What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2020-11-06 · 183 added, 318 removed, 332 unchanged (60% of the section changed)

3 unchanged sentences

(In thousands, except per share data, unaudited)

September 30,

Current Assets:

1 unchanged sentence

Accounts receivable, net of allowance for expected credit losses of $ 731 and $ 708 as

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

of March 31, 2021 and December 31, 2020, respectively

Deferred commissions

15 unchanged sentences

Total liabilities

Commitments and contingencies

Commitments and contingencies (Note 4, 13)

Stockholders' Equity (Note 11):

4 unchanged sentences

Authorized - 125,000 shares

Issued - 23,579 and 23,275 shares as of September 30, 2020 and December 31, 2019,

Outstanding - 18,948 and 18,644 shares as of September 30, 2020 and

Issued - 23,755 and 23,648 shares as of March 31, 2021 and December 31, 2020,

Outstanding - 19,124 and 19,017 shares as of March 31, 2021 and

December 31, 2020, respectively

1 unchanged sentence

Retained earnings

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

Treasury stock - 4,631 shares as of March 31, 2021 and December 31, 2020

Accumulated other comprehensive loss

6 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Total revenues

4 unchanged sentences

Amortization of intangible assets

Acquisition and integration costs

Integration costs

Total operating expenses

Income (loss) from operations

Income from operations

Interest expense

Other income (expense), net

Gain (loss) on investments, net

Gain on investments, net

Income (loss) before income taxes

Income tax expense (benefit)

Income tax expense

Net income (loss)

8 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Net income (loss)

Other comprehensive income (loss), net of taxes:

Other comprehensive loss net of tax:

Foreign currency translation

Net change in fair value of interest rate swap

Other comprehensive income (loss)

Net change in market value of interest rate swap

Other comprehensive loss

Comprehensive income (loss)

3 unchanged sentences

(In thousands, unaudited)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

3 unchanged sentences

Amortization of intangible assets

Net (gains) losses from investments

Net gains from investments

Deferred income taxes

Stock-based compensation

Operating lease right-of-use asset amortization and impairments

Operating lease right-of-use assets, amortization, and impairments

Amortization of deferred financing fees

Foreign currency losses

Changes in assets and liabilities, net of acquisitions:

Foreign currency (gains) losses

Changes in assets and liabilities:

Accounts receivable

7 unchanged sentences

Cash flows from investing activities:

Acquisitions, net of cash acquired

Purchases of property and equipment

Other investing activity

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from borrowings, net of costs

Payments on borrowings

Payment of debt issuance costs

Deferred acquisition payments

Proceeds from issuance of common stock under employee equity incentive plans

Taxes paid related to net share settlements of stock-based compensation awards

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

5 unchanged sentences

Cash paid for income taxes

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.

9 unchanged sentences

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.

The results of operations for the three months ended March 31, 2021 may not be indicative of the results for the year ending December 31, 2021, or any other period.

Reclassification

Effective for the first quarter of 2021, the Company modified its key metrics, as further described in Item 2.

Management’s Discussions and Analysis of Financial Condition and Results of Operations.

As part of these changes, beginning January 1, 2021, the Company is classifying all components of its subscription research products within the Research revenues financial statement line on the Consolidated Statements of Operations.

In prior periods, the separate advisory session performance obligations included in any of the Company’s subscription research products were classified within the Consulting revenues financial statement line.

Prior periods have been reclassified to conform to the current presentation which resulted in approximately $ 1.4 million of revenue being reclassified from Consulting revenues to Research revenues during the three months ended March 31, 2020.

This reclassification had no impact on the amount of total revenues previously reported.

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,

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 on the accompanying Consolidated Statements of Cash Flows (in thousands).

Three Months Ended March 31,

Cash and cash equivalents

2 unchanged sentences

Cash, cash equivalents and restricted cash shown in statement of cash flows

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.

Restricted cash consists of collateral required for leased office space, letters of credit, and credit card processing outside of the U.S.

The short-term or long-term classification regarding the collateral for the leased office space and letters of credit is determined in accordance with the expiration of the underlying leases.

Adoption of New Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

The Company adopted the guidance in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No.

2019-12, Income Taxes – Simplifying the Accounting for Income Taxes on January 1, 2021 .

The 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 adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

In June 2016, the FASB issued 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):

Balance at December 31, 2019

Cumulative effect adjustment of adopting Topic 326

Provision for expected credit losses

Translation adjustments

Balance at September 30, 2020

supportable information to estimate credit losses on certain types of financial instruments, including trade receivables.

On January 1, 2020 , t he 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.

The Company adopted the guidance in ASU No.

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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.

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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 2 — Goodwill and Other Intangible Assets

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

Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair values of the tangible and identifiable intangible net assets acquired.

Goodwill is not amortized;

however, it is required to be tested for impairment annually, which requires assessment of the potential impairment at the reporting unit level.

Testing for impairment is also required on an interim basis if an event or circumstance indicates it is more likely than not an impairment loss has been incurred.

The Company performed its annual impairment testing as of November 30, 2020 utilizing a qualitative assessment to determine if it was more likely than not that the fair values of each of its reporting units was less than their respective carrying values and concluded that no impairments existed.

Subsequent to completing the annual test and through March 31, 2021, there were no events or circumstances that required an interim impairment test.

Accordingly, a s of March 31, 2021 , the Company had no accumulated goodwill impairment losses.

Approximately $ 8.2 million of goodwill is allocated to the Company’s Consulting reporting unit, which has a negative carrying value as of March 31, 2021.

The change in the carrying amount of goodwill for the three months ended March 31, 2021 is summarized as follows (in thousands):

Balance at December 31, 2020

Translation adjustments

Balance at September 30, 2020

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

As a result of the Company’s segment 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.

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

Balance at March 31, 2021

Finite-Lived Intangible Assets

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

September 30, 2020

March 31, 2021

Amortizable intangible assets:

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Note 3 — 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”).

On January 3, 2019, 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 .

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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):

A s of March 31, 2021 , t he amount payable in each year is set forth in the table below (in thousands) :

2021 (remainder)

1 unchanged sentence

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.

The Company has $ 74.1 million of available borrowing capacity on the revolver (not including the expansion feature) as of March 31, 2021.

Proceeds from the Revolving Credit Facility can 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.

As of March 31, 2021 , $ 0.9 million in letters of credit were issued under the Revolving Credit Facility.

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

4 unchanged sentences

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

September 30, 2020

March 31, 2021

December 31, 2020

Term loan facility (1)

Revolving credit facility (2)

Principal amount outstanding (1) (2)

1 unchanged sentence

Net carrying amount

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 %.

This amount consists entirely of the outstanding Term Loan balance.

The contractual annualized interest rate as of March 31, 2021 on the Term loan facility was 2.125 %, which consisted of LIBOR of 0.125 % plus a margin of 2.000 %.

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 6 – Derivatives and Hedging for further information on the swap.

The Company had $ 74.1 million of available borrowing capacity on the revolver (not including the expansion feature) as of September 30, 2020 .

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 weighted average annual effective rate on the Company's total debt outstanding for the three months ended March 31, 2021 , was 2.146 %.

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.

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

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

If the impact of COVID-19 is more severe than currently forecasted this may impact the Company’s ability to comply with its financial covenants, and it is not 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 .

As of March 31, 2021 , the Company is in compliance with its financial covenants under 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.

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

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

For the Three Months Ended September 30,

Operating lease cost

Short-term lease cost

Variable lease cost

Sublease income

Total lease cost

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Operating lease cost

4 unchanged sentences

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

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Cash paid for amounts included in the measurement of operating

lease liabilities

Operating lease right-of-use assets obtained in exchange for lease

Operating lease ROU assets obtained in exchange for lease

Weighted-average remaining lease term - operating leases (years)

Weighted-average discount rate - operating leases

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

Future minimum lease payments under non-cancellable leases as of March 31, 2021 are as follows (in thousands):

2021 (remainder)

2 unchanged sentences

Present value of lease liabilities

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

Operating lease right-of-use assets

Lease balances as of March 31, 2021 are as follows (in thousands):

Operating lease ROU assets

Short-term operating lease liabilities (1)

3 unchanged sentences

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.

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

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

acquisition that the Company no longer used as a result of the integration of SiriusDecisions.

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

Note 5 – Revenue and Related Matters

Disaggregated Revenue

The Company disaggregates revenue as set forth in the following tables (in thousands):

Revenue by Geography

For the Three Months Ended March 31,

North America

Revenue location is determined based on where the products and services are consumed.

Contract Assets and Contract Liabilities

Accounts Receivable

3 unchanged sentences

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.

There were no contract assets as of March 31, 2021 or 2020.

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

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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

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.

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

During the three months ended March 31, 2021 and 2020, the Company recognized $ 72.3 and $ 69.9 million of revenue, respectively, related to its deferred revenue balances at January 1 of each such period.

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

Approximately $ 489.0 million of revenue is expected to be recognized during the next 24 months from remaining performance obligations as of March 31, 2021.

Reserves for Credit Losses

The allowance for expected credit losses on accounts receivable for the three months ended March 31, 2021 is summarized as follows (in thousands):

Balance at December 31, 2020

Provision for expected credit losses

Balance at March 31, 2021

When evaluating the adequacy of the allowance for expected credit losses, the Company makes judgments regarding the collectability of accounts receivable based, in part, on the Company’s historical loss rate experience, customer concentrations, management’s expectations of future losses as informed by current economic conditions, and changes in customer payment terms.

the expected financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required .

I f the expected financial condition of the Company’s customers were to improve, the allowances may be reduced accordingly.

Cost to Obtain Contracts

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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 .

Costs to obtain a contract are amortized to earnings over the initial contract term, which is the same period the related revenue is recognized.

Amortization expense related to deferred commissions for the three months ended March 31, 2021 and 2020 was $ 8.8 million and $ 8.1 million, respectively.

The Company evaluates the recoverability of deferred commissions at each balance sheet date and there were no impairments recorded during the three months ended March 31, 2021 and 2020 .

Note 6 — 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.

The Company has a derivative contract (an interest rate swap) to mitigate the cash flow risk associated with changes in interest rates on its variable rate debt (refer to Note 3 – Debt ).

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

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.

At March 31, 2021, the Company had a single interest rate swap contract that matures in 2022 , with an initial notional amount of $ 95.0 million.

The notional amount at March 31, 2021 was $ 52.7 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 fair value of the swap on March 31, 2021 was a liability of $ 0.9 million (refer to Note 7 – Fair Value Measurements for information on determining the fair value).

The liability is included in other non-current liabilities on 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.

Since its inception, and through March 31, 2021, the interest rate swap was considered highly effective.

Accordingly, the entire negative fair value as of March 31, 2021 of $ 0.6 million, net of taxes, is recorded in accumulated other comprehensive loss.

The Company expects $ 0.5 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.

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,

Realized gains or losses related to the interest rate swap are included as operating activities in the Consolidated Statements of Cash Flows.

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

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

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

For the Three Months Ended

Amount recorded in:

Interest expense (1)

Other income (expense), net (2)

Consists of interest expense from the interest rate swap contract.

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 7 — 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 carrying amounts reflected on the Consolidated Balance Sheets for cash, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term maturities.

The Company’s financial instruments also include its outstanding variable-rate borrowings (refer to Note 3 – 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.

Additionally, the Company measures certain financial assets and liabilities at fair value on a recurring basis including cash equivalents and its derivative contract.

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 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

As of March 31, 2021

Money market funds (1)

Contingent purchase price (2)

Interest rate swap (2)

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Money market funds (1)

Contingent purchase price (2)

Interest rate swap (2)

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Included in cash and cash equivalents on the Consolidated Balance Sheets.

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.

The Company has an interest rate swap contract that hedges the risk of variability from interest payments on its borrowings (refer to Note 3 – Debt and Note 6 – Derivatives and Hedging ).

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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):

Consideration

Balance at December 31, 2019

Fair value adjustment of contingent purchase price (1)

Foreign exchange effect

Balance at September 30, 2020

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

During the three months ended March 31, 2021, 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 liabilities.

Note 8 — Income Taxes

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

Income tax expense for the 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.

Income tax expense for the three months ended March 31, 2021 was $ 2.0 million resulting in an effective tax rate of 33.4 % for the period.

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

negative 3.8 % for the period.

The increase in income tax expense during the 202 1 period was primarily due to the increase in overall U.S.

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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.

The Company evaluated the impact of the CARES Act and determined it was not material to its financial position or results of operations.

Note 9 — 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

Other Comprehensive

Income (Loss)

Balance at June 30, 2020

Other comprehensive income (loss) activity during the period:

Foreign currency translation

Unrealized loss before reclassification

Reclassification of AOCI/L to income (1)

Other comprehensive income (loss) for the period

Balance at September 30, 2020

Total Accumulated

Other Comprehensive

Income (Loss)

Balance at June 30, 2019

Other comprehensive income (loss) activity during the period:

Foreign currency translation

Other comprehensive income (loss) for the period

Balance at September 30, 2019

Total Accumulated

Interest Rate

Other Comprehensive

Income (Loss)

Balance at December 31, 2020

Other comprehensive income (loss) activity during the period:

Foreign currency translation (1)

Unrealized loss before reclassification

Reclassification of AOCI/L to income (1)

Other comprehensive income (loss) for the period

Balance at September 30, 2020

Total Accumulated

Other Comprehensive

Income (Loss)

Unrealized gain before reclassification, net

of tax of $( 1 )

Reclassification of AOCI/L to income, net

of tax of $( 73 ) (2)

Balance at March 31, 2021

Interest Rate

Balance at December 31, 2019

Other comprehensive income (loss) activity during the period:

Foreign currency translation (1)

Other comprehensive income (loss) for the period

Balance at September 30, 2019

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.

Unrealized loss, net of tax of $ 462

Balance at March 31, 2020

The Company does not record tax provisions or benefits for the net changes in foreign currency translation adjustments as it intends to permanently reinvest undistributed earnings of its foreign subsidiaries.

Reclassification is related to the Company’s interest rate swap (cash flow hedge) and was recorded in interest expense on the Consolidated Statements of Operations.

Refer to Note 6 – Derivatives and Hedging .

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Three Months Ended

Nine Months Ended

September 30,

Basic weighted average common shares outstanding

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

Three Months Ended September 30, 2020

Treasury Stock

Comprehensive

Income (Loss)

Balance at June 30, 2020

Issuance of common stock under

stock plans, net

Stock-based compensation expense

Other comprehensive income

Balance at September 30, 2020

Three Months Ended September 30, 2019

Three Months Ended March 31, 2021

Treasury Stock

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Income (Loss)

Balance at June 30, 2019

Stockholders'

Balance at December 31, 2020

Issuance of common stock under

stock plans, net

stock plans, including tax effects

Stock-based compensation expense

Other comprehensive loss

Balance at September 30, 2019

Nine Months Ended September 30, 2020

Net change in interest rate swap,

Foreign currency translation

Balance at March 31, 2021

Three Months Ended March 31, 2020

Treasury Stock

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Income (Loss)

Stockholders'

Balance at December 31, 2019

Issuance of common stock under

stock plans, net

stock plans, including tax effects

Stock-based compensation expense

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to adoption of new accounting

pronouncement, net of tax of $ 61

Other comprehensive income

Balance at September 30, 2020

Nine Months Ended September 30, 2019

Treasury Stock

Comprehensive

Income (Loss)

Balance at December 31, 2018

Issuance of common stock under

stock plans, net

Stock-based compensation expense

Other comprehensive loss

Balance at September 30, 2019

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

pronouncement, net of tax

Net change in interest rate swap,

Foreign currency translation

Balance at March 31, 2020

Restricted stock unit activity for the three months ended March 31, 2021 is presented below (in thousands, except per share data):

Unvested at December 31, 2020

Unvested at September 30, 2020

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

Unvested at March 31, 2021

Stock option activity for the three months ended March 31, 2021 is presented below (in thousands, except per share data and contractual term):

Term (in years)

Outstanding at December 31, 2020

Outstanding at September 30, 2020

Vested and Exercisable at September 30, 2020

Outstanding at March 31, 2021

Vested and Exercisable at March 31, 2021

No stock options were granted or forfeited during the three months ended March 31, 2021.

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):

Stock-based compensation was recorded in the following expense categories on the Consolidated Statements of Operations (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Cost of services and fulfillment

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Three Months Ended

Nine Months Ended

September 30,

Average risk-free interest rate

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Weighted average fair value

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.

In 2019, the Company suspended its dividends program as a result of the acquisition of SiriusDecisions, Inc.

and the related debt incurred to fund the acquisition (refer to Note 3 – Debt ).

The Company did not declare or pay any dividends in the three months ended March 31, 2021 and 2020, 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.

As of March 31, 2021, 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.

In the three months ended March 31, 2021 and 2020, the Company did no t repurchase any shares of common stock.

From the inception of the program through March 31, 2021, the Company repurchased 16.3 million shares of common stock at an aggregate cost of $ 474.9 million.

Note 12 — 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:

The Company’s operations are grouped into three segments:

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.

These segments are based on the management structure of the Company and how management uses financial information to evaluate performance and determine how to allocate resources.

The Company’s products and services are delivered through each segment as described below.

Additionally, the tables below include the reclassification of revenues for the components of the Company’s CV subscription research products, as described further in Note 1:

Interim Consolidated Financial Statements .

The Research segment includes the revenues from all of the Company’s research products as well as consulting revenues from advisory services (such as speeches and advisory days) delivered by the Company’s research organization.

Research segment costs include the cost of the organizations responsible for developing and delivering these products in addition to the costs of the product management organization responsible for product pricing and packaging, and the launch of new products.

In May 2021, the Company announced the launch of a new research portfolio called Forrester Decisions, anticipated to be available in August 2021.

This new portfolio of products will help executives, functional leaders, and their teams, across technology, marketing, customer experience, sales, and product management, plan and pursue initiatives for driving growth.

The Forrester Decisions product combines the research, frameworks, models, and methodologies of the Company’s Forrester Research and SiriusDecisions Research product offerings, as well as features of the Company’s Connect and Analytics products.

In connection with the launch of Forrester Decisions, the Company will no longer provide disaggregation of revenue by its research products in the segment tables below (refer to Note 5 – Revenue and Related Matters for disclosure of disaggregated revenue).

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

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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.

Segment expenses include the direct expenses of each segment organization and exclude 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 on investments.

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

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

Three Months Ended September 30, 2020

The Company provides information by reportable segment in the tables below (in thousands):

Research Segment

Consulting Segment

Events Segment

Three Months Ended March 31, 2021

Research revenues

Total research revenues

Consulting revenues

Events revenues

Total segment revenues

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Amortization of intangible assets

Acquisition and integration costs

Integration costs

Interest expense, other expense, and gains on investments

Loss before income taxes

Three Months Ended September 30, 2019

Research revenues

Total research revenues

Total segment revenues

Segment expenses

Selling, marketing, administrative and other expenses

Amortization of intangible assets

Acquisition and integration costs

Interest expense, other income and losses on investments

Loss before income taxes

Nine Months Ended September 30, 2020

Research revenues

Total research revenues

Total segment revenues

Segment expenses

Selling, marketing, administrative and other expenses

Amortization of intangible assets

Acquisition and integration costs

Interest expense, other expense and gains on investments

Income before income taxes

Nine Months Ended September 30, 2019

Research Segment

Consulting Segment

Events Segment

Three Months Ended March 31, 2020

Research revenues

Total research revenues

Consulting revenues

Events revenues

Total segment revenues

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Amortization of intangible assets

Acquisition and integration costs

Interest expense, other expense and losses on investments

Integration costs

Interest expense, other income, and gains on investments

Loss before income taxes

Note 15 — Commitments and Contingencies

Note 13 — 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.

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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 1. Financial Statements