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, 2023

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 2, 2023, 19,212,000 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, 2023 and December 31, 2022

3

 

Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022

4

 

Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2023 and 2022

5

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022

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

 

 

 

 

 


 

PART I.

ITEM 1. FINANCIAL STATEMENTS

FORRESTER RESEARCH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data, unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

109,951

 

 

$

103,629

 

Marketable investments

 

 

13,664

 

 

 

19,688

 

Accounts receivable, net of allowance for expected credit losses of $578 and $560 as
   of June 30, 2023 and December 31, 2022, respectively

 

 

46,277

 

 

 

73,345

 

Deferred commissions

 

 

18,260

 

 

 

24,559

 

Prepaid expenses and other current assets

 

 

22,069

 

 

 

14,069

 

Total current assets

 

 

210,221

 

 

 

235,290

 

Property and equipment, net

 

 

20,707

 

 

 

23,208

 

Operating lease right-of-use assets

 

 

44,649

 

 

 

49,970

 

Goodwill

 

 

243,287

 

 

 

242,149

 

Intangible assets, net

 

 

43,406

 

 

 

49,504

 

Other assets

 

 

8,404

 

 

 

8,317

 

Total assets

 

$

570,674

 

 

$

608,438

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,137

 

 

$

361

 

Accrued expenses and other current liabilities

 

 

62,779

 

 

 

91,007

 

Deferred revenue

 

 

179,613

 

 

 

178,021

 

Total current liabilities

 

 

243,529

 

 

 

269,389

 

Long-term debt

 

 

35,000

 

 

 

50,000

 

Non-current operating lease liabilities

 

 

44,831

 

 

 

50,751

 

Other non-current liabilities

 

 

15,669

 

 

 

16,642

 

Total liabilities

 

 

339,029

 

 

 

386,782

 

Commitments and contingencies (Note 5, 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 - 24,512 and 24,367 shares as of June 30, 2023 and December 31, 2022,
   respectively

 

 

 

 

 

 

Outstanding - 19,180 and 19,062 shares as of June 30, 2023 and
   December 31, 2022, respectively

 

 

245

 

 

 

244

 

Additional paid-in capital

 

 

269,371

 

 

 

261,766

 

Retained earnings

 

 

175,860

 

 

 

174,631

 

Treasury stock - 5,332 and 5,305 shares as of June 30, 2023 and
   December 31, 2022, respectively

 

 

(207,887

)

 

 

(207,067

)

Accumulated other comprehensive loss

 

 

(5,944

)

 

 

(7,918

)

Total stockholders’ equity

 

 

231,645

 

 

 

221,656

 

Total liabilities and stockholders’ equity

 

$

570,674

 

 

$

608,438

 

 

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

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Research

 

$

87,699

 

 

$

89,447

 

 

$

168,605

 

 

$

175,227

 

Consulting

 

 

29,970

 

 

 

39,262

 

 

 

61,720

 

 

 

77,693

 

Events

 

 

17,920

 

 

 

19,537

 

 

 

18,934

 

 

 

20,297

 

Total revenues

 

 

135,589

 

 

 

148,246

 

 

 

249,259

 

 

 

273,217

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services and fulfillment

 

 

54,614

 

 

 

60,991

 

 

 

103,906

 

 

 

114,242

 

Selling and marketing

 

 

41,581

 

 

 

44,974

 

 

 

83,113

 

 

 

89,018

 

General and administrative

 

 

15,315

 

 

 

15,925

 

 

 

36,542

 

 

 

31,449

 

Depreciation

 

 

2,191

 

 

 

2,299

 

 

 

4,295

 

 

 

4,618

 

Amortization of intangible assets

 

 

3,068

 

 

 

3,354

 

 

 

6,134

 

 

 

6,716

 

Restructuring and related costs

 

 

10,532

 

 

 

 

 

 

12,121

 

 

 

 

Total operating expenses

 

 

127,301

 

 

 

127,543

 

 

 

246,111

 

 

 

246,043

 

Income from operations

 

 

8,288

 

 

 

20,703

 

 

 

3,148

 

 

 

27,174

 

Interest expense

 

 

(730

)

 

 

(535

)

 

 

(1,523

)

 

 

(1,148

)

Other income (expense), net

 

 

514

 

 

 

103

 

 

 

1,064

 

 

 

(154

)

Gain on investments, net

 

 

 

 

 

 

 

 

 

 

 

426

 

Income before income taxes

 

 

8,072

 

 

 

20,271

 

 

 

2,689

 

 

 

26,298

 

Income tax expense

 

 

2,768

 

 

 

6,397

 

 

 

1,460

 

 

 

8,276

 

Net income

 

$

5,304

 

 

$

13,874

 

 

$

1,229

 

 

$

18,022

 

Basic income per common share

 

$

0.28

 

 

$

0.74

 

 

$

0.06

 

 

$

0.95

 

Diluted income per common share

 

$

0.28

 

 

$

0.72

 

 

$

0.06

 

 

$

0.94

 

Basic weighted average common shares outstanding

 

 

19,193

 

 

 

18,871

 

 

 

19,151

 

 

 

