares outstanding

 

 

19,377

 

 

 

18,831

 

 

 

19,332

 

 

 

18,828

 

 

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

 

4


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income

$

8,343

 

 

$

11,837

 

 

$

12,299

 

 

$

11,324

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

723

 

 

 

885

 

 

 

(1,578

)

 

 

(1,035

)

Net change in market value of interest rate swap

 

139

 

 

 

45

 

 

 

329

 

 

 

(1,136

)

Other comprehensive income (loss)

 

862

 

 

 

930

 

 

 

(1,249

)

 

 

(2,171

)

Comprehensive income

$

9,205

 

 

$

12,767

 

 

$

11,050

 

 

$

9,153

 

 

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

 

5


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 

 

Six Months Ended

 

 

June 30,

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

Net income

$

12,299

 

 

$

11,324

 

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

 

 

 

 

 

Depreciation

 

4,545

 

 

 

4,854

 

Impairment of property and equipment

 

 

 

 

626

 

Amortization of intangible assets

 

7,871

 

 

 

9,425

 

Net gains from investments

 

 

 

 

(2,365

)

Deferred income taxes

 

(4,620

)

 

 

(1,737

)

Stock-based compensation

 

4,889

 

 

 

5,266

 

Operating lease right-of-use assets amortization and impairments

 

5,701

 

 

 

7,417

 

Amortization of deferred financing fees

 

467

 

 

 

490

 

Foreign currency (gains) losses

 

778

 

 

 

(2

)

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

20,468

 

 

 

29,955

 

Deferred commissions

 

4,377

 

 

 

5,295

 

Prepaid expenses and other current assets

 

2,371

 

 

 

404

 

Accounts payable

 

385

 

 

 

704

 

Accrued expenses and other liabilities

 

(13,668

)

 

 

(33,548

)

Deferred revenue

 

29,999

 

 

 

(6,902

)

Operating lease liabilities

 

(5,769

)

 

 

(6,204

)

Net cash provided by operating activities

 

70,093

 

 

 

25,002

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(5,243

)

 

 

(5,110

)

Net cash used in investing activities

 

(5,243

)

 

 

(5,110

)

Cash flows from financing activities:

 

 

 

 

 

Payments on borrowings

 

(6,250

)

 

 

(18,688

)

Repurchases of common stock

 

(2,673

)

 

 

 

Proceeds from issuance of common stock under employee equity incentive plans

 

3,065

 

 

 

2,010

 

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

 

(595

)

 

 

(951

)

Net cash used in financing activities

 

(6,453

)

 

 

(17,629

)

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

 

(122

)

 

 

(2,254

)

Net change in cash, cash equivalents and restricted cash

 

58,275

 

 

 

9

 

Cash, cash equivalents and restricted cash, beginning of period

 

90,652

 

 

 

69,192

 

Cash, cash equivalents and restricted cash, end of period

$

148,927

 

 

$

69,201

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

$

1,732

 

 

$

2,368

 

Cash paid (received) for income taxes

$

5,066

 

 

$

(273

)

 

 

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, 2020. 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 income, and cash flows as of the dates and for the periods presented have been included. The results of operations for the three and six months ended June 30, 2021 may not be indicative of the results for the year ending December 31, 2021, or any other period.

Reclassification

Effective for the first quarter of 2021, the Company modified its key metrics, as further described in Item 2. Management’s Discussions and Analysis of Financial Condition and Results of Operations. As part of these changes, beginning January 1, 2021, the Company is classifying all components of its subscription research products within the Research revenues financial statement line on the Consolidated Statements of Income. In prior periods, the separate advisory session performance obligations included in any of the Company’s subscription research products were classified within the Consulting revenues financial statement line. Prior periods have been reclassified to conform to the current presentation which resulted in approximately $1.4 million and $2.9 million of revenue being reclassified from Consulting revenues to Research revenues during the three and six months ended June 30, 2020, respectively. This reclassification had no impact on the amount of total revenues previously reported.

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).

 

 

Six Months Ended June 30,

 

 

2021

 

 

2020

 

Cash and cash equivalents

$

146,387

 

 

$

68,377

 

Restricted cash classified in (1):

 

 

 

 

 

Prepaid expenses and other current assets

 

221

 

 

 

787

 

Other assets

 

2,319

 

 

 

37

 

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

$

148,927

 

 

$

69,201

 

 

(1)
Restricted cash consists of collateral required for leased office space and credit card processing outside of the U.S. 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. 

Adoption of New Accounting Pronouncements

The Company adopted the guidance in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes on January 1, 2021. The standard provides guidance to simplify the accounting for income taxes in certain areas, changes the accounting for select income tax transactions, and makes other minor improvements. The adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“Topic 326”). The standard amends the existing financial instrument incurred loss impairment model by requiring entities to use a forward-looking approach based on expected losses and to consider a broader range of reasonable and

 

7


 

supportable information to estimate credit losses on certain types of financial instruments, including trade receivables. On January 1, 2020, the Company adopted the standard using the modified retrospective method in which prior periods are not adjusted and recorded a cumulative effect adjustment of $0.2 million to decrease retained earnings.

