Forrester Research(FORR) - 2023 Q4 - Annual Report

PART I Item 1. Business Forrester Research, Inc. is a global independent research and advisory firm, with its subscription-based business experiencing a 4% Contract Value decline in 2023 due to macroeconomic conditions and platform transition - Forrester Research, Inc. is a global independent research and advisory firm focused on helping business and technology leaders drive growth through customer obsession[13] - The foundation of Forrester's business model is its ability to help leaders tackle priorities and drive growth through customer obsession, with Contract Value (CV) being the most significant business metric[17] Contract Value and Client Metrics: | Metric | December 31, 2023 | December 31, 2022 | Absolute Change | Percentage Change | | :---------------- | :------------------ | :------------------ | :-------------- | :---------------- | | Contract value | $332.1 million | $345.4 million | $(13.3) million | (4%) | | Client retention | 73% | 74% | (1) point | | | Wallet retention | 87% | 94% | (7) points | | | Number of clients | 2,449 | 2,778 | (329) | (12%) | - The decrease in key metrics (CV, client retention, wallet retention, and number of clients) is primarily due to macroeconomic conditions affecting smaller technology clients and the technology industry, and the ongoing transition to the Forrester Decisions product platform[92] - As of December 31, 2023, Forrester employed 1,744 persons globally, with 601 sales personnel, a decrease from 709 in 2022[39][30] Item 1A. Risk Factors Forrester faces risks from declining subscription renewals, reduced consulting demand, adverse economic conditions, generative AI, loss of key staff, debt, and cybersecurity - Success depends on retaining and enriching existing subscriptions, including the migration to Forrester Decisions products; declines in retention or new sales could adversely affect results[45] - Consulting revenues comprised 25% of total revenues in 2023 (down from 28% in 2022); a decline in new or existing engagements could negatively impact financial condition[46] - The use of generative AI, while offering opportunities, poses risks such as factual errors, confidential information distribution, ethical concerns, data privacy/security risks, and intellectual property rights issues, potentially reducing demand for services[50] - The company's future success is highly dependent on attracting and retaining qualified professional staff, including senior management, research professionals, consultants, and sales/marketing personnel[52] - Outstanding debt of $35.0 million under a $150.0 million revolving credit facility could restrict business and adversely affect financial condition, liquidity, and results of operations[54][138] Item 1B. Unresolved Staff Comments Forrester Research, Inc. has not received any unresolved written comments from the Securities and Exchange Commission - The company has not received any unresolved written comments from the SEC[64] Item 1C. Cybersecurity Forrester maintains a comprehensive cybersecurity program aligned with NIST to protect systems and data, with board oversight, and has not experienced any material incidents to date - Forrester has implemented a cybersecurity program aligned with the National Institute of Standards and Technology (NIST) Cybersecurity Framework to identify, assess, manage, and mitigate cybersecurity risks[66] - The board of directors has final oversight responsibility for cybersecurity, with the CIO leading annual interactive sessions and the audit committee assisting in risk assessment and management[71] - To date, Forrester is not aware of any material cybersecurity threats or incidents that have materially affected its business, strategy, results of operations, or financial condition[70] Item 2. Properties Forrester's corporate headquarters is a 190,000 square foot office in Cambridge, Massachusetts, with additional leased office spaces globally, all deemed adequate for current and future needs - Forrester's corporate headquarters is located in Cambridge, Massachusetts, comprising approximately 190,000 square feet of office space, with the lease expiring on February 28, 2027[73] - The company also rents office space in San Francisco, New York City, McLean (VA), Norwalk (CT), London, New Delhi, Singapore, and Sydney, in addition to other short-term leases[74] Item 3. Legal Proceedings Forrester is subject to ordinary course legal proceedings and claims, which management believes will not have a material adverse effect on financial position, results, or cash flows, though interim