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, 2022

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 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 1, 2022, 18,980,000 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, 2022 and December 31, 2021

3

 

Consolidated Statements of Income for the three and six months ended June 30, 2022 and 2021

4

 

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021

5

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

6

 

Notes to Consolidated Financial Statements

7

Item 2.

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

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

31

 

 

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 3.

Defaults Upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

33

 

 

 

SIGNATURES

34

 

 

 

 

 

2


 

PART I.

ITEM 1. FINANCIAL STATEMENTS

FORRESTER RESEARCH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data, unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

103,225

 

 

$

115,769

 

Marketable investments (Note 2)

 

 

19,388

 

 

 

18,509

 

Accounts receivable, net of allowance for expected credit losses of $593 and $610 as
   of June 30, 2022 and December 31, 2021, respectively

 

 

59,014

 

 

 

86,965

 

Deferred commissions

 

 

22,570

 

 

 

29,631

 

Prepaid expenses and other current assets

 

 

18,350

 

 

 

18,614

 

Total current assets

 

 

222,547

 

 

 

269,488

 

Property and equipment, net

 

 

26,159

 

 

 

28,245

 

Operating lease right-of-use assets

 

 

58,966

 

 

 

65,009

 

Goodwill

 

 

241,471

 

 

 

244,994

 

Intangible assets, net

 

 

55,904

 

 

 

62,733

 

Other assets

 

 

9,883

 

 

 

9,660

 

Total assets

 

$

614,930

 

 

$

680,129

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

101

 

 

$

840

 

Accrued expenses and other current liabilities

 

 

66,347

 

 

 

97,800

 

Deferred revenue

 

 

210,592

 

 

 

213,696

 

Total current liabilities

 

 

277,040

 

 

 

312,336

 

Long-term debt

 

 

50,000

 

 

 

75,000

 

Non-current operating lease liabilities

 

 

57,517

 

 

 

65,038

 

Other non-current liabilities

 

 

20,274

 

 

 

23,848

 

Total liabilities

 

 

404,831

 

 

 

476,222

 

Commitments and contingencies (Note 5, 14)

 

 

 

 

 

 

Stockholders' Equity (Note 12):

 

 

 

 

 

 

Preferred stock, $0.01 par value

 

 

 

 

 

 

Authorized - 500 shares; issued and outstanding - none

 

 

 

 

 

 

Common stock, $0.01 par value

 

 

 

 

 

 

Authorized - 125,000 shares

 

 

 

 

 

 

Issued - 24,159 and 24,085 shares as of June 30, 2022 and December 31, 2021,
   respectively

 

 

 

 

 

 

Outstanding - 18,854 and 19,058 shares as of June 30, 2022 and
   December 31, 2021, respectively

 

 

242

 

 

 

241

 

Additional paid-in capital

 

 

254,937

 

 

 

245,985

 

Retained earnings

 

 

170,847

 

 

 

152,825

 

Treasury stock - 5,305 and 5,027 shares as of June 30, 2022 and
   December 31, 2021, respectively

 

 

(207,067

)

 

 

(191,955

)

Accumulated other comprehensive loss

 

 

(8,860

)

 

 

(3,189

)

Total stockholders’ equity

 

 

210,099

 

 

 

203,907

 

Total liabilities and stockholders’ equity

 

$

614,930

 

 

$

680,129

 

 

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,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Research

 

$

89,447

 

 

$

81,002

 

 

$

175,227

 

 

$

155,970

 

Consulting

 

 

39,262

 

 

 

40,960

 

 

 

77,693

 

 

 

79,510

 

Events

 

 

19,537

 

 

 

6,708

 

 

 

20,297

 

 

 

6,971

 

Total revenues

 

 

148,246

 

 

 

128,670

 

 

 

273,217

 

 

 

242,451

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services and fulfillment

 

 

60,991

 

 

 

52,258

 

 

 

114,242

 

 

 

99,735

 

Selling and marketing

 

 

44,974

 

 

 

42,556

 

 

 

89,018

 

 

 

81,835

 

General and administrative

 

 

15,925

 

 

 

14,334

 

 

 

31,449

 

 

 

27,512

 

Depreciation

 

 

2,299

 

 

 

2,255

 

 

 

4,618

 

 

 

4,545

 

Amortization of intangible assets

 

 

3,354

 

 

 

3,968

 

 

 

6,716

 

 

 

7,871

 

Integration costs

 

 

 

 

 

216

 

 

 

 

 

 

334

 

Total operating expenses

 

 

127,543

 

 

 

115,587

 

 

 

246,043

 

 

 

221,832

 

Income from operations

 

 

20,703

 

 

 

13,083

 

 

 

27,174

 

 

 

20,619

 

Interest expense

 

 

(535

)

 

 

(1,066

)

 

 

(1,148

)

 

 

(2,195

)

Other income (expense), net

 

 

103

 

 

 

(201

)

 

 

(154

)

 

 

(671

)

Gain on investments, net

 

 

 

 

 

 

 

 

426

 

 

 

 

Income before income taxes

 

 

20,271

 

 

 

11,816

 

 

 

26,298

 

 

 

17,753

 

Income tax expense

 

 

6,397

 

 

 

3,473

 

 

 

8,276

 

 

 

5,454

 

Net income

 

$

13,874

 

 

$

8,343

 

 

$

18,022

 

 

$

12,299

 

Basic income per common share

 

$

0.74

 

 

$

0.44

 

 

$

0.95

 

 

$

0.64

 

Diluted income per common share

 

$

0.72

 

 

$

0.43

 

 

$

0.94

 

