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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 September 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 October 31, 2022, 19,052,000 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 September 30, 2022 and December 31, 2021

3

 

Consolidated Statements of Income for the three and nine months ended September 30, 2022 and 2021

4

 

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2022 and 2021

5

 

Consolidated Statements of Cash Flows for the nine months ended September 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

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)

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

98,735

 

 

$

115,769

 

Marketable investments (Note 2)

 

 

20,003

 

 

 

18,509

 

Accounts receivable, net of allowance for expected credit losses of $632 and $610 as
   of September 30, 2022 and December 31, 2021, respectively

 

 

50,602

 

 

 

86,965

 

Deferred commissions

 

 

18,893

 

 

 

29,631

 

Prepaid expenses and other current assets

 

 

16,051

 

 

 

18,614

 

Total current assets

 

 

204,284

 

 

 

269,488

 

Property and equipment, net

 

 

25,053

 

 

 

28,245

 

Operating lease right-of-use assets

 

 

55,637

 

 

 

65,009

 

Goodwill

 

 

238,949

 

 

 

244,994

 

Intangible assets, net

 

 

52,496

 

 

 

62,733

 

Other assets

 

 

8,821

 

 

 

9,660

 

Total assets

 

$

585,240

 

 

$

680,129

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,069

 

 

$

840

 

Accrued expenses and other current liabilities

 

 

65,247

 

 

 

97,800

 

Deferred revenue

 

 

180,758

 

 

 

213,696

 

Total current liabilities

 

 

247,074

 

 

 

312,336

 

Long-term debt

 

 

50,000

 

 

 

75,000

 

Non-current operating lease liabilities

 

 

53,539

 

 

 

65,038

 

Other non-current liabilities

 

 

20,738

 

 

 

23,848

 

Total liabilities

 

 

371,351

 

 

 

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 - 24,352 and 24,085 shares as of September 30, 2022 and December 31, 2021,
   respectively

 

 

 

 

 

 

Outstanding - 19,047 and 19,058 shares as of September 30, 2022 and
   December 31, 2021, respectively

 

 

244

 

 

 

241

 

Additional paid-in capital

 

 

258,341

 

 

 

245,985

 

Retained earnings

 

 

176,261

 

 

 

152,825

 

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

 

 

(207,067

)

 

 

(191,955

)

Accumulated other comprehensive loss

 

 

(13,890

)

 

 

(3,189

)

Total stockholders’ equity

 

 

213,889

 

 

 

203,907

 

Total liabilities and stockholders’ equity

 

$

585,240

 

 

$

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Research

 

$

87,038

 

 

$

79,876

 

 

$

262,265

 

 

$

235,846

 

Consulting

 

 

37,382

 

 

 

37,393

 

 

 

115,075

 

 

 

116,903

 

Events

 

 

3,259

 

 

 

867

 

 

 

23,556

 

 

 

7,838

 

Total revenues

 

 

127,679

 

 

 

118,136

 

 

 

400,896

 

 

 

360,587

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services and fulfillment

 

 

52,717

 

 

 

49,836

 

 

 

166,959

 

 

 

149,571

 

Selling and marketing

 

 

44,231

 

 

 

41,340

 

 

 

133,249

 

 

 

123,175

 

General and administrative

 

 

16,448

 

 

 

14,383

 

 

 

47,897

 

 

 

41,895

 

Depreciation

 

 

2,374

 

 

 

2,342

 

 

 

6,992

 

 

 

6,887

 

Amortization of intangible assets

 

 

3,352

 

 

 

3,696

 

 

 

10,068

 

 

 

11,567

 

Integration costs

 

 

 

 

 

 

 

 

 

 

 

334

 

Total operating expenses

 

 

119,122

 

 

 

111,597

 

 

 

365,165

 

 

 

333,429

 

Income from operations

 

 

8,557

 

 

 

6,539

 

 

 

35,731

 

 

 

27,158

 

Interest expense

 

 

(584

)

 

 

(1,056

)

 

 

(1,732

)

 

 

(3,251

)

Other income (expense), net

 

 

346

 

 

 

(195

)

 

 

192

 

 

 

(866

)

Gain on investments, net

 

 

 

 

 

 

 

 

426

 

 

 

 

Income before income taxes

 

 

8,319

 

 

 

5,288

 

 

 

34,617

 

 

 

23,041

 

Income tax expense

 

 

2,905

 

 

 

766

 

 

 

11,181

 

 

 

6,220

 

Net income

 

$

5,414

 

 

$

4,522

 

 

$

23,436

 

 

$

16,821

 

Basic income per common share

 

$

0.29

 

 

$

0.24

 

 

$

1.24

 

 

$

0.88

 

Diluted income per common share

 

$

0.28

 

 

$

0.23

 

 

$

1.22

 

 

$

0.87

 

Basic weighted average common shares outstanding

 

 

18,958

 

 

 

19,134

 

 

 

18,939

 

 

 

19,107

 

Diluted weighted average common shares outstanding

 

 

19,139

 

 

 

19,388

 

 

 

19,192

 

 

 

19,351

 

 

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

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

$

5,414

 

 

$

4,522

 

 

$

23,436

 

 

$

16,821

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss, net of tax:

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

(4,971

)

 

 

(1,508

)

 

 

(10,813

)

 

 

(3,086

)

Net change in market value of investments

 

(54

)

 

 

(4

)

 

 

(147

)

 

 

(4

)

Net change in market value of interest rate swap

 

(5

)

 

 

128

 

 

 

259

 

 

 

457

 

Other comprehensive loss

 

(5,030

)

 

 

(1,384

)

 

 

(10,701

)

 

 

(2,633

)

Comprehensive income

$

384

 

 

$

3,138

 

 

$

12,735

 

 

$

14,188

 

 

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

 

5


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 

 

Nine Months Ended

 

 

September 30,

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

Net income

$

23,436

 

 

$

16,821

 

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

 

 

 

 

 

Depreciation

 

6,992

 

 

 

6,887

 

Amortization of intangible assets

 

10,068

 

 

 

11,567

 

Net gains from investments

 

(426

)

 

 

 

Deferred income taxes

 

(3,023

)

 

 

(2,157

)

Stock-based compensation

 

11,036

 

 

 

7,351

 

Operating lease right-of-use assets amortization

 

8,138

 

 

 

8,742

 

Amortization of deferred financing fees

 

331

 

 

 

703

 

Amortization of premium on investments

 

48

 

 

 

25

 

Foreign currency (gains) losses

 

(167

)

 

 

1,033

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

34,801

 

 

 

31,052

 

Deferred commissions

 

10,741

 

 

 

5,562

 

Prepaid expenses and other current assets

 

2,185

 

 

 

(3,394

)

Accounts payable

 

262

 

 

 

64

 

Accrued expenses and other liabilities

 

(30,801

)

 

 

(6,870

)

Deferred revenue

 

(26,262

)

 

 

16,132

 

Operating lease liabilities

 

(9,556

)

 

 

(8,526

)

Net cash provided by operating activities

 

37,803

 

 

 

84,992

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(4,227

)

 

 

(9,845

)

Purchases of marketable investments

 

(22,819

)

 

 

(18,549

)

Proceeds from maturities of marketable investments

 

21,081

 

 

 

1,500

 

Other investing activity

 

246

 

 

 

44

 

Net cash used in investing activities

 

(5,719

)

 

 

(26,850

)

Cash flows from financing activities:

 

 

 

 

 

Payments on borrowings

 

(25,000

)

 

 

(9,375

)

Repurchases of common stock

 

(15,112

)

 

 

(10,646

)

Proceeds from issuance of common stock under employee equity incentive plans

 

4,298

 

 

 

7,840

 

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

 

(2,975

)

 

 

(3,347

)

Net cash used in financing activities

 

(38,789

)

 

 

(15,528

)

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

 

(10,727

)

 

 

(1,464

)

Net change in cash, cash equivalents and restricted cash

 

(17,432

)

 

 

41,150

 

Cash, cash equivalents and restricted cash, beginning of period

 

118,031

 

 

 

90,652

 

Cash, cash equivalents and restricted cash, end of period

$

100,599

 

 

$

131,802

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

$

1,456

 

 

$

2,532

 

Cash paid for income taxes

$

5,380

 

 

$

7,366

 

 

 

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 nine months ended September 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).

 

 

Nine Months Ended September 30,

 

 

2022

 

 

2021

 

Cash and cash equivalents

$

98,735

 

 

$

129,332

 

Restricted cash classified in (1):

 

 

 

 

 

Prepaid expenses and other current assets

 

 

 

 

215

 

Other assets

 

1,864

 

 

 

2,255

 

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

$

100,599

 

 

$

131,802

 

 

(1)
Restricted cash consists of collateral required for leased office space, and for the nine months ended September 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 September 30, 2022

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate obligations

 

$

19,234

 

 

$

 

 

$

(232

)

 

$

19,002

 

Federal agency obligations

 

 

1,000

 

 

 

1

 

 

 

 

 

 

1,001

 

Total

 

$

20,234

 

 

$

1

 

 

$

(232

)

 

$

20,003

 

 

 

 

As of December 31, 2021

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate obligations

 

$

18,542

 

 

$

 

 

$

(33

)