Forrester Research(FORR) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents Forrester Research, Inc.'s unaudited consolidated financial statements, covering balance sheets, income, comprehensive income, cash flows, and notes Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2023 | December 31, 2022 | Change ($) | Change (%) | | :----------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total assets | $570,674 | $608,438 | $(37,764) | (6.2%) | | Total liabilities | $339,029 | $386,782 | $(47,753) | (12.4%) | | Total stockholders' equity | $231,645 | $221,656 | $9,989 | 4.5% | - Current assets decreased by $25.069 million (10.6%) from $235.290 million at December 31, 2022, to $210.221 million at June 30, 2023, primarily due to decreases in accounts receivable and deferred commissions[10] - Current liabilities decreased by $25.860 million (9.6%) from $269.389 million at December 31, 2022, to $243.529 million at June 30, 2023, mainly driven by a decrease in accrued expenses and other current liabilities[10] Consolidated Statements of Operations Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change ($) | Change (%) | | :----------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total revenues | $135,589 | $148,246 | $(12,657) | (8.5%) | | Income from operations | $8,288 | $20,703 | $(12,415) | (60.0%) | | Net income | $5,304 | $13,874 | $(8,570) | (61.8%) | | Diluted income per common share | $0.28 | $0.72 | $(0.44) | (61.1%) | | | | | | | | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | Change (%) | | :----------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total revenues | $249,259 | $273,217 | $(23,958) | (8.8%) | | Income from operations | $3,148 | $27,174 | $(24,026) | (88.4%) | | Net income | $1,229 | $18,022 | $(16,793) | (93.2%) | | Diluted income per common share | $0.06 | $0.94 | $(0.88) | (93.6%) | Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change ($) | Change (%) | | :----------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net income | $5,304 | $13,874 | $(8,570) | (61.8%) | | Other comprehensive income (loss) | $735 | $(4,489) | $5,224 | 116.4% | | Comprehensive income | $6,039 | $9,385 | $(3,346) | (35.6%) | | | | | | | | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | Change (%) | | :----------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net income | $1,229 | $18,022 | $(16,793) | (93.2%) | | Other comprehensive income (loss) | $1,974 | $(5,671) | $7,645 | 134.8% | | Comprehensive income | $3,203 | $12,351 | $(9,148) | (74.1%) | - Other comprehensive income (loss) significantly improved, moving from a loss of $(4,489) thousand in Q2 2022 to a gain of $735 thousand in Q2 2023, primarily driven by foreign currency translation adjustments[15] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------------------------------------------ | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $15,788 | $34,755 | $(18,967) | (54.6%) | | Net cash provided by (used in) investing activities | $3,444 | $(3,592) | $7,036 | 195.9% | | Net cash used in financing activities | $(15,239) | $(38,290) | $23,051 | (60.2%) | | Net change in cash, cash equivalents and restricted cash | $6,417 | $(12,772) | $19,189 | 150.2% | - Cash, cash equivalents and restricted cash increased by $6.417 million for the six months ended June 30, 2023, reaching $112.071 million, a significant improvement from a net decrease of $(12.772) million in the prior year period[18] Notes to Consolidated Financial Statements Note 1 — Interim Consolidated Financial Statements Details the basis of presentation for unaudited interim financial statements, GAAP adherence, restricted cash, and recent accounting pronouncements - The unaudited interim consolidated financial statements are prepared in accordance with GAAP for interim financial information and SEC rules for Form 10-Q, with certain footnote disclosures omitted[20] Cash, Cash Equivalents and Restricted Cash (in thousands) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $109,951 | $103,225 | | Restricted cash classified in other assets | $2,120 | $2,034 | | Cash, cash equivalents and restricted cash (statement of cash flows) | $112,071 | $105,259 | - Recent accounting pronouncements (ASU No. 2020-04 and 2022-06 on Reference Rate Reform) are not anticipated to have an impact on the Company's financial position or results of operations[23] Note 2 — Marketable Investments Summarizes marketable investments, including corporate and federal agency obligations, detailing market value, maturity periods, and no realized gains or losses Marketable Investments (in thousands) | Category | June 30, 2023 Market Value | December 31, 2022 Market Value | | :---------------------- | :--------------------------- | :--------------------------- | | Corporate obligations | $11,684 | $17,703 | | Federal agency obligations | $1,980 | $1,985 | | Total | $13,664 | $19,688 | Marketable Investments Maturity Periods as of June 30, 2023 (in thousands) | Category | FY 2023 (remainder) | FY 2024 | FY 2025 | Total | | :---------------------- | :------------------ | :-------- | :-------- | :-------- | | Corporate obligations | $5,953 | $3,832 | $1,899 | $11,684 | | Federal agency obligations | — | $1,980 | — | $1,980 | | Total | $5,953 | $5,812 | $1,899 | $13,664 | - No realized gains or losses on marketable investments were recorded during the three and six months ended June 30, 2023 and 2022[25] Note 3 — Goodwill and Other Intangible Assets Details goodwill and finite-lived intangible assets, noting unimpaired goodwill and a decrease in net carrying amount of amortized intangibles - The Company performed its annual goodwill impairment testing as of November 30, 2022, and concluded no impairments existed. No interim impairment test was required through June 30, 2023[29] Goodwill Carrying Amount (in thousands) | Metric | Amount | | :------------------------- | :------- | | Balance at December 31, 2022 | $242,149 | | Translation adjustments | $1,138 | | Balance at June 30, 2023 | $243,287 | Finite-Lived Intangible Assets, Net Carrying Amount (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Customer relationships | $39,766 | $43,981 | | Technology | $1,311 | $2,107 | | Trademarks | $2,329 | $3,416 | | Total | $43,406 | $49,504 | Estimated Intangible Asset Amortization Expense (in thousands) | Year | Amount | | :---------------- | :------- | | 2023 (remainder) | $5,817 | | 2024 | $9,916 | | 2025 | $8,876 | | 2026 | $8,392 | | 2027 | $8,324 | | Thereafter | $2,081 | | Total | $43,406 | Note 4 — Debt Outlines the $150.0 million revolving credit facility, outstanding balance, interest rate, and compliance with loan covenants - The Company has a $150.0 million revolving credit facility maturing in December 2026, with an expansion feature for an additional $50.0 million[32] Outstanding Borrowings (in thousands) | Description | June 30, 2023 | December 31, 2022 | | :---------------- | :------------ | :---------------- | | Credit facility | $35,000 | $50,000 | - The contractual annualized interest rate as of June 30, 2023, was 6.452% (SOFR of 5.102% plus a margin of 1.35%). The weighted average annual effective interest rate for the three and six months ended June 30, 2023, was 6.32% and 6.06%, respectively[38][39] - The Company was in full compliance with all restrictive loan covenants as of June 30, 2023, and had $114.4 million of available borrowing capacity[33][39] Note 5 — Leases Details operating leases, associated costs, and ROU asset impairments due to office closures Total Lease Cost (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change ($) | Change (%) | | :--------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total lease cost | $4,439 | $5,046 | $(607) | (12.0%) | | | | | | | | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | Change (%) | | :--------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total lease cost | $8,668 | $10,194 | $(1,526) | (15.0%) | - Operating lease ROU assets obtained in exchange for lease obligations increased significantly to $1.110 million for the six months ended June 30, 2023, from $0.172 million in the prior year period[42] - During the six months ended June 30, 2023, the Company recorded ROU asset impairments of $0.8 million related to closing one floor of its San Francisco office and one other smaller office location[45] Future Minimum Lease Payments as of June 30, 2023 (in thousands) | Year | Operating Lease Payments | | :----------------------- | :----------------------- | | 2023 (remainder) | $8,133 | | 2024 | $16,184 | | 2025 | $13,920 | | 2026 | $12,336 | | 2027 | $5,713 | | Thereafter | $8,913 | | Total lease payments | $65,199 | Note 6 – Revenue and Related Matters Provides disaggregated revenue by geography, contract assets/liabilities, credit loss allowance, and deferred commission amortization, with future revenue expectations Revenue by Geography (in thousands) | Region | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | North America | $112,006 | $124,177 | $(12,171) | (9.8%) | | Europe | $15,564 | $15,871 | $(307) | (1.9%) | | Asia Pacific | $6,137 | $6,445 | $(308) | (4.8%) | | Other | $1,882 | $1,753 | $129 | 7.4% | | Total | $135,589 | $148,246 | $(12,657) | (8.5%) | | | | | | | | Region | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | Change (%) | | :------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | North America | $204,677 | $226,487 | $(21,810) | (9.6%) | | Europe | $29,276 | $30,343 | $(1,067) | (3.5%) | | Asia Pacific | $11,519 | $13,118 | $(1,599) | (12.2%) | | Other | $3,787 | $3,269 | $518 | 15.8% | | Total | $249,259 | $273,217 | $(23,958) | (8.8%) | - Approximately $362.2 million of revenue is expected to be recognized during the next 24 months from remaining performance obligations as of June 30, 2023[52] Allowance for Expected Credit Losses (in thousands) | Metric | Amount | | :----------------------------- | :------- | | Balance at December 31, 2022 | $560 | | Provision for expected credit losses | $315 | | Write-offs | $(297) | | Balance at June 30, 2023 | $578 | - Amortization expense related to deferred commissions was $10.4 million and $19.0 million for the three and six months ended June 30, 2023, respectively, a decrease from the prior year periods[54] Note 7 — Derivatives and Hedging Describes the Company's use of an interest rate swap (matured) and foreign currency forward exchange contracts for hedging, with no outstanding balances - The Company's interest rate swap contract, designated as a cash flow hedge, matured on December 31, 2022[55][58] - Foreign currency forward exchange contracts are used to mitigate foreign currency risk, with all contracts entered into during the six months ended June 30, 2023, settling by period-end[59][60] Derivative Contracts Impact on Consolidated Statements of Operations (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Interest expense | $0 | $(50) | $0 | $(195) | | Other income (expense), net | $4 | $(93) | $66 | $(176) | | Total | $4 | $(143) | $66 | $(371) | Note 8 — Fair Value Measurements Explains the fair value hierarchy for financial assets, classifying money market funds as Level 1 and marketable investments as Level 2 Fair Value Hierarchy for Financial Assets (in thousands) | Category | Level 1 (June 30, 2023) | Level 2 (June 30, 2023) | Total (June 30, 2023) | | :---------------------- | :---------------------- | :---------------------- | :-------------------- | | Money market funds | $5,360 | — | $5,360 | | Marketable investments | — | $13,664 | $13,664 | | Total Assets | $5,360 | $13,664 | $19,024 | | | | | | | Category | Level 1 (Dec 31, 2022) | Level 2 (Dec 31, 2022) | Total (Dec 31, 2022) | | :---------------------- | :---------------------- | :---------------------- | :-------------------- | | Money market funds | $5,800 | — | $5,800 | | Marketable investments | — | $19,688 | $19,688 | | Total Assets | $5,800 | $19,688 | $25,488 | - No assets or liabilities were transferred between levels of the fair value hierarchy, and no changes were made to valuation techniques for Level 2 assets and liabilities during the six months ended June 30, 2023[69] Note 9 — Income Taxes Details interim income tax provisions, noting a higher effective tax rate due to share-based awards and a full-year 2023 forecast of 43% Income Tax Expense and Effective Tax Rate (in thousands) | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------ | :----------------------------- | :----------------------------- | | Income tax expense | $1,460 | $8,276 | | Effective tax rate | 54.3% | 31.5% | - The increase in the effective tax rate during the 2023 period was primarily due to tax expense related to the settlement of share-based awards[72] - The Company anticipates its effective tax rate for the full year 2023 will be approximately 43%[72] Note 10 — Accumulated Other Comprehensive Loss ("AOCL") Details Accumulated Other Comprehensive Loss (AOCL) components, showing improvement due to positive foreign currency translation adjustments Accumulated Other Comprehensive Loss (AOCL) (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :---------------------- | :------------ | :---------------- | | Marketable Investments | $(137) | $(159) | | Translation Adjustment | $(5,807) | $(7,759) | | Total AOCL | $(5,944) | $(7,918) | - Foreign currency translation adjustments contributed $1.952 million in comprehensive income for the six months ended June 30, 2023, compared to a loss of $(5.842) million in the prior year period[74] Note 11 — Net Income Per Common Share Explains basic and diluted net income per common share calculation, including common stock and common equivalent shares Weighted Average Common Shares Outstanding (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------------------ | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Basic weighted average common