 

$

0.64

 

Basic weighted average common shares outstanding

 

 

18,871

 

 

 

19,126

 

 

 

18,929

 

 

 

19,094

 

Diluted weighted average common shares outstanding

 

 

19,173

 

 

 

19,377

 

 

 

19,218

 

 

 

19,332

 

 

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,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

$

13,874

 

 

$

8,343

 

 

$

18,022

 

 

$

12,299

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

(4,528

)

 

 

723

 

 

 

(5,842

)

 

 

(1,578

)

Net change in market value of investments

 

(29

)

 

 

 

 

 

(93

)

 

 

 

Net change in market value of interest rate swap

 

68

 

 

 

139

 

 

 

264

 

 

 

329

 

Other comprehensive income (loss)

 

(4,489

)

 

 

862

 

 

 

(5,671

)

 

 

(1,249

)

Comprehensive income

$

9,385

 

 

$

9,205

 

 

$

12,351

 

 

$

11,050

 

 

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,

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

Net income

$

18,022

 

 

$

12,299

 

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

 

 

 

 

 

Depreciation

 

4,618

 

 

 

4,545

 

Amortization of intangible assets

 

6,716

 

 

 

7,871

 

Net gains from investments

 

(426

)

 

 

 

Deferred income taxes

 

(3,225

)

 

 

(4,620

)

Stock-based compensation

 

7,131

 

 

 

4,889

 

Operating lease right-of-use assets amortization

 

5,384

 

 

 

5,701

 

Amortization of deferred financing fees

 

219

 

 

 

467

 

Amortization of premium on investments

 

71

 

 

 

 

Foreign currency losses

 

80

 

 

 

778

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

26,705

 

 

 

20,468

 

Deferred commissions

 

7,062

 

 

 

4,377

 

Prepaid expenses and other current assets

 

(326

)

 

 

2,371

 

Accounts payable

 

(734

)

 

 

385

 

Accrued expenses and other liabilities

 

(30,680

)

 

 

(13,668

)

Deferred revenue

 

318

 

 

 

29,999

 

Operating lease liabilities

 

(6,180

)

 

 

(5,769

)

Net cash provided by operating activities

 

34,755

 

 

 

70,093

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(2,698

)

 

 

(5,243

)

Purchases of marketable investments

 

(12,028

)

 

 

 

Proceeds from maturities of marketable investments

 

10,955

 

 

 

 

Other investing activity

 

179

 

 

 

 

Net cash used in investing activities

 

(3,592

)

 

 

(5,243

)

Cash flows from financing activities:

 

 

 

 

 

Payments on borrowings

 

(25,000

)

 

 

(6,250

)

Repurchases of common stock

 

(15,112

)

 

 

(2,673

)

Proceeds from issuance of common stock under employee equity incentive plans

 

2,077

 

 

 

3,065

 

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

 

(255

)

 

 

(595

)

Net cash used in financing activities

 

(38,290

)

 

 

(6,453

)

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

 

(5,645

)

 

 

(122

)

Net change in cash, cash equivalents and restricted cash

 

(12,772

)

 

 

58,275

 

Cash, cash equivalents and restricted cash, beginning of period

 

118,031

 

 

 

90,652

 

Cash, cash equivalents and restricted cash, end of period

$

105,259

 

 

$

148,927

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

$

938

 

 

$

1,732

 

Cash paid for income taxes

$

4,189

 

 

$

5,066

 

 

 

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, 2021. 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, 2022 may not be indicative of the results for the year ending December 31, 2022, 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).

 

 

Six Months Ended June 30,

 

 

2022

 

 

2021

 

Cash and cash equivalents

$

103,225

 

 

$

146,387

 

Restricted cash classified in (1):

 

 

 

 

 

Prepaid expenses and other current assets

 

 

 

 

221

 

Other assets

 

2,034

 

 

 

2,319

 

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

$

105,259

 

 

$

148,927

 

 

(1)
Restricted cash consists of collateral required for leased office space, and for the six months ended June 30, 2021, also included an amount for 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.

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 adoption of this standard will not have a material impact on the Company’s financial position or results of operations as the Company's only interest rate swap, which is based on LIBOR, will terminate prior to the cessation of LIBOR.

 

 

7


 

Note 2 — Marketable Investments

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

 

 

As of June 30, 2022

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate obligations

 

$

19,546

 

 

$

1

 

 

$

(159

)

 

$

19,388

 

Total

 

$

19,546

 

 

$

1

 

 

$

(159

)

 

$

19,388

 

 

 

 

As of December 31, 2021

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate obligations

 

$

18,542

 

 

$

 

 

$

(33

)

 

$

18,509

 

Total

 

$

18,542

 

 

$

 

 

$

(33

)

 

$

18,509

 

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 the sale of the Company’s marketable investments during the three and six months ended June 30, 2022.

The following table summarizes the maturity periods of the marketable investments in the Company’s portfolio as of June 30, 2022 (in thousands).

 

 

FY 2022

 

 

FY 2023

 

 

FY 2024

 

 

Total

 

Corporate obligations

 

$

8,113

 

 

$

8,899

 

 

$

2,376

 

 

$

19,388

 

Total

 

$

8,113

 

 

$

8,899

 

 

$

2,376

 

 

$

19,388

 

 

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 June 30, 2022

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

 

Market

 

 

Unrealized

 

 

Market

 

 

Unrealized

 

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

Corporate obligations

 

$

18,443

 

 

$

159

 

 

$

 

 

$

 

Total

 

$

18,443

 

 

$

159

 

 

$

 

 

$