Forrester Research(FORR) - 2025 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements Forrester Research reported a significant net loss in Q1 2025, primarily due to a revenue decline and a substantial goodwill impairment charge, despite improved operating cash flow Consolidated Balance Sheets As of March 31, 2025, total assets decreased to $439.8 million due to a goodwill reduction, while total liabilities increased and stockholders' equity significantly declined | Financial Item | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $218,499 | $201,364 | | Goodwill | $145,267 | $227,959 | | Total Assets | $439,806 | $503,862 | | Total Current Liabilities | $223,687 | $203,971 | | Long-term debt | $35,000 | $35,000 | | Total Liabilities | $292,372 | $274,325 | | Retained Earnings | $84,662 | $171,934 | | Total Stockholders' Equity | $147,434 | $229,537 | Consolidated Statements of Operations Total revenues decreased by 10.2% in Q1 2025, with a significant goodwill impairment charge leading to a substantial operating and net loss compared to the prior year | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Revenues | $89,876 | $100,077 | | Goodwill Impairment | $83,895 | $0 | | Loss from Operations | ($87,591) | ($9,292) | | Net Loss | ($87,272) | ($6,673) | | Diluted Loss Per Share | ($4.62) | ($0.35) | Consolidated Statements of Cash Flows Net cash provided by operating activities significantly improved to $26.7 million in Q1 2025, leading to a $19.6 million increase in cash and equivalents during the quarter | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $26,723 | $611 | | Net cash used in investing activities | ($8,472) | ($7,236) | | Net cash provided by (used in) financing activities | $235 | ($4,273) | | Net change in cash, cash equivalents and restricted cash | $19,572 | ($11,550) | Notes to Consolidated Financial Statements Key notes detail the $83.9 million goodwill impairment, a 6% workforce reduction, and revenue declines across Research and Consulting segments - A triggering event, including a substantial and sustained decline in the company's stock price, led to a quantitative impairment test as of March 31, 2025, resulting in a goodwill impairment charge of $83.9 million for the Research reporting unit[34] - In January 2025, the company implemented a workforce reduction of approximately 6%, recording $1.5 million in severance and related costs during the first quarter, following a 3% workforce reduction in February 2024[81][82] - On April 11, 2025, the company amended its headquarters lease in Cambridge, MA, extending the term for floors 4-6 through June 2039 while terminating the lease for floors 1-3 by May 2026[95] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 10% revenue decline to decreased Contract Value and divestiture, with a $83.9 million goodwill impairment driving net loss, despite improved operating cash flow and strong liquidity Key Metrics Key performance metrics as of March 31, 2025, show a 7% decrease in Contract Value and a 14% drop in client numbers, with mixed retention rates | Metric | As of March 31, 2025 | As of March 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Contract value | $290.9 million | $312.8 million | (7%) | | Client retention | 73% | 72% | +1 pt | | Wallet retention | 86% | 87% | (1) pt | | Number of clients | 1,822 | 2,122 | (14%) | Results of Operations Total revenues declined 10% in Q1 2025, primarily due to lower CV and divestiture, with an $83.9 million goodwill impairment driving a significant operating loss | Revenue Type | Q1 2025 (in millions) | Q1 2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Research | $68.4 | $76.6 | (11%) | | Consulting | $21.4 | $23.1 | (7%) | | Events | $0.0 | $0.4 | (93%) | | Total | $89.9 | $100.1 | (10%) | - A goodwill impairment charge of $83.9 million was recorded in Q1 2025, which is not deductible for tax purposes, and was the primary reason for the significant increase in net loss[113][114] - The effective tax rate decreased to 1% in Q1 2025 from 24% in Q1 2024, primarily due to the non-deductible nature of the goodwill impairment charge[123] Segment Results Both Research and Consulting segments experienced revenue declines of 10% and 11% respectively, while expenses decreased due to reduced headcount | Segment | Q1 2025 Revenue (in thousands) | Q1 2024 Revenue (in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Research | $73,472 | $81,224 | (10%) | | Consulting | $16,378 | $18,498 | (11%) | | Events | $26 | $355 | (93%) | | Segment | Q1 2025 Operating Income (in thousands) | Q1 2024 Operating Income (in thousands) | | :--- | :--- | :--- | | Research | $47,336 | $49,280 | | Consulting | $7,479 | $7,612 | | Events | ($738) | ($423) | Liquidity and Capital Resources The company maintains strong liquidity with $134.3 million in cash and investments, significantly improved operating cash flow, and compliance with credit facility covenants - The $26.1 million increase in cash from operations was primarily due to a $20.9 million decrease in cash used for accrued expenses, resulting from lower incentive compensation payments and the payment of a legal settlement in the prior year[133] - As of March 31, 2025, the company had $35.0 million outstanding under its credit facility and was in full compliance with all financial covenants[136][137] - The company holds $134.3 million in cash, cash equivalents, and marketable investments, of which $83.9 million is held outside the U.S. and is intended to be permanently reinvested abroad[139] Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes were reported regarding the company's assessment of market risk since its 2024 year-end report - There have been no material changes in the company's assessment of its sensitivity to market risk since its 2024 year-end report[143] Item 4. Controls and Procedures Disclosure controls and procedures were deemed effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[144] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[145] PART II OTHER INFORMATION Item 1. Legal Proceedings The company is subject to ordinary course legal proceedings and accrues for probable and estimable liabilities as detailed in the financial statements - The company may be subject to legal proceedings in the ordinary course of business and accrues for losses when they are probable and estimable[94][148] Item 1A. Risk Factors A new risk factor highlights the substantial goodwill impairment recorded in Q1 2025, warning of potential future impairment charges impacting financial results - A new risk factor highlights that the company recently recorded a substantial goodwill impairment charge of $83.9 million and that any future impairments of goodwill or other long-lived assets could negatively impact results of operations[150] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any shares of its common stock under its authorized program during the first quarter of 2025 - The company did not purchase any shares of its common stock under the stock repurchase program during the first quarter of 2025[151] Other Items (3, 4, 5, 6) Items 3 and 4 were not applicable, while Item 5 confirmed no Rule 10b5-1 trading arrangement changes, and Item 6 listed filed exhibits - No defaults on senior securities or mine safety disclosures were reported[152][153] - No director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[154]