The Company adopted the guidance in ASU No. 2017-04, Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment on January 1, 2020. The new standard simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test and requires that instead, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The adoption of this standard did not impact the Company’s financial position or results of operations.

The Company adopted the guidance in ASU No. 2018-13, Fair Value Measurement Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement on January 1, 2020. The new standard modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including changes to fair value transfers and Level 3 fair value measurements. Changes required upon adoption of this standard are included in Note 7 – Fair Value Measurements and did not impact the Company’s financial position or results of operations.

The Company adopted the guidance in ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract on January 1, 2020. The new standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Finance Reporting. The new standard provides optional guidance for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting due to the risk of cessation of the London Interbank Offered Rate (“LIBOR”). The updates apply to contracts, hedging relationships, and other transactions that reference LIBOR, or another reference rate expected to be discontinued because of reference rate reform, and as a result require a modification. An entity may elect to apply the amendments immediately or at any point through December 31, 2022. The Company is currently evaluating the potential impact that this standard may have on its financial position and results of operations, including the standard’s potential impact on any contractual changes in the future that may result from reference rate reform. 

Note 2 — 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. 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, 2020 utilizing a qualitative assessment to determine if it was more likely than not that 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 June 30, 2021, there were no events or circumstances that required an interim impairment test. Accordingly, as of June 30, 2021, the Company had no accumulated goodwill impairment losses. Approximately $8.3 million of goodwill is allocated to the Company’s Consulting reporting unit, which has a negative carrying value as of the date of the last test.

 

The change in the carrying amount of goodwill for the six months ended June 30, 2021 is summarized as follows (in thousands):

 

Total

 

Balance at December 31, 2020

$

247,211

 

Translation adjustments

 

(976

)

Balance at June 30, 2021

$

246,235

 

 

 

8


 

Finite-Lived Intangible Assets

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

 

 

June 30, 2021

 

 

Gross

 

 

 

 

 

Net

 

 

Carrying

 

 

Accumulated

 

 

Carrying

 

 

Amount

 

 

Amortization

 

 

Amount

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

Customer relationships

$

78,398

 

 

$

21,537

 

 

$

56,861

 

Technology

 

16,807

 

 

 

11,834

 

 

 

4,973

 

Trademarks

 

12,472

 

 

 

4,316

 

 

 

8,156

 

Total

$

107,677

 

 

$

37,687

 

 

$

69,990

 

 

 

December 31, 2020

 

 

Gross

 

 

 

 

 

Net

 

 

Carrying

 

 

Accumulated

 

 

Carrying

 

 

Amount

 

 

Amortization

 

 

Amount

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

Customer relationships

$

78,450

 

 

$

17,277

 

 

$

61,173

 

Technology

 

16,956

 

 

 

10,197

 

 

 

6,759

 

Trademarks

 

12,495

 

 

 

2,432

 

 

 

10,063

 

Total

$

107,901

 

 

$

29,906

 

 

$

77,995

 

 

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

 

2021 (remainder)

$

7,259

 

2022

 

13,195

 

2023

 

11,951

 

2024

 

9,908

 

2025

 

8,882

 

Thereafter

 

18,795

 

Total

$

69,990

 

 

Note 3 — Debt

On January 3, 2019, the Company entered into a $200.0 million credit agreement (the “Credit Agreement”). The Credit Agreement provides for: (1) senior secured term loans in an aggregate principal amount of $125.0 million (the “Term Loans”) and (2) a senior secured revolving credit facility in an aggregate principal amount of $75.0 million (the “Revolving Credit Facility”). The Credit Agreement is scheduled to mature on January 3, 2024.

The Credit Agreement permits the Company to borrow incremental term loans and/or increase commitments under the Revolving Credit Facility in an aggregate principal amount up to $50.0 million, subject to approval by the administrative agent and certain customary terms and conditions.

The Term Loans and Revolving Credit Facility can be repaid early, in part or in whole, at any time and from time to time, without premium or penalty, other than customary breakage reimbursement requirements for LIBOR based loans. The Term Loans must be prepaid with net cash proceeds of (i) certain debt incurred or issued by Forrester and its restricted subsidiaries and (ii) certain asset sales and condemnation or casualty events, subject to certain reinvestment rights.

Amounts borrowed under the Credit Agreement bear interest, at Forrester’s option, at a rate per annum equal to either (i) LIBOR for the applicable interest period plus a margin that is between 1.75% and 2.50% based on Forrester’s consolidated total leverage ratio, or (ii) the alternate base rate plus a margin that is between 0.75% and 1.50% based on Forrester’s consolidated total leverage ratio. In addition, the Company pays a commitment fee that is between 0.25% and 0.35% per annum, based on Forrester’s consolidated total leverage ratio, on the average daily unused portion of the Revolving Credit Facility, payable quarterly, in arrears.