effects could be material - Forrester is subject to legal proceedings and civil and regulatory claims in the ordinary course of business[75] - Management believes 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, though interim effects could be material[77] Item 4. Mine Safety Disclosures This item is not applicable to Forrester Research, Inc - This item is not applicable[78] PART II Item 5. Market For Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Forrester's common stock is listed on Nasdaq under 'FORR', with no dividends paid in 2022-2023, and $514.1 million used for stock repurchases out of $585.0 million authorized - Forrester's common stock is listed on the Nasdaq Global Select Market under the symbol "FORR"[81] - The company did not declare or pay any dividends during the years ended December 31, 2022 and 2023[81] | Metric | As of December 31, 2023 | | :-------------------------------- | :---------------------- | | Total authorized for repurchase | $585.0 million | | Aggregate cost of shares repurchased | $514.1 million | | Shares repurchased | 17.1 million | | Repurchases in Q4 2023 | None | Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews Forrester's financial performance, highlighting an 11% decrease in total revenues in 2023, significant declines in operating and net income, and strong liquidity with $124.5 million in cash and marketable investments Overview Forrester generates revenue from Research, Consulting, and Events, with key metrics like Contract Value, client retention, and wallet retention declining in 2023 due to macroeconomic conditions and the Forrester Decisions platform transition - Forrester derives revenues from subscriptions to Research products, licensing electronic 'reprints' of Research, performing consulting projects, and hosting events[87] - Research revenues as a percentage of total revenues increased from approximately 66% in 2022 to approximately 70% in 2023, reflecting a focus on Contract Value (CV) products[89] | Metric | As of December 31, 2023 | As of December 31, 2022 | Absolute Change | Percentage Change | | :---------------- | :---------------------- | :---------------------- | :-------------- | :---------------- | | Contract value | $332.1 million | $345.4 million | $(13.3) million | (4%) | | Client retention | 73% | 74% | (1) point | | | Wallet retention | 87% | 94% | (7) points | | | Number of clients | 2,449 | 2,778 | (329) | (12%) | - The decline in key metrics is attributed to macroeconomic conditions (funding/budget pressure on tech clients, uncertain economic conditions) and the ongoing transition to the Forrester Decisions product platform, which comprised 62% of CV as of December 31, 2023[92] Critical Accounting Estimates Forrester's financial statements rely on critical accounting estimates for revenue recognition, goodwill, intangible assets, and income taxes, all requiring significant management judgment and impacting financial reporting - Critical accounting estimates include revenue recognition, goodwill, intangible and other long-lived assets, and income taxes, requiring significant management judgment and potentially impacting financial statements if actual results differ[93][94] - Revenue recognition involves complex judgments in identifying distinct performance obligations, allocating transaction prices based on standalone selling prices, and estimating unused prepaid performance obligations[94][95][97] - Goodwill and intangible assets are subject to annual impairment tests, which involve qualitative or quantitative assessments requiring estimates of market conditions, operational performance, projected financial results, and discount rates[99][100] - Income tax estimates involve recognizing deferred tax assets and liabilities and determining valuation allowances, considering all available evidence to assess the likelihood of realization[103][104] Results of Operations for the years ended December 31, 2023 and 2022 Forrester's total revenues decreased by 11% in 2023, with significant declines across all segments, leading to an 86% decrease in net income and an increased effective tax rate of 51% | Metric | 2023 (in millions) | 2022 (in millions) | Absolute Change | Percentage Change | | :-------------------------- | :----------------- | :----------------- | :-------------- | :---------------- | | Total revenues | $480.8 | $537.8 | $(57.0) | (11%) | | Research revenues | $334.4 | $354.5 | $(20.1) | (6%) | | Consulting revenues | $118.2 | $152.6 | $(34.4) | (23%) | | Events revenues | $28.2 | $30.7 | $(2.6) | (8%) | | Income from operations | $6.8 | $32.7 | $(25.9) | (79%) | | Net