shares outstanding | 19,193 | 18,871 | 19,151 | 18,929 | | Weighted average common equivalent shares | 65 | 302 | 63 | 289 | | Diluted weighted average common shares outstanding | 19,258 | 19,173 | 19,214 | 19,218 | - Options and restricted stock units excluded from diluted weighted average share calculation as anti-dilutive were 706 thousand for the three months and 657 thousand for the six months ended June 30, 2023[77] Note 12 - Stockholders' Equity Provides a detailed roll-forward of stockholders' equity components, equity plan activity, stock-based compensation, and treasury stock repurchases Total Stockholders' Equity (in thousands) | Metric | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------ | :---------------- | | Total stockholders' equity | $231,645 | $221,656 | Restricted Stock Unit Activity (in thousands, except per share data) | Metric | Number of Shares | Weighted Average Grant Date Fair Value | | :------------------------ | :--------------- | :------------------------------------- | | Unvested at Dec 31, 2022 | 682 | $46.28 | | Granted | 309 | $34.52 | | Vested | (117) | $50.70 | | Forfeited | (86) | $43.55 | | Unvested at June 30, 2023 | 788 | $41.32 | Stock-Based Compensation Expense (in thousands) | Expense Category | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Cost of services and fulfillment | $2,209 | $2,203 | $4,056 | $4,129 | | Selling and marketing | $807 | $752 | $1,304 | $1,385 | | General and administrative | $844 | $882 | $1,665 | $1,617 | | Total | $3,860 | $3,837 | $7,025 | $7,131 | - During the three and six months ended June 30, 2023, the Company repurchased approximately 27 thousand shares of common stock at an aggregate cost of approximately $0.8 million[84] Note 13 — Restructuring and Related Costs Details two significant workforce reductions in 2023, resulting in $12.1 million in restructuring and related costs, including impairments - In January 2023, the Company implemented a 4% workforce reduction, incurring $0.6 million in severance and related costs during Q1 2023, along with a $0.4 million incremental impairment to its California office and a $0.6 million write-off of a capitalized software project[85] - In May 2023, the Company implemented an 8% workforce reduction, recording $7.5 million of severance and related costs during Q2 2023. Additionally, $2.3 million in restructuring costs were incurred for office closures (including ROU asset impairments and accelerated amortization) and $0.7 million in contract termination costs[86] Restructuring Accrual Activity for May 2023 Action (in thousands) | Metric | Amount | | :------------------------------------ | :------- | | Accrual at December 31, 2022 | $0 | | Additional restructuring and related costs | $10,532 | | Non-cash charge (included above) | $(2,253) | | Cash payments | $(3,299) | | Accrual at June 30, 2023 | $4,980 | Note 14 — Operating Segments Describes the Company's three operating segments (Research, Consulting, Events), their performance evaluation, and revenue declines due to macroeconomic conditions - The Company operates in three reportable segments: Research, Consulting, and Events, with performance evaluated based on segment revenues and direct expenses[89][92] Segment Revenue and Expense Changes (YoY) | Segment | 3 Months Ended June 30, 2023 Revenue Change | 3 Months Ended June 30, 2023 Expense Change | 6 Months Ended June 30, 2023 Revenue Change | 6 Months Ended June 30, 2023 Expense Change | | :---------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Research | (6%) | (1%) | (7%) | 1% | | Consulting | (19%) | (19%) | (16%) | (16%) | | Events | (8%) | (5%) | (7%) | (5%) | - Consulting segment revenue decrease was primarily due to the macroeconomic environment and a policy of only selling consulting to contract value clients, except in limited circumstances[135] Note 15 — Contingencies Discloses legal proceedings and claims, including a $4.8 million legal settlement accrual, with no expected material adverse effect on financials - The Company accrued $4.8 million of expense in the quarter ended March 31, 2023, for a preliminary legal settlement in a wage-related matter, classified in general and administrative expense[95] - Management believes that the likely results of current legal proceedings and claims are not expected to have a material adverse effect on the Company's financial position, results of operations, or cash flows, although the effect could be material to consolidated results for any interim reporting period[97] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Provides management's perspective on financial