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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 March 31, 2024

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 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 April 29, 2024, 19,107,000 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 March 31, 2024 and December 31, 2023

3

 

Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023

4

 

Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2024 and 2023

5

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

6

 

Notes to Consolidated Financial Statements

7

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

29

 

 

 

SIGNATURES

30

 

 

 

 

 


 

PART I.

ITEM 1. FINANCIAL STATEMENTS

FORRESTER RESEARCH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data, unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

61,379

 

 

$

72,909

 

Marketable investments

 

 

57,095

 

 

 

51,580

 

Accounts receivable, net of allowance for expected credit losses of $764 and $574 as
   of March 31, 2024 and December 31, 2023, respectively

 

 

54,717

 

 

 

58,999

 

Deferred commissions

 

 

21,498

 

 

 

23,207

 

Prepaid expenses and other current assets

 

 

23,892

 

 

 

9,305

 

Total current assets

 

 

218,581

 

 

 

216,000

 

Property and equipment, net

 

 

17,787

 

 

 

19,401

 

Operating lease right-of-use assets

 

 

34,380

 

 

 

39,722

 

Goodwill

 

 

243,028

 

 

 

244,257

 

Intangible assets, net

 

 

35,073

 

 

 

37,637

 

Other assets

 

 

6,821

 

 

 

7,157

 

Total assets

 

$

555,670

 

 

$

564,174

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,749

 

 

$

1,796

 

Accrued expenses and other current liabilities

 

 

44,698

 

 

 

81,482

 

Deferred revenue

 

 

193,664

 

 

 

156,798

 

Total current liabilities

 

 

241,111

 

 

 

240,076

 

Long-term debt

 

 

35,000

 

 

 

35,000

 

Non-current operating lease liabilities

 

 

34,472

 

 

 

37,673

 

Other non-current liabilities

 

 

14,156

 

 

 

11,160

 

Total liabilities

 

 

324,739

 

 

 

323,909

 

Commitments and contingencies (Note 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 - 24,881 and 24,684 shares as of March 31, 2024 and December 31, 2023,
   respectively

 

 

 

 

 

 

Outstanding - 19,242 and 19,248 shares as of March 31, 2024 and
   December 31, 2023, respectively

 

 

249

 

 

 

247

 

Additional paid-in capital

 

 

281,453

 

 

 

278,057

 

Retained earnings

 

 

171,008

 

 

 

177,681

 

Treasury stock - 5,639 and 5,437 shares as of March 31, 2024 and December 31, 2023,
respectively

 

 

(215,246

)

 

 

(211,149

)

Accumulated other comprehensive loss

 

 

(6,533

)

 

 

(4,571

)

Total stockholders’ equity

 

 

230,931

 

 

 

240,265

 

Total liabilities and stockholders’ equity

 

$

555,670

 

 

$

564,174

 

 

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

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

Research

 

$

76,581

 

 

$

80,906

 

Consulting

 

 

23,141

 

 

 

31,750

 

Events

 

 

355

 

 

 

1,014

 

Total revenues

 

 

100,077

 

 

 

113,670

 

Operating expenses:

 

 

 

 

 

 

Cost of services and fulfillment

 

 

44,690

 

 

 

49,292

 

Selling and marketing

 

 

39,422

 

 

 

41,532

 

General and administrative

 

 

14,059

 

 

 

21,227

 

Depreciation

 

 

2,060

 

 

 

2,104

 

Amortization of intangible assets

 

 

2,514

 

 

 

3,066

 

Restructuring costs

 

 

6,624

 

 

 

1,589

 

Total operating expenses

 

 

109,369

 

 

 

118,810

 

Loss from operations

 

 

(9,292

)

 

 

(5,140

)

Interest expense

 

 

(762

)

 

 

(793

)

Other income, net

 

 

1,274

 

 

 

550

 

Loss before income taxes

 

 

(8,780

)

 

 

(5,383

)

Income tax benefit

 

 

(2,107

)

 

 

(1,308

)

Net loss

 

$

(6,673

)

 

$

(4,075

)

Basic loss per common share

 

