# Forrester Research, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [Forrester Research, Inc.](/companies/forr.md) (CIK 1023313)
- Form: 10-Q
- Filed: 2024-11-08
- Accepted by EDGAR: Nov 8, 2024, 09:00 ET
- Period: 2024-09-30
- Accession: 0000950170-24-123723
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1023313/000095017024123723/forr-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1023313/000095017024123723/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $102.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $324.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $40.5m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $134.3m | us-gaap:CostOfRevenue |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $57.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $172.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$731.0k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $1.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $4.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $7.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$5.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$6.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.30 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.32 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.30 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.32 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 19,065,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 19,147,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$2.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $2.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2024-01-01 to 2024-09-30 | $13.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-09-30 | $62.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $193.9m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $505.3m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $198.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $270.9m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $35.0m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-09-30 | $234.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 39,184 characters.

### Overview

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “intends,” “plans,” “estimates,” or similar expressions are intended to identify these forward-looking statements. Reference is made in particular to our statements about changing stakeholder expectations, migration of our clients into our Forrester Decisions products, product development, holding hybrid events, possible acquisitions, future dividends, future share repurchases, future growth rates, operating income and cash from operations, future deferred revenue, future compliance with financial covenants under our credit facility, future interest expense, anticipated increases in, and productivity of, our sales force and headcount, the adequacy of our cash, and cash flows to satisfy our working capital and capital expenditures, and the anticipated impact of accounting standards. These statements are based on our current plans and expectations and involve risks and uncertainties. Important factors that could cause actual future activities and results to differ include, among others, our ability to retain and enrich subscriptions to, and licenses of, our Research products and services, our ability to fulfill existing or generate new consulting engagements and advisory services, our ability to generate and increase demand for the Events we host, any adverse economic conditions that result in a reduction in technology spending or demand for our products and services, our international operations expose us to a variety of operational risks which could negatively impact us, our ability to offer new products and services, the use of Generative AI in our business and by our clients and competitors, our dependence on key personnel, our ability to attract and retain qualified professional staff, our ability to respond to business and economic conditions and market trends, the impact of our outstanding debt, competition and industry consolidation, possible variations in our quarterly operating results, concentration of our stock ownership, the possibility of network disruptions and security breaches, our ability to enforce and protect our intellectual property rights, compliance with privacy laws, taxation risks, and any weakness identified in our system of internal controls. These risks are described more completely in our Annual Report on Form 10-K for the year ended December 31, 2023. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

We derive revenues from subscriptions to our Research products and services, licensing electronic “reprints” of our Research, performing consulting projects and advisory services, and hosting events. We offer contracts for our Research products as either multi-year contracts or annual contracts, which are typically payable in advance on an annual basis. Subscription products are recognized as revenue over the term of the contract. Accordingly, a substantial portion of our billings are initially recorded as deferred revenue. Reprints include an obligation to deliver a customer-selected research document and certain usage data provided through an on-line platform, which represents two performance obligations. We recognize revenue for the performance obligation for the data portion of the reprint ratably over the license term. We recognize revenue for the performance obligation for the research document at the time of providing access to the document. Billings for licensing of reprints are initially recorded as deferred revenue. Clients purchase consulting projects and advisory services independently and/or to supplement their access to our subscription-based products. Consulting project revenues, which are based upon fixed-fee agreements, are recognized as the services are provided. Advisory service revenues, such as speeches and advisory days, are recognized when the service is complete or the customer receives the agreed upon deliverable. Billings attributable to consulting projects and advisory services are initially recorded as deferred revenue. Events revenues consist of ticket and sponsorship sales for a Forrester-hosted event. Billings for events are also initially recorded as deferred revenue and are recognized as revenue upon completion of each event.

Our primary operating expenses consist of cost of services and fulfillment, selling and marketing expenses, and general and administrative expenses. Cost of services and fulfillment represents the costs associated with the production and delivery of our products and services, including salaries, bonuses, employee benefits, and stock-based compensation expense for all personnel that produce and deliver our products and services, including all associated editorial, travel, and support services. Selling and marketing expenses include salaries, sales commissions, bonuses, employee benefits, stock-based compensation expense, travel expenses, promotional costs, and other costs incurred in marketing and selling our products and services. General and administrative expenses include the costs of the technology, operations, finance, and human resources groups and our other administrative functions, including salaries, bonuses, employee benefits, and stock-based compensation expense. Overhead costs such as facilities, net of sublease income, and annual fees for cloud-based information technology systems are allocated to these categories according to the number of employees in each group.