condition, operations, revenue, expenses, segment performance, liquidity, and macroeconomic and restructuring impacts Overview - The Company derives revenues from subscriptions to Research products and services, licensing electronic 'reprints,' performing consulting projects and advisory services, and hosting events[99] - Primary operating expenses include cost of services and fulfillment, selling and marketing expenses, and general and administrative expenses[100] Key Business Metrics (dollars in millions) | Metric | As of June 30, 2023 | As of June 30, 2022 | Absolute Change | Percentage Change | | :---------------- | :------------------ | :------------------ | :-------------- | :---------------- | | Contract value | $344.0 | $345.3 | $(1.3) | (0%) | | Client retention | 74% | 76% | (2) points | — | | Wallet retention | 92% | 99% | (7) points | — | | Number of clients | 2,604 | 2,928 | (324) | (11%) | - The decrease in retention rates and number of clients is primarily attributable to macroeconomic conditions (funding/budget pressure, high inflation, increasing interest rates, geopolitical turbulence, recession threat) and the ongoing transition of the client base to the Forrester Decisions product platform[103] Results of Operations Revenues Total Revenues by Segment (dollars in millions) | Revenue Category | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Absolute Change | Percentage Change | | :--------------- | :----------------------------- | :----------------------------- | :-------------- | :---------------- | | Total revenues | $135.6 | $148.2 | $(12.7) | (9%) | | Research revenues | $87.7 | $89.4 | $(1.7) | (2%) | | Consulting revenues | $30.0 | $39.3 | $(9.3) | (24%) | | Events revenues | $17.9 | $19.5 | $(1.6) | (8%) | | | | | | | | Revenue Category | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Absolute Change | Percentage Change | | :--------------- | :----------------------------- | :----------------------------- | :-------------- | :---------------- | | Total revenues | $249.3 | $273.2 | $(24.0) | (9%) | | Research revenues | $168.6 | $175.2 | $(6.6) | (4%) | | Consulting revenues | $61.7 | $77.7 | $(16.0) | (21%) | | Events revenues | $18.9 | $20.3 | $(1.4) | (7%) | - Total revenues decreased 9% during both the three and six months ended June 30, 2023, compared to the prior year periods, and decreased by 8% for the six months when excluding foreign currency effects[108] - Consulting revenues decreased 24% and 21% for the three and six months, respectively, due to decreased delivery of advisory and consulting services, influenced by the macroeconomic environment and a focus on contract value clients[110] Cost of Services and Fulfillment Cost of Services and Fulfillment (dollars in millions) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Absolute Change | Percentage Change | | :----------------------------- | :----------------------------- | :----------------------------- | :-------------- | :---------------- | | Cost of services and fulfillment | $54.6 | $61.0 | $(6.4) | (10%) | | | | | | | | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Absolute Change | Percentage Change | | :----------------------------- | :----------------------------- | :----------------------------- | :-------------- | :---------------- | | Cost of services and fulfillment | $103.9 | $114.2 | $(10.3) | (9%) | - The decrease was primarily due to a $3.8 million decrease in compensation and benefit costs (lower headcount, incentive bonuses, benefits) for the three months, and a $4.8 million decrease for the six months (lower incentive bonuses, benefits, partially offset by higher salaries)[113][114] - Professional services costs decreased by $1.8 million for the three months and $4.5 million for the six months, mainly due to lower contractor costs, outsourced expenses, and consulting fees[113][114] Selling and Marketing Selling and Marketing Expenses (dollars in millions) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Absolute Change | Percentage Change | | :----------------------------- | :----------------------------- | :----------------------------- | :-------------- | :---------------- | | Selling and marketing expenses | $41.6 | $45.0 | $(3.4) | (8%) | | | | | | | | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Absolute Change | Percentage Change | | :----------------------------- | :----------------------------- | :----------------------------- | :-------------- | :---------------- | | Selling and marketing expenses | $83.1 | $89.0 | $(5.9) | (7%) | - The decrease was primarily due to a $3.1 million decrease in compensation and benefit