$

(0.35

)

 

$

(0.21

)

Diluted loss per common share

 

$

(0.35

)

 

$

(0.21

)

Basic weighted average common shares outstanding

 

 

19,285

 

 

 

19,108

 

Diluted weighted average common shares outstanding

 

 

19,285

 

 

 

19,108

 

 

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

 

4


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, unaudited)

 

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Net loss

$

(6,673

)

 

$

(4,075

)

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

Foreign currency translation

 

(1,968

)

 

 

1,206

 

Net change in market value of investments

 

6

 

 

 

33

 

Other comprehensive income (loss)

 

(1,962

)

 

 

1,239

 

Comprehensive loss

$

(8,635

)

 

$

(2,836

)

 

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

 

5


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 

 

Three Months Ended

 

 

March 31,

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

Net loss

$

(6,673

)

 

$

(4,075

)

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

 

 

 

 

 

Depreciation

 

2,060

 

 

 

2,104

 

Impairment of property and equipment

 

646

 

 

 

 

Amortization of intangible assets

 

2,514

 

 

 

3,066

 

Deferred income taxes

 

3,485

 

 

 

1,926

 

Stock-based compensation

 

3,574

 

 

 

3,165

 

Operating lease right-of-use assets amortization and impairments

 

5,679

 

 

 

2,886

 

Amortization of deferred financing fees

 

113

 

 

 

109

 

Amortization of discount on investments

 

(172

)

 

 

(63

)

Foreign currency losses

 

72

 

 

 

20

 

Changes in assets and liabilities:

 

 

 

 

 

Accounts receivable

 

3,885

 

 

 

14,691

 

Deferred commissions

 

1,709

 

 

 

1,957

 

Prepaid expenses and other current assets

 

(14,617

)

 

 

(8,819

)

Accounts payable

 

970

 

 

 

64

 

Accrued expenses and other liabilities

 

(36,002

)

 

 

(37,416

)

Deferred revenue

 

36,998

 

 

 

36,041

 

Operating lease liabilities

 

(3,630

)

 

 

(3,374

)

Net cash provided by operating activities

 

611

 

 

 

12,282

 

Cash flows from investing activities:

 

 

 

 

 

Purchases of property and equipment

 

(1,426

)

 

 

(1,632

)

Purchases of marketable investments

 

(32,745

)

 

 

(964

)

Proceeds from maturities of marketable investments

 

23,900

 

 

 

4,000

 

Proceeds from sales of marketable investments

 

3,021

 

 

 

 

Other investing activity

 

14

 

 

 

(62

)

Net cash provided by (used in) investing activities

 

(7,236

)

 

 

1,342

 

Cash flows from financing activities:

 

 

 

 

 

Payments on borrowings

 

 

 

 

(15,000

)

Repurchases of common stock

 

(4,097

)

 

 

 

Proceeds from issuance of common stock under employee equity incentive plans

 

1,253

 

 

 

1,840

 

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

 

(1,429

)

 

 

(1,079

)

Net cash used in financing activities

 

(4,273

)

 

 

(14,239

)

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

 

(652

)

 

 

1,249

 

Net change in cash, cash equivalents and restricted cash

 

(11,550

)

 

 

634

 

Cash, cash equivalents and restricted cash, beginning of period

 

75,042

 

 

 

105,654

 

Cash, cash equivalents and restricted cash, end of period

$

63,492

 

 

$

106,288

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

$

646

 

 

$

742

 

Cash paid for income taxes

$

3,195

 

 

$

1,620

 

 

 

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, 2023. 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 loss, and cash flows as of the dates and for the periods presented have been included. The results of operations for the three months ended March 31, 2024 may not be indicative of the results for the year ending December 31, 2024, 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).

