Forrester Research(FORR) - 2023 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) For the first quarter of 2023, Forrester Research reported a net loss of $4.1 million, a significant reversal from the $4.1 million net income in the same period of 2022, driven by a 9% year-over-year decline in total revenues to $113.7 million Consolidated Balance Sheets As of March 31, 2023, total assets slightly decreased to $593.9 million, mirrored by a reduction in total liabilities to $371.1 million, primarily due to lower long-term debt | | March 31, 2023 (In thousands) | December 31, 2022 (In thousands) | | :--- | :--- | :--- | | Total current assets | $225,844 | $235,290 | | Total assets | $593,888 | $608,438 | | Total current liabilities | $269,305 | $269,389 | | Long-term debt | $35,000 | $50,000 | | Total liabilities | $371,142 | $386,782 | | Total stockholders' equity | $222,746 | $221,656 | - Cash and cash equivalents remained stable at approximately $104.2 million as of March 31, 2023[10] Consolidated Statements of Operations The company reported a net loss of $4.1 million for Q1 2023, a reversal from prior-year net income, primarily due to a 9% decrease in total revenues to $113.7 million | Metric (In thousands, except per share data) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total revenues | $113,670 | $124,971 | | Research | $80,906 | $85,780 | | Consulting | $31,750 | $38,431 | | Total operating expenses | $118,810 | $118,500 | | Income (loss) from operations | $(5,140) | $6,471 | | Net income (loss) | $(4,075) | $4,148 | | Diluted income (loss) per common share | $(0.21) | $0.22 | - The company incurred $1.6 million in restructuring costs during Q1 2023, which were not present in the same period of 2022[12] Consolidated Statements of Cash Flows Net cash from operating activities significantly decreased to $12.3 million in Q1 2023, while financing activities included a $15.0 million debt repayment, resulting in a slight overall cash increase | Cash Flow Activity (In thousands) | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $12,282 | $22,666 | | Net cash provided by (used in) investing activities | $1,342 | $(1,912) | | Net cash used in financing activities | $(14,239) | $(22,737) | | Net change in cash, cash equivalents and restricted cash | $634 | $(3,336) | - Financing activities in Q1 2023 included a $15.0 million payment on borrowings, while Q1 2022 also included $9.5 million in common stock repurchases not present in Q1 2023[18] Notes to Consolidated Financial Statements The notes detail stable goodwill, a reduction in outstanding debt to $35 million, a $1.6 million restructuring charge in Q1 2023, and a subsequent 8% workforce reduction in May 2023 - As of March 31, 2023, the company had $35.0 million in outstanding borrowings under its credit facility, a decrease from $50.0 million at the end of 2022[36] - In January 2023, the company implemented a workforce reduction of approximately 4%, recording $0.6 million in related costs, alongside an additional $1.0 million restructuring charge for office closure and a software write-off[78][79] - Subsequent to the quarter's end, in May 2023, the company initiated another workforce reduction of approximately 8% and office closures, with anticipated total costs of $10.0 million to $11.0 million[88] - Following an April 2023 mediation, the company accrued $4.8 million for a wage-related matter, classified under general and administrative expenses for the quarter[85] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 9% revenue decline and weakened performance to macroeconomic conditions and product transition, with Contract Value flat but wallet retention significantly dropping to 92% Key Metrics As of March 31, 2023, key performance metrics showed pressure with Contract Value flat, but client and wallet retention declining, and client numbers decreasing by 9% | Metric | As of March 31, 2023 | As of March 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Contract value | $347.3 M | $347.3 M | 0% | | Client retention | 74% | 77% | (3) points | | Wallet retention | 92% | 103% | (11) points | | Number of clients | 2,678 | 2,945 | (9%) | - The decrease in retention rates and client numbers is attributed to macroeconomic pressures on technology clients and the ongoing transition to the Forrester Decisions product platform[94] Results of Operations Total revenues decreased by 9% to $113.7 million in Q1 2023, with Research and Consulting revenues falling, while general and administrative expenses surged 37% due to a $4.8 million legal settlement provision | Revenue Type (in millions) | Q1 2023 | Q1 2022 | % Change | | :--- | :--- | :--- | :--- | | Total revenues | $113.7 | $125.0 | (9%) | | Research revenues | $80.9 | $85.8 | (6%) | | Consulting revenues | $31.8 | $38.4 | (17%) | - General and administrative expenses increased by $5.7 million (37%) year-over-year, mainly due to a $4.8 million provision for a preliminary legal settlement for a wage-related matter[104] Segment Results The Research segment experienced an 8% revenue decrease, while Consulting revenue declined 13% due to lower demand for content marketing and strategy consulting offerings amid challenging macroeconomic conditions | Segment (Q1 2023 vs Q1 2022) | Revenue Change | Expense Change | | :--- | :--- | :--- | | Research | (8%) | +4% | | Consulting | (13%) | (14%) | | Events | +33% | (7%) | - The decline in Consulting segment revenue was primarily due to lower demand for content marketing and strategy consulting offerings[118] Liquidity and Capital Resources The company maintains a solid liquidity position with $121.0 million in cash and investments, despite a decrease in cash from operations, and made a $15.0 million discretionary debt repayment - Cash generated from operating activities was $12.3 million for Q1 2023, a decrease from $22.7 million in Q1 2022, primarily due to lower net income and timing of benefit payments[121] - The company used $14.2 million in financing activities, mainly for a $15.0 million repayment of its revolving credit facility[124] - As of March 31, 2023, the company had cash, cash equivalents, and marketable investments of $121.0 million and believes this is sufficient to meet its needs for the next twelve months[129] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reported no material changes to its market risk disclosures since its Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes in the company's assessment of its sensitivity to market risk from what was disclosed in the 2022 Form 10-K[133] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to 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 March 31, 2023[134] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[135] PART II OTHER INFORMATION Item 1. Legal Proceedings The company accrued $4.8 million in Q1 2023 for a wage-related matter that reached an agreement in principle during an April 2023 mediation - The company accrued $4.8 million in Q1 2023 for a wage-related matter that reached an agreement in principle during an April 2023 mediation[85][138] Item 1A. Risk Factors The company states that the risk factors previously disclosed in its 2022 Annual Report on Form 10-K remain applicable and have not materially changed - There are no new risk factors presented; the company directs investors to the risk factors discussed in its 2022 Annual Report on Form 10-K[139] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Forrester did not repurchase any shares of its common stock under its authorized stock repurchase program during the first quarter of 2023 - The company did not purchase any of its common stock under the stock repurchase program during the quarter ended March 31, 2023[140] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including amendments to credit agreements, CEO and CFO certifications, and interactive data files - Key exhibits filed include the Second Amendment to the Credit Agreement and certifications from the Principal Executive Officer and Principal Financial Officer[146]