costs (commissions, headcount, incentive bonuses, benefits) for the three months, and a $4.7 million decrease for the six months (commissions, incentive bonuses, benefits)[115][116] General and Administrative General and Administrative Expenses (dollars in millions) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | Absolute Change | Percentage Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :-------------- | :---------------- | | General and administrative expenses | $15.3 | $15.9 | $(0.6) | (4%) | | | | | | | | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Absolute Change | Percentage Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :-------------- | :---------------- | | General and administrative expenses | $36.5 | $31.4 | $5.1 | 16% | - The six-month increase was primarily due to a $5.7 million increase in legal costs, including a $4.8 million provision for a preliminary legal settlement for a wage-related matter and related legal services[118] Depreciation - Depreciation expense was consistent during the three and six months ended June 30, 2023, compared to the prior year periods[119] Amortization of Intangible Assets - Amortization expense decreased by $0.3 million and $0.6 million during the three and six months ended June 30, 2023, respectively, compared to the prior year periods due to a decrease in the amortization of a trademark intangible asset[120] Restructuring and Related Costs - In January 2023, a 4% workforce reduction was implemented, incurring $0.6 million in severance and related costs, a $0.4 million impairment to the California office, and a $0.6 million software write-off[121] - In May 2023, an 8% workforce reduction was implemented, resulting in $7.5 million of severance and related costs, $2.3 million in restructuring costs for office closures (including ROU asset impairments), and $0.7 million in contract termination costs[122] Interest Expense - Interest expense increased by $0.2 million and $0.4 million during the three and six months ended June 30, 2023, respectively, compared to the prior year periods, due to an increase in the annualized interest rate on borrowings, partially offset by lower average outstanding borrowings[123] Other Income (Expense), Net - Other income (expense), net, increased $0.4 million and $1.2 million during the three and six months ended June 30, 2023, respectively, primarily due to an increase in interest income[124] Gain on Investments, Net - Gain on investments, net, decreased $0.4 million during the six months ended June 30, 2023, compared to the prior year period, due to a decrease in investment gains generated by the underlying technology-related investment funds[125] Income Tax Expense - Income tax expense decreased by $6.8 million during the six months ended June 30, 2023, compared to the prior year period, primarily due to the decrease in income from operations[127] - The effective tax rate increased to 54% for the six months ended June 30, 2023, from 31% in the prior year, primarily due to tax expense related to the settlement of share-based awards[127] - For the full year 2023, the Company anticipates its effective tax rate will be approximately 43%[127] Segment Results - Research segment revenues decreased 6% and 7% during the three and six months ended June 30, 2023, respectively, primarily due to flat Contract Value (CV) growth and a decline in revenue from reprint and discontinued products[133] - Consulting segment revenues decreased 19% and 16% during the three and six months ended June 30, 2023, respectively, primarily due to the macroeconomic environment and a strategic focus on selling consulting only to contract value clients[135] - Event segment revenues decreased 8% and 7% during the three and six months ended June 30, 2023, respectively, due to a decrease in sponsorship revenues and event ticket revenue from lower attendance[137] Liquidity and Capital Resources Cash Flows from Activities (dollars in millions) | Cash Flow Activity | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | Change ($) | | :------------------------- | :----------------------------- | :----------------------------- | :--------- | | Operating activities | $15.8 | $34.8 | $(19.0) | | Investing activities | $3.4 | $(3.6) | $7.0 | | Financing activities | $(15.2) | $(38.3) | $23.1 | - The $19.0 million decrease in cash provided from operations was primarily due to a $16.8 million decrease in net income, the timing of certain benefit payments, and an increase in income tax payments[140] - Financing activities used $15.2 million of cash, primarily for $15.0 million in discretionary repayments