 

 

Three Months Ended March 31,

 

 

2024

 

 

2023

 

Cash and cash equivalents shown in balance sheets

$

61,379

 

 

$

104,217

 

Restricted cash classified in other assets (1):

 

2,113

 

 

 

2,071

 

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

$

63,492

 

 

$

106,288

 

 

(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 November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The new standard enhances the disclosures of reportable segment information, primarily in regards to significant segment expenses. The new standard will be effective for the Company for the annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adoption of the standard on its consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The new standard enhances income tax disclosure requirements by requiring specified categories and greater disaggregation within the rate reconciliation table, disclosure of income taxes paid by jurisdiction, and providing clarification on uncertain tax positions and related financial statement impacts. The new standard will be effective for the Company on January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact of adoption of the standard on its consolidated financial statements.

 

7


 

Note 2 — Marketable Investments

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

 

 

As of March 31, 2024

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate obligations

 

$

21,989

 

 

$

 

 

$

(66

)

 

$

21,923

 

Federal agency obligations

 

 

2,000

 

 

 

 

 

 

(4

)

 

 

1,996

 

Money market funds

 

 

33,176

 

 

 

 

 

 

 

 

 

33,176

 

Total

 

$

57,165

 

 

$

 

 

$

(70

)

 

$

57,095

 

 

 

 

As of December 31, 2023

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate obligations

 

$

18,049

 

 

$

 

 

$

(72

)

 

$

17,977

 

Federal agency obligations

 

 

2,000

 

 

 

 

 

 

(7

)

 

 

1,993

 

Money market funds

 

 

31,610

 

 

 

 

 

 

 

 

 

31,610

 

Total

 

$

51,659

 

 

$

 

 

$

(79

)

 

$

51,580

 

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 months ended March 31, 2024 and 2023.

The following table summarizes the maturity periods of the marketable investments in the Company’s portfolio as of March 31, 2024 (in thousands).

 

 

FY 2024

 

 

FY 2025

 

 

Total

 

Corporate obligations

 

$

19,475

 

 

$

2,448

 

 

$

21,923

 

Federal agency obligations

 

 

1,996

 

 

 

 

 

 

1,996

 

Money market funds

 

 

33,176

 

 

 

 

 

 

33,176

 

Total

 

$

54,647

 

 

$

2,448

 

 

$

57,095

 

 

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 March 31, 2024

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

 

Market

 

 

Unrealized

 

 

Market

 

 

Unrealized

 

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

Corporate obligations

 

$

17,026

 

 

$

16

 

 

$

4,897

 

 

$

50

 

Federal agency obligations

 

 

 

 

 

 

 

 

1,996

 

 

 

4

 

Total

 

$

17,026

 

 

$

16

 

 

$

6,893

 

 

$

54

 

 

 

 

As of December 31, 2023

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

 

Market

 

 

Unrealized

 

 

Market

 

 

Unrealized

 

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

Corporate obligations

 

$

13,098

 

 

$

8

 

 

$

4,879

 

 

$

64

 

Federal agency obligations

 

 

 

 

 

 

 

 

1,993

 

 

 

7

 

Total

 

$

13,098

 

 

$

8

 

 

$

6,872

 

 

$

71

 

 

 

8


 

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.

The Company performed its annual impairment testing as of November 30, 2023 utilizing a quantitative assessment to determine if 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 March 31, 2024, there were no events or circumstances that required an interim impairment test. Accordingly, as of March 31, 2024, the Company had no accumulated goodwill impairment losses. Approximately $8.2 million of goodwill is allocated to the Company’s Consulting reporting unit, which had a negative carrying value as of the date of the last test.

 

The change in the carrying amount of goodwill for the three months ended March 31, 2024 is summarized as follows (in thousands):

 

Total

 

Balance at December 31, 2023

$

244,257

 

Translation adjustments

 

(1,229

)

Balance at March 31, 2024

$

243,028

 

Finite-Lived Intangible Assets

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

 

 

March 31, 2024

 

 

Gross

 

 

 

 

 

Net

 

 

Carrying

 

 

Accumulated

 

 

Carrying

 

 

Amount

 

 

Amortization

 

 

Amount

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

Customer relationships

$

77,626

 

 

$

44,183

 

 

$

33,443

 

Technology

 

16,290

 

 

 

15,881

 

 

 

409

 

Trademarks

 

12,484

 

 

 

11,263

 