Our key metrics focus on our contract value ("CV") products. We are focusing on CV products as these products are our most profitable products and historically our contracts for CV products have renewed at high rates (as measured by our client retention and wallet retention metrics).

We calculate CV at the foreign currency rates used for internal planning purposes each year. For comparative purposes, we have recast historical CV and wallet retention at the current year foreign currency rates and using the updated methodology as described on the investor relations section of our website. In addition, due to the divestiture of the FeedbackNow product line in the third quarter of 2024, we have recast our historical metrics to exclude FeedbackNow products and clients. We have included the recast metrics below for the nine months ended September 30, 2023, and we have also provided recast metrics dating back to the third quarter of 2022, on the investor relations section of our website.

Contract value, client retention, wallet retention, and number of clients are metrics that we believe are important to understanding our research business. We define these metrics as follows:

- *Contract value (CV) —* is defined as the value attributable to all of our recurring research-related contracts. Contract value is calculated as the annualized value of all contracts in effect at a specific point in time, without regard to how much revenue has already been recognized. Contract value primarily consists of subscription-based products for which revenue is recognized on a ratable basis, except for the entitlements embedded in our subscription products, such as event tickets and advisory sessions, for which the revenue is recognized when the item is delivered. Contract value also includes our reprint products, as these products are used throughout the year by our clients and are typically renewed.
- *Client retention —* represents the percentage of client companies (defined as all clients that buy a CV product) at the prior year measurement date that have active contracts at the current year measurement date.
- *Wallet retention —* represents a measure of the CV we have retained with clients over a twelve-month period, including increases or decreases in retained client CV during the period. Wallet retention is calculated on a percentage basis by dividing the annualized contract value of our current clients, who were also clients a year ago, by the total annualized contract value from a year ago.
- *Clients —* is calculated at the enterprise level as all clients that have an active CV contract.

Client retention and wallet retention are not necessarily indicative of the rate of future retention of our revenue base. A summary of our key metrics is as follows (dollars in millions):

|  | As of September 30, 2024 | 2023 | Absolute Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Contract value | $315.2 | $331.2 | $(16.0) | (5%) |
| Client retention | 73% | 73% | — |  |
| Wallet retention | 89% | 89% | — |  |
| Number of clients | 2,002 | 2,338 | (336) | (14%) |

Contract value at September 30, 2024 decreased by 5% compared to the prior year period due to wallet retention being at 89% for the period (representing retention and enrichment of the prior year CV base) and new client acquisition not fully offsetting the net retention loss. Client retention and wallet retention were both flat at September 30, 2024 compared to the prior year period. However, client retention increased by 1 percentage point and wallet retention was flat, compared to the prior quarter. The decrease in the number of clients from the prior year period is primarily attributable to 1) macroeconomic conditions affecting our client base including a) funding and budget pressure on our smaller technology clients and the technology industry in general, and b) the uncertain economic conditions during the past year caused by inflation, high interest rates, and geopolitical turbulence, and 2) the ongoing transition of our client base to our Forrester Decisions product platform that was launched in August 2021. As of September 30, 2024, approximately 78% of our overall CV was in our Forrester Decisions product platform. By the end of 2024, we anticipate that over 80% of our CV will be in our Forrester Decisions product platform. The remaining CV will represent non-Forrester Decisions CV products, primarily reprints, with less than 5% in our heritage research products. The ongoing macroeconomic conditions and product transition are anticipated to continue to pressure our key metrics through 2024.

Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including but not limited to, those related to our revenue recognition, goodwill, intangible and other long-lived assets, and income taxes. Management bases its estimates on historical experience, data available at the time the estimates are made, and various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting estimates are described in our Annual Report on Form 10-K for the year ended December 31, 2023.