of the revolving credit facility, $1.3 million in taxes related to share settlements, and $0.8 million for common stock repurchases[143] - As of June 30, 2023, the Company had $123.6 million in cash, cash equivalents, and marketable investments, with $90.8 million held outside the U.S. The remaining stock repurchase authorization was approximately $74.1 million[143][148] Recent Accounting Pronouncements - Refer to Note 1 – Interim Consolidated Financial Statements for a full description of recent accounting pronouncements, including expected dates of adoption and effects on results of operations and financial condition[149] Critical Accounting Policies and Estimates - There have been no material changes to the critical accounting policies and estimates previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022[150] Item 3. Quantitative and Qualitative Disclosures About Market Risk Reports no material changes in the Company's market risk sensitivity assessment since the prior Annual Report on Form 10-K - No material changes in the assessment of sensitivity to market risk have occurred since the Annual Report on Form 10-K for the year ended December 31, 2022[152] Item 4. Controls and Procedures Details the evaluation of disclosure controls and procedures, confirming effectiveness and no material changes to internal control over financial reporting Evaluation of Disclosure Controls and Procedures - Management, including the principal executive officer and principal financial officer, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2023, to provide reasonable assurance of achieving desired control objectives[153] Changes in Internal Control Over Financial Reporting - There was no change in the Company's internal control over financial reporting that occurred during the quarter ended June 30, 2023, which has materially affected, or is reasonably likely to materially affect, internal control over financial reporting[154] PART II. OTHER INFORMATION Item 1. Legal Proceedings Incorporates legal proceedings and contingencies information by reference from Note 15 of Part I, Item 1 - Information regarding legal proceedings is incorporated by reference from Note 15 - Contingencies in Part I, Item 1 of this Quarterly Report[156] Item 1A. Risk Factors Refers to risk factors from the Annual Report on Form 10-K, noting their continued applicability and potential for additional unknown risks - The risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2022, remain applicable to the Company's business[157] - Additional risks and uncertainties not currently known or deemed immaterial may also materially adversely affect the business, financial condition, and/or operating results[157] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details the stock repurchase program, including shares repurchased during Q2 2023 and remaining authorization - The Board of Directors authorized an aggregate $585.0 million for common stock repurchases under its stock repurchase program[158] Common Stock Repurchases During Q2 2023 | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | Maximum Approximate Dollar Value of Shares Yet to be Purchased (In thousands) | | :---------------- | :------------------------------- | :------------------------------- | :-------------------------------------------------------------------------- | | June 1 - June 30 | 27,500 | $29.82 | $74,146 | - As of June 30, 2023, approximately $74.1 million remained authorized for stock repurchases[158] Item 3. Defaults Upon Senior Securities This item is not applicable to the Company for the current reporting period - Not applicable[159] Item 4. Mine Safety Disclosures This item is not applicable to the Company for the current reporting period - Not applicable[160] Item 5. Other Information Reports no director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2023 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2023[161] Item 6. Exhibits Lists all exhibits filed with Form 10-Q, including organizational documents, officer certifications, and Inline XBRL documents - Exhibits include Restated Certificate of Incorporation, Amended and Restated By-Laws, Specimen Certificate for Common Stock, Certifications of the Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1, 32.2), and various Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[164] SIGNATURES Signatures Formally attests that the Quarterly Report on Form 10-Q has been duly signed by Forrester Research, Inc.'s Chief Financial Officer - The report was signed by L. Christian Finn, Chief Financial Officer of Forrester Research, Inc., on August 9, 2023[168]