18,929

 

Diluted weighted average common shares outstanding

 

 

19,258

 

 

 

19,173

 

 

 

19,214

 

 

 

19,218

 

 

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,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

$

5,304

 

 

$

13,874

 

 

$

1,229

 

 

$

18,022

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

746

 

 

 

(4,528

)

 

 

1,952

 

 

 

(5,842

)

Net change in market value of investments

 

(11

)

 

 

(29

)

 

 

22

 

 

 

(93

)

Net change in market value of interest rate swap

 

 

 

 

68

 

 

 

 

 

 

264

 

Other comprehensive income (loss)

 

735

 

 

 

(4,489

)

 

 

1,974

 

 

 

(5,671

)

Comprehensive income

$

6,039

 

 

$

9,385

 

 

$

3,203

 

 

$

12,351

 

 

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,

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

Net income

$

1,229

 

 

$

18,022

 

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

 

 

 

 

 

Depreciation

 

4,295

 

 

 

4,618

 

Impairment of property and equipment

 

600

 

 

 

 

Amortization of intangible assets

 

6,134

 

 

 

6,716

 

Net gains from investments

 

 

 

 

(426

)

Deferred income taxes

 

(1,479

)

 

 

(3,225

)

Stock-based compensation

 

7,025

 

 

 

7,131

 

Operating lease right-of-use assets amortization and impairments

 

6,691

 

 

 

5,384

 

Amortization of deferred financing fees

 

220

 

 

 

219

 

Amortization of (discount) premium on investments

 

(122

)

 

 

71

 

Foreign currency losses

 

39

 

 

 

80

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

27,391

 

 

 

26,705

 

Deferred commissions

 

6,299

 

 

 

7,062

 

Prepaid expenses and other current assets

 

(7,122

)

 

 

(326

)

Accounts payable

 

767

 

 

 

(734

)

Accrued expenses and other liabilities

 

(28,824

)

 

 

(30,680

)

Deferred revenue

 

(535

)

 

 

318

 

Operating lease liabilities

 

(6,820

)

 

 

(6,180

)

Net cash provided by operating activities

 

15,788

 

 

 

34,755

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(2,664

)

 

 

(2,698

)

Purchases of marketable investments

 

(964

)

 

 

(12,028

)

Proceeds from maturities of marketable investments

 

7,138

 

 

 

10,955

 

Other investing activity

 

(66

)

 

 

179

 

Net cash provided by (used in) investing activities

 

3,444

 

 

 

(3,592

)

Cash flows from financing activities:

 

 

 

 

 

Payments on borrowings

 

(15,000

)

 

 

(25,000

)

Repurchases of common stock

 

(820

)

 

 

(15,112

)

Proceeds from issuance of common stock under employee equity incentive plans

 

1,840

 

 

 

2,077

 

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

 

(1,259

)

 

 

(255

)

Net cash used in financing activities

 

(15,239

)

 

 

(38,290

)

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

 

2,424

 

 

 

(5,645

)

Net change in cash, cash equivalents and restricted cash

 

6,417

 

 

 

(12,772

)

Cash, cash equivalents and restricted cash, beginning of period

 

105,654

 

 

 

118,031

 

Cash, cash equivalents and restricted cash, end of period

$

112,071

 

 

$

105,259

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

$

1,302

 

 

$

938

 

Cash paid for income taxes

$

9,729

 

 

$

4,189

 

 

 

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, 2022. 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, 2023 may not be indicative of the results for the year ending December 31, 2023, 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,

 

 

2023

 

 

2022

 

Cash and cash equivalents

$

109,951

 

 

$

103,225

 

Restricted cash classified in other assets (1):

 

2,120

 

 

 

2,034

 

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

$

112,071

 

 

$

105,259

 

 

(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 March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The amendments in this update defer the sunset date of Topic 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The amendments in this update apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. It is anticipated the standard will have no impact on the Company’s financial position or results of operations.

 

Note 2 — Marketable Investments

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

 

 

As of June 30, 2023

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate obligations

 

$

11,846

 

 

$

 

 

$

(162

)

 

$

11,684

 

Federal agency obligations

 

 

1,999

 

 

 

 

 

 

(19

)

 

 

1,980

 

Total

 

$

13,845

 

 

$

 

 

$

(181

)

 

$

13,664

 

 

 

7


 

 

 

 

As of December 31, 2022

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate obligations

 

$

17,900

 

 

$

8

 

 

$

(205

)

 

$

17,703

 

Federal agency obligations

 

 

1,999

 

 

 

 

 

 

(14

)

 

 

1,985

 

Total

 

$

19,899

 

 

$

8

 

 

$

(219

)

 

$

19,688

 

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 and six months ended June 30, 2023 and 2022.

The following table summarizes the maturity periods of the marketable investments in the Company’s portfolio as of June 30, 2023 (in thousands).

 

 

FY 2023

 

 

FY 2024

 

 

FY 2025

 

 

Total

 

Corporate obligations

 

$

5,953

 

 

$

3,832

 

 

$

1,899

 

 

$

11,684

 

Federal agency obligations

 

 

 

 

 

1,980