UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. |
FOR THE QUARTERLY PERIOD ENDED
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. |
COMMISSION FILE NUMBER:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
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(Zip Code) |
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(Address of principal executive offices) |
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(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
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Trading Symbol(s) |
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Name of Each Exchange on Which Registered |
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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.
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).
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 |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 November 1, 2023,
FORRESTER RESEARCH, INC.
INDEX TO FORM 10-Q
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PART I |
FINANCIAL INFORMATION |
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Item 1. |
3 |
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Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 |
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4 |
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5 |
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Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 |
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7 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. |
31 |
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Item 4. |
31 |
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PART II |
OTHER INFORMATION |
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Item 1. |
32 |
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Item 1A. |
32 |
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Item 2. |
32 |
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Item 3. |
32 |
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Item 4. |
32 |
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Item 5. |
32 |
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Item 6. |
33 |
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34 |
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PART I.
ITEM 1. FINANCIAL STATEMENTS
FORRESTER RESEARCH, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data, unaudited)
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September 30, |
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December 31, |
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2023 |
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2022 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable investments |
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Accounts receivable, net of allowance for expected credit losses of $ |
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Deferred commissions |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Goodwill |
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Intangible assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current Liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Deferred revenue |
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Total current liabilities |
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Long-term debt |
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Non-current operating lease liabilities |
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Other non-current liabilities |
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Total liabilities |
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Stockholders' Equity: |
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Preferred stock, $ |
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Authorized - |
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Common stock, $ |
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Authorized - |
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Issued - |
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Outstanding - |
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Additional paid-in capital |
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Retained earnings |
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Treasury stock - |
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( |
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( |
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Accumulated other comprehensive loss |
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( |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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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)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenues: |
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Research |
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$ |
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$ |
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$ |
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$ |
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Consulting |
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Events |
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Total revenues |
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Operating expenses: |
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Cost of services and fulfillment |
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Selling and marketing |
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General and administrative |
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Depreciation |
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Amortization of intangible assets |
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Restructuring and related costs |
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Total operating expenses |
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Income from operations |
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Interest expense |
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( |
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( |
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( |
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( |
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Other income, net |
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Gain on investments, net |
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Income before income taxes |
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Income tax expense |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Basic income per common share |
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$ |
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$ |
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$ |
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$ |
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Diluted income per common share |
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$ |
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$ |
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$ |
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$ |
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Basic weighted average common shares outstanding |
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Diluted weighted average common shares outstanding |
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The accompanying notes are an integral part of these consolidated financial statements.
4
FORRESTER RESEARCH, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands, unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Net income |
$ |
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$ |
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$ |
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$ |
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Other comprehensive loss, net of tax: |
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Foreign currency translation |
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( |
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( |
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( |
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( |
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Net change in market value of investments |
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( |
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( |
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Net change in market value of interest rate swap |
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( |
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Other comprehensive loss |
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( |
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( |
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( |
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Comprehensive income |
$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements.
5
FORRESTER RESEARCH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)
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Nine Months Ended |
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September 30, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net income |
$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation |
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Impairment of property and equipment |
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Amortization of intangible assets |
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Net gains from investments |
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( |
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Deferred income taxes |
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( |
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( |
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Stock-based compensation |
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Operating lease right-of-use assets amortization and impairments |
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Amortization of deferred financing fees |
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Amortization of (discount) premium on investments |
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Foreign currency gains |
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( |
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Changes in assets and liabilities: |
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Accounts receivable |
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Deferred commissions |
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Prepaid expenses and other current assets |
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Accounts payable |
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Accrued expenses and other liabilities |
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( |
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( |
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Deferred revenue |
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( |
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( |
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Operating lease liabilities |
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( |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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Purchases of marketable investments |
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Proceeds from maturities of marketable investments |
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Other investing activity |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities: |
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Payments on borrowings |
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( |
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( |
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Repurchases of common stock |
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( |
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( |
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Debt issuance costs |
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Proceeds from issuance of common stock under employee equity incentive plans |
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Taxes paid related to net share settlements of stock-based compensation awards |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Effect of exchange rate changes on cash, cash equivalents and restricted cash |
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( |
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Net change in cash, cash equivalents and restricted cash |
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( |
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( |
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Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period |
$ |
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$ |
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Supplemental disclosure of cash flow information: |
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Cash paid for interest |
$ |
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$ |
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Cash paid for income taxes |
$ |
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$ |
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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 nine months ended September 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).
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Nine Months Ended September 30, |
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2023 |
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2022 |
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Cash and cash equivalents |
$ |
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$ |
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(1): |
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Cash, cash equivalents and restricted cash shown in statement of cash flows |
$ |
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$ |
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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. The standard has not impacted the Company’s financial position or results of operations, and will not have an impact in the future as the Company no longer has any financial instruments that reference LIBOR.
7
Note 2 — Marketable Investments
The following table summarizes the Company’s marketable investments (in thousands):
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As of September 30, 2023 |
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Gross |
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Gross |
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Amortized |
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Unrealized |
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Unrealized |
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Market |
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Cost |
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Gains |
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Losses |
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Value |
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Corporate obligations |
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$ |
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$ |
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$ |
( |
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$ |
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Federal agency obligations |
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( |
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Total |
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$ |
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$ |
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$ |
( |
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$ |
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As of December 31, 2022 |
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Gross |
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Gross |
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Amortized |
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Unrealized |
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Unrealized |
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Market |
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Cost |
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Gains |
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Losses |
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Value |
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Corporate obligations |
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$ |
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$ |
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$ |
( |
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$ |
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Federal agency obligations |
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( |
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Total |
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$ |
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$ |
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$ |
( |
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$ |
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Realized gains and losses on investments are included in earnings and are determined using the specific identification method. There were
The following table summarizes the maturity periods of the marketable investments in the Company’s portfolio as of September 30, 2023 (in thousands).
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FY 2023 |
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FY 2024 |
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FY 2025 |
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Total |
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Corporate obligations |
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$ |
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$ |
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$ |
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$ |
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Federal agency obligations |
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$ |
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Total |
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$ |
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$ |
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$ |
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$ |
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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):
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As of September 30, 2023 |
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Less Than 12 Months |
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12 Months or Greater |
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Market |
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Unrealized |
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Market |
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Unrealized |
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Value |
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Losses |
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Value |
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Losses |
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Corporate obligations |
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$ |
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$ |
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$ |
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$ |
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Federal agency obligations |
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Total |
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$ |
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$ |
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$ |
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$ |
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As of December 31, 2022 |
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Less Than 12 Months |
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12 Months or Greater |
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Market |
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Unrealized |
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Market |
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Unrealized |
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Value |
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Losses |
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Value |
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Losses |
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Corporate obligations |
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$ |
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$ |
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$ |
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$ |
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Federal agency obligations |
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Total |
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$ |
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$ |
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$ |
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$ |
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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.
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The Company performed its annual impairment testing as of November 30, 2022 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
The change in the carrying amount of goodwill for the nine months ended September 30, 2023 is summarized as follows (in thousands):
Balance at December 31, 2022 |
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Foreign currency translation adjustments |
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Balance at September 30, 2023 |
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Finite-Lived Intangible Assets
The carrying values of finite-lived intangible assets are as follows (in thousands):
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September 30, 2023 |
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Gross |
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Net |
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Carrying |
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Accumulated |
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Carrying |
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Amount |
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Amortization |
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Amount |
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Amortizable intangible assets: |
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Customer relationships |
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