 

9


 

The Term Loans require repayment of the outstanding principal balance in quarterly installments each year, with the balance repayable on the maturity date, subject to customary exceptions. As of June 30, 2021, the amount payable in each year is set forth in the table below (in thousands):

 

2021 (remainder)

 

6,250

 

2022

 

12,500

 

2023

 

15,625

 

2024

 

68,750

 

Total remaining principal payments

$

103,125

 

 

The Revolving Credit Facility does not require repayment prior to maturity, subject to customary exceptions. The Company has $74.1 million of available borrowing capacity on the revolver (not including the expansion feature) as of June 30, 2021. Proceeds from the Revolving Credit Facility can be used towards working capital and general corporate purposes. Up to $5.0 million of the Revolving 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 June 30, 2021, $0.9 million in letters of credit were issued under the Revolving Credit Facility.

Forrester incurred $1.8 million in costs related to the Revolving Credit Facility, which are recorded in other assets on the Consolidated Balance Sheets. These costs are being amortized as interest expense on the Consolidated Statements of Income on a straight-line basis over the five-year term of the Revolving Credit Facility. Forrester incurred $2.8 million in costs related to the Term Loans, which are recorded as a reduction to the face value of long-term debt on the Consolidated Balance Sheets. These costs are being amortized as interest expense on the Consolidated Statements of Income utilizing the effective interest rate method.

Outstanding Borrowings

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

 

Description:

 

June 30, 2021

 

 

December 31, 2020

 

Principal amount outstanding (1) (2)

 

$

103,125

 

 

$

109,375

 

Less: Deferred financing fees

 

 

(1,283

)

 

 

(1,576

)

Net carrying amount

 

$

101,842

 

 

$

107,799

 

 

(1)
This amount consists entirely of the outstanding Term Loan balance.
(2)
The contractual annualized interest rate as of June 30, 2021 on the Term loan facility was 2.125%, which consisted of LIBOR of 0.125% plus a margin of 2.000%. However, the Company has an interest rate swap that effectively converts the floating LIBOR base rates on a portion of the amounts outstanding to a fixed base rate. Refer to Note 6 – Derivatives and Hedging for further information on the swap. The weighted average annual effective rate on the Company's total debt outstanding for the three and six months ended June 30, 2021, was 2.125% and 2.136%, respectively.

The Credit Agreement contains certain customary restrictive loan covenants, including among others, financial covenants that apply a maximum leverage ratio and minimum fixed charge coverage ratio. The maximum leverage ratio is based on total debt outstanding at the measurement date divided by EBITDA (as defined in the Credit Agreement) and the fixed charge coverage ratio is based upon EBITDA (as defined in the Credit Agreement), less capital expenditures, as a ratio to certain fixed charges, including Term Loan amortization, cash interest expense and cash taxes. 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, pay dividends or other payments in respect to capital stock, change fiscal year, or enter into certain transactions with affiliates and subsidiaries. The Credit Agreement also contains customary events of default, representations, and warranties.

As of June 30, 2021, the Company is in compliance with its financial covenants under the Credit Agreement. The Company currently forecasts that it will be in compliance with its financial covenants for at least one year from the issuance of these interim financial statements.

All obligations under the Credit Agreement 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 and its subsidiaries (limited to 65% of the voting equity of certain subsidiaries).

 

10


 

Note 4 — 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 on 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 on the Consolidated Balance Sheets and are not material.

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

 

 

 

For the Three Months Ended June 30,

 

 

 

2021

 

 

2020

 

Operating lease cost

 

$

4,062

 

 

$

3,944

 

Short-term lease cost

 

 

98

 

 

 

81

 

Variable lease cost

 

 

1,280

 

 

 

1,660

 

Sublease income

 

 

(105

)

 

 

(63

)

Total lease cost

 

$

5,335

 

 

$

5,622

 

 

 

 

For the Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Operating lease cost

 

$

7,882

 

 

$

7,935

 

Short-term lease cost

 

 

186

 

 

 

163

 

Variable lease cost

 

 

2,715

 

 

 

3,016

 

Sublease income

 

 

(166

)

 

 

(124

)

Total lease cost

 

$

10,617

 

 

$

10,990

 

 

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

 

 

 

For the Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

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

 

$

5,769

 

 

$

6,204

 

Operating lease ROU assets obtained in exchange for lease
   obligations

 

$

7,385

 

 

$

3,898

 

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

 

 

6.3

 

 

 

6.1

 

Weighted-average discount rate - operating leases

 

 

4.4

%

 

 

5.0

%

 

Future minimum lease payments under non-cancelable leases and estimated future sublease cash receipts from non-cancelable arrangements as of June 30, 2021 are as follows (in thousands):

 

 

 

Operating Lease

 

 

Sublease

 

 

 

Payments

 

 

Cash Receipts

 

2021 (remainder)