income | $3.1 | $21.8 | $(18.7) | (86%) | | Effective tax rate | 51% | 29% | 22 points | | - The decrease in Research revenues was primarily due to a decline in Contract Value (CV) and revenue from reprint and discontinued products, with growth in Forrester Decisions offset by declines in legacy research products[107] - Consulting revenues decreased due to lower client bookings, influenced by the macroeconomic environment and a policy change to primarily sell consulting only to contract value clients[108] - Restructuring costs increased to $13.3 million in 2023 from $9.3 million in 2022, reflecting workforce reductions (4% in Jan 2023, 8% in May 2023, 3% in Feb 2024) and office closures to streamline operations and align cost structure with revenue outlook[117][118][119][173] Segment Results Forrester operates in Research, Consulting, and Events segments, all experiencing revenue declines in 2023, with Consulting down 19% due to lower bookings and strategic shifts, alongside corresponding expense reductions - Forrester operates in three reportable segments: Research, Consulting, and Events, with performance evaluated based on segment revenues and direct expenses[125][128] | Segment | 2023 Total Segment Revenues (in thousands) | 2022 Total Segment Revenues (in thousands) | Year over year revenue change | | :-------- | :--------------------------------------- | :--------------------------------------- | :---------------------------- | | Research | $363,222 | $396,012 | (8%) | | Consulting | $89,402 | $111,028 | (19%) | | Events | $28,155 | $30,747 | (8%) | | Segment | 2023 Segment Expenses (in thousands) | 2022 Segment Expenses (in thousands) | Year over year expense change | | :-------- | :----------------------------------- | :----------------------------------- | :---------------------------- | | Research | $(132,444) | $(133,566) | (1%) | | Consulting | $(45,028) | $(56,889) | (21%) | | Events | $(20,557) | $(21,801) | (6%) | - Consulting segment revenue decrease was primarily due to lower client bookings, influenced by macroeconomic conditions and a policy to sell consulting primarily to contract value clients[131] Liquidity and Capital Resources Forrester's cash from operating activities decreased to $21.7 million in 2023, but the company maintains strong liquidity with $124.5 million in cash and marketable investments, and is compliant with debt covenants | Cash Flow Activity | 2023 (in millions) | 2022 (in millions) | Change (in millions) | | :----------------------- | :----------------- | :----------------- | :------------------- | | Operating activities | $21.7 | $39.4 | $(17.8) | | Investing activities | $(36.8) | $(6.8) | $(30.0) | | Financing activities | $(18.3) | $(38.9) | $20.6 | - The decrease in cash from operating activities in 2023 was primarily due to an $18.8 million decrease in net income[135] - As of December 31, 2023, Forrester had $124.5 million in cash, cash equivalents, and marketable investments, with $75.8 million held outside the U.S. and $35.0 million outstanding on its $150.0 million revolving credit facility[142][138] - The company was in full compliance with all financial covenants under its credit facility as of December 31, 2023, and expects to remain compliant for the next 12 months[139] Recent Accounting Pronouncements Forrester adopted ASU No. 2019-12 with no material impact and is currently evaluating ASU No. 2023-07 (Segment Reporting) and ASU No. 2023-09 (Income Taxes) for future disclosure enhancements - ASU No. 2019-12, Income Taxes, adopted in January 2021, did not have a material impact on financial position or results[189] - The company is evaluating the impact of ASU No. 2023-07, Segment Reporting (effective January 2024), and ASU No. 2023-09, Income Taxes (effective January 2025), which enhance disclosure requirements[245][246] Item 7A. Quantitative and Qualitative Disclosures About Market Risk Forrester faces market risks from foreign currency exchange rates and variable interest rates on its $35.0 million debt, mitigating currency risk with forward contracts, while its investment portfolio is stable - Forrester is exposed to market risk from changes in foreign currency exchange rates and interest rates on its variable-rate debt[146] | Metric | 2023 (in millions) | 2022 (in millions) | 2021 (in millions) | | :------------------------ | :----------------- | :----------------- | :----------------- | | Foreign currency exchange losses | $0.3 | $0.2 | $1.4 | - As of December 31, 2023, the company had $35.0 million in floating-rate debt; a hypothetical 25 basis point change in interest rates could impact