### Results of Operations

The following table sets forth our statement of operations as a percentage of total revenues for the periods indicated:

| Revenues: | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Research revenues | 75.2% | 71.1% | 73.1% | 68.7% |
| Consulting revenues | 22.8 | 24.9 | 22.0 | 24.8 |
| Events revenues | 2.0 | 4.0 | 4.9 | 6.5 |
| Total revenues | 100.0 | 100.0 | 100.0 | 100.0 |
| Operating expenses: |  |  |  |  |
| Cost of services and fulfillment | 41.1 | 42.3 | 42.5 | 41.9 |
| Selling and marketing | 37.3 | 35.2 | 36.4 | 33.9 |
| General and administrative | 15.4 | 13.3 | 13.6 | 14.2 |
| Depreciation | 1.9 | 2.0 | 1.9 | 1.8 |
| Amortization of intangible assets | 2.3 | 2.7 | 2.3 | 2.5 |
| Restructuring costs | 1.0 | — | 2.4 | 3.4 |
| Loss from sale of divested operation | 1.7 | — | 0.5 | — |
| Income (loss) from operations | (0.7) | 4.5 | 0.4 | 2.3 |
| Interest expense | (0.8) | (0.7) | (0.7) | (0.6) |
| Other income, net | 0.5 | 0.5 | 0.8 | 0.4 |
| Income (loss) before income taxes | (1.0) | 4.3 | 0.5 | 2.1 |
| Income tax expense | 4.7 | 2.1 | 2.4 | 1.1 |
| Net income (loss) | (5.7%) | 2.2% | (1.9%) | 1.0% |

### Three and Nine Months Ended September 30, 2024 and 2023

### Revenues

*(dollars in millions)*

|  | Three Months Ended September 30, 2024 | 2023 | Absolute Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Total revenues | $102.5 | $113.4 | $(10.9) | (10%) |
| Research revenues | $77.1 | $80.6 | $(3.5) | (4%) |
| Consulting revenues | $23.4 | $28.2 | $(4.9) | (17%) |
| Events revenues | $2.1 | $4.6 | $(2.5) | (54%) |
| Revenues attributable to customers outside of the U.S. | $23.6 | $25.8 | $(2.2) | (9%) |
| Percentage of revenue attributable to customers outside of the U.S. | 23% | 23% | — |  |

*(dollars in millions)*

|  | Nine Months Ended September 30, 2024 | 2023 | Absolute Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Total revenues | $324.4 | $362.7 | $(38.3) | (11%) |
| Research revenues | $237.3 | $249.2 | $(11.9) | (5%) |
| Consulting revenues | $71.3 | $90.0 | $(18.6) | (21%) |
| Events revenues | $15.8 | $23.5 | $(7.7) | (33%) |
| Revenues attributable to customers outside of the U.S. | $73.4 | $79.0 | $(5.6) | (7%) |
| Percentage of revenue attributable to customers outside of the U.S. | 23% | 22% | 1 point |  |

24

Research revenues are recognized as revenue primarily on a ratable basis over the term of the contracts, which are generally 12 or 24-month periods. Research revenues decreased 4% and 5% during the three and nine months ended September 30, 2024, respectively, compared to the prior year periods primarily due to the decrease in CV, as discussed above. From a product perspective, the decrease in revenues was primarily due to a decline in revenue from our reprint product and our other smaller and discontinued products. In addition, revenue from our subscription research products declined 1% and 2% during the three and nine months ended September 30, 2024, respectively.

Consulting revenues decreased 17% and 21% during the three and nine months ended September 30, 2024, respectively, compared to the prior year periods. The decrease in revenues during the three and nine months ended September 30, 2024 was due to a decrease in delivery of consulting services due to lower client bookings.

Events revenues decreased 54% and 33% during the three and nine months ended September 30, 2024, respectively, compared to the prior year periods. The decrease in revenues during the three and nine months ended September 30, 2024 was due primarily to a decrease in sponsorship revenues and a decrease in event ticket revenue.

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

### Cost of Services and Fulfillment

|  | Three Months Ended September 30, 2024 | 2023 | Absolute Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Cost of services and fulfillment (dollars in millions) | $42.2 | $48.0 | $(5.8) | (12%) |
| Cost of services and fulfillment as a percentage of total revenues | 41% | 42% | (1) point |  |
| Service and fulfillment employees (at end of period) | 690 | 790 | (100) | (13%) |

|  | Nine Months Ended September 30, 2024 | 2023 | Absolute Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Cost of services and fulfillment (dollars in millions) | $138.0 | $151.9 | $(13.9) | (9%) |
| Cost of services and fulfillment as a percentage of total revenues | 43% | 42% | 1 point |  |

Cost of services and fulfillment expenses decreased 12% during the three months ended September 30, 2024 compared to the prior year period. The decrease was primarily due to (1) a $4.7 million decrease in compensation and benefit costs due to a decrease in headcount and incentive bonus costs and (2) a $0.9 million decrease in event expenses.

