Forrester Research(FORR) - 2022 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited financial statements for Q3 and nine months ended September 30, 2022, show revenue and net income growth, with decreased operating cash flow and total assets Consolidated Balance Sheets - As of September 30, 2022, total assets decreased to $585.2 million from $680.1 million at year-end 2021, primarily due to reductions in accounts receivable, deferred commissions, and goodwill. Total liabilities also decreased to $371.4 million from $476.2 million, driven by lower deferred revenue and long-term debt. Stockholders' equity increased to $213.9 million[11] Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $585,240 | $680,129 | | Total Current Assets | $204,284 | $269,488 | | Goodwill | $238,949 | $244,994 | | Total Liabilities | $371,351 | $476,222 | | Deferred Revenue | $180,758 | $213,696 | | Long-term Debt | $50,000 | $75,000 | | Total Stockholders' Equity | $213,889 | $203,907 | Consolidated Statements of Income - For the third quarter of 2022, total revenues grew to $127.7 million from $118.1 million in Q3 2021, with net income increasing to $5.4 million from $4.5 million. For the nine-month period, revenues rose to $400.9 million from $360.6 million, and net income grew to $23.4 million from $16.8 million year-over-year[14] Financial Performance Summary (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | 9 Months 2022 | 9 Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $127,679 | $118,136 | $400,896 | $360,587 | | Research | $87,038 | $79,876 | $262,265 | $235,846 | | Consulting | $37,382 | $37,393 | $115,075 | $116,903 | | Events | $3,259 | $867 | $23,556 | $7,838 | | Income from Operations | $8,557 | $6,539 | $35,731 | $27,158 | | Net Income | $5,414 | $4,522 | $23,436 | $16,821 | | Diluted EPS | $0.28 | $0.23 | $1.22 | $0.87 | Consolidated Statements of Cash Flows - For the nine months ended September 30, 2022, net cash provided by operating activities was $37.8 million, a significant decrease from $85.0 million in the prior-year period. Net cash used in investing activities was $5.7 million, while financing activities used $38.8 million, primarily for debt repayment and stock repurchases[20] Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $37,803 | $84,992 | | Net cash used in investing activities | ($5,719) | ($26,850) | | Net cash used in financing activities | ($38,789) | ($15,528) | | Net change in cash, cash equivalents and restricted cash | ($17,432) | $41,150 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 11% revenue growth to Research and Events segments, despite slight declines in client retention, with increased operating expenses and solid liquidity Key Metrics - Contract Value (CV) increased by 7% to $353.0 million as of September 30, 2022, driven by increased contract bookings. However, client retention and wallet retention decreased by 3 and 2 percentage points, respectively, attributed to higher turnover in smaller clients amid macroeconomic conditions and a product platform transition[104] Key Business Metrics as of September 30 | Metric | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Contract value | $353.0 M | $328.6 M | +7% | | Client retention | 75% | 78% | (3) points | | Wallet retention | 97% | 99% | (2) points | | Number of clients | 2,875 | 2,964 | (3%) | Results of Operations - Total revenues for Q3 2022 increased 8% (10% constant currency) YoY, driven by 9% growth in Research revenues and 276% growth in Events revenues. For the nine-month period, total revenues grew 11% (13% constant currency)[108][109] - Operating expenses rose across all categories for both the three and nine-month periods. The increases were primarily due to higher compensation and benefits from increased headcount, higher travel expenses related to the return of in-person events, and increased professional services costs[113][115][117] - Interest expense decreased for the three and nine-month periods due to lower average outstanding borrowings, despite a rise in the effective interest rate[121] Segment Results - Research Segment: Revenues grew 6% in Q3 and 8% in the nine-month period, driven by increased contract value. Expenses rose 15% and 13% respectively, due to higher compensation costs from increased headcount[130][131][132] - Consulting Segment: Revenues increased 6% in Q3 and 4% in the nine-month period, led by demand for content marketing and strategy consulting. Expenses for this segment grew 13% in both periods, mainly from higher compensation and contractor costs[130][133][134] - Events Segment: Revenues saw a significant increase of 276% in Q3 and 201% in the nine-month period, reflecting the return to in-person events. Expenses also rose sharply, up 93% for the nine-month period, due to costs associated with hosting these events[130][135][136] Liquidity and Capital Resources - Cash from operations decreased to $37.8 million for the nine months ended Sep 30, 2022, from $85.0 million in the prior year period, primarily due to changes in deferred revenue and accrued expenses[137] - The company amended its credit facility in December 2021, increasing its revolving credit facility to $150.0 million and extending the maturity to 2026. As of September 30, 2022, $50.0 million was outstanding[140][141] - During the first nine months of 2022, the company repurchased approximately 0.3 million shares for $15.1 million. The remaining stock repurchase authorization was approximately $75.0 million as of September 30, 2022[89][139] - As of September 30, 2022, the company held $118.7 million in cash, cash equivalents, and marketable investments, with $77.5 million held outside the U.S. Management believes current cash and operational cash flows are sufficient to meet requirements for the next twelve months[145] Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in the company's assessment of market risk sensitivity since its 2021 Annual Report on Form 10-K - There have been no material changes in the company's market risk exposure since its 2021 year-end report[149] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2022[150] - No material changes to the company's internal control over financial reporting were identified during the third quarter of 2022[151] PART II OTHER INFORMATION Legal Proceedings The company is subject to ordinary course legal proceedings and claims, which could materially impact operations due to costs and management resource diversion - The company is subject to legal proceedings from time to time in the ordinary course of business[153] Risk Factors No material changes to the risk factors previously disclosed in the 2021 Annual Report on Form 10-K have occurred, and prior risks remain applicable - The risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2021, remain applicable to the business[154] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any common stock under its authorized program during the quarter ended September 30, 2022 - No shares of common stock were repurchased during the third quarter of 2022[155] Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The report includes a list of exhibits filed, such as officer certifications and Inline XBRL documents[162]