annual pretax interest expense by approximately $0.1 million[148][149] - The investment portfolio, primarily short-term and investment-grade, is not expected to be materially affected by sudden changes in market interest rates[150] Item 8. Consolidated Financial Statements and Supplementary Data This section presents Forrester's audited consolidated financial statements for 2021-2023, with PricewaterhouseCoopers LLP providing an unqualified opinion on both financial statements and internal control over financial reporting - PricewaterhouseCoopers LLP issued an unqualified opinion on Forrester's consolidated financial statements for the period ended December 31, 2023, and on the effectiveness of its internal control over financial reporting[157][158] Consolidated Balance Sheet Highlights (in thousands): | Metric | December 31, 2023 | December 31, 2022 | | :-------------------------- | :------------------ | :------------------ | | Total assets | $564,174 | $608,438 | | Total liabilities | $323,909 | $386,782 | | Total stockholders' equity | $240,265 | $221,656 | | Cash and cash equivalents | $72,909 | $103,629 | | Marketable investments | $51,580 | $19,688 | | Long-term debt | $35,000 | $50,000 | Consolidated Statements of Operations Highlights (in thousands): | Metric | 2023 | 2022 | 2021 | | :-------------------------- | :----- | :----- | :----- | | Total revenues | $480,779 | $537,787 | $494,315 | | Income from operations | $6,766 | $32,654 | $38,642 | | Net income | $3,050 | $21,806 | $24,844 | | Diluted income per common share | $0.16 | $1.14 | $1.28 | Consolidated Statements of Cash Flows Highlights (in thousands): | Metric | 2023 | 2022 | 2021 | | :-------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $21,673 | $39,425 | $107,067 | | Net cash used in investing activities | $(36,759) | $(6,814) | $(29,296) | | Net cash used in financing activities | $(18,299) | $(38,871) | $(49,143) | Report of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP provided an unqualified opinion on Forrester's consolidated financial statements for 2023 and 2022, and on the effectiveness of internal control over financial reporting as of December 31, 2023[157][158] - A critical audit matter identified was Revenue Recognition – Identification of Distinct Performance Obligations, due to the high degree of auditor effort in evaluating management's judgments[165][166] Consolidated Balance Sheets | ASSETS (in thousands) | December 31, 2023 | December 31, 2022 | | :-------------------------- | :------------------ | :------------------ | | Cash and cash equivalents | $72,909 | $103,629 | | Marketable investments | $51,580 | $19,688 | | Accounts receivable, net | $58,999 | $73,345 | | Total current assets | $216,000 | $235,290 | | Goodwill | $244,257 | $242,149 | | Intangible assets, net | $37,637 | $49,504 | | Total assets | $564,174 | $608,438 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | December 31, 2023 | December 31, 2022 | | :------------------------------------------------ | :------------------ | :------------------ | | Deferred revenue | $156,798 | $178,021 | | Total current liabilities | $240,076 | $269,389 | | Long-term debt | $35,000 | $50,000 | | Total liabilities | $323,909 | $386,782 | | Total stockholders' equity | $240,265 | $221,656 | Consolidated Statements of Operations | (in thousands, except per share data) | 2023 | 2022 | 2021 | | :------------------------------------ | :----- | :----- | :----- | | Revenues: | | | | | Research | $334,396 | $354,453 | $325,340 | | Consulting | $118,228 | $152,587 | $156,114 | | Events | $28,155 | $30,747 | $12,861 | | Total revenues | $480,779 | $537,787 | $494,315 | | Operating expenses: | | | | | Cost of services and fulfillment | $204,484 | $223,773 | $201,815 | | Selling and marketing | $167,352 | $181,940 | $170,949 | | General and administrative | $68,497 | $67,655 | $58,056 | | Restructuring costs | $13,272 | $9,335 | $0 | | Total operating expenses | $474,013 | $505,133 | $455,673 | | Income from operations | $6,766 | $32,654 | $38,642 | | Net income | $3,050 | $21,806 | $24,844 | | Diluted income per common share | $0.16 | $1.14 | $1.28 | Consolidated Statements of Comprehensive Income | (in thousands) | 2023 | 2022 | 2021 | | :------------------------------------ | :----- | :----- | :----- | | Net income | $3,050 | $21,806 | $24,844 | | Other comprehensive income (loss), net of tax: | | | | | Foreign currency translation | $3,248 | $(4,807) | $(3,083) | | Net change in market value of interest rate swap | $0 | $212 | $609 | | Net change in market value of investments | $99 | $(134) | $(25) | | Other comprehensive income (loss) | $3,347 | $(4,729) | $(2,499) | | Comprehensive income | $6,397 | $17,077 | $22,345 | Consolidated Statements of Stockholders' Equity | (in thousands) | Balance at Dec 31, 2022 | Issuance of common stock | Repurchases of common stock | Stock-based compensation expense | Net income | Net change in marketable investments | Foreign currency translation | Balance at Dec 31, 2023 | | :-------------------------- | :---------------------- | :----------------------- | :-------------------------- | :------------------------------- | :--------- | :----------------------------------- | :--------------------------- | :---------------------- | | Common Stock, $0.01 Par Value | $244 | $3 | $0 | $0 | $0 | $0 | $0 | $247 | | Additional Paid-in Capital | $261,766 | $805 | $0 | $15,486 | $0 | $0 | $0 | $278,057 | | Retained Earnings | $174,631 | $0 | $0 | $0 | $3,050 | $0 | $0 | $177,681 | | Treasury Stock | $(207,067) | $0 | $(4,082) | $0 | $0 | $0 | $0 | $(211,149) | | Accumulated Other Comprehensive Loss | $(7,918) | $0 | $0 | $0 | $0 | $99 | $3,248 | $(4,571) | | Total Stockholders' Equity | $221,656 | $808 | $(4,082) | $15,486 | $3,050 | $99 | $3,248 | $240,265 | Consolidated Statements of Cash Flows | (in thousands) | 2023 | 2022 | 2021 | | :------------------------------------ | :----- | :----- | :----- | | Cash flows from operating activities: | | | | | Net income | $3,050 | $21,806 | $24,844 | | Net cash provided by operating activities | $21,673 | $39,425 | $107,067 | | Cash flows from investing activities: | | | | | Purchases of property and equipment | $(5,495) | $(5,663) | $(10,745) | | Purchases of marketable investments | $(61,068) | $(28,683) | $(21,607) | | Proceeds from maturities of marketable investments | $28,338 | $27,331 | $2,000 | | Net cash used in investing activities | $(36,759) | $(6,814) | $(29,296) | | Cash flows from financing activities: | | | | | Payments on borrowings | $(15,000) | $(25,000) | $(34,375) | | Repurchases of common stock | $(4,082) | $(15,112) | $(20,066) | | Net cash used in financing activities | $(18,299) | $(38,871) | $(49,143) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(30,612) | $(12,377) | $27,379 | | Cash, cash equivalents and restricted cash, end of year | $75,042 | $105,654 | $118,031 | Notes to Consolidated Financial Statements Note 1 – Summary of Significant Accounting Policies - Forrester Research, Inc. is a global independent research and advisory firm, with financial statements prepared in accordance with GAAP and SEC rules[185][186] - Critical accounting estimates include revenue recognition, goodwill, intangible and other long-lived assets, and income taxes, requiring management judgment[188] - Revenue recognition follows a five-step model, identifying performance obligations and allocating transaction prices, with revenue recognized when control of products/services is transferred to the customer[206] - Research revenues are primarily recognized ratably over the contract term, while consulting project revenues are recognized over time based on hours expended, and event revenues upon completion of the event[211][212][214] - Deferred revenue consists of billings in excess of recognized revenue, with approximately $385.6 million expected to be recognized over the next 24 months from remaining performance obligations as of December 31, 2023[222][223] Note 2 – Marketable Investments | (in thousands) | Amortized Cost (2023) | Market Value (2023) | Amortized Cost (2022) | Market Value (2022) | | :-------------------- | :-------------------- | :------------------ | :-------------------- | :------------------ | | Corporate obligations | $18,049 | $17,977 | $17,900 | $17,703 | | Federal agency obligations | $2,000 | $1,993 | $1,999 | $1,985 | | Money market funds | $31,610 | $31,610 | $0 | $0 | | Total | $51,659 | $51,580 | $19,899 | $19,688 | - Marketable investments are classified as available-for-sale securities and carried at fair value, with unrealized gains and losses recorded in accumulated other comprehensive loss[192] - The company did not record any other-than-temporary impairment losses on its available-for-sale securities during 2023, 2022, or 2021[193] Note 3 – Goodwill and Other Intangible Assets | Goodwill by Segment (in thousands) | December 31, 2023 | December 31, 2022 | | :--------------------------------- | :------------------ | :------------------ | | Research Segment | $236,058 | $234,020 | | Consulting Segment | $8,199 | $8,129 | | Total Goodwill | $244,257 | $242,149 | - Forrester performed its annual goodwill impairment test as of November 30, 2023, using a quantitative assessment and concluded that no impairments existed[250] | Amortizable Intangible Assets (in thousands) | Gross Carrying Amount (2023) | Accumulated Amortization (2023) | Net Carrying Amount (2023) | | :------------------------------------------- | :--------------------------- | :------------------------------ | :------------------------- | | Customer relationships | $77,640 | $42,091 | $35,549 | | Technology | $16,524 | $15,950 | $574 | | Trademarks | $12,519 | $11,005 | $1,514 | | Total | $106,683 | $69,046 | $37,637 | - Amortization expense related to intangible assets was $12.0 million in 2023, down from $13.2 million in 2022, and is expected to be approximately $10.0 million for 2024[252][116] Note 4 – Debt - Forrester's Amended Credit Agreement provides a $150.0 million revolving credit facility, maturing in December 2026, with an option to increase commitments by $50.0 million[254][255] | Metric | December 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------- | :------------------------------- | :------------------------------- | | Revolving credit facility outstanding | $35,000 | $50,000 | | Available borrowing capacity | $114,400 | N/A | | Contractual annualized interest rate | 6.70596% | N/A | | Weighted average annual effective rate | 6.3% | 2.9% | - The credit facility contains customary restrictive loan covenants, including financial covenants for maximum leverage ratio, minimum interest coverage ratio, and maximum annual capital expenditures, with which the company was in full compliance as of December 31, 2023[262] Note 5 – Leases - Forrester's leases are primarily operating leases for office space, with ROU assets and lease liabilities recognized based on the present value of future minimum lease payments[226][227] | Lease Metric (in thousands) | 2023 | 2022 | | :------------------------------------ | :----- | :----- | | Total lease cost | $17,525 | $19,708 | | Cash paid for operating lease liabilities | $13,839 | $12,939 | | Operating ROU assets obtained | $1,110 | $323 | | Weighted-average remaining lease term | 4.3 years | 5.1 years | | Weighted-average discount rate | 4.3% | 4.3% | - In 2023, the company recorded $1.9 million of ROU asset impairments and accelerated amortization, and $0.7 million of leasehold improvement impairments due to closing various offices, following $3.7 million and $1.3 million respectively in 2022[267] Note 6 – Derivatives and Hedging - Forrester uses derivative contracts, including foreign currency forward exchange contracts, to mitigate cash flow risk from foreign currency exchange rates[269][272] - The company's interest rate swap matured on December 31, 2022, and no amounts related to it were recorded in 2023[270][274] - Foreign currency forward contracts are recorded at fair value, with realized and unrealized gains and losses included in other income (expense), net, as they are not designated as accounting hedges[272] Note 7 – Fair Value Measurements - Forrester classifies financial assets and liabilities measured at fair value into Level 1, 2, or 3 hierarchy based on observability of inputs[276][277][278] | Financial Assets (in thousands) | Level 1 (2023) | Level 2 (2023) | Total (2023) | Level 1 (2022) | Level 2 (2022) | Total (2022) | | :------------------------------ | :------------- | :------------- | :----------- | :------------- | :------------- | :----------- | | Money market funds | $55,128 | $0 | $55,128 | $5,800 | $0 | $5,800 | | Marketable investments | $0 | $19,970 | $19,970 | $0 | $19,688 | $19,688 | | Total Assets | $55,128 | $19,970 | $75,098 | $5,800 | $19,688 | $25,488 | - No assets or liabilities were transferred between fair value hierarchy levels during 2023 and 2022, and no changes were made to valuation techniques for Level 2 assets and liabilities[280] Note 8 – Income Taxes | Income before income taxes (in thousands) | 2023 | 2022 | 2021 | | :---------------------------------------- | :----- | :----- | :----- | | Domestic | $(4,058) | $16,552 | $22,424 | | Foreign | $10,343 | $14,172 | $10,767 | | Total | $6,285 | $30,724 | $33,191 | | Income tax expense (in thousands) | 2023 | 2022 | 2021 | | :-------------------------------- | :----- | :----- | :----- | | Total current | $8,696 | $15,570 | $8,622 | | Total deferred | $(5,461) | $(6,652) | $(275) | | Income tax expense | $3,235 | $8,918 | $8,347 | | Effective Tax Rate Reconciliation | 2023 | 2022 | 2021 | | :-------------------------------- | :----- | :----- | :----- | | Federal statutory rate | 21.0% | 21.0% | 21.0% | | State tax provision, net of federal benefit | 8.1% | 5.2% | 3.8% | | Stock compensation | 17.5% | 0.9% | (0.4)% | | Effective tax rate | 51.5% | 29.0% | 25.1% | - The increase in the effective tax rate in 2023 was primarily due to the decline in income before taxes and increased non-deductible stock compensation[283] - As of December 31, 2023, Forrester maintained a valuation allowance of $1.1 million, primarily related to foreign net operating loss carryforwards from an acquisition[288] Note 9 – Stockholders' Equity - Forrester's Board of Directors authorized an aggregate $585.0 million for common stock repurchases, with approximately 17.1 million shares repurchased at a cost of $514.1 million as of December 31, 2023[294] - The Equity Incentive Plan was amended in May 2023, extending its term to May 2033 and increasing shares issuable by 3,500,000, with approximately 4.2 million shares available for future grants as of December 31, 2023[297][298] | RSU Activity (in thousands, except per share data) | Number of Shares | Weighted Average Grant Date Fair Value | | :------------------------------------------------- | :--------------- | :------------------------------------- | | Unvested at December 31, 2022 | 682 | $46.28 | | Granted | 695 | $32.82 | | Vested | (271) | $44.95 | | Forfeited | (107) | $42.72 | | Unvested at December 31, 2023 | 999 | $37.66 | - The Employee Stock Purchase Plan allows eligible employees to purchase common stock at a discount, with approximately 0.6 million shares remaining available for issuance as of December 31, 2023[303] Note 10 – Employee Pension Plans - Forrester sponsors several defined contribution plans for eligible employees, with contributions totaling $7.8 million in 2023, $8.2 million in 2022, and $6.5 million in 2021[308] Note 11 – Restructuring - In January 2023, Forrester implemented a 4% workforce reduction, incurring $0.6 million in severance and related costs in Q1 2023, and additional impairments of $0.4 million to its California office in Q1 and Q4 2023[309] - In May 2023, an 8% workforce reduction was implemented, incurring $7.5 million in severance and related costs, along with $2.3 million in restructuring costs for office closures, including ROU asset and leasehold improvement impairments[310][312] - In February 2024, a 3% workforce reduction was implemented, with approximately $0.7 million in severance costs recorded in Q4 2023, and total anticipated costs of $7.3 million to $7.7 million, including $3.8 million in non-cash lease impairment costs[313] Note 12 – Operating Segment and Enterprise Wide Reporting - Forrester operates in three reportable segments: Research, Consulting, and Events, with performance evaluated based on segment revenues and direct expenses[314][317] | Segment Revenues (in thousands) | 2023 | 2022 | 2021 | | :------------------------------ | :----- | :----- | :----- | | Research | $363,222 | $396,012 | $372,587 | | Consulting | $89,402 | $111,028 | $108,867 | | Events | $28,155 | $30,747 | $12,861 | | Total segment revenues | $480,779 | $537,787 | $494,315 | | Revenues by Geographic Destination | 2023 (in thousands) | 2022 (in thousands) | 2021 (in thousands) | | :--------------------------------- | :------------------ | :------------------ | :------------------ | | United States | $373,483 | $426,041 | $381,662 | | Europe (excluding United Kingdom) | $37,912 | $36,664 | $41,264 | | United Kingdom | $21,311 | $20,079 | $21,913 | | Canada | $16,416 | $20,759 | $17,213 | | Asia Pacific | $23,604 | $26,548 | $26,768 | | Other | $8,053 | $7,696 | $5,495 | | Total | $480,779 | $537,787 | $494,315 | Note 13 – Certain Balance Sheet Accounts | Property and Equipment, Net (in thousands) | 2023 | 2022 | | :----------------------------------------- | :----- | :----- | | Computers and equipment | $10,128 | $14,303 | | Computer software | $34,641 | $34,903 | | Furniture and fixtures | $9,188 | $9,745 | | Leasehold improvements | $29,506 | $30,285 | | Total property and equipment | $83,463 | $89,236 | | Less accumulated depreciation | $(64,062) | $(66,028) | | Total property and equipment, net | $19,401 | $23,208 | | Accrued Expenses and Other Current Liabilities (in thousands) | 2023 | 2022 | | :------------------------------------------------------------ | :----- | :----- | | Payroll and related benefits | $43,426 | $53,581 | | Taxes | $4,680 | $5,823 | | Lease liability | $14,181 | $13,632 | | Other | $19,195 | $17,971 | | Total | $81,482 | $91,007 | | Allowance for Doubtful Accounts (in thousands) | 2023 | 2022 | 2021 | | :--------------------------------------------- | :----- | :----- | :----- | | Balance, beginning of year | $560 | $610 | $708 | | Provision for doubtful accounts | $701 | $638 | $225 | | Write-offs | $(692) | $(669) | $(318) | | Balance, end of year | $574 | $560 | $610 | Note 14 – Contingencies - Forrester accrues for legal contingencies when a liability is probable and estimable, and expenses related legal fees as incurred[324] - In Q1 2023, the company accrued $4.8 million for a wage-related legal settlement, classified in general and administrative expense[324] - Management believes current legal proceedings are not expected to have a material adverse effect on financial position, results of operations, or cash flows, though interim effects could be material[326] Note 15 – Subsequent Events - In February 2024, Forrester implemented a 3% workforce reduction and plans to close its San Francisco office, anticipating total costs of $7.3 million to $7.7 million, including $3.8 million in non-cash lease impairment costs[327] Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure This item is not applicable to Forrester Research, Inc., as there have been no changes in or disagreements with accountants on accounting and financial disclosure - This item is not applicable[328] Item 9A. Controls and Procedures Forrester's management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023, an assessment concurred by PricewaterhouseCoopers LLP, with no material changes in Q4 2023 - Forrester's disclosure controls and procedures were effective as of December 31, 2023[329] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO 2013 framework[331] - PricewaterhouseCoopers LLP audited and confirmed the effectiveness of internal control over financial reporting[332] - No material changes in internal control over financial reporting occurred during the quarter ended December 31, 2023[333] Item 9B. Other Information No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q4 2023 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q4 2023[334] Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to Forrester Research, Inc - This item is not applicable[335] PART III Item 10. Directors, Executive Officers, and Corporate Governance This section lists Forrester's executive officers as of March 8, 2024, and references the company's Code of Business Conduct and Ethics, with further details incorporated from the 2024 Proxy Statement - Key executive officers include George F. Colony (Chairman & CEO), L. Christian Finn (CFO), and Nate Swan (Chief Sales Officer)[338][340][345] - Forrester maintains a Code of Business Conduct and Ethics covering all employees, officers, and directors, available on its website[346] Item 11. Executive Compensation Executive compensation details are incorporated by reference from Forrester's 2024 Proxy Statement - Executive compensation details are incorporated by reference from the 2024 Proxy Statement[349] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information is incorporated by reference from the 2024 Proxy Statement, detailing 1,200,150 securities to be issued from outstanding options and 4,807,930 shares available for future issuance under equity plans - Security ownership information is incorporated by reference from the 2024 Proxy Statement[350] | Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | :------------------------------------ | :-------------------------------------------------------------------------- | :-------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------- | | Equity compensation plans approved by stockholders | 1,200,150 | $33.93 | 4,807,930 | - The available shares for future issuance include 4,210,914 shares under the Equity Incentive Plan and 597,016 shares under the Stock Purchase Plan[350] Item 13. Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from Forrester's 2024 Proxy Statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Proxy Statement[351] Item 14. Principal Accountant Fees and Services Details on principal accountant fees and services are incorporated by reference from Forrester's 2024 Proxy Statement - Details on principal accountant fees and services are incorporated by reference from the 2024 Proxy Statement[352] PART IV Item 15. Exhibits and Financial Statement Schedules Financial statements are filed as part of this 10-K report, with no separate schedules, and a complete listing of exhibits is provided in the Exhibit Index - Financial statements are included in this 10-K report, with no separate financial statement schedules[354] - A complete listing of exhibits is provided in the Exhibit Index[354] Item 16. Form 10-K Summary This item is not applicable to Forrester Research, Inc - This item is not applicable[355]