 

 

1,221

 

Total

$

106,400

 

 

$

71,327

 

 

$

35,073

 

 

 

December 31, 2023

 

 

Gross

 

 

 

 

 

Net

 

 

Carrying

 

 

Accumulated

 

 

Carrying

 

 

Amount

 

 

Amortization

 

 

Amount

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

Customer relationships

$

77,640

 

 

$

42,091

 

 

$

35,549

 

Technology

 

16,524

 

 

 

15,950

 

 

 

574

 

Trademarks

 

12,519

 

 

 

11,005

 

 

 

1,514

 

Total

$

106,683

 

 

$

69,046

 

 

$

37,637

 

 

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

 

2024 (remainder)

$

7,401

 

2025

 

8,875

 

2026

 

8,392

 

2027

 

8,324

 

2028

 

2,081

 

Total

$

35,073

 

 

 

9


 

Note 4 — Debt

The Company has a credit facility that provides up to $150.0 million of revolving credit commitments and matures in December of 2026. The credit facility includes an expansion feature that permits the Company to increase the revolving credit commitments in an aggregate principal amount up to $50.0 million, subject to approval by the administrative agent and certain customary terms and conditions.

The credit facility contains certain customary restrictive loan covenants, including among others, financial covenants that apply a maximum leverage ratio, minimum interest coverage ratio, and maximum annual capital expenditures. 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, change fiscal year, or enter into certain transactions with affiliates and subsidiaries. The Company was in full compliance with the covenants as of March 31, 2024.

The Company may voluntarily prepay revolving loans under the credit facility at any time and from time to time, without premium or penalty. No interim amortization payments are required to be made under the credit facility.

The credit facility provided that once LIBOR ceased to exist in 2023, the benchmark rate for the loans outstanding automatically transferred from LIBOR to the Secured Overnight Financing Rate (SOFR). In April 2023, the Company executed a second amendment to the credit facility to facilitate the conversion from LIBOR to SOFR and to set the base interest rate at SOFR plus 10 basis points.

Up to $5.0 million of the 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 March 31, 2024, $0.6 million in letters of credit were issued under the credit facility.

Outstanding Borrowings

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

Description:

 

March 31, 2024

 

 

December 31, 2023

 

Credit facility

 

$

35,000

 

 

$

35,000

 

The contractual annualized interest rate as of March 31, 2024 was 6.68%.

The Company had $114.4 million of available borrowing capacity on the credit facility (not including the expansion feature) as of March 31, 2024. The weighted average annual effective interest rate for the three months ended March 31, 2024, was 6.6883%.

All obligations under the credit facility 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's subsidiaries (limited to 65% of the voting equity of certain subsidiaries).

Note 5 — 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 in 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 in the Consolidated Balance Sheets and are not material.

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

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Operating lease cost

 

$

3,094

 

 

$

3,314

 

Short-term lease cost

 

 

214

 

 

 

261

 

Variable lease cost

 

 

1,230

 

 

 

785

 

Sublease income

 

 

(130

)

 

 

(131

)

Total lease cost

 

$

4,408

 

 

$

4,229

 

 

 

10


 

 

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

 

 

 

For the Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

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

 

$

3,630

 

 

$

3,374

 

Operating lease ROU assets obtained in exchange for lease
   obligations

 

$

408

 

 

$

1,323

 

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

 

 

4.1

 

 

 

4.9

 

Weighted-average discount rate - operating leases

 

 

4.2

%

 

 

4.3

%

 

Future minimum lease payments under non-cancelable leases and estimated future sublease cash receipts from non-cancelable arrangements as of March 31, 2024 are as follows (in thousands):

 

 

 

Operating Lease

 

 

Sublease

 

 

 

Payments

 

 

Cash Receipts

 

2024 (remainder)

 

$

12,209

 

 

$

471

 

2025

 

 

13,933

 

 

 

 

2026

 

 

12,325

 

 

 

 

2027

 

 

5,707

 

 

 

 

2028

 

 

2,875

 

 

 

 

Thereafter

 

 

6,024

 

 

 

 

Total lease payments and estimated sublease cash receipts

 

 

53,073

 

 

$

471

 

Less imputed interest

 

 

(4,515

)

 

 

 

Present value of lease liabilities

 

$

48,558

 

 

 

 

 

Lease balances as of March 31, 2024 are as follows (in thousands):

 

Operating lease ROU assets

 

$

34,380

 

 

 

 

 

Short-term operating lease liabilities (1)

 

$

14,086

 

Non-current operating lease liabilities

 

 

34,472

 

Total operating lease liabilities

 

$

48,558

 

 

(1)
Included in accrued expenses and other current liabilities in the Consolidated Balance Sheets.

The Company’s leases do not contain residual value guarantees, material restrictions, or covenants.

During the three months ended March 31, 2024, the Company recorded a $3.2 million ROU asset impairment and $0.6 million of leasehold improvements impairments related to closing the 11th floor of its offices located at 150 Spear Street, San Francisco, California. During the three months ended March 31, 2023, the Company recorded a $0.4 million ROU asset impairment related to closing the 10th floor of its offices located at 150 Spear Street, San Francisco, California. The impairments are included in restructuring and related costs in the Consolidated Statements of Operations. As a result of the impairments, the ROU assets were required to be recorded at their estimated fair values as Level 3 non-financial assets. The fair values of the asset groups were determined using a discounted cash flow model, which required the use of estimates, including projected cash flows for the related assets, the selection of a discount rate used in the model, and regional real estate industry data.

 

11


 

Note 6 – Revenue and Related Matters

Disaggregated Revenue

The Company disaggregates revenue as set forth in the following tables (in thousands):

Revenue by Geography

 

 

For the Three Months Ended March 31,

 

Revenues: (1)

 

2024

 

 

2023

 

North America

 

$

79,629

 

 

$

92,671

 

Europe

 

 

13,437

 

 

 

13,712

 

Asia Pacific

 

 

4,891

 

 

 

5,382

 

Other

 

 

2,120

 

 

 

1,905

 

Total

 

$

100,077

 

 

$

113,670

 

 

(1)
Revenue location is determined based on where the products and services are consumed.

Contract Assets and Contract Liabilities

Accounts Receivable

Accounts receivable includes amounts billed and currently due from customers. Since the only condition for payment of the Company’s invoices is the passage of time, a receivable is recorded on the date an invoice is issued. Also included in accounts receivable are unbilled amounts resulting from revenue exceeding the amount billed to the customer, where the right to payment is unconditional. If the right to payment for services performed was conditional on something other than the passage of time, the unbilled amount would be recorded as a separate contract asset. There were no contract assets as of March 31, 2024 or 2023.

The majority of the Company’s contracts are non-cancelable. However, for contracts that are cancelable by the customer, the Company does not record a receivable when it issues an invoice. The Company records accounts receivable on these contracts only up to the amount of revenue earned but not yet collected.

In addition, since the majority of the Company’s contracts are invoiced for annual periods, and payment is expected within one year from the transfer of products and services, the Company does not adjust its receivables or transaction prices for the effects of a significant financing component.

Deferred Revenue

The Company refers to contract liabilities as deferred revenue in the Consolidated Balance Sheets. Payment terms in the Company’s customer contracts vary, but generally require payment in advance of fully satisfying the performance obligation(s). Deferred revenue consists of billings in excess of revenue recognized. Similar to accounts receivable, the Company does not record deferred revenue for unpaid invoices issued on a cancelable contract.

 

During the three months ended March 31, 2024 and 2023, the Company recognized $62.5 million and $72.9 million of revenue, respectively, related to its deferred revenue balance at January 1 of each such period.

 

Approximately $378.4 million of revenue is expected to be recognized during the next 24 months from remaining performance obligations as of March 31, 2024.

