FORRESTER RESEARCH, INC. 10-Q

ITEM 1. FINANCIAL STATEMENTS FORRESTER RESEARCH, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data, unaudited) September 30, December 31, 2020 2019 ASSETS Current Assets: Cash and cash equivalents $ 73,027 $ 67,904 Accounts receivable, net of allowance for expected credit losses of $ 796 and $ 628 as of September 30, 2020 and December 31, 2019, respectively 54,141 84,605 Deferred commissions 14,408 20,326 Prepaid expenses and other current assets 16,041 19,201 Total current assets 157,617 192,036 Property and equipment, net 28,531 29,937 Operating lease right-of-use assets 73,211 69,100 Goodwill 244,990 243,895 Intangible assets, net 83,386 97,363 Other assets 5,040 6,829 Total assets $ 592,775 $ 639,160 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 1,707 $ 505 Accrued expenses and other current liabilities 54,802 79,857 Current portion of long-term debt 11,719 9,375 Deferred revenue 155,418 179,194 Total current liabilities 223,646 268,931 Long-term debt, net of deferred financing fees 98,268 121,170 Non-current operating lease liabilities 72,940 67,062 Other non-current liabilities 23,213 23,909 Total liabilities 418,067 481,072 Commitments and contingencies Stockholders' Equity (Note 12): Preferred stock, $ 0.01 par value Authorized - 500 shares; issued and outstanding - none — — Common stock, $ 0.01 par value Authorized - 125,000 shares Issued - 23,579 and 23,275 shares as of September 30, 2020 and December 31, 2019, respectively Outstanding - 18,948 and 18,644 shares as of September 30, 2020 and December 31, 2019, respectively 236 233 Additional paid-in capital 225,053 216,454 Retained earnings 125,554 118,147 Treasury stock - 4,631 shares as of September 30, 2020 and December 31, 2019 ( 171,889 ) ( 171,889 ) Accumulated other comprehensive loss ( 4,246 ) ( 4,857 ) Total stockholders’ equity 174,708 158,088 Total liabilities and stockholders’ equity $ 592,775 $ 639,160 The accompanying notes are an integral part of these consolidated financial statements. 3 FORRESTER RESEARCH, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data, unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Revenues: Research $ 72,813 $ 74,548 $ 219,230 $ 219,436 Consulting 34,633 32,619 102,980 98,422 Events 1,131 1,429 6,253 19,570 Total revenues 108,577 108,596 328,463 337,428 Operating expenses: Cost of services and fulfillment 46,125 44,929 133,442 146,610 Selling and marketing 42,209 41,605 121,599 127,655 General and administrative 12,475 13,533 35,936 39,944 Depreciation 2,544 2,121 7,398 6,310 Amortization of intangible assets 4,722 5,654 14,147 16,963 Acquisition and integration costs 328 2,394 3,815 7,848 Total operating expenses 108,403 110,236 316,337 345,330 Income (loss) from operations 174 ( 1,640 ) 12,126 ( 7,902 ) Interest expense ( 1,259 ) ( 1,904 ) ( 4,104 ) ( 6,341 ) Other income (expense), net ( 274 ) 127 ( 165 ) ( 229 ) Gain (loss) on investments, net — ( 17 ) 2,365 ( 61 ) Income (loss) before income taxes ( 1,359 ) ( 3,434 ) 10,222 ( 14,533 ) Income tax expense (benefit) 2,401 ( 735 ) 2,658 ( 73 ) Net income (loss) $ ( 3,760 ) $ ( 2,699 ) $ 7,564 $ ( 14,460 ) Basic income (loss) per common share $ ( 0.20 ) $ ( 0.15 ) $ 0.40 $ ( 0.78 ) Diluted income (loss) per common share $ ( 0.20 ) $ ( 0.15 ) $ 0.40 $ ( 0.78 ) Basic weighted average common shares outstanding 18,872 18,546 18,779 18,448 Diluted weighted average common shares outstanding 18,872 18,546 18,873 18,448 The accompanying notes are an integral part of these consolidated financial statements. 4 FORRESTER RESEARCH, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (In thousands, unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Net income (loss) $ ( 3,760 ) $ ( 2,699 ) $ 7,564 $ ( 14,460 ) Other comprehensive income (loss), net of taxes: Foreign currency translation 2,577 ( 1,614 ) 1,542 ( 1,450 ) Net change in fair value of interest rate swap 205 — ( 931 ) — Other comprehensive income (loss) 2,782 ( 1,614 ) 611 ( 1,450 ) Comprehensive income (loss) $ ( 978 ) $ ( 4,313 ) $ 8,175 $ ( 15,910 ) The accompanying notes are an integral part of these consolidated financial statements. 5 FORRESTER RESEARCH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) Nine Months Ended September 30, 2020 2019 Cash flows from operating activities: Net income (loss) $ 7,564 $ ( 14,460 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 7,398 6,310 Impairment of property and equipment 626 — Amortization of intangible assets 14,147 16,963 Net (gains) losses from investments ( 2,365 ) 61 Deferred income taxes ( 1,600 ) ( 9,257 ) Stock-based compensation 7,964 8,605 Operating lease right-of-use asset amortization and impairments 10,525 9,647 Amortization of deferred financing fees 736 720 Foreign currency losses 277 524 Changes in assets and liabilities, net of acquisitions: Accounts receivable 30,226 33,384 Deferred commissions 5,916 2,036 Prepaid expenses and other current assets 1,693 ( 610 ) Accounts payable 1,183 828 Accrued expenses and other liabilities ( 22,481 ) ( 6,550 ) Deferred revenue ( 23,554 ) 6,532 Operating lease liabilities ( 9,056 ) ( 9,111 ) Net cash provided by operating activities 29,199 45,622 Cash flows from investing activities: Acquisitions, net of cash acquired — ( 237,684 ) Purchases of property and equipment ( 7,279 ) ( 8,362 ) Other investing activity 4,335 29 Net cash used in investing activities ( 2,944 ) ( 246,017 ) Cash flows from financing activities: Proceeds from borrowings, net of costs — 171,275 Payments on borrowings ( 21,031 ) ( 40,688 ) Payment of debt issuance costs — ( 857 ) Deferred acquisition payments ( 1,064 ) ( 2,802 ) Proceeds from issuance of common stock under employee equity incentive plans 3,514 5,589 Taxes paid related to net share settlements of stock-based compensation awards ( 2,876 ) ( 2,232 ) Net cash provided by (used in) financing activities ( 21,457 ) 130,285 Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 580 ) ( 1,212 ) Net change in cash, cash equivalents and restricted cash 4,218 ( 71,322 ) Cash, cash equivalents and restricted cash, beginning of period 69,192 140,296 Cash, cash equivalents and restricted cash, end of period $ 73,410 $ 68,974 Supplemental disclosure of cash flow information: Cash paid for interest $ 3,385 $ 5,466 Cash paid for income taxes $ 2,338 $ 3,305 Non-cash financing activities for the nine months ended September 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. The accompanying notes are an integral part of these consolidated financial statements. 6 FORRESTER RESEARCH, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 — Interim Consolidated Financial Statements Basis of Presentation The accompanying unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. It is recommended that these financial statements be read in conjunction with the consolidated financial statements and related notes that appear in the Forrester Research, Inc. (“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 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 nine months ended September 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 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 had previously announced that its events for the remainder of 2020 will be held as virtual events. While the duration and severity of this pandemic is uncertain, the Company currently expects the reduction in its 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 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. The Company has implemented several cost-reduction measures that include reductions to travel, new hiring, and employee incentive compensation programs. 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 September 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 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 September 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 nine months ended September 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. 7 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). Nine Months Ended September 30, 2020 2019 Cash and cash equivalents $ 73,027 $ 67,629 Restricted cash classified in (1): Prepaid expenses and other current assets 345 717 Other assets 38 628 Cash, cash equivalents and restricted cash shown in statement of cash flows $ 73,410 $ 68,974 (1) Restricted cash consists of collateral required for letters of credit and credit card processing outside of the U.S. The short-term or long-term classification regarding the collateral for the letters of credit is determined in accordance with the expiration of the underlying lease as the letters of credit are non-cancellable while the leases are in effect. Adoption of New Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“Topic 326”). The standard amends the existing financial instrument incurred loss impairment model by requiring entities to use a forward-looking approach based on expected losses and to consider a broader range of reasonable and supportable information to estimate credit losses on certain types of financial instruments, including trade receivables. On January 1, 2020 , the Company adopted the standard using the modified retrospective method in which prior periods are not adjusted and recorded a cumulative effect adjustment of $ 0.2 million to decrease retained earnings. 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 nine months ended September 30, 2020 is summarized as follows (in thousands): Total Allowance Balance at December 31, 2019 $ 628 Cumulative effect adjustment of adopting Topic 326 218 Provision for expected credit losses 591 Write-offs ( 637 ) Translation adjustments ( 4 ) Balance at September 30, 2020 $ 796 The Company adopted the guidance in ASU No. 2017-04, Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment on January 1, 2020 . The new standard simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test and requires that instead, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The adoption of this standard did not impact the Company’s financial position or results of operations. The Company adopted the guidance in ASU No. 2018-13, Fair Value Measurement Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement on January 1, 2020 . The new standard modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement , including changes to fair value transfers and Level 3 fair value measurements. Changes required upon adoption of this standard are included in Note 8 – Fair Value Measurements and did not impact the Company’s financial position or results of operations. The Company adopted the guidance in ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract on January 1, 2020 . The new standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The adoption of this standard did not have a material impact on the Company’s financial position or results of operations. 8 Recent Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes . The new standard provides guidance to simplify the accounting for income taxes in certain areas, changes the accounting for select income tax transactions, and makes other minor improvements. The new standard will be effective for the Company on January 1, 2021. 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 Forrester accounts for business combinations in accordance with the acquisition method of accounting as prescribed by Accounts Standards Codification (“ASC”) Topic 805, Business Combinations (“Topic 805”). 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 nine months ended September 30, 2020. SiriusDecisions, Inc. On January 3, 2019, Forrester acquired 100 % of the issued and outstanding shares of SiriusDecisions, Inc. (“SiriusDecisions”), a privately-held company based in Wilton, Connecticut with approximately 350 employees globally. SiriusDecisions equips business-to-business (B2B) sales, marketing, and product leaders with the actionable research, frameworks, tools, operational benchmarks and expert advice they need to maximize performance and drive alignment. The acquisition creates several opportunities for the Company, including cross-selling services to the Company’s respective client bases, extending SiriusDecisions’ platform, methodologies, data, and best-practices tools into new roles, and accelerating international and industry growth. The acquisition of SiriusDecisions was determined to be an acquisition of a business under the provisions of Topic 805. 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 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 nine months ended September 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 Goodwill The change in the carrying amount of goodwill for the nine months ended September 30, 2020 is summarized as follows (in thousands): Total Balance at December 31, 2019 $ 243,895 Translation adjustments 1,095 Balance at September 30, 2020 $ 244,990 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 realignments during the first half of 2020 (refer to Note 14 – Operating Segments for additional information), the Company performed qualitative assessments of goodwill for all reporting units immediately prior to and after the reporting unit changes and concluded no impairment existed. Approximately $ 8.0 million of goodwill is allocated to the Company’s Consulting reporting unit, which has a negative carrying value as of September 30, 2020. 9 As of September 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): September 30, 2020 Gross Net Carrying Accumulated Carrying Amount Amortization Amount Amortizable intangible assets Customer relationships $ 109,977 $ 46,699 $ 63,278 Technology 16,815 9,326 7,489 Backlog 13,000 11,375 1,625 Trademarks 12,474 1,480 10,994 Total $ 152,266 $ 68,880 $ 83,386 December 31, 2019 Gross Net Carrying Accumulated Carrying Amount Amortization Amount Amortizable intangible assets Customer relationships $ 109,825 $ 40,169 $ 69,656 Technology 16,661 7,051 9,610 Backlog 13,000 6,500 6,500 Trademarks 12,451 854 11,597 Total $ 151,937 $ 54,574 $ 97,363 Estimated intangible asset amortization expense for each of the five succeeding years is as follows (in thousands): 2020 (remainder) $ 4,720 2021 12,380 2022 11,042 2023 10,862 2024 9,751 Thereafter 34,631 Total $ 83,386 Note 4 — Debt In connection with the acquisition of SiriusDecisions, on January 3, 2019 (the “Closing Date”) the Company entered into a $ 200.0 million credit agreement (the “Credit Agreement”). The Credit Agreement provides for: (1) senior secured term loans in an aggregate principal amount of $ 125.0 million (the “ Term Loans ”) and (2) a senior secured revolving credit facility in an aggregate principal amount of $ 75.0 million (the “ Revolving Credit Facility ”). On the Closing Date, the full $ 125.0 million of the Term Loans and $ 50.0 million of the Revolving Credit Facility were used to finance a portion of the acquisition of SiriusDecisions and to pay certain fees, costs and expenses incurred in connection with the acquisition and the Credit Agreement. The Credit Agreement is scheduled to mature on January 3, 2024 . 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 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. 10 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 September 30, 2020 , the amount payable in each year is set forth in the table below (in thousands): 2020 (remainder) $ 2,344 2021 12,500 2022 12,500 2023 15,625 2024 68,750 Total remaining principal payments $ 111,719 The Revolving Credit Facility does not require repayment prior to maturity, subject to customary exceptions. In addition to financing the acquisition, proceeds from the Revolving Credit Facility can also be used towards working capital and general corporate purposes. 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 September 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. These costs are being amortized as interest expense on the Consolidated Statements of Operations on a straight-line basis over the five-year term of the Revolving Credit Facility. Forrester incurred $ 2.8 million in costs related to the Term Loans, which are recorded as a reduction to the face value of long-term debt on the Consolidated Balance Sheets. These costs are being amortized as interest expense on the Consolidated Statements of Operations utilizing the effective interest rate method. Outstanding Borrowings The following table summarizes the Company’s total outstanding borrowings as of the dates indicated (in thousands): Description: September 30, 2020 December 31, 2019 Term loan facility (1) $ 111,719 $ 118,750 Revolving credit facility (2) — 14,000 Principal amount outstanding (3) 111,719 132,750 Less: Deferred financing fees ( 1,732 ) ( 2,205 ) Net carrying amount $ 109,987 $ 130,545 (1) The contractual annualized interest rate as of September 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. (2) The Company had $ 74.1 million of available borrowing capacity on the revolver (not including the expansion feature) as of September 30, 2020 . (3) The weighted average annual effective rate on the Company's total debt outstanding for the three and nine months ended September 30, 2020 , was 2.1875 % and 2.9006 %, 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 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. 11 As of September 30, 2020 , the Company is in compliance with its financial covenants und er the Credit Agreement . 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 cost - reduction measures implemented during the first quarter of the year. 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). Note 5 — Leases All of the Company’s leases are operating leases, the majority of which are for office space. Operating lease right-of-use (“ROU”) assets and non-current operating lease liabilities are included as individual line items on the Consolidated Balance Sheets, while short-term operating lease liabilities are recorded within accrued expenses and other current liabilities. Leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheets and are not material. The components of lease expense were as follows (in thousands): For the Three Months Ended September 30, 2020 2019 Operating lease cost $ 4,114 $ 3,851 Short-term lease cost 81 80 Variable lease cost 1,539 1,197 Sublease income ( 65 ) ( 54 ) Total lease cost $ 5,669 $ 5,074 For the Nine Months Ended September 30, 2020 2019 Operating lease cost $ 12,049 $ 11,215 Short-term lease cost 245 420 Variable lease cost 4,555 3,888 Sublease income ( 190 ) ( 121 ) Total lease cost $ 16,659 $ 15,402 Additional lease information is summarized in the following table (in thousands, except lease term and discount rate): For the Nine Months Ended September 30, 2020 2019 Cash paid for amounts included in the measurement of operating lease liabilities $ 9,056 $ 9,111 Operating lease right-of-use assets obtained in exchange for lease obligations $ 16,117 $ 17,770 Weighted-average remaining lease term - operating leases (years) 6.6 6.6 Weighted-average discount rate - operating leases 4.6 % 5.1 % 12 Future minimum lease payments under non-cancellable leases as of September 30, 2020 are as follows (in thousands): 2020 (remainder) $ 3,863 2021 15,285 2022 15,494 2023 14,962 2024 14,575 Thereafter 33,723 Total lease payments 97,902 Less imputed interest ( 13,062 ) Present value of lease liabilities $ 84,840 Lease balances as of September 30, 2020 are as follows (in thousands): Operating lease right-of-use assets $ 73,211 Short-term operating lease liabilities (1) $ 11,900 Non-current operating lease liabilities 72,940 Total operating lease liabilities $ 84,840 (1) Included in accrued expenses and other current liabilities on the Consolidated Balance Sheets. The Company’s leases do not contain residual value guarantees, material restrictions or covenants, and all sublease transactions are not material. The Company incurred $ 1.4 million of ROU asset impairments during the nine months ended September 30, 2020 related to facility leases from the SiriusDecisions, Inc. acquisition. These impairments are recorded in acquisition and integration costs in the Consolidated Statements of Operations . Additionally, the Company received a variable incentive payment of $ 3.5 million in the fourth quarter of 2020 from one of its landlords to terminate the related office space lease early. This amount will be recognized as a reduction in rent expense during the fourth quarter of 2020. Note 6 – Contract Assets and Liabilities Accounts Receivable Accounts receivable includes amounts billed and currently due from customers. 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 September 30, 2020 or 2019. The majority of the Company’s contracts are non-cancellable. However, for contracts that are cancellable by the customer, the Company does not record a receivable when it issues an invoice. The Company records accounts receivable on these contracts only up to the amount of revenue earned but not yet collected. In addition, since the majority of the Company’s contracts are for a duration of one year and payment is expected within one year from the transfer of products and services, the Company does not adjust its receivables or transaction prices for the effects of a significant financing component. Deferred Revenue The Company refers to contract liabilities as deferred revenue on the Consolidated Balance Sheets. Payment terms in the Company’s customer contracts vary, but generally require payment in advance of fully satisfying the performance obligation(s). Deferred revenue consists of billings in excess of revenue recognized. Similar to accounts receivable, the Company does not record deferred revenue for invoices issued on a cancellable contract. During the three months ended September 30, 2020 and 2019, the Company recognized revenue of $ 25.5 and $ 21.2 million, respectively, related to its deferred revenue balance at the beginning of each such period. During the nine months ended September 30, 2020 and 2019, the Company recognized revenue of $ 138.6 and $ 132.8 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 13 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 $ 301.0 million of revenue is expected to be recognized during the next 24 months from remaining performance obligations as of September 30, 2020. Cost to Obtain Contracts The Company capitalizes commissions paid to sales representatives and related fringe benefits costs that are incremental to obtaining customer contracts . These costs are included in deferred commissions on the Consolidated Balance Sheets. The Company accounts for these costs at a portfolio level as the Company’s contracts are similar in nature and the amortization model used closely matches the amortization expense that would be recognized on a contract-by-contract basis. 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 for the three months ended September 30, 2020 and 2019 was $ 9.9 million and $ 8.1 million, respectively. Amortization expense related to deferred commissions for the nine months ended September 30, 2020 and 2019 was $ 27.1 million and $ 24.1 million, respectively. The Company evaluates the recoverability of deferred commissions at each balance sheet date . Note 7 — Derivatives and Hedging 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 (refer to 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 September 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 September 30, 2020 was $ 80.6 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 September 30, 2020 was a liability of $ 1.4 million (refer to 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. The swap has been designated and accounted for as a cash flow hedge of the forecasted interest payments on the Company’s debt. As long as the swap continues to be a highly effective hedge of the designated interest rate risk, changes in the fair value of the swap are recorded in accumulated other comprehensive loss, a component of equity. Any ineffective portion of a change in the fair value of a hedge is recorded in earnings. As required under Topic 815, the swap’s effectiveness is assessed on a quarterly basis. Since its inception, and through September 30, 2020, the interest rate swap was considered highly effective. Accordingly, the entire negative fair value as of September 30, 2020 of $ 1.0 million (net of taxes) is recorded in accumulated other comprehensive loss. The Company expects $ 0.7 million of this loss, net of taxes, to be reclassified into earnings within the next 12 months. 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 nine months ended September 30, 2020, the Company entered into three foreign currency forward exchange contracts, all of which settled by September 30, 2020. Accordingly, as of September 30, 2020, there are no amounts recorded in the Consolidated Balance Sheets for these contracts. 14 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 Nine Months Ended September 30, September 30, Amount recorded in: 2020 2019 2020 2019 Interest expense (1) $ ( 318 ) $ — $ ( 556 ) $ — Other income (expense), net (2) — — ( 157 ) — Total $ ( 318 ) $ — $ ( 713 ) $ — (1) Consists of interest expense from the interest rate swap contract. (2) Consists of net realized losses on foreign currency forward contracts. The Company did no t have any derivatives as of, or during, the nine months ended September 30, 2019. Note 8 — Fair Value Measurements The carrying amounts reflected in the Consolidated Balance Sheets for cash, accounts receivable, accounts payable, and accrued expenses (excluding the contingent consideration discussed below) approximate fair value due to their short-term maturities. The Company’s financial instruments also include its outstanding variable-rate borrowings (refer to Note 4 – Debt ). 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 and liabilities at fair value on a recurring basis including cash equivalents 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. Level 2 — Fair value based on inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 — Fair value based on unobservable inputs that are supported by little or no market activity and such inputs are significant to the fair value of the assets or liabilities. 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 September 30, 2020 Level 1 Level 2 Level 3 Total Assets Money market funds (1) $ 502 $ — $ — $ 502 Total Assets $ 502 $ — $ — $ 502 Liabilities Contingent purchase price (2) $ — $ — $ ( 2,684 ) $ ( 2,684 ) Interest rate swap (3) — $ ( 1,441 ) — $ ( 1,441 ) Total Liabilities $ — $ ( 1,441 ) $ — $ ( 1,441 ) 15 As of December 31, 2019 Level 1 Level 2 Level 3 Total Assets Money market funds (1) $ 2,354 $ — $ — $ 2,354 Total Assets $ 2,354 $ — $ — $ 2,354 Liabilities Contingent purchase price (2) $ — $ — $ ( 2,511 ) $ ( 2,511 ) Interest rate swap (3) — $ ( 144 ) — $ ( 144 ) Total Liabilities $ — $ ( 144 ) $ ( 2,511 ) $ ( 2,655 ) (1) Included in cash and cash equivalents on the Consolidated Balance Sheets. (2) 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 calculated fair value of the remaining contingent consideration to be paid to the sellers at December 31, 2019 was $ 2.5 million. As of September 30, 2020, the contingency had been resolved and the remaining contractual payment of $ 2.7 million was due to the sellers. This amount was paid in October 2020 . The amounts as of September 30, 2020 and December 31, 2019 are included in accrued expenses and other current liabilities in the Consolidated Balance Sheets. (3) The Company has an interest rate swap contract that hedges the risk of variability from interest payments on its borrowings (refer to Note 4 – Debt and Note 7 – Derivatives and Hedging ). 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 nine months ended September 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 activity for the nine months ended September 30, 2020 consisted entirely of the contingent purchase price related to the acquisition of FeedbackNow. Changes in the fair value of Level 3 contingent consideration for the nine months ended September 30, 2020 were as follows (in thousands): Contingent Consideration Balance at December 31, 2019 $ ( 2,511 ) Fair value adjustment of contingent purchase price (1) ( 22 ) Foreign exchange effect ( 151 ) Balance at September 30, 2020 $ ( 2,684 ) (1) This amount was recognized as acquisition and integration costs within the Consolidated Statements of Operations. Note 9 — Income Taxes Forrester provides for income taxes on an interim basis according to management’s estimate of the effective tax rate expected to be applicable for the full fiscal year. 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 nine months ended September 30, 2020 was $ 2.7 million resulting in an effective tax rate of 26.0 % for the period. Income tax benefit for the nine months ended September 30, 2019 was $ 0.1 million resulting in an effective tax rate of 0.5 % for the period. The increase in income tax expense during the 2020 period was primarily due to the increase in overall U.S. profitability. The Company anticipates that its effective tax rate for the full year 2020 will be approximately 25 %. 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. 16 Note 10 — Accumulated Other Comprehensive Income (Loss) (“AOCI/L”) The components of accumulated other comprehensive income (loss) are as follows (net of tax, in thousands): Total Accumulated Interest Rate Translation Other Comprehensive Swap Adjustment Income (Loss) Balance at June 30, 2020 $ ( 1,240 ) $ ( 5,788 ) $ ( 7,028 ) Other comprehensive income (loss) activity during the period: Foreign currency translation — 2,577 2,577 Unrealized loss before reclassification ( 23 ) — ( 23 ) Reclassification of AOCI/L to income (1) 228 — 228 Other comprehensive income (loss) for the period 205 2,577 2,782 Balance at September 30, 2020 $ ( 1,035 ) $ ( 3,211 ) $ ( 4,246 ) Total Accumulated Translation Other Comprehensive Adjustment Income (Loss) Balance at June 30, 2019 $ ( 4,990 ) $ ( 4,990 ) Other comprehensive income (loss) activity during the period: Foreign currency translation ( 1,614 ) ( 1,614 ) Other comprehensive income (loss) for the period ( 1,614 ) ( 1,614 ) Balance at September 30, 2019 $ ( 6,604 ) $ ( 6,604 ) Total Accumulated Interest Rate Translation Other Comprehensive Swap Adjustment Income (Loss) Balance at December 31, 2019 $ ( 104 ) $ ( 4,753 ) $ ( 4,857 ) Other comprehensive income (loss) activity during the period: Foreign currency translation — 1,542 1,542 Unrealized loss before reclassification ( 1,330 ) — ( 1,330 ) Reclassification of AOCI/L to income (1) 399 — 399 Other comprehensive income (loss) for the period ( 931 ) 1,542 611 Balance at September 30, 2020 $ ( 1,035 ) $ ( 3,211 ) $ ( 4,246 ) Total Accumulated Translation Other Comprehensive Adjustment Income (Loss) Balance at December 31, 2018 $ ( 5,154 ) $ ( 5,154 ) Other comprehensive income (loss) activity during the period: Foreign currency translation ( 1,450 ) ( 1,450 ) Other comprehensive income (loss) for the period ( 1,450 ) ( 1,450 ) Balance at September 30, 2019 $ ( 6,604 ) $ ( 6,604 ) (1) Reclassifications are related to the Company’s interest rate swap (cash flow hedge) and were recorded in Interest expense in the Consolidated Statements of Operations. Refer to Note 7 – Derivatives and Hedging . 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. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury-stock method. Common equivalent shares consist of common stock issuable on the exercise of outstanding stock options and the vesting of restricted stock units. 17 Basic and diluted weighted average common shares are as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Basic weighted average common shares outstanding 18,872 18,546 18,779 18,448 Weighted average common equivalent shares — — 94 — Diluted weighted average common shares outstanding 18,872 18,546 18,873 18,448 Options and restricted stock units excluded from diluted weighted average share calculation as effect would have been anti-dilutive 790 1,090 427 1,086 Note 12 — Stockholders’ Equity The components of stockholders’ equity are as follows (in thousands): Three Months Ended September 30, 2020 Common Stock Treasury Stock Accumulated Number of Shares $0.01 Par Value Additional Paid-in Capital Retained Earnings Number of Shares Cost Other Comprehensive Income (Loss) Total Equity Balance at June 30, 2020 23,401 $ 234 $ 222,778 $ 129,314 4,631 $ ( 171,889 ) $ ( 7,028 ) $ 173,409 Issuance of common stock under stock plans, net 178 2 ( 422 ) — — — — ( 420 ) Stock-based compensation expense — — 2,697 — — — — 2,697 Net loss — — — ( 3,760 ) — — — ( 3,760 ) Other comprehensive income — — — — — — 2,782 2,782 Balance at September 30, 2020 23,579 $ 236 $ 225,053 $ 125,554 4,631 $ ( 171,889 ) $ ( 4,246 ) $ 174,708 Three Months Ended September 30, 2019 Common Stock Treasury Stock Accumulated Number of Shares $0.01 Par Value Additional Paid-in Capital Retained Earnings Number of Shares Cost Other Comprehensive Income (Loss) Total Equity Balance at June 30, 2019 23,089 $ 231 $ 210,378 $ 115,956 4,631 $ ( 171,889 ) $ ( 4,990 ) $ 149,686 Issuance of common stock under stock plans, net 158 1 ( 794 ) — — — — ( 793 ) Stock-based compensation expense — — 3,072 — — — — 3,072 Net loss — — — ( 2,699 ) — — — ( 2,699 ) Other comprehensive loss — — — — — — ( 1,614 ) ( 1,614 ) Balance at September 30, 2019 23,247 $ 232 $ 212,656 $ 113,257 4,631 $ ( 171,889 ) $ ( 6,604 ) $ 147,652 Nine Months Ended September 30, 2020 Common Stock Treasury Stock Accumulated Number of Shares $0.01 Par Value Additional Paid-in Capital Retained Earnings Number of Shares Cost Other Comprehensive Income (Loss) Total Equity Balance at December 31, 2019 23,275 $ 233 $ 216,454 $ 118,147 4,631 $ ( 171,889 ) $ ( 4,857 ) $ 158,088 Issuance of common stock under stock plans, net 304 3 635 — — — — 638 Stock-based compensation expense — — 7,964 — — — — 7,964 Cumulative effect adjustment due to adoption of new accounting pronouncement, net of tax of $ 61 — — — ( 157 ) — — — ( 157 ) Net income — — — 7,564 — — — 7,564 Other comprehensive income — — — — — — 611 611 Balance at September 30, 2020 23,579 $ 236 $ 225,053 $ 125,554 4,631 $ ( 171,889 ) $ ( 4,246 ) $ 174,708 18 Nine Months Ended September 30, 2019 Common Stock Treasury Stock Accumulated Number of Shares $0.01 Par Value Additional Paid-in Capital Retained Earnings Number of Shares Cost Other Comprehensive Income (Loss) Total Equity Balance at December 31, 2018 22,951 $ 230 $ 200,696 $ 127,717 4,631 $ ( 171,889 ) $ ( 5,154 ) $ 151,600 Issuance of common stock under stock plans, net 296 2 3,355 — — — — 3,357 Stock-based compensation expense — — 8,605 — — — — 8,605 Net loss — — — ( 14,460 ) — — — ( 14,460 ) Other comprehensive loss — — — — — — ( 1,450 ) ( 1,450 ) Balance at September 30, 2019 23,247 $ 232 $ 212,656 $ 113,257 4,631 $ ( 171,889 ) $ ( 6,604 ) $ 147,652 Equity Plans Restricted stock unit activity for the nine months ended September 30, 2020 is presented below (in thousands, except per share data): Weighted- Average Number of Grant Date Shares Fair Value Unvested at December 31, 2019 656 $ 42.94 Granted 355 35.10 Vested ( 267 ) 42.21 Forfeited ( 84 ) 43.60 Unvested at September 30, 2020 660 $ 38.94 Stock option activity for the nine months ended September 30, 2020 is presented below (in thousands, except per share data and contractual term): Weighted - Weighted - Average Average Exercise Remaining Aggregate Number Price Per Contractual Intrinsic of Shares Share Term (in years) Value Outstanding at December 31, 2019 436 $ 35.62 Granted — — Exercised ( 29 ) 32.94 Forfeited ( 53 ) 37.75 Outstanding at September 30, 2020 354 $ 35.52 3.26 $ 28 Vested and Exercisable at September 30, 2020 354 $ 35.52 3.26 $ 28 Stock-Based Compensation Forrester recognizes the fair value of stock-based compensation over the requisite service period of the individual grantee, which generally equals the vesting period . Stock-based compensation was recorded in the following expense categories in the Consolidated Statements of Operations (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Cost of services and fulfillment $ 1,638 $ 1,782 $ 4,463 $ 4,812 Selling and marketing 446 441 1,231 1,366 General and administrative 613 849 2,270 2,427 Total $ 2,697 $ 3,072 $ 7,964 $ 8,605 19 Forrester utilizes the Black-Scholes valuation model for estimating the fair value of shares subject to purchase under the employee stock purchase plan, which were valued using the following assumptions: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Average risk-free interest rate 0.12 % 1.89 % 0.12 % 1.89 % Expected dividend yield 0.0 % 0.0 % 0.0 % 0.0 % Expected life 0.5 Years 0.5 Years 0.5 Years 0.5 Years Expected volatility 93 % 30 % 93 % 30 % Weighted average fair value $ 14.57 $ 8.29 $ 14.57 $ 8.29 Dividends In 2019, the Company suspended its dividends program as a result of the acquisition of SiriusDecisions on January 3, 2019 (refer to Note 2 – Acquisitions) , and the related debt incurred to fund the acquisition (refer to Note 4 – Debt ). The Company did no t declare or pay any dividends in the nine months ended September 30, 2020 and 2019, respectively. Treasury Stock As of September 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 nine months ended September 30, 2020 and 2019, the Company did no t repurchase any shares of common stock. From the inception of the program through September 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 September 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 $ 0.5 million and $ 2.5 million, respectively, and 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 from non-marketable investments were zero and $ 2.4 million during the three and nine months ended September 30, 2020, respectively, and are included in Gain (loss) on investments, net in the Consolidated Statements of Operations. Gains and losses from non-marketable investments were immaterial during the three months ended September 30, 2019. Losses from non-marketable investments were $ 0.1 million during the nine months ended September 30, 2019. The Company uses the cumulative earnings approach to classify distributions received from equity method investments. During the three and nine months ended September 30, 2020, $ 4.3 million was distributed from the funds to the Company. This amount was included within Other investing activity in the Consolidated Statements of Cash Flows as it was considered a return on investment. During the three and nine months ended September 30, 2019, no distributions were received from the funds. Note 14 — Operating Segments 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 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 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. 20 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 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): Research Consulting Events Consolidated Three Months Ended September 30, 2020 Research revenues Research $ 54,107 $ — $ — $ 54,107 Connect 13,710 — — 13,710 Analytics 4,996 — — 4,996 Total research revenues 72,813 — — 72,813 Consulting 13,372 21,261 — 34,633 Events — — 1,131 1,131 Total segment revenues 86,185 21,261 1,131 108,577 Segment expenses ( 28,645 ) ( 9,646 ) ( 1,284 ) ( 39,575 ) Selling, marketing, administrative and other expenses ( 63,778 ) Amortization of intangible assets ( 4,722 ) Acquisition and integration costs ( 328 ) Interest expense, other expense and gains on investments ( 1,533 ) Loss before income taxes $ ( 1,359 ) Research Consulting Events Consolidated Three Months Ended September 30, 2019 Research revenues Research $ 55,022 $ — $ — $ 55,022 Connect 14,257 — — 14,257 Analytics 5,269 — — 5,269 Total research revenues 74,548 — — 74,548 Consulting 13,357 19,262 — 32,619 Events — — 1,429 1,429 Total segment revenues 87,905 19,262 1,429 108,596 Segment expenses ( 28,632 ) ( 9,299 ) ( 1,733 ) ( 39,664 ) Selling, marketing, administrative and other expenses ( 62,524 ) Amortization of intangible assets ( 5,654 ) Acquisition and integration costs ( 2,394 ) Interest expense, other income and losses on investments ( 1,794 ) Loss before income taxes $ ( 3,434 ) 21 Research Consulting Events Consolidated Nine Months Ended September 30, 2020 Research revenues Research $ 163,071 $ — $ — $ 163,071 Connect 40,677 — — 40,677 Analytics 15,482 — — 15,482 Total research revenues 219,230 — — 219,230 Consulting 40,749 62,231 — 102,980 Events — — 6,253 6,253 Total segment revenues 259,979 62,231 6,253 328,463 Segment expenses ( 81,979 ) ( 29,766 ) ( 5,167 ) ( 116,912 ) Selling, marketing, administrative and other expenses ( 181,463 ) Amortization of intangible assets ( 14,147 ) Acquisition and integration costs ( 3,815 ) Interest expense, other expense and gains on investments ( 1,904 ) Income before income taxes $ 10,222 Research Consulting Events Consolidated Nine Months Ended September 30, 2019 Research revenues Research $ 161,107 $ — $ — $ 161,107 Connect 41,895 — — 41,895 Analytics 16,434 — — 16,434 Total research revenues 219,436 — — 219,436 Consulting 42,768 55,654 — 98,422 Events — — 19,570 19,570 Total segment revenues 262,204 55,654 19,570 337,428 Segment expenses ( 89,780 ) ( 28,207 ) ( 13,398 ) ( 131,385 ) Selling, marketing, administrative and other expenses ( 189,134 ) Amortization of intangible assets ( 16,963 ) Acquisition and integration costs ( 7,848 ) Interest expense, other expense and losses on investments ( 6,631 ) Loss before income taxes $ ( 14,533 ) Note 15 — Commitments and Contingencies From time to time, the Company may be subject to legal proceedings and civil and regulatory claims that arise in the ordinary course of its business activities. Regardless of the outcome, litigation can have a material adverse effect on the Company because of defense and settlement costs, diversion of management resources, and other factors. 22