Forrester Research(FORR) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited consolidated financial statements for the six months ended June 30, 2025, show a significant decline in total assets, primarily due to a goodwill impairment of $83.9 million. Total revenues decreased by 9% year-over-year to $201.5 million, leading to a net loss of $83.4 million for the six-month period, compared to a net loss of $0.4 million in the prior year. Despite the net loss, cash flow from operations improved significantly to $23.1 million from a use of $2.3 million in the same period of 2024 Consolidated Balance Sheets As of June 30, 2025, total assets were $436.0 million, a decrease from $503.9 million at year-end 2024, largely driven by a significant reduction in goodwill from $228.0 million to $147.4 million. Total liabilities remained relatively stable at $276.5 million, while total stockholders' equity decreased substantially to $159.5 million from $229.5 million, reflecting the net loss and goodwill impairment Balance Sheet Items | Balance Sheet Items (In thousands) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $67,767 | $56,087 | | Goodwill | $147,376 | $227,959 | | Total assets | $436,038 | $503,862 | | Liabilities & Equity | | | | Deferred revenue | $154,502 | $145,404 | | Total liabilities | $276,499 | $274,325 | | Retained earnings | $88,575 | $171,934 | | Total stockholders' equity | $159,539 | $229,537 | - Goodwill decreased by $80.6 million from December 31, 2024, to June 30, 2025, primarily due to an impairment charge[10] Consolidated Statements of Operations For the six months ended June 30, 2025, the company reported a net loss of $83.4 million, a stark contrast to the $0.4 million net loss in the same period of 2024. This was primarily driven by an $83.9 million goodwill impairment charge. Total revenues declined by 9.2% year-over-year to $201.5 million, with decreases across all segments: Research, Consulting, and Events Statement of Operations | Statement of Operations (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total revenues | $201,535 | $221,902 | | Goodwill impairment | $83,895 | $0 | | Income (loss) from operations | $(80,635) | $2,022 | | Net income (loss) | $(83,359) | $(381) | | Diluted income (loss) per common share | $(4.39) | $(0.02) | - For the second quarter of 2025, net income was $3.9 million, down from $6.3 million in Q2 2024, as revenues declined 8.3% to $111.7 million[12] Consolidated Statements of Comprehensive Income (Loss) For the six months ended June 30, 2025, the company reported a comprehensive loss of $75.9 million. This includes the net loss of $83.4 million, partially offset by a $7.4 million positive foreign currency translation adjustment Comprehensive Income (Loss) | Comprehensive Income (Loss) (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net income (loss) | $(83,359) | $(381) | | Other comprehensive income (loss) | $7,446 | $(2,155) | | Comprehensive income (loss) | $(75,913) | $(2,536) | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $23.1 million, a significant improvement from the $2.3 million used in the prior-year period. Investing activities used $14.7 million, primarily for purchases of marketable investments. Financing activities used a minimal $0.3 million, compared to $8.3 million in 2024 which included significant stock repurchases Cash Flows | Cash Flows (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $23,096 | $(2,295) | | Net cash used in investing activities | $(14,749) | $(2,676) | | Net cash used in financing activities | $(250) | $(8,274) | | Net change in cash, cash equivalents and restricted cash | $11,877 | $(14,073) | Notes to Consolidated Financial Statements The notes provide critical details on key financial events, including a $83.9 million goodwill impairment charge in the Research segment, restructuring activities involving workforce reductions in January 2025 and February 2024, and the divestiture of the FeedbackNow product line in August 2024. The company also maintains a $150 million credit facility with $35 million drawn as of June 30, 2025, and is in compliance with all covenants - Goodwill Impairment: A goodwill impairment charge of $83.9 million was recorded for the Research reporting unit during the period ended March 31, 2025, triggered by a sustained decline in the company's stock price and market capitalization[34] - Restructuring: The company implemented a 6% workforce reduction in January 2025, recording $1.9 million in related costs during the first half of 2025. This followed a 3% reduction in February 2024[88][87] - Divestiture: The non-core product line, FeedbackNow, was sold in August 2024 for approximately $17.6 million, consisting of cash, a note receivable, and an equity investment[27] - Debt: As of June 30, 2025, the company had $35.0 million in outstanding borrowings under its credit facility and was in full compliance with all covenants[41][43] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 9% year-over-year revenue decline for the first six months of 2025 to challenging macroeconomic conditions impacting client bookings and contract values. Key metrics show a 7% decrease in Contract Value (CV) to $288.7 million, and a 12% drop in the number of clients. Despite lower revenues, operating expenses also decreased due to cost control measures, including workforce reductions. The company recorded a significant $83.9 million goodwill impairment charge in Q1 2025. Liquidity remains strong, with cash from operations increasing to $23.1 million Key Metrics | Key Metrics | As of June 30, 2025 | As of June 30, 2024 | % Change | | :--- | :--- | :--- | :--- | | Contract value | $288.7 million | $311.9 million | (7%) | | Client retention | 74% | 72% | +2 pts | | Wallet retention | 85% | 88% | (3) pts | | Number of clients | 1,805 | 2,052 | (12%) | - The decline in wallet retention to 85% was primarily due to lower enrichment of contracts as they renewed, indicating clients are spending less on average[111] - A goodwill impairment charge of $83.9 million was recorded for the Research reporting unit as of March 31, 2025, due to a sustained decline in stock price and market capitalization, macroeconomic conditions, and a larger than expected decline in contract bookings[129] Results of Operations For the six months ended June 30, 2025, total revenues fell 9% to $201.5 million. Research revenues decreased 9%, Consulting revenues fell 6%, and Events revenues dropped 25%. Operating expenses decreased across the board, with Cost of Services down 7%, Selling and Marketing down 8%, and G&A down 7%, reflecting lower headcount and cost management. However, these savings were overshadowed by the $83.9 million goodwill impairment, resulting in an operating loss of $80.6 million Revenue Breakdown | Revenue Breakdown (Six Months Ended June 30) | 2025 (in millions) | 2024 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Research revenues | $146.3 | $160.2 | (9%) | | Consulting revenues | $44.9 | $48.0 | (6%) | | Events revenues | $10.3 | $13.7 | (25%) | | Total revenues | $201.5 | $221.9 | (9%) | - The decrease in Research revenues was primarily due to the decline in Contract Value (CV) and the divestiture of the FeedbackNow product line in Q3 2024[116] - The decrease in Events revenues was primarily due to a decline in sponsorship revenues[118] Segment Results For the six months ended June 30, 2025, all three operating segments experienced revenue declines. Research segment revenue fell 8% to $157.2 million, Consulting segment revenue dropped 10% to $34.1 million, and Events segment revenue decreased 25% to $10.3 million. Research segment expenses decreased 16% due to lower headcount and professional services costs. The Events segment reported a small operating loss of $0.4 million for the period Segment Revenue | Segment Revenue (Six Months Ended June 30, 2025) | Revenue (in thousands) | YoY Change | | :--- | :--- | :--- | | Research Segment | $157,187 | (8%) | | Consulting Segment | $34,082 | (10%) | | Events Segment | $10,266 | (25%) | Segment Operating Income | Segment Operating Income (Six Months Ended June 30, 2025) | Operating Income (in thousands) | | :--- | :--- | | Research Segment | $104,869 | | Consulting Segment | $15,027 | | Events Segment | $(437) | Liquidity and Capital Resources The company's liquidity position remains solid, with $135.0 million in cash, cash equivalents, and marketable investments as of June 30, 2025. Cash from operations for the first six months of 2025 was $23.1 million, a $25.4 million increase from the prior year, mainly due to lower payments for incentive compensation. The company has $35.0 million outstanding on its credit facility and believes its current cash and operational cash flow are sufficient to meet its needs for the next twelve months - Cash from operating activities increased by $25.4 million for the six months ended June 30, 2025, compared to the prior year period[151] - As of June 30, 2025, the company had cash, cash equivalents, and marketable investments of $135.0 million, with $88.0 million held outside the U.S[158] - The remaining stock repurchase authorization was approximately $80.0 million as of June 30, 2025[153] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no material changes in its assessment of sensitivity to market risk since its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes in the company's assessment of its sensitivity to market risk from what was disclosed in the 2024 Form 10-K[162] Item 4. Controls and Procedures Management, including the principal executive and financial officers, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025. There were no material changes to the company's internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[163] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[164] PART II OTHER INFORMATION Item 1. Legal Proceedings The company reports that it currently has no material pending litigation. It may be subject to various legal proceedings in the ordinary course of business, but none are currently considered material - The company currently has no material pending litigation[105][167] Item 1A. Risk Factors A new risk factor has been added to supplement the disclosures in the 2024 Form 10-K. This new risk highlights the substantial goodwill impairment charge of $83.9 million recorded in Q1 2025 and warns that future impairments of goodwill or other long-lived assets could negatively impact profitability and financial results - A new risk factor was added concerning the potential for future asset impairments following the $83.9 million goodwill impairment charge recorded for the Research segment in the first quarter of 2025[169] - The triggering event for the impairment was a sustained decline in share price, macroeconomic conditions, and a larger than expected decline in contract bookings[169] 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 stock repurchase program during the quarter ended June 30, 2025 - No shares of common stock were repurchased during the quarter ended June 30, 2025[170] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer, and XBRL data files - Exhibits filed include officer certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101.INS, 101.SCH, 104)[176]