Reserves for Credit Losses

The allowance for expected credit losses on accounts receivable for the three months ended March 31, 2024 is summarized as follows (in thousands):

 

 

Total
Allowance

 

Balance at December 31, 2023

 

$

574

 

Provision for expected credit losses

 

 

223

 

Write-offs

 

 

(33

)

Balance at March 31, 2024

 

$

764

 

When evaluating the adequacy of the allowance for expected credit losses, the Company makes judgments regarding the collectability of accounts receivable based, in part, on the Company’s historical loss rate experience, customer concentrations, management’s expectations of future losses as informed by current economic conditions, and changes in customer payment terms. If the expected financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make

 

12


 

payments, additional allowances may be required. If the expected financial condition of the Company’s customers were to improve, the allowances may be reduced accordingly.

Cost to Obtain Contracts

The Company capitalizes commissions paid to sales representatives and related fringe benefits costs that are incremental to obtaining customer contracts. These costs are included in deferred commissions in the Consolidated Balance Sheets. The Company accounts for these costs at a portfolio level as the Company’s contracts are similar in nature and the amortization model used closely matches the amortization expense that would be recognized on a contract-by-contract basis. Costs to obtain a contract are amortized to earnings over the initial contract term, which is the same period the related revenue is recognized. Amortization expense related to deferred commissions for the three months ended March 31, 2024 and 2023 was $7.9 million and $8.6 million, respectively. The Company evaluates the recoverability of deferred commissions at each balance sheet date and there were no impairments recorded during the three months ended March 31, 2024 and 2023.

Note 7 — Derivatives and Hedging

The Company enters into a limited number of foreign currency forward exchange contracts to mitigate the effects of adverse fluctuations in foreign currency exchange rates on transactions entered into in the normal course of business that are denominated in foreign currencies that differ from the local functional currency. These contracts generally have short durations and are recorded at fair value with both realized and unrealized gains and losses recorded in other income, net in the Consolidated Statements of Operations because the Company does not designate these contracts as hedges for accounting purposes.

During the three months ended March 31, 2024, the Company entered into three foreign currency forward exchange contracts, all of which settled by March 31, 2024. Accordingly, as of March 31, 2024, there is no amount recorded in the Consolidated Balance Sheets for these contracts. During the three months ended March 31, 2023, the Company entered into three foreign currency forward exchange contracts, all of which settled by March 31, 2023. Accordingly, as of March 31, 2023, there is no amount recorded in the Consolidated Balance Sheets for these contracts.

The Company’s derivative counterparties are investment grade financial institutions. The Company does not have any collateral arrangements with these counterparties and the derivative contracts do not contain credit risk-related contingent features. The table below provides information regarding amounts recognized in the Consolidated Statements of Operations for the derivative contracts for the periods indicated (in thousands):

 

 

Three Months Ended

 

 

 

March 31,

 

Amount recorded in:

 

2024

 

 

2023

 

Other income, net

 

$

(14

)

 

$

62

 

 

Note 8 — Fair Value Measurements

The carrying amounts reflected in the Consolidated Balance Sheets for cash, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term maturities. The Company’s financial instruments also include its outstanding variable-rate borrowings (refer to Note 4 – Debt). The Company believes that the carrying amount of its variable-rate borrowings reasonably approximate their fair values because the rates of interest on those borrowings reflect current market rates of interest.

Additionally, the Company measures certain financial assets and liabilities at fair value on a recurring basis including cash equivalents and marketable investments. The fair values of these financial assets and liabilities have been classified as Level 1, 2, or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements:

Level 1 — Fair value based on quoted prices in active markets for identical assets or liabilities.

Level 2 — Fair value based on inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Fair value based on unobservable inputs that are supported by little or no market activity and such inputs are significant to the fair value of the assets or liabilities.

 

13


 

The following table represents the Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):

 

 

 

As of March 31, 2024

 

 

 

Level 1

 

 

Level 2

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

Money market funds (1)

 

$

43,726

 

 

$

 

 

$

43,726

 

Marketable investments (3)

 

 

 

 

 

23,919

 

 

 

23,919

 

Total Assets

 

$

43,726

 

 

$

23,919

 

 

$

67,645

 

 

 

 

As of December 31, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

Money market funds (2)

 

$

55,128

 

 

$

 

 

$

55,128

 

Marketable investments (3)

 

 

 

 

 

19,970

 

 

 

19,970

 

Total Assets

 

$

55,128

 

 

$

19,970

 

 

$

75,098

 

(1)
U.S. based funds of $10.5 million are included in cash and cash equivalents and non-U.S. based funds of $33.2 million are included in marketable investments in the Consolidated Balance Sheets.
(2)
U.S. based funds of $23.5 million are included in cash and cash equivalents and non-U.S. based funds of $31.6 million are included in marketable investments in the Consolidated Balance Sheets.
(3)
Marketable investments have been initially valued at the transaction price and subsequently valued, at the end of the reporting period, utilizing third party pricing services or other market observable data. The pricing services utilize industry standard valuation methods, including both income and market-based approaches and observable market inputs to determine value. These observable market inputs include reportable trades, benchmark yields, credit spreads, broker/dealer quotes, bids, offers, current spot rates and other industry and economic events.

During the three months ended March 31, 2024, the Company did not transfer assets or liabilities between levels of the fair value hierarchy. Additionally, there have been no changes to the valuation techniques for Level 2 assets and liabilities.

Note 9 — Income Taxes

Forrester provides for income taxes on an interim basis according to management’s estimate of the effective tax rate expected to be applicable for the full fiscal year. Certain items such as changes in tax rates, tax benefits or expense related to settlements of share-based awards, and foreign currency gains or losses are treated as discrete items and are recorded in the period in which they arise.

Income tax benefit for the three months ended March 31, 2024 was $2.1 million resulting in an effective tax rate of 24.0% for the period. Income tax benefit for the three months ended March 31, 2023 was $1.3 million resulting in an effective tax rate of 24.3% for the period.

The Company anticipates that its effective tax rate for the full year 2024 will be approximately 50%.

Note 10 — Accumulated Other Comprehensive Loss (“AOCL”)

The components of accumulated other comprehensive loss are as follows (net of tax, in thousands):

 

 

Marketable

 

 

Translation

 

 

 

 

 

 

Investments

 

 

Adjustment

 

 

Total AOCL

 

Balance at December 31, 2023

 

$

(60

)

 

$

(4,511

)

 

$

(4,571

)

Foreign currency translation (1)

 

 

 

 

 

(1,968

)

 

 

(1,968

)

Unrealized gain, net of tax of $(2)

 

 

6

 

 

 

 

 

 

6

 

Balance at March 31, 2024

 

$

(54

)

 

$

(6,479

)

 

$

(6,533

)

 

 

 

Marketable

 

 

Translation

 

 

 

 

 

 

Investments

 

 

Adjustment

 

 

Total AOCL

 

Balance at December 31, 2022

 

$

(159

)

 

$

(7,759

)

 

$

(7,918

)

Foreign currency translation (1)

 

 

 

 

 

1,206

 

 

 

1,206

 

Unrealized gain, net of tax of $(11)

 

 

33

 

 

 

 

 

 

33

 

Balance at March 31, 2023

 

$

(126

)

 

$

(6,553

)

 

$

(6,679

)

 

(1)
The Company does not record tax provisions or benefits for the net changes in foreign currency translation adjustments as it intends to permanently reinvest undistributed earnings of its foreign subsidiaries.

 

14


 

Note 11 — Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the basic weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the diluted weighted average number of common shares and common equivalent shares outstanding during the period. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury-stock method. Common equivalent shares consist of common stock issuable on the exercise of outstanding stock options and the vesting of restricted stock units.

Basic and diluted weighted average common shares are as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Basic weighted average common shares outstanding

 

 

19,285

 

 

 

19,108

 

Weighted average common equivalent shares

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

 

19,285

 

 

 

19,108

 

Options and restricted stock units excluded from diluted
   weighted average share calculation as effect would have
   been anti-dilutive

 

 

1,082

 

 

 

703

 

 

Note 12 — Stockholders’ Equity

The components of stockholders’ equity are as follows (in thousands):

 

Three Months Ended March 31, 2024

 

 

Common Stock

 

 

 

 

 

 

 

 

Treasury Stock