What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-11-06 compared with 2020-08-10 · 117 added, 88 removed, 212 unchanged (49% of the section changed)

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Important factors that could cause actual future activities and results to differ include, among others, our ability to retain and enrich subscriptions to, and licenses of, our Research, Connect, and Analytics products, our ability to fulfill existing or generate new advisory and consulting engagements, our ability to generate and increase demand for the Events we host, technology spending, our ability to mitigate the adverse impact from the widespread outbreak of COVID-19 which could disrupt or restrict our ability to sell or fulfill, or reduce demand for, our products, services, and events, the risks and challenges inherent in international business activities including any impact of Brexit, our ability to offer new products and services, our dependence on key personnel, our ability to attract and retain qualified professional staff, our ability to respond to business and economic conditions and market trends, our ability to integrate the operations of acquired companies, the impact of our outstanding debt, the possibility of network disruptions and security breaches, competition and industry consolidation, our ability to enforce and protect our intellectual property rights, compliance with privacy laws, possible variations in our quarterly operating results, taxation risks, concentration of our stock ownership, and any weakness identified in our system of internal controls.

These risks are described more completely in our Annual Report on Form 10-K for the year ended December 31, 2019 and in Item 1A of Part II of this Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.

We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

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

We also announced that our events in the second half of 2020 will be held as virtual events.

While the duration and severity of this pandemic is uncertain, we currently expect a reduction in our subscription Research, Connect and Analytics revenues during the second half of the 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.

We had previously announced that our events for the remainder of 2020 will be held as virtual events.

While the duration and severity of this pandemic is uncertain, we currently expect the reduction in our subscription Research, Connect and Analytics revenues to continue during the fourth quarter of 2020 due to reduced customer contract booking activity that began in March 2020 and continued into the third quarter of 2020.

The extent to which the COVID-19 pandemic ultimately impacts our business, financial condition, results of operations, cash flows, and liquidity may differ from our 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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We paid for the acquisition with $175.0 million of debt and cash on hand.

See Note 2 - Acquisitions and Note 4 – Debt in the Notes to Consolidated Financial Statements for more information on the acquisition and related debt obligations.

Refer to Note 2 - Acquisitions and Note 4 – Debt in the Notes to Consolidated Financial Statements for more information on the acquisition and related debt obligations.

We derive revenues from subscriptions to our Research, Connect and Analytics products and services, licensing electronic “reprints” of our Research, performing advisory services and consulting projects, and hosting Events.

We offer contracts for our Research, Connect and Analytics products that are typically renewable annually and payable in advance.

Subscription products are recognized as revenue ratably over the term of the contract.

Subscription product revenues are recognized ratably over the term of the contract.

Accordingly, a substantial portion of our billings are initially recorded as deferred revenue.

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Billings for licensing of reprints are initially recorded as deferred revenue.

Clients purchase advisory and consulting services independently and/or to supplement their access to our subscription-based products.

Clients purchase advisory and consulting services independently and/or to supplement their access to our subscription products.

Consulting project revenues, which generally are short-term in nature and based upon fixed-fee agreements, are recognized as the services are provided.

Advisory service revenues, such as workshops, speeches and advisory days, are recognized when the service is complete or the customer receives the agreed upon deliverable.

Advisory service revenues, such as workshops, speeches and advisory days, are recognized when the service is

complete or the customer receives the agreed upon deliverable.

Billings attributable to advisory services and consulting projects are initially recorded as deferred revenue.

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A summary of our key metrics is as follows (dollars in millions):

September 30,

Deferred revenue

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Number of clients

Deferred revenue and agreement value decreased 6% and 3% , respectively , at June 30, 2020 compared to the prior year , primarily due to a reduction in contract billing s during the six months ended June 30, 2020 as the economic effects of COVID-19 became widespread in Europe and North America .

R etention and enrichment rate s decreased from the prior year as they were negatively affected by a decrease in contract bookings experienced in 2020.

Deferred revenue and agreement value decreased 8% and 5%, respectively, at September 30, 2020 compared to the prior year, primarily due to a reduction in contract bookings during the nine months ended September 30, 2020 due to the negative economic effects of COVID-19.

Retention and enrichment rates decreased from the prior year due to the decrease in contract bookings experienced in 2020.

Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

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On an ongoing basis, we evaluate our policies and estimates, including but not limited to, those related to our revenue recognition, leases, goodwill, intangible and other long-lived assets, and income taxes.

Management bases its estimates on historical experience, data available at the time the estimates are made and various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Total revenues

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Income (loss) before income taxes

Income tax expense

Income tax expense (benefit)

Net income (loss)

Three and Six Months Ended June 30, 2020 and 2019

Three and Nine Months Ended September 30, 2020 and 2019

Three Months Ended

September 30,

(dollars in millions)

Total revenues

Research revenues

Consulting revenues

Events revenues

Revenues attributable to customers outside of the U.S.

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Number of events

Six Months Ended

Nine Months Ended

September 30,

(dollars in millions)

Total revenues

Research revenues

Consulting revenues

Events revenues

Revenues attributable to customers outside of the U.S.

1 unchanged sentence

Number of events

Total revenues decreased 11% and 4% during the three and six months ended June 30, 2020, respectively, compared to the prior year periods and decreased 15% and 8%, respectively, after adjusting for the fair value adjustment of pre-acquisition deferred revenue that reduced revenues during the three and six months ended June 30, 2019.

Total revenues remained essentially consistent and decreased 3% during the three and nine months ended September 30, 2020, respectively, compared to the prior year periods.

This includes the fair value adjustment of pre-acquisition deferred revenue, which reduced revenues during the three and nine months ended September 30, 2019, favorably impacting the comparable periods in 2020 by 1% and 3%, respectively.

Revenues from customers outside the U.S.

decreased 12% and 7% during the three and six months ended June 30, 2020, respectively, which was primarily due to a decrease in revenues in Canada and the United Kingdom.

decreased 4% and 6% during the three and nine months ended September 30, 2020, respectively, which was primarily due to a decrease in revenues in Canada and the United Kingdom.

Research revenues are recognized as revenue primarily on a ratable basis over the term of the contracts, which are generally twelve-month periods.

Research revenues decreased 4% and increased 1% during the three and six months ended June 30, 2020, respectively, compared to the prior year periods and decreased 7% and 3%, respectively, after adjusting for the fair value adjustment of pre-acquisition deferred revenue that reduced revenues during the three and six months ended June 30, 2019.

The decrease in Research revenues, after adjusting for the deferred revenue fair vale adjustment, was driven by reduced revenues for the Research, Connect, and Analytics products.

Consulting revenues increased 3% and 4% during the three and six months ended June 30, 2020, respectively, compared to the prior year periods primarily due to growth in project consulting.

Events revenues decreased 72% during both the three and six months ended June 30, 2020 compared to the prior year periods, and decreased 85% for both periods after adjusting for the fair value adjustment of pre-acquisition deferred revenue that reduced revenues during the three and six months ended June 30, 2019.

The decrease in Events revenues was due to lower sponsorship revenues in 2020 compared to the prior year due primarily to the change to virtual events as a result of the COVID-19 pandemic, and, to a lesser extent, having six fewer events during the 2020 period.

Research revenues decreased 2% and remained essentially consistent during the three and nine months ended September 30, 2020, respectively, compared to the prior year periods.

During the three and nine months ended September 30, 2020, the decrease in Research revenues, after adjusting for the deferred revenue fair value adjustment, was driven by reduced revenues for the Research, Connect, and Analytics products.

Consulting revenues increased 6% and 5% during the three and nine months ended September 30, 2020, respectively, compared to the prior year periods primarily due to growth in project consulting that was partially offset by slower growth in advisory services.

Events revenues decreased 20% and 68% during the three and nine months ended September 30, 2020, respectively, compared to the prior year periods.

This includes the fair value adjustment of pre-acquisition deferred revenue, which reduced revenues during the nine months ended September 30, 2019, favorably impacting the comparable period in 2020 by 13%.

The decrease in Events revenues was due to lower sponsorship revenues in 2020 compared to the prior year period due primarily to the change to virtual events as a result of the COVID-19 pandemic, and, to a lesser extent, having seven fewer events during the 2020 period.

Refer to the “Segments Results” section below for a discussion of revenues and expenses by segment.

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Three Months Ended

September 30,

Cost of services and fulfillment (dollars in millions)

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(at end of period)

Six Months Ended

Nine Months Ended

September 30,

Cost of services and fulfillment (dollars in millions)

Cost of services and fulfillment as a percentage of total

Cost of services and fulfillment expenses decreased 22% during the three months ended June 30, 2020 compared to the prior year period.

The decrease was primarily due to (1) a $7.6 million decrease in event expenses due to switching our two flagship events to virtual delivery and the cancellation of two smaller events, both as a result of the COVID-19 pandemic, (2) a $2.9 million decrease in compensation and benefit costs, resulting principally from a decrease in incentive bonuses and other related cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic, partially offset by an increase in headcount and merit increases, (3) a $2.6 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19

pandemic , and (4) a $0.3 million decrease in stock compensation expense.

These decreases were partially offset by a $1.

1 million increase in professional services costs primarily due to an increase in outsourced services related to revenue delivery .

Cost of services and fulfillment expenses decreased 14% during the six months ended June 30, 2020 compared to the prior year period.

The decrease was primarily due to (1) a $7.8 million decrease in event expenses due to switching our two flagship events to virtual delivery and the cancellation of two smaller events, both as a result of the COVID-19 pandemic, (2) a $5.6 million decrease in compensation and benefit costs, resulting principally from a decrease in incentive bonuses and other related cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic, partially offset by an increase in headcount and merit increases, (3) a $3.2 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic, and (4) a $0.2 million decrease in stock compensation expense.

These decreases were partially offset by a $2.6 million increase in professional services costs primarily due to an increase in outsourced services related to revenue delivery, survey costs, and product enhancements .

Cost of services and fulfillment expenses increased 3% during the three months ended September 30, 2020 compared to the prior year period.

The increase was primarily due to (1) a $2.9 million increase in compensation and benefits due to an increase in headcount, merit increases, and the reinstatement of some employee benefits during the third quarter that were previously suspended as a result of the impact of the COVID-19 pandemic, and (2) a $0.9 million increase in professional services costs primarily due to an increase in outsourced services related to revenue delivery and survey costs .

These increases were partially offset by (1) a $1.8 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic, and (2) a $0.5 million

decrease in event expenses due to switching our events to virtual delivery as a result of the COVID-19 pandemic , and one less event compared to the prior year period.

Cost of services and fulfillment expenses decreased 9% during the nine months ended September 30, 2020 compared to the prior year period.

The decrease was primarily due to (1) an $8.3 million decrease in event expenses due to switching our events to virtual delivery as a result of the COVID-19 pandemic, as well as seven less events compared to the prior year period, (2) a $5.0 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic, (3) a $2.8 million decrease in compensation and benefit costs, resulting principally from a decrease in incentive bonuses and other related cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic, partially offset by an increase in headcount and merit increases, and (4) a $0.3 million decrease in stock compensation expense.

These decreases were partially offset by a $3.5 million increase in professional services costs primarily due to an increase in outsourced services related to revenue delivery, temporary contractors, survey costs, and product enhancements .

Selling and Marketing

Three Months Ended

September 30,

Selling and marketing expenses (dollars in millions)

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Selling and marketing employees (at end of period)

Six Months Ended

Nine Months Ended

September 30,

Selling and marketing expenses (dollars in millions)

Selling and marketing expenses as a percentage of total

Selling and marketing expenses decreased 11% during the three months ended June 30, 2020 compared to the prior year period.

The decrease was primarily due to (1) a $2.5 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic, (2) a $1.7 million decrease in compensation and benefit costs, resulting principally from a decrease in incentive bonuses and other related cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic as well as a decrease in commissions expense, partially offset by an increase in headcount and merit increases, (3) a $0.3 million decrease in bad debt expense, and (4) a $0.2 million decrease in marketing costs as a result of moving our events to virtual delivery.

Selling and marketing expenses decreased 8% during the six months ended June 30, 2020 compared to the prior year period.

The decrease was primarily due to (1) a $3.6 million decrease in travel and entertainment expenses due to reduced travel and other related cost reduction measures as a result of the COVID-19 pandemic, (2) a $2.4 million decrease in compensation and benefit costs, resulting principally from a decrease in incentive bonuses and other related cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic, as well as a decrease in commissions expense, partially offset by an increase in headcount and merit increases, and (3) a $0.4 million decrease in marketing and training costs as a result of moving our events to virtual delivery.

Selling and marketing expenses increased 1% during the three months ended September 30, 2020 compared to the prior year period.

The increase was primarily due to a $3.0 million increase in compensation and benefit costs due to an increase in headcount, merit increases, commissions expense and the reinstatement of some employee benefits previously suspended as a result of the impact of the COVID-19 pandemic.

This increase was partially offset by (1) a $1.6 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic, (2) a $0.5 million decrease in bad debt expense, and (3) a $0.2 million decrease in professional services costs.

Selling and marketing expenses decreased 5% during the nine months ended September 30, 2020 compared to the prior year period.

The decrease was primarily due to (1) a $5.3 million decrease in travel and entertainment expenses due to reduced travel and other related cost reduction measures as a result of the COVID-19 pandemic, (2) a $0.5 million decrease in marketing and training costs as a result of moving our events to virtual delivery, and (3) a $0.4 million decrease in bad debt expense.

These decreases were partially offset by a $0.3 million increase in compensation and benefit costs, resulting principally from an increase in headcount and merit increases as well as an increase in commissions expense, partially offset by a decrease in incentive bonuses and other related cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic.

General and Administrative

Three Months Ended

September 30,

General and administrative expenses (dollars in millions)

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General and administrative employees (at end of period)

Six Months Ended

Nine Months Ended

September 30,

General and administrative expenses (dollars in millions)

1 unchanged sentence

total revenues

General and administrative expenses decreased 13% during the three months ended June 30, 2020 compared to the prior year period .

The decrease was primarily due to (1) a $ 1 .

2 million decrease in compensation and benefit costs, resulting principally from a decrease in incentive bonuses and other related cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic , as well as a decrease in headcount, and (2) a $0.3 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic .

General and administrative expenses decreased 11% during the six months ended June 30, 2020 compared to the prior year period.

The decrease was primarily due to (1) a $2.6 million decrease in compensation and benefit costs, resulting principally from a decrease in incentive bonuses and other related cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic, and (2) a $0.3 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic.

Depreciation expense increased by $0.3 million and $0.7 million during the three and six months ended June 30, 2020, respectively, compared to the prior year periods due primarily to additional leasehold improvements being put into service.

General and administrative expenses decreased 7% during the three months ended September 30, 2020 compared to the prior year period.

The decrease was primarily due to (1) a $0.6 million decrease in professional services costs mostly due to a decrease in consulting expenses, (2) a $0.2 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic, and (3) a $0.2 million decrease in stock compensation expense.

General and administrative expenses decreased 10% during the nine months ended September 30, 2020 compared to the prior year period.

The decrease was primarily due to (1) a $2.5 million decrease in compensation and benefit costs, resulting principally from a decrease in incentive bonuses and other related cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic, as well as a decrease in headcount, (2) a $0.5 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic, (3) a $0.5 million decrease in professional services costs mostly due to a decrease in consulting expenses, and (4) a $0.2 million decrease in stock compensation expense.

Depreciation expense increased by $0.4 million and $1.1 million during the three and nine months ended September 30, 2020, respectively, compared to the prior year periods due primarily to additional leasehold improvements being put into service.

Amortization of Intangible Assets

Amortization expense decreased by $0.4 million and $1.9 million during the three and six months ended June 30, 2020, respectively, compared to the prior year periods due to certain technology intangible assets becoming fully amortized.

Amortization expense decreased by $0.9 million and $2.8 million during the three and nine months ended September 30, 2020, respectively, compared to the prior year periods due to certain technology intangible assets becoming fully amortized.

Acquisition and Integration Costs

The Company did not have any acquisitions in 2020 and had one acquisition, SiriusDecisions, at the beginning of 2019.

We did not have any acquisitions in 2020 and had one acquisition, SiriusDecisions, at the beginning of 2019.

Acquisition and integration costs consist of direct and incremental costs to acquire and integrate acquired companies and primarily consist of certain fair value adjustments, consulting, severance, accounting and tax professional fees, and lease expense for unused facilities.

Acquisition and integration costs decreased by $1.9 million during the three months ended June 30, 2020 compared to the prior year period primarily due to a decrease in professional service fees, partially offset by an increase related to the benefit of recording deferred commissions for SiriusDecisions in the year of the acquisition.

Acquisition and integration costs decreased by $2.0 million during the six months ended June 30, 2020 compared to the prior year period primarily due to (1) a $4.1 million decrease in professional service fees and transaction costs, and (2) a $1.4 million decrease in severance.

These decreases were offset by (1) a $1.9 million ROU asset impairment recognized in the 2020 period, and (2) a $1.8 million increase related to the benefit of recording deferred commissions for SiriusDecisions in the year of the acquisition.

Acquisition and integration costs decreased by $2.1 million during the three months ended September 30, 2020 compared to the prior year period primarily due to a decrease in professional service fees and severance, partially offset by an increase related to the benefit of recording deferred commissions for SiriusDecisions in the year of the acquisition.

Acquisition and integration costs decreased by $4.0 million during the nine months ended September 30, 2020 compared to the prior year period primarily due to (1) a $4.8 million decrease in professional service fees and transaction costs, (2) a $2.3 million decrease in severance, and (3) a $0.7 million decrease in marketing and insurance costs.

These decreases were partially offset by (1) a $2.3 million increase related to the benefit of recording deferred commissions for SiriusDecisions in the year of the acquisition, and (2) a $1.9 million ROU asset impairment recognized in the 2020 period.

We expect to incur integration costs in a range of $4.5 million to $5.0 million for the year ending December 31, 2020.

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Interest expense consists of interest on our borrowings used to finance the previous acquisition of SiriusDecisions and realized gains (losses) on the related interest rate swap.

Interest expense decreased by $0.8 million and $1.6 million during the three and six months ended June 30, 2020, respectively, compared to the prior year periods.

Interest expense decreased by $0.6 million and $2.2 million during the three and nine months ended September 30, 2020, respectively, compared to the prior year periods.

These decreases were due to lower average outstanding borrowings and lower effective interest rates.

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Other income (expense), net primarily consists of gains (losses) on foreign currency, gains (losses) on foreign currency forward contracts, and interest income.

Other income (expense), net remained essentially consistent during the three months ended June 30, 2020 compared to the prior year period.

The increase in other income (expense), net of $0.5 million during the six months ended June 30, 2020 compared to the prior year period was primarily due to a decrease in foreign currency losses.

The decrease in other income (expense), net of $0.4 million during the three months ended September 30, 2020 compared to the prior year period was primarily due to an increase in foreign currency losses.

The increase in other income (expense), net of $0.1 million during the nine months ended September 30, 2020 compared to the prior year period was primarily due to a decrease in foreign currency losses.

Gain (Loss) on Investments, Net

Gain (loss) on investments, net primarily represents our share of equity method investment gains and losses from our technology-related investment funds.

Gain (loss) on investments, net increased by $2.4 million during both the three and six months ended June 30, 2020 compared to the prior year periods due to an increase in investment gains generated by the underlying funds.

Gain (loss) on investments, net remained essentially consistent during the three months ended September 30, 2020 compared to the prior year period.

Gain (loss) on investments, net increased by $2.4 million during the nine months ended September 30, 2020 compared to the prior year period due to an increase in investment gains generated by the underlying funds.

Income Tax Expense

Three Months Ended

September 30,

Provision for income taxes (dollars in millions)

Effective tax rate

Six Months Ended

Nine Months Ended

September 30,

Provision for income taxes (dollars in millions)

Effective tax rate

Income tax expense decreased by $0.4 million during the six months ended June 30, 2020 compared to the prior year period due to the release of a U.S.

valuation allowance on capital loss carryforwards.

Income tax expense increased by $2.8 million during the nine months ended September 30, 2020 compared to the prior year period primarily due to the increase in overall U.S.

profitability.

For the full year 2020, we anticipate that our effective tax rate will be approximately 25%.

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(dollars in thousands)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Research revenues

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(dollars in thousands)

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

Research revenues

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(dollars in thousands)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Research revenues

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(dollars in thousands)

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Research revenues

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Segment expenses

Research segment revenues decreased 5% and remained essentially consistent during the three and six months ended June 30, 2020, respectively, compared to the prior year periods , and decreased 7% and 4%, respectively, after adjusting for the fair value adjustment of pre-acquisition deferred revenue that reduced revenues during the three and six months ended June 30, 2019.

The decrease in segment revenues, after adjusting for the deferred revenue fair value adjustment, was due to (1) a decrease in Research product line revenues due to a decrease in our subscription revenues that was partially offset by an increase in reprint product revenues, (2) a decrease in Connect product revenues due primarily to a decrease in the leadership board product, (3) a decrease in our Analytics products, and (4) a decrease in Consulting product revenues due to a decrease in advisory delivery during the period.

Research segment expenses decreased 17% and 13% during the three and six months ended June 30, 2020, respectively, compared to the prior year periods.

The decrease in expenses during the three months ended June 30, 2020 was primarily due to a (1) a $3.0 million decrease in compensation and benefit costs resulting principally from a decrease in incentive bonuses and other cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic, partially offset by an increase in headcount and merit increases, and (2) a $1.9 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic.

The decrease in expenses during the six months ended June 30, 2020 was primarily due to (1) a $5.9 million decrease in compensation and benefit costs resulting principally from a decrease in incentive bonuses and other related cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic, partially offset by an increase in headcount and merit increases, and (2) a $1.8 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic.

Consulting segment revenues increased 13% during the three and six months ended June 30, 2020, respectively, compared to the prior year periods driven by strong consulting delivery.

Consulting segment expenses increased 7% and 6% during the three and six months ended June 30, 2020, respectively, compared to the prior year periods.

The increase in expenses during the three months ended June 30, 2020 was primarily due to (1) a $0.8 million increase in professional services primarily due to an increase in outsourced services related to revenue delivery and an increase in survey costs, (2) a $0.3 million increase in compensation and benefit costs due to an increase in headcount and merit increases, partially offset by a decrease in incentive bonuses due to the cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic, and (3) a $0.4 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic.

The increase in expenses during the six months ended June 30, 2020 was primarily due to (1) a $1.5 million increase in professional services primarily due to an increase in outsourced services related to revenue delivery and an increase in survey costs, (2) a $0.3 million increase in compensation and benefit costs due to an increase in headcount and merit increases, partially offset by a decrease in incentive bonuses due to the cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic, and (3) a $0.6 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic.

Event segment revenues decreased 72% during both the three and six months ended June 30, 2020 compared to the prior year periods and decreased 85% for both periods after adjusting for the fair value adjustment of pre-acquisition deferred revenue that reduced revenues during the three and six months ended June 30, 2019.

Event segment expenses decreased 70% and 67% during the three and six months ended June 30, 2020, respectively, compared to the prior year periods.

The decrease in expenses during the three months ended June 30, 2020 was primarily due to (1) a $7.3 million decrease in event expenses due primarily to the change to virtual events as a result of the COVID-19 pandemic, and, to a lesser extent, having six fewer events during the 2020 period, and (2) a $0.2 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic.

The decrease in expenses during the six months ended June 30, 2020 was primarily due to (1) a $7.4 million decrease in event expenses due primarily to the change to virtual events as a result of the COVID-19 pandemic, and, to a lesser extent, having six fewer events during the 2020 period, and (2) a $0.3 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic.

Research segment revenues decreased 2 % and 1 % during the three and nine months ended September 30, 2020 , respectively, compared to the prior year periods .

The decrease in segment revenues during the three months ended September 30, 2020 , after adjusting for the deferred revenue fair value adjustment, was due to (1) a decrease in Research product line revenues due to a decrease in our subscription revenues that was partially offset by an increase in reprint product revenues, and (2) a decrease in Connect product revenues due primarily to a decrease in the leadership board product that was partially offset by an increase in the learning and executive programs products .

The decrease in segment revenues during the nine months ended September 30, 2020 , after adjusting for the deferred revenue fair value adjustment, was due to (1) a decrease in Research product line revenues due to a decrease in our subscription revenues that was partially offset by an increase in reprint product revenues, (2) a decrease in Connect product revenues due primarily to a decrease in the leadership board product that was partially offset by an increase in the learning and executive programs products, (3) a decrease in our Analytics products, and (4) a decrease in Consulting product revenues due to a decrease in advisory delivery during the period.

Research segment expenses remained essentially consistent and decreased 9% during the three and nine months ended September 30, 2020, respectively, compared to the prior year periods.

The decrease in expenses during the nine months ended September 30, 2020 was primarily due to (1) a $4.6 million decrease in compensation and benefit costs resulting principally from a decrease in incentive bonuses and other related cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic, partially offset by an increase in headcount and merit increases, and (2) a $3.2 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic.

Consulting segment revenues increased 10% and 12% during the three and nine months ended September 30, 2020, respectively, compared to the prior year periods driven by strong demand for consulting services.

Consulting segment expenses increased 4% and 6% during the three and nine months ended September 30, 2020, respectively, compared to the prior year periods.

The increase in expenses during the three months ended September 30, 2020 was primarily due to (1) a $0.7 million increase in professional services primarily due to an increase in outsourced services related to revenue delivery and an increase in survey costs, which was partially offset by a $0.4 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic.

The increase in expenses during the nine months ended September 30, 2020 was primarily due to (1) a $2.2 million increase in professional services primarily due to an increase in outsourced services related to revenue delivery and an increase in survey costs, temporary contractors, and product enhancements, (2) a $0.5 million increase in compensation and benefit costs due to an increase in headcount and merit increases, partially offset by a decrease in incentive bonuses due to the cost-reduction measures implemented as a result of the impact of the COVID-19 pandemic, and (3) a $1.0 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic.

Event segment revenues decreased 21% and 68% during the three and nine months ended September 30, 2020, respectively, compared to the prior year periods.

Event segment expenses decreased 26% and 61% during the three and nine months ended September 30, 2020, respectively, compared to the prior year periods.

The decrease in expenses during the three months ended September 30, 2020 was primarily due to a $0.4 million decrease in event expenses due primarily to the change to virtual events as a result of the COVID-19 pandemic, and, to a lesser extent, having one fewer event during the 2020 period.

The decrease in expenses during the nine months ended September 30, 2020 was primarily due to (1) a $7.9 million decrease in event expenses due primarily to the change to virtual events as a result of the COVID-19 pandemic, and, to a lesser extent, having seven fewer events during the 2020 period, and (2) a $0.3 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic.

Liquidity and Capital Resources

We have historically financed our operations primarily through funds generated from operations.

Research revenues, which constituted approximately 67% of our revenues during the six months ended June 30, 2020, are generally renewable annually and are typically payable in advance.

We generated cash from operating activities of $25.0 million and $33.5 million during the six months ended June 30, 2020 and 2019, respectively.

The $8.5 million decrease in cash provided from operations for the six months ended June 30, 2020 was primarily due to an $18.2 million reduction in cash generated from accounts receivable and deferred revenue due to a reduction in contract bookings for the period, partially offset by the combination of an increase in net income for the period with an increases in cash used for working capital.

During the six months ended June 30, 2020, we used cash in investing activities of $5.1 million for purchases of property and equipment, primarily consisting of software and leasehold improvements .

During the six months ended June 30, 2019, we used cash in

investing activities of $24 3 .

6 million, consisting primarily of $238.9 million for the acquisition of SiriusDecisions, net of cash acquired, and $ 4 .

Research revenues, which constituted approximately 67% of our revenues during the nine months ended September 30, 2020, are generally renewable annually and are typically payable in advance.

We generated cash from operating activities of $29.2 million and $45.6 million during the nine months ended September 30, 2020 and 2019, respectively.

The $16.4 million decrease in cash provided from operations for the nine months ended September 30, 2020 was primarily due to a $33.2 million reduction in cash generated from accounts receivable and deferred revenue due to a reduction in contract bookings for the period, partially offset by the combination of an increase in net income for the period with an increase in cash used for working capital.

During the nine months ended September 30, 2020, we used cash in investing activities of $2.9 million primarily for $7.3 million of purchases of property and equipment, primarily consisting of software and leasehold improvements .

This was partially offset by a $4.3 million distribution received from an equity method investment.

During the nine months ended September 30, 2019,

we used cash in investing activities of $24 6 .

0 million, consisting primarily of $23 7 .

7 million for the acquisition of SiriusDecisions, net of cash acquired, and $ 8 .

4 million in purchases of property and equipment , consist ing primarily of software and leasehold improvements.

We used $17.6 million of cash from financing activities during the six months ended June 30, 2020 primarily due to $18.7 million of repayments of debt that consisted of $14.0 million of discretionary payments on our revolving credit facility and $4.7 million of required repayments of our term loan.

We generated $140.7 million of cash in financing activities during the six months ended June 30, 2019 primarily due to $171.3 million of borrowings, which reflects the face value of debt of $175.0 million less $3.7 million that was netted against the proceeds to pay debt issuance costs.

We used $21.5 million of cash from financing activities during the nine months ended September 30, 2020 primarily due to $21.0 million of repayments of debt that consisted of $14.0 million of discretionary payments on our revolving credit facility and $7.0 million of required repayments of our term loan.

We generated $130.3 million of cash in financing activities during the nine months ended September 30, 2019 primarily due to $171.3 million of borrowings, which reflects the face value of debt of $175.0 million less $3.7 million that was netted against the proceeds to pay debt issuance costs.

This was partially offset by $40.7 million of repayments of debt that consisted of $36.0 million of discretionary payments on our revolving credit facility and $4.7 million of required repayments of our term loan.

During the remainder of 2020, we anticipate paying approximately $3.6 million of deferred acquisition purchase price (which consists of up to $2.6 million for a contingent consideration agreement (refer to Note 8 – Fair Value Measurements in the Notes to Consolidated Financial Statements) and $1.0 million of an indemnity holdback) for the FeedbackNow acquisition that occurred in 2018.

During the remainder of 2020, we anticipate paying approximately $2.7 million of deferred acquisition purchase price for a contingent consideration agreement (refer to Note 8 – Fair Value Measurements in the Notes to Consolidated Financial Statements).

In connection with the acquisition of SiriusDecisions, we entered into a $200.0 million credit agreement on January 3, 2019 (the “Credit Agreement”).

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

As of June 30, 2020, we were in compliance with our financial covenants under the Credit Agreement.

As of September 30, 2020, we were in compliance with our financial covenants under the Credit Agreement.

We currently forecast that we will be in compliance with our financial covenants for at least one year from the issuance of these interim financial statements, after taking into consideration the cost cutting measures implemented during the first half of the year.

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

As of June 30, 2020, we had cash and cash equivalents of $68.4 million.

As of September 30, 2020, we had cash and cash equivalents of $73.0 million.

This balance includes $57.9 million held outside of the U.S.

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We primarily lease office space under non-cancellable operating lease agreements.

During the three months ended March 31, 2020, we entered into several operating leases that commence later in 2020.

During the three months ended March 31, 2020, we entered into several operating leases that commenced later in 2020.

These leases require us to make $17.2 million of lease payments over the terms of the leases, which are up to ten years.

This additional amount is reflected in the table above.

Refer to Note 5 - Leases in the Notes to the Consolidated Financial Statements.

Purchase commitments principally consist of contractual commitments for software, outsourced research services and Event venues.

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As a result of these changes, during the three months ended March 31, 2020 we were able to cancel contracts for event venues, reducing our previously disclosed purchase commitments amounts by a total of $2.1 million.

During the three months ended June 30, 2020, there were no additional material changes to our contractual obligations.

Other than as noted above, the Contractual Obligations section in our Annual Report on Form 10-K for the year ended December 31, 2019 remains current in all material respects.

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Recent Accounting Pronouncements

See Note 1 – Interim Consolidated Financial Statements in the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements including the expected dates of adoption and effects on results of operations and financial condition.

Refer to Note 1 – Interim Consolidated Financial Statements in the Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements including the expected dates of adoption and effects on results of operations and financial condition.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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 2. Management’s Discussion and Analysis