Cost of services and fulfillment expenses decreased 9% during the nine months ended September 30, 2024 compared to the prior year period. The decrease was primarily due to (1) a $12.1 million decrease in compensation and benefit costs due to a decrease in headcount and incentive bonus costs, partially offset by an increase in benefit costs (mainly due to a benefit during 2023 resulting from the introduction of the flexible vacation and personal paid time off policy in the United States), (2) a $1.0 million decrease in event expenses, (3) a $0.6 million decrease in professional services costs primarily due to a decrease in contractor costs, and (4) a $0.5 million decrease in facilities costs.

### Selling and Marketing

|  | Three Months Ended September 30, 2024 | 2023 | Absolute Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Selling and marketing expenses (dollars in millions) | $38.3 | $40.0 | $(1.7) | (4%) |
| Selling and marketing expenses as a percentage of total revenues | 37% | 35% | 2 points |  |
| Selling and marketing employees (at end of period) | 663 | 680 | (17) | (3%) |

|  | Nine Months Ended September 30, 2024 | 2023 | Absolute Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Selling and marketing expenses (dollars in millions) | $117.9 | $123.1 | $(5.1) | (4%) |
| Selling and marketing expenses as a percentage of total revenues | 36% | 34% | 2 points |  |

25

Selling and marketing expenses decreased 4% during the three months ended September 30, 2024 compared to the prior year period. The decrease was primarily due to a $1.7 million decrease in compensation and benefit costs due to a decrease in headcount, commissions expense, and incentive bonus costs.

Selling and marketing expenses decreased 4% during the nine months ended September 30, 2024 compared to the prior year period. The decrease was primarily due to a $5.7 million decrease in compensation and benefit costs due to a decrease in headcount, commissions expense, and incentive bonus costs, partially offset by an increase in benefit costs (mainly due to a benefit during 2023 resulting from the introduction of the flexible vacation and personal paid time off policy in the United States). This decrease was partially offset by a $1.2 million increase in professional services costs primarily due to an increase in consulting fees.

### General and Administrative

|  | Three Months Ended September 30, 2024 | 2023 | Absolute Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| General and administrative expenses (dollars in millions) | $15.7 | $15.1 | $0.6 | 4% |
| General and administrative expenses as a percentage of total revenues | 15% | 13% | 2 points |  |
| General and administrative employees (at end of period) | 255 | 280 | (25) | (9%) |

|  | Nine Months Ended September 30, 2024 | 2023 | Absolute Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| General and administrative expenses (dollars in millions) | $44.2 | $51.7 | $(7.4) | (14%) |
| General and administrative expenses as a percentage of total revenues | 14% | 14% | — |  |

The fluctuation in general and administrative expenses was immaterial during the three months ended September 30, 2024 compared to the prior year period.

General and administrative expenses decreased 14% during the nine months ended September 30, 2024 compared to the prior year period. The decrease was primarily due to (1) a $5.4 million decrease in legal costs, due primarily to a $4.8 million provision for a legal settlement recorded in 2023 for a wage-related matter and related legal services and (2) a $2.5 million decrease in compensation and benefit costs due to a decrease in headcount and incentive bonus costs, partially offset by an increase in benefit costs (mainly due to a benefit during 2023 resulting from the introduction of the flexible vacation and personal paid time off policy in the United States). These decreases were partially offset by a $0.6 million increase in software costs.

### Depreciation

Depreciation expense decreased by $0.3 million and $0.5 million during the three and nine months ended September 30, 2024, respectively, compared to the prior year periods due to certain software assets becoming fully depreciated.

### Amortization of Intangible Assets

Amortization expense decreased by $0.6 million and $1.7 million during the three and nine months ended September 30, 2024, respectively, compared to the prior year periods due to a decrease in the amortization of trademark and technology intangible assets.

### Restructuring and Related Costs

In May 2023, we implemented a reduction in our workforce of approximately 8% across various geographies and functions to better align our cost structure with our revised revenue outlook for the year, and to streamline our sales and consulting organizations to more efficiently go to market in support of driving contract value growth in the future. We recorded $7.5 million of severance and related costs for this action during the second quarter of 2023. In addition, we closed certain of our smaller offices both inside and outside the U.S. in order to reduce facility costs and better match our facilities to our hybrid work strategy. As a result of closing the offices, we recorded restructuring costs of $2.3 million, which included $1.3 million related to right-of-use asset impairments and accelerated amortization and $0.6 million related to impairments of leasehold improvements. We also incurred $0.7 million in contract termination costs.

In February 2024, we implemented a reduction in our workforce of approximately 3% across various geographies and functions to better align our cost structure with the revenue outlook for the year. We recorded $0.7 million of severance and related costs for this action during the fourth quarter of 2023, and $2.8 million during the first quarter of 2024. We recorded a restructuring charge of $3.8 million during the first quarter of 2024 related to closing one floor of our offices in California, of which $3.2 million related to an impairment of a right-of-use asset and $0.6 million related to an impairment of leasehold improvements. We anticipate all of the severance and related costs for this plan to be paid during 2024.

During the third quarter of 2024, we recorded an additional restructuring charge of $0.7 million related to closing both floors of our offices located at 150 Spear Street, San Francisco, California, of which $0.4 million related to an impairment of the right-of-use assets and $0.3 million related to an impairment of leasehold improvements. Also during the third quarter of 2024, we recognized $0.2 million of expense from the write-off of foreign currency translation adjustments related to the liquidation of a small foreign operation.

### Loss From Sale of Divested Operation

Loss from sale of divested operation of $1.8 million was attributable to the sale of our FeedbackNow product line in August 2024.

### Interest Expense

Interest expense consists of interest on our borrowings. The fluctuation for interest expense was immaterial during the three and nine months ended September 30, 2024 compared to the prior year periods.

### Other Income, Net

Other income, net primarily consists of interest income, gains and losses on foreign currency, and gains and losses on foreign currency forward contracts. Other income, net decreased by $0.1 million and increased by $1.1 million during the three and nine months ended September 30, 2024, respectively, compared to the prior year periods. The increase in other income, net for the nine months ended September 30, 2024 was primarily due to a $1.9 million increase in interest income, partially offset by a $0.9 million increase in foreign currency exchange losses.

### Income Tax Expense

|  | Three Months Ended September 30, 2024 | 2023 | Absolute Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Provision for income taxes (dollars in millions) | $4.7 | $2.4 | $2.3 | 99% |
| Effective tax rate | (440%) | 49% | (489) points |  |

|  | Nine Months Ended September 30, 2024 | 2023 | Absolute Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Provision for income taxes (dollars in millions) | $7.9 | $3.8 | $4.1 | 106% |
| Effective tax rate | 461% | 51% | 410 points |  |

The increase in the effective tax rate during the nine months ended September 30, 2024 compared to the prior year period is primarily due to the following discrete tax items during the nine months ended September 30, 2024: 1) tax expense from the disposition of assets related to the FeedbackNow product line of $3.5 million, 2) tax expense from the settlement of share-based awards of $1.7 million, 3) foreign withholding taxes due to the dissolution of a foreign subsidiary of $0.3 million, and 4) a valuation allowance recorded against non-realizable state NOL carryforwards due to the dissolution of a domestic subsidiary of $0.5 million. However, for the fourth quarter of 2024, we anticipate that our effective tax rate will be approximately 40%, resulting in a full year 2024 effective tax rate in a range of 135% to 270%.

### Segment Results

We operate in three segments: Research, Consulting, and Events. These segments, which are also our reportable segments, are based on our management structure and how management uses financial information to evaluate performance and determine how to allocate resources. Our products and services are delivered through each segment as described below.

The Research segment includes the revenues from all of our research products as well as consulting revenues primarily from advisory services (such as speeches and advisory days) delivered by our 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. During the third quarter of 2024, we realigned the reporting structure of its technology teams and as such certain technology costs are no longer reported within the Research segment, and are now reported within the line selling, marketing, administrative and other expenses. Prior period amounts have been recast to conform to the current presentation.

The Consulting segment includes the revenues and the related costs of our project consulting organization. The project consulting organization delivers a majority of our project consulting revenue.

The Events segment includes the revenues and the costs of the organization responsible for developing and hosting our events.

We evaluate reportable segment performance and allocates resources based on segment revenues and expenses. 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, restructuring and related costs, loss from sale of divested operation, interest expense, and other income. The accounting policies used by the segments are the same as those used in the consolidated financial statements.

*(dollars in thousands)*

| Three Months Ended September 30, 2024 | Research Segment | Consulting Segment | Events Segment | Consolidated |
| --- | ---: | ---: | ---: | