What changed in this filing

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Item 1. Financial Statements

2020-08-10 compared with 2020-05-11 · 269 added, 159 removed, 379 unchanged (53% of the section changed)

6 unchanged sentences

Accounts receivable, net of allowance for expected credit losses of $ 931 and $ 628 as

of March 31, 2020 and December 31, 2019, respectively

of June 30, 2020 and December 31, 2019, respectively

Deferred commissions

21 unchanged sentences

Authorized - 125,000 shares

Issued - 23,389 and 23,275 shares as of March 31, 2020 and

December 31, 2019, respectively

Outstanding - 18,758 and 18,644 shares as of March 31, 2020 and

Issued - 23,401 and 23,275 shares as of June 30, 2020 and December 31, 2019,

Outstanding - 18,770 and 18,644 shares as of June 30, 2020 and

December 31, 2019, respectively

1 unchanged sentence

Retained earnings

Treasury stock - 4,631 shares as of March 31, 2020 and December 31, 2019, at cost

Treasury stock - 4,631 shares as of June 30, 2020 and December 31, 2019

Accumulated other comprehensive loss

6 unchanged sentences

Three Months Ended

Research services

Advisory services and events

Six Months Ended

Total revenues

10 unchanged sentences

Gain (loss) on investments, net

Loss before income taxes

Income tax expense (benefit)

Basic loss per common share

Diluted loss per common share

Income (loss) before income taxes

Income tax expense

Net income (loss)

Basic income (loss) per common share

Diluted income (loss) per common share

Basic weighted average common shares outstanding

2 unchanged sentences

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, unaudited)

Three Months Ended

Other comprehensive loss, net of taxes:

Six Months Ended

Net income (loss)

Other comprehensive income (loss), net of taxes:

Foreign currency translation

Net change in market value of interest rate swap

Other comprehensive loss

Comprehensive loss

Net change in fair value of interest rate swap

Other comprehensive income (loss)

Comprehensive income (loss)

The accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

(In thousands, unaudited)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash provided by operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Impairment of property and equipment

18 unchanged sentences

Purchases of property and equipment

Other investing activity

Net cash used in investing activities

13 unchanged sentences

Cash paid for interest

Cash paid for income taxes

Non-cash financing activities for the three months ended March 31, 2019 include $3.7 million of debt issuance costs deducted directly from the proceeds of borrowings by the lender.

Cash (received) paid for income taxes

Non-cash financing activities for the six months ended June 30, 2019 include $ 3.7 million of debt issuance costs deducted directly from the proceeds of borrowings by the lender.

Refer to Note 4 – Debt for further information.

9 unchanged sentences

(“Forrester”) Annual Report on Form 10-K for the year ended December 31, 2019.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the financial position, results of operations, comprehensive loss and cash flows as of the dates and for the periods presented have been included.

The results of operations for the three months ended March 31, 2020 may not be indicative of the results for the year ending December 31, 2020, or any other period.

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the financial position, results of operations, comprehensive income (loss), and cash flows as of the dates and for the periods presented have been included.

The results of operations for the three and six months ended June 30, 2020 may not be indicative of the results for the year ending December 31, 2020, or any other period.

Due to the Company’s operating segment realignment during the three months ended June 30, 2020, the revenue line items in the Consolidated Statements of Operations were updated to present Events revenues as a separate financial statement line.

In the prior presentation, Events revenues were combined within the “Advisory services and events revenues” financial statement line.

Prior periods have been reclassified to conform to the current period presentation.

These reclassifications had no impact on the amount of total revenues previously reported.

Liquidity and Impact of COVID-19

The global spread of the novel coronavirus (COVID-19), which has been declared by the World Health Organization to be a “pandemic”, has spread to many countries and is impacting worldwide economic activity.

Many governments have implemented policies intended to stop or slow the further spread of the disease, such as shelter-in-place orders, resulting in the temporary closure of non-essential businesses, and these measures may remain in place for a significant period of time.

Due to COVID-19 materially impacting our business beginning only in the last month of the quarter, the impact on our business in the first quarter of 2020 is primarily limited to March customer contract bookings and the amount of consulting projects delivered.

While the duration and severity of this pandemic is uncertain, the Company currently expects that its results of operations in the second quarter of 2020 will have the most significant impact of the effects of COVID-19, and that subsequent periods will also be negatively impacted.

The Company typically generates a significant portion of its Events revenues in the second quarter of the year, including revenues from its two flagship events, the SiriusDecisions Summit and CX North America, both of which will be held as virtual events, resulting in a significant reduction in revenues and profits from these two events.

In addition, the Company cancelled two smaller events originally scheduled for the second quarter of the year.

The Company also expects a reduction in its subscription Research, Connect and Analytics revenues and a reduction in Consulting revenues during the second quarter due to reduced customer contract booking activity in March, which is expected to continue through at least the second quarter of 2020.

The COVID-19 pandemic has significantly affected the Company beginning in March 2020 primarily through lower contract bookings and a reduction in revenues from the conversion of the Company’s events from in-person to virtual events.

The Company also announced that its events in the second half of 2020 will be held as virtual events.

While the duration and severity of this pandemic is uncertain, the Company currently expects a reduction in its subscription Research, Connect and Analytics revenues during the second half of 2020 due to reduced customer contract booking activity that began in March 2020, and which is expected to continue through at least the third quarter of 2020.

The extent to which the COVID-19 pandemic ultimately impacts the Company’s business, financial condition, results of operations, cash flows, and liquidity may differ from the Company’s current estimates due to inherent uncertainties regarding the duration and further spread of the outbreak, its severity, actions taken to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

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The Company will continue to proactively respond to the situation and may take further actions that alter the Company’s business operations as may be required by governmental authorities, or that the Company determines are in the best interests of its employees and customers.

As of March 31, 2020, the Company is in compliance with its financial covenants under its Credit Agreement (refer to Note 4 – Debt ).

As of June 30, 2020, the Company is in compliance with its financial covenants under its Credit Agreement (refer to Note 4 – Debt ).

The Company currently forecasts that it will be in compliance with its financial covenants for at least one year from the issuance of these interim financial statements, after taking into consideration the measures noted above.

If the impact of COVID-19 is more severe than currently forecasted this may impact the Company’s ability to comply with its financial covenants which could have a material adverse effect on the Company.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to it and the unknown future impacts COVID-19 as of March 31, 2020 and through the date of this report.

The accounting matters assessed included, but were not limited to, the allowance for expected credit losses, the carrying value of our goodwill and other long-lived assets, valuation allowances for tax assets and revenue recognition.

While there was not a material impact to the consolidated financial statements as of and for the quarter ended March 31, 2020 resulting from the Company’s assessments, the Company’s future assessment of its current expectations of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to its consolidated financial statements in future reporting periods.

The Company assessed certain accounting estimates that generally require consideration of forecasted financial information in context with the information reasonably available to it and the unknown future impacts COVID-19 as of June 30, 2020 and through the date of this report.

The accounting matters assessed included, but were not limited to, the allowance for expected credit losses, the carrying value of its goodwill and other long-lived assets, valuation allowances for tax assets, and revenue recognition.

While there was not a material impact to the consolidated financial statements resulting from the Company’s assessments as of and for the three and six months ended June 30, 2020, the Company’s future assessment of its current expectations of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to its consolidated financial statements in future reporting periods.

Presentation of Restricted Cash

The following table summarizes the end-of-period cash and cash equivalents from the Company's Consolidated Balance Sheets and the total cash, cash equivalents and restricted cash as presented in the accompanying Consolidated Statements of Cash Flows (in thousands).

Three Months Ended March 31,

Six Months Ended June 30,

Cash and cash equivalents

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Expected losses are based, in part, on the Company’s historical loss rate experience as well as management’s expectations of future losses as informed by current economic conditions.

The allowance for expected credit losses on accounts receivable for the three months ended March 31, 2020 is summarized as follows (in thousands):

The allowance for expected credit losses on accounts receivable for the six months ended June 30, 2020 is summarized as follows (in thousands):

Balance at December 31, 2019

3 unchanged sentences

Translation adjustments

Balance at March 31, 2020

Balance at June 30, 2020

The Company adopted the guidance in ASU No.

18 unchanged sentences

The Company is currently evaluating the potential impact that this standard may have on its financial position and results of operations.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Finance Reporting .

The new standard provides optional guidance for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting due to the risk of cessation of the London Interbank Offered Rate (“LIBOR”).

The updates apply to contracts, hedging relationships, and other transactions that reference LIBOR, or another reference rate expected to be discontinued because of reference rate reform, and as a result require a modification.

An entity may elect to apply the amendments immediately or at any point through December 31, 2022.

The Company is currently evaluating the potential impact that this standard may have on its financial position and results of operations, including the standard’s potential impact on any contractual changes in the future that may result from reference rate reform.

Note 2 — Acquisitions

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The acquisition method of accounting requires the Company to record the assets and liabilities acquired based on their estimated fair values as of the acquisition date, with any excess of the consideration transferred over the estimated fair value of the net assets acquired, including identifiable intangible assets, to be recorded to goodwill.

The Company did not have any business combinations during the three months ended March 31, 2020.

The Company did not have any business combinations during the six months ended June 30, 2020.

SiriusDecisions, Inc.

5 unchanged sentences

Pursuant to the terms of the merger agreement, the Company paid $ 246.8 million at closing after certain transaction expense adjustments, which was subject to a working capital adjustment.

SiriusDecisions’ operating results and the related goodwill are reported within the Company’s Products and Research segments, as realigned on January 1, 2020 and further discussed in Note 14 – Operating Segments .

SiriusDecisions’ operating results are reported within the Company’s Research, Consulting and Events segments.

During the year ended December 31, 2019, the Company finalized the purchase price allocation and related accounting for the acquisition.

The Company recognized $1.7 million of acquisition costs in the three months ended March 31, 2019 related to the SiriusDecisions acquisition.

The Company recognized $ 1.7 million of acquisition costs in the six months ended June 30, 2019 related to the SiriusDecisions acquisition.

The costs primarily consisted of investment banker fees and other professional services costs and are included in acquisition and integration costs within the Consolidated Statements of Operations.

Note 3 — Goodwill and Other Intangible Assets

The change in the carrying amount of goodwill for the three months ended March 31, 2020 is summarized as follows (in thousands):

The change in the carrying amount of goodwill for the six months ended June 30, 2020 is summarized as follows (in thousands):

Balance at December 31, 2019

Translation adjustments

Balance at March 31, 2020

Balance at June 30, 2020

The Company assesses goodwill for impairment annually on November 30, or on an interim basis if an event indicates a specific impairment may exist.

As a result of the Company’s segment realignment on January 1, 2020 (refer to Note 14 - Operating Segments for additional information), the Company performed a qualitative assessment of goodwill for all reporting units immediately prior to and after the reporting unit change, which was based on the quantitative assessment performed as of November 30, 2019 and activity in December 2019.

The Company concluded that no impairment existed and goodwill was reassigned based on the relative fair values of the product lines transferred to each reporting unit.

Approximately $12 million of goodwill is allocated to the Company’s Product reporting unit, which has a negative carrying value as of March 31, 2020.

As of March 31, 2020, the Company had no accumulated goodwill impairment losses.

As a result of the Company’s segment realignment during the three months ended June 30, 2020 (refer to Note 14 – Operating Segments for additional information), the Company performed a qualitative assessment of goodwill for all reporting units immediately prior to and after the reporting unit change.

The Company concluded that no impairment existed.

As of June 30, 2020 , the Company had no accumulated goodwill impairment losses.

Finite-Lived Intangible Assets

The carrying values of finite-lived intangible assets are as follows (in thousands):

March 31, 2020

June 30, 2020

Amortizable intangible assets

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The Credit Agreement permits the Company to borrow incremental term loans and/or increase commitments under the Revolving Credit Facility in an aggregate principal amount up to $ 50.0 million, subject to approval by the administrative agent and certain customary terms and conditions.

The Term Loans and Revolving Credit Facility can be repaid early, in part or in whole, at any time and from time to time, without premium or penalty, other than customary breakage reimbursement requirements for London Interbank Offering Rate ( “LIBOR” ) based loans.

The Term Loans must be prepaid with net cash proceeds of (i) certain debt incurred or issued by Forrester and its restricted subsidiaries and (ii) certain asset sales and condemnation or casualty events, subject to certain reinvestment rights.

Amounts borrowed under the Credit Agreement bear interest, at Forrester’s option, at a rate per annum equal to either (i) LIBOR for the a pplicable interest period plus a margin that is between 1.75% and 2.50% based on Forrester’s consolidated total leverage ratio or (ii) the alternate base rate plus a margin that is between 0.75% and 1.50% based on Forrester’s consolidated total leverage ra tio.

In addition, the Company pay s a commitment fee that is between 0.25% and 0.3 5 % per annum , based on Forrester’s consolidated total leverage ratio, on the average daily unused portion of the Revolving Credit Facility, payable quarterly, in arrears .

The Term Loans require repayment of the outstanding principal balance in quarterly installments each year, commencing on March 31, 2019 with the balance repayable on the maturity date, subject to customary exceptions.

The amount payable in each year as of March 31, 2020 is set forth in the table below (in thousands):

Amounts borrowed under the Credit Agreement bear interest, at Forrester’s option, at a rate per annum equal to either (i) LIBOR for the applicable interest period plus a margin that is between 1.75 % and 2.50 % based on Forrester’s consolidated total leverage ratio or (ii) the alternate base rate plus a margin that is between 0.75 % and 1.50 % based on Forrester’s consolidated total leverage ratio.

In addition, the Company pays a commitment fee that is between 0.25 % and 0.35 % per annum, based on Forrester’s consolidated total leverage ratio, on the average daily unused portion of the Revolving Credit Facility, payable quarterly, in arrears.

The Term Loans require repayment of the outstanding principal balance in quarterly installments each year, with the balance repayable on the maturity date, subject to customary exceptions.

As of June 30, 2020 , the amount payable in each year a is set forth in the table below (in thousands):

2020 (remainder)

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Up to $ 5.0 million of the Revolving Credit Facility is available for the issuance of letters of credit, and any drawings under the letters of credit must be reimbursed within one business day.

As of March 31, 2020, $0.9 million in letters of credit were issued under the Revolving Credit Facility.

As of June 30, 2020 , $ 0.9 million in letters of credit were issued under the Revolving Credit Facility.

Forrester incurred $ 1.8 million in costs related to the Revolving Credit Facility, which are recorded in other assets on the Consolidated Balance Sheets.

4 unchanged sentences

The following table summarizes the Company’s total outstanding borrowings as of the dates indicated (in thousands):

March 31, 2020

June 30, 2020

December 31, 2019

4 unchanged sentences

Net carrying amount

The contractual annualized interest rate as of March 31, 2020 on the Term loan facility was 3.00%, which consisted of LIBOR of 1.00% plus a margin of 2.00%.

The contractual annualized interest rate as of June 30, 2020 on the Term loan facility was 2.1875 %, which consisted of LIBOR of 0.1875 % plus a margin of 2.00 %.

However, the Company has an interest rate swap that effectively converts the floating LIBOR base rates on a portion of the amounts outstanding to a fixed base rate.

Refer to Note 7 – Derivatives and Hedging for further information on the swap.

The Company had $75.0 million of available borrowing capacity on the revolver (not including the expansion feature) as of March 31, 2020.

The weighted average annual effective rate on the Company's total debt outstanding for the three months ended March 31, 2020, was 3.88%.

The Company had $ 75.0 million of available borrowing capacity on the revolver (not including the expansion feature) as of June 30, 2020 .

The weighted average annual effective rate on the Company's total debt outstanding for the three and six months ended June 30, 2020 , was 2.54 % and 3.24 %, respectively.

The Credit Agreement contains certain customary restrictive loan covenants, including among others, financial covenants that apply a maximum leverage ratio and minimum fixed charge coverage ratio.

The maximum leverage ratio is based on total debt outstanding at the measurement date divided by EBITDA (as defined in the Credit Agreement) and the fixed charge coverage ratio is based upon EBITDA, as defined, less capital expenditures, as a ratio to certain fixed charges, including Term Loan amortization, cash interest expense and cash taxes.

The maximum leverage ratio is based on total debt outstanding at the measurement date divided by EBITDA (as defined in the Credit Agreement) and the fixed charge coverage ratio is based upon EBITDA (as defined in the Credit Agreement), less capital expenditures, as a ratio to certain fixed charges, including Term Loan amortization, cash interest expense and cash taxes.

The negative covenants limit, subject to various exceptions, the Company’s ability to incur additional indebtedness, create liens on assets, merge, consolidate, liquidate or dissolve any part of the Company, sell assets, pay dividends or other payments in respect to capital stock, change fiscal year, or enter into certain transactions with affiliates and subsidiaries.

The Credit Agreement also contains customary events of default, representations, and warranties.

As of March 31, 2020, the Company is in c ompliance with its financial covenants under the Credit Agreement .

As of June 30, 2020 , the Company is in compliance with its financial covenants und er the Credit Agreement .

If the impact of COVID-19 is more severe than currently forecasted this may impact the Company’s ability to comply with its financial covenants, and it is not certa in that the Company would be able to renegotiate the terms of the Credit Agreement in order to provide relief related to the financial covenants .

If the Company were unable to meet its financial covenants and then were unable to renegotiate the terms of it s financial covenants, all debt outstanding under the Credit Agreement could become immediately due and payable .

If the impact of COVID-19 is more severe than currently forecasted this may impact the Company’s ability to comply with its financial covenants, and it is not certain that the Company would be able to renegotiate the terms of the Credit Agreement in order to provide relief related to the financial covenants.

If the Company were unable to meet its financial covenants and then were unable to renegotiate the terms of its financial covenants, all debt outstanding under the Credit Agreement could become immediately due and payable .

All obligations under the Credit Agreement are unconditionally guaranteed by each of the Company’s existing and future, direct and indirect material wholly-owned domestic subsidiaries, other than certain excluded subsidiaries, and are collateralized by a first priority lien on substantially all tangible and intangible assets including intellectual property and all of the capital stock of the Company and its subsidiaries (limited to 65 % of the voting equity of certain subsidiaries).

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The components of lease expense were as follows (in thousands):

Three Months Ended

March 31, 2020

March 31, 2019

For the Three Months Ended June 30,

Operating lease cost

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Total lease cost

For the Six Months Ended June 30,

Operating lease cost

Short-term lease cost

Variable lease cost

Sublease income

Total lease cost

Additional lease information is summarized in the following table (in thousands, except lease term and discount rate):

Three Months Ended

March 31, 2020

March 31, 2019

Six Months Ended

June 30, 2020

June 30, 2019

Cash paid for amounts included in the measurement of operating

3 unchanged sentences

Weighted-average discount rate - operating leases

Future minimum lease payments under non-cancellable leases as of March 31, 2020 are as follows (in thousands):

Future minimum lease payments under non-cancellable leases as of June 30, 2020 are as follows (in thousands):

2020 (remainder)

2 unchanged sentences

Present value of lease liabilities

Lease balances as of March 31, 2020 are as follows (in thousands):

Lease balances as of June 30, 2020 are as follows (in thousands):

Operating lease right-of-use assets

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The Company incurred $ 1.4 million of ROU asset impairments during the three months ended March 31, 2020 related to facility leases from the SiriusDecisions, Inc.

acquisition and are recorded in acquisition and integration costs in the Consolidated Statements of Operations.

During the three months ended March 31, 2020, the Company entered into several operating leases for office space which do not commence until later in 2020.

These operating leases, which aggregated $17.2 million of undiscounted lease payments, have lease terms of up to ten years.

Additionally, the Company could receive a variable incentive payment from its landlord to terminate one of its office space leases early.

These impairments are recorded in acquisition and integration costs in the Consolidated Statements of Operations .

During the three months ended June 30, 2020, the Company did not enter into any new leases.

As of June 30, 2020, only one of the operating leases entered into during the prior quarter had not yet commenced.

This operating lease, which consists of $ 13.9 million of undiscounted lease payments, has a lease term of ten years and is expected to commence later in 2020.

Additionally, the Company could receive a variable incentive payment from one of its landlords to terminate the related office space lease early.

The range of possible incentive payments is zero to $ 3.5 million, would be received in late 2020 or the first half of 2021, and is dependent on the Company’s ability to exit the existing facility by the proposed early termination dates.

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Accounts receivable includes amounts billed and currently due from customers.

Since the only condition for payment of our invoices is the passage of time, the Company records a receivable on the date the invoice is issued.

Since the only condition for payment of the Company’s invoices is the passage of time, a receivable is recorded on the date an invoice is issued.

Also included in accounts receivable are unbilled amounts resulting from revenue exceeding the amount billed to the customer, where the right to payment is unconditional.

If the right to payment for services performed was conditional on something other than the passage of time, the unbilled amount would be recorded as a separate contract asset.

There were no contract assets as of March 31, 2020 or 2019.

There were no contract assets as of June 30, 2020 or 2019.

The majority of the Company’s contracts are non-cancellable.

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Similar to accounts receivable, the Company does not record deferred revenue for invoices issued on a cancellable contract.

The Company recognized revenue of $69.9 and $58.1 million during the three months ended March 31, 2020 and 2019, respectively, related to its deferred revenue balance at the beginning of each such period.

During the three months ended June 30, 2020 and 2019, the Company recognized revenue of $ 43.2 and $ 53.5 million, respectively, related to its deferred revenue balance at the beginning of each such period.

During the six months ended June 30, 2020 and 2019, the Company recognized revenue of $ 113.1 and $ 111.6 million, respectively, related to its deferred revenue balance at the

beginning of each such period.

To determine revenue recognized in each such period from deferred revenue at the beginning of the period, the Company first allocates revenue to the individual deferred revenue balance outstanding at the beginning of the period, until the revenue equals that balance .

Approximately $343.6 million of revenue is expected to be recognized during the next 12 to 24 months from remaining performance obligations as of March 31, 2020.

Approximately $ 309.8 million of revenue is expected to be recognized during the next 12 to 24 months from remaining performance obligations as of June 30, 2020.

Cost to Obtain Contracts

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Costs to obtain a contract are amortized to operations as the related revenue is recognized over the initial contract term.

Amortization expense related to deferred commissions was $8.1 million and $7.2 million for the three months ended March 31, 2020 and 2019, respectively.

Amortization expense related to deferred commissions for the three months ended June 30, 2020 and 2019 was $ 9.0 million and $ 8.9 million, respectively.

Amortization expense related to deferred commissions for the six months ended June 30, 2020 and 2019 was $ 17.2 million and $ 16.0 million, respectively.

The Company evaluates the recoverability of deferred commissions at each balance sheet date .

Note 7 — Derivatives and Hedging

During 2019, the Company entered into an interest rate swap contract to mitigate the cash flow risk associated with changes in interest rates on its variable rate debt (see Note 4 – Debt ).

The Company accounts for its outstanding interest rate swap contract in accordance with FASB ASC Topic 815 – Derivatives and Hedging (“Topic 815”) , which requires all derivatives, including derivatives designated as accounting hedges, to be recorded on the balance sheet at fair value.

At March 31, 2020, the Company had a single interest rate swap contract that matures in 2022, with an initial notional amount of $95.0 million.

The notional amount at March 31, 2020 was $89.1 million.

The Company enters into derivative contracts (an interest rate swap and foreign currency forwards) to mitigate the cash flow risk associated with changes in interest rates on its variable rate debt (see Note 4 – Debt ) and changes in foreign exchange rates on forecasted foreign currency transactions.

The Company accounts for its derivate contracts in accordance with FASB ASC Topic 815 – Derivatives and Hedging (“Topic 815”) , which requires all derivatives, including derivatives designated as accounting hedges, to be recorded on the balance sheet at fair value.

Interest Rate Swap

At June 30, 2020, the Company had a single interest rate swap contract that matures in 2022 , with an initial notional amount of $ 95.0 million.

The notional amount at June 30, 2020 was $ 84.9 million.

The Company pays a base fixed rate of 1.65275 % and in return receives the greater of (1) 1-month LIBOR, rounded up to the nearest 1/16 of a percent, or (2) 0.00 %.

The fair value of the swap on March 31, 2020 was a liability of $1.8 million (see Note 8 – Fair Value Measurements for information on determining the fair value).

The fair value of the swap on June 30, 2020 was a liability of $ 1.7 million (see Note 8 – Fair Value Measurements for information on determining the fair value).

The liability is included in other non-current liabilities in the Consolidated Balance Sheets.

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As required under Topic 815, the swap’s effectiveness is assessed on a quarterly basis.

Since its inception, and through March 31, 2020, the interest rate swap was considered highly effective.

Accordingly, the $1.3 million net accumulated loss as of March 31, 2020 continues to be deferred and recorded, net of taxes, in other comprehensive loss.

Since its inception, and through June 30, 2020, the interest rate swap was considered highly effective.

Accordingly, the entire $ 1.2 million negative fair value as of June 30, 2020 is recorded, net of taxes, in other comprehensive loss.

The Company expects $ 0.8 million of this loss, net of taxes, to be reclassified into earnings within the next 12 months.

The Company’s derivative counterparty is an investment grade financial institution.

The Company does not have any collateral arrangements with its derivative counterparty and the derivative contract does not contain credit risk related contingent features.

The Company did not have any derivatives as of, or during, the three months ended March 31, 2019.

Foreign Currency Forwards

The Company enters into foreign currency forward exchange contracts to mitigate the effects of adverse fluctuations in foreign currency exchange rates on transactions entered into in the normal course of business that are denominated in foreign currencies that differ from the local functional currency.

These contracts generally have short durations and are recorded at fair value with both realized and unrealized gains and losses recorded in other income (expense), net in the Consolidated Statements of Operations because the Company does not designate these contracts as hedges for accounting purposes.

During the three months ended June 30, 2020, the Company entered into three foreign currency forward exchange contracts, all of which settled by June 30, 2020.

Accordingly, as of June 30, 2020, there are no amounts recorded in the Consolidated Balance Sheets for these contracts.

The Company’s derivative counterpart ies are investment grade financial institution s .

The Company does not have any collateral arrangements with its derivative counterpart ies and the derivative contract s do not contain credit risk related contingent features.

The table below provides information regarding amounts recognized in the Consolidated Statements of Operations for derivative contracts for the periods indicated (in thousands):

Three Months Ended

Six Months Ended

Amount recorded in:

Interest expense (1)

Other income (expense), net (2)

Consists of interest expense from interest rate swap contract.

Consists of net realized gains and losses on foreign currency forward contracts.

The Company did no t have any derivatives as of, or during, the six months ended June 30, 2019.

Note 8 — Fair Value Measurements

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The Company believes that the carrying amount of its variable-rate borrowings reasonably approximate their fair values because the rates of interest on those borrowings reflect current market rates of interest.

Additionally, the Company measures certain financial assets at fair value on a recurring basis including cash equivalents, contingent purchase price related to acquisitions, and its interest rate swap.

The fair values of these financial assets have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements:

Additionally, the Company measures certain financial assets and liabilities at fair value on a recurring basis including cash equivalents, contingent purchase price related to acquisitions, and its derivative contracts.

The fair values of these financial assets and liabilities have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements:

Level 1 — Fair value based on quoted prices in active markets for identical assets or liabilities.

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The following table represents the Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):

As of March 31, 2020

As of June 30, 2020

Money market funds (1)

Total Assets:

Contingent purchase price (2)

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Money market funds (1)

Total Assets:

Contingent purchase price (2)

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The acquisition of FeedbackNow on July 6, 2018 included a contingent consideration arrangement that required up to $ 4.2 million of consideration to be paid to the sellers based on the financial performance of FeedbackNow during the two-year period subsequent to the closing date.

The fair value of the remaining contingent consideration to be paid to the sellers is $2.5 million at both March 31, 2020 and December 31, 2019, and is included in accrued expenses and other current liabilities in the Consolidated Balance Sheets.

The fair value of the remaining contingent consideration to be paid to the sellers is $ 2.6 million at June 30, 2020 and $ 2.5 million at December 31, 2019, and is included in accrued expenses and other current liabilities in the Consolidated Balance Sheets.

The Company has an interest rate swap contract that hedges the risk of variability from interest payments on its borrowings (see Note 4 – Debt and Note 7 – Derivatives and Hedging ).

The fair value of the interest rate swap is based on mark-to-market valuations prepared by a third-party broker.

The fair value of the interest rate swap is based on valuations prepared by a third-party broker.

Those valuations are based on observable interest rates and other observable market data, which the Company considers Level 2 inputs.

During the three months ended March 31, 2020 and 2019, the Company did not transfer assets or liabilities between levels of the fair value hierarchy.

During the six months ended June 30, 2020 and 2019, the Company did not transfer assets or liabilities between levels of the fair value hierarchy.

Additionally, there have been no changes to the valuation techniques for Level 2 or Level 3 liabilities.

Level 3 liabilities at March 31, 2020 consist entirely of the contingent purchase price related to the acquisition of FeedbackNow.

Changes in the fair value of Level 3 contingent consideration for the three months ended March 31, 2020 were as follows (in thousands):

Level 3 liabilities at June 30, 2020 consist entirely of the contingent purchase price related to the acquisition of FeedbackNow.

Changes in the fair value of Level 3 contingent consideration for the six months ended June 30, 2020 were as follows (in thousands):

Consideration

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Foreign exchange effect

Balance at March 31, 2020

Balance at June 30, 2020

This amount was recognized as acquisition and integration costs within the Consolidated Statements of Operations.

As of March 31, 2020, the remaining range of undiscounted amounts that could be payable under this arrangement is zero to $2.5 million.

As of June 30, 2020, the remaining range of undiscounted amounts that could be payable under this arrangement is $ 2.0 million to $ 2.6 million.

The amount is expected to be finalized and paid to the sellers by the end of 2020.

The significant unobservable inputs used in the Monte Carlo simulation to fair value the contingent consideration included projected contract bookings, a discount rate of 17.3 %, and revenue volatility of 26.6 %.

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Certain items such as changes in tax rates, tax benefits or expense related to settlements of share-based payment awards, and foreign currency gains or losses are treated as discrete items and are recorded in the period in which they arise.

Income tax expense for the three months ended March 31, 2020 was $19 thousand resulting in an effective tax rate of negative 3.8% for the period.

Income tax benefit for the three months ended March 31, 2019 was $0.2 million resulting in an effective tax rate of 1.7% for the period.

The Company anticipates that its effective tax rate for the full year 2020 will be approximately 10% to 15%.

Income tax expense for the six months ended June 30, 2020 was $ 0.3 million resulting in an effective tax rate of 2.2 % for the period.

Income tax expense for the six months ended June 30, 2019 was $ 0.7 million resulting in an effective tax rate of ( 6.0 )% for the period.

The decrease in income tax expense during the 2020 period was due to the release of a U.S.

valuation allowance on capital loss carryforwards.

The Company anticipates that its effective tax rate for the full year 2020 will be approximately 1 %.

On March 27, 2020, Congress enacted the Coronavirus Aid, Relief and Economic Security ("CARES") Act to provide certain relief as a result of the COVID-19 outbreak.

The Company is currently evaluating the potential impact that the provisions in the CARES may have on its financial position and results of operations.

In July 2015, the U.S.

Tax Court issued an opinion in Altera Corp.

Commissioner related to the treatment of stock-based compensation expense in an intercompany cost-sharing arrangement.

The opinion invalidates part of a treasury regulation requiring stock-based compensation to be included in any qualified intercompany cost-sharing arrangement.

The Company previously recorded a tax benefit based on the opinion in the case.

In June 2019, the U.S.

Court of Appeals for Ninth Circuit reversed the U.S.

Tax Court’s decision.

submitted its appeal for an en banc rehearing before the U.S.

Court of Appeals for the Ninth Circuit, which was subsequently denied.

During 2020 , Altera Corp.

submitted a request to the Supreme Court to accept the case for review, which was also denied, resulting in finality of any legal recourse.

The Company maintains its previously recorded tax benefit in accordance with the U.S.

Tax Court decision.

Note 10 — Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows (in thousands):

Net Unrealized Gain

(Loss) on Interest

The components of accumulated other comprehensive loss are as follows (net of tax, in thousands):

Total Accumulated

Interest Rate

Other Comprehensive

Balance at December 31, 2019

Balance at March 31, 2020

Other comprehensive income (loss) activity during the period:

Foreign currency translation

Unrealized loss on interest rate swap, net of tax of $462

Unrealized loss before reclassification

Reclassification of realized losses to income

Other comprehensive income (loss) for the period

Balance at June 30, 2020

Total Accumulated

Other Comprehensive

Balance at March 31, 2019

Other comprehensive income (loss) activity during the period:

Foreign currency translation

Other comprehensive income (loss) for the period

Balance at June 30, 2019

Total Accumulated

Interest Rate

Other Comprehensive

Balance at December 31, 2019

Other comprehensive income (loss) activity during the period:

Foreign currency translation

Balance at March 31, 2019

Note 11 — Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the basic weighted average number of common shares outstanding during the period.

Diluted net loss per common share is computed by dividing net loss by the diluted weighted average number of common shares and common equivalent shares outstanding during the period.

The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury-stock method.

Unrealized loss before reclassification

Reclassification of realized losses to income

Other comprehensive income (loss) for the period

Balance at June 30, 2020

Total Accumulated

Other Comprehensive

Balance at December 31, 2018

Other comprehensive income (loss) activity during the period:

Foreign currency translation

Other comprehensive income (loss) for the period

Balance at June 30, 2019

Note 11 — Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the basic weighted average number of common shares outstanding during the period.

Diluted net income (loss) per common share is computed by dividing net income (loss) by the diluted weighted average number of common shares and common equivalent shares outstanding during the period.

weighted average number of common equivalent shares outstanding has been determined in accordance with the treasur y-stock method.

Common equivalent shares consist of common stock issuable on the exercise of outstanding stock options and the vesting of restricted stock units.

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Three Months Ended

Six Months Ended

Basic weighted average common shares outstanding

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The components of stockholders’ equity are as follows (in thousands):

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Treasury Stock

1 unchanged sentence

Income (Loss)

Balance at March 31, 2020

Issuance of common stock under

stock plans, net

Stock-based compensation expense

Other comprehensive income

Balance at June 30, 2020

Three Months Ended June 30, 2019

Treasury Stock

Comprehensive

Income (Loss)

Balance at March 31, 2019

Issuance of common stock under

stock plans, net

Stock-based compensation expense

Other comprehensive income

Balance at June 30, 2019

Six Months Ended June 30, 2020

Treasury Stock

Comprehensive

Income (Loss)

Balance at December 31, 2019

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pronouncement, net of tax of $ 61

Net change in interest rate swap, net

of tax of $462

Foreign currency translation

Balance at March 31, 2020

Three Months Ended March 31, 2019

Other comprehensive loss

Balance at June 30, 2020

Six Months Ended June 30, 2019

Treasury Stock

5 unchanged sentences

Stock-based compensation expense

Foreign currency translation

Balance at March 31, 2019

Restricted stock unit activity for the three months ended March 31, 2020 is presented below (in thousands, except per share data):

Other comprehensive income

Balance at June 30, 2019

Restricted stock unit activity for the six months ended June 30, 2020 is presented below (in thousands, except per share data):

Unvested at December 31, 2019

Unvested at March 31, 2020

Stock option activity for the three months ended March 31, 2020 is presented below (in thousands, except per share data and contractual term):

Unvested at June 30, 2020

Stock option activity for the six months ended June 30, 2020 is presented below (in thousands, except per share data and contractual term):

Term (in years)

Outstanding at December 31, 2019

Outstanding at March 31, 2020

Exercisable at March 31, 2020

Vested and expected to vest at March 31, 2020

Outstanding at June 30, 2020

Exercisable at June 30, 2020

Vested and expected to vest at June 30, 2020

Stock-Based Compensation

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Three Months Ended

Six Months Ended

Cost of services and fulfillment

3 unchanged sentences

Three Months Ended

Six Months Ended

Average risk-free interest rate

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As a result of the acquisition of SiriusDecisions on January 3, 2019 (see Note 2 – Acquisitions) , and the related debt incurred to fund the acquisition (see Note 4 – Debt ), the Company suspended its dividends program in 2019.

The Company did not declare or pay any dividends in the three months ended March 31, 2020 and March 31, 2019, respectively.

The Company did no t declare or pay any dividends in the six months ended June 30, 2020 and 2019, respectively.

Treasury Stock

As of March 31, 2020, Forrester’s Board of Directors had authorized an aggregate $535.0 million to purchase common stock under its stock repurchase program.

As of June 30, 2020, Forrester’s Board of Directors had authorized an aggregate $ 535.0 million to purchase common stock under its stock repurchase program.

The shares repurchased may be used, among other things, in connection with Forrester’s equity incentive and purchase plans.

In the three months ended March 31, 2020 and March 31, 2019, the Company did not repurchase any shares of common stock.

From the inception of the program through March 31, 2020, the Company repurchased 16.3 million shares of common stock at an aggregate cost of $474.9 million.

N ote 13 — Non-Marketable Investments

At March 31, 2020 and December 31, 2019, the carrying value of the Company’s non-marketable investments, which were composed of interests in technology-related private equity funds, was $2.5 million, and is included in other assets in the Consolidated Balance Sheets.

In the six months ended June 30, 2020 and 2019, the Company did no t repurchase any shares of common stock.

From the inception of the program through June 30, 2020, the Company repurchased 16.3 million shares of common stock at an aggregate cost of $ 474.9 million.

Note 13 — Non-Marketable Investments

At June 30, 2020 and December 31, 2019, the carrying value of the Company’s non-marketable investments, which were composed of interests in technology-related private equity funds, was $ 4.9 million and $ 2.5 million, respectively.

At June 30, 2020, $ 4.3 million is included in prepaid expenses and other current assets in the Consolidated Balance Sheets as Forrester received a distribution of this amount from the underlying funds during July 2020.

The remaining $ 0.6 million, and the entire balance at December 31, 2019, is included in other assets in the Consolidated Balance Sheets.

The Company’s non-marketable investments are accounted for using the equity method as the investments are limited partnerships and the Company has an ownership interest in excess of 5 % and, accordingly, the Company records its share of the investee’s operating results each period.

Gains (losses) from non-marketable investments were immaterial during the three months ended March 31, 2020 and 2019 and are included in gain (loss) on investments, net in the Consolidated Statements of Operations.

During the three months ended March 31, 2020 and 2019, no distributions were received from the funds.

Gains from non-marketable investments were $ 2.4 million during each of the three and six months ended June 30, 2020 and are included in gain (loss) on investments, net in the Consolidated Statements of Operations.

Gains (losses) from non-marketable investments were immaterial during the three and six months ended June 30, 2019.

During the three and six months ended June 30, 2020 and 2019, no distributions were received from the funds.

Note 14 — Operating Segments

As of January 1, 2020, the Company realigned its internal management and reporting into Products and Research segments.

The realignment eliminated the SiriusDecisions segment as it no longer operated under a separate management structure.

The 2019 amounts have been revised to conform to the current presentation.

The Products segment includes the revenues of the Connect, Analytics, and Events products and the costs of the organizations responsible for developing and delivering these products.

In addition, this segment includes Consulting revenues and the related cost of the Company’s project consulting organization.

The project consulting organization delivers a majority of the Company’s project consulting revenue and certain advisory services primarily related to the Analytics product line.

This segment also includes the costs of the product management organization that is responsible for product pricing and packaging and the launch of new products.

The Research segment includes the revenues of the Research products and the cost of the organizations responsible for developing and delivering the Company’s Research products.

In addition, this segment includes Consulting revenues primarily from the delivery of advisory services (such as workshops, speeches and advisory days) delivered by the Company’s research analysts.

As described in the Company’s Form 8-K filed on April 2, 2020, Forrester’s Chief Product Officer resigned from the Company effective April 17, 2020.

Subsequently, the Chief Product Officer position was eliminated and the Company reorganized its operations to reflect three lines of business:

Research, Consulting, and Events.

As a result of these changes, during the three months ended June 30, 2020, the Company realigned its internal reporting into Research, Consulting, and Events.

The realignment eliminated the Products segment as the product lines and organizations supporting the related revenues began operating under the new management structure.

The prior period amounts have been revised to conform to the current presentation.

The Research segment includes the revenues of the Research, Connect and Analytics products and the cost of the organizations responsible for developing and delivering these products.

In addition, this segment includes Consulting revenues from the delivery of advisory services (such as workshops, speeches and advisory days) delivered by the Company’s research and analytics analysts.

The costs of the product management organization that is responsible for product pricing and packaging, and the launch of new products is included in this segment.

The Consulting segment includes the revenues and the related costs of the Company’s project consulting organization.

The project consulting organization delivers a majority of the Company’s project consulting revenue and certain advisory services.

The Events segment includes the revenues and the costs of the organization responsible for developing and hosting in-person and virtual events.

The Company evaluates reportable segment performance and allocates resources based on segment revenues and expenses.

Segment expenses include the direct expenses of each segment organization and excludes selling and marketing expenses, general and administrative expenses, stock-based compensation expense, depreciation expense, adjustments to incentive bonus compensation from target amounts, amortization of intangible assets, interest and other expense, and losses on investments.

Segment expenses include the direct expenses of each segment organization and exclude s selling and marketing expenses, general and administrative expenses, stock-based compensation expense, depreciation expense, adjustments to incentive bonus compensation from target amounts, amortization of intangible assets, interest and other expense, and gains ( losses ) on investments.

The accounting policies used by the segments are the same as those used in the consolidated financial statements.

The Company provides disaggregated revenue by product in the segment tables below (in thousands):

Three Months Ended March 31, 2020

Research services revenues

Total research services revenues

Advisory services and events revenues

Total advisory services and events revenues

Three Months Ended June 30, 2020

Research revenues

Total research revenues

Total segment revenues

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Acquisition and integration costs

Interest expense, other income and gain on investments

Loss before income taxes

Three Months Ended March 31, 2019

Research services revenues

Total research services revenues

Advisory services and events revenues

Total advisory services and events revenues

Interest expense, other expense and gains on investments

Income before income taxes

Three Months Ended June 30, 2019

Research revenues

Total research revenues

Total segment revenues

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Acquisition and integration costs

Interest expense, other income and loss on investments

Interest expense, other expense and losses on investments

Income before income taxes

Six Months Ended June 30, 2020

Research revenues

Total research revenues

Total segment revenues

Segment expenses

Selling, marketing, administrative and other expenses

Amortization of intangible assets

Acquisition and integration costs

Interest expense, other income and gains on investments

Income before income taxes

Six Months Ended June 30, 2019

Research revenues

Total research revenues

Total segment revenues

Segment expenses

Selling, marketing, administrative and other expenses

Amortization of intangible assets

Acquisition and integration costs

Interest expense, other expense and losses on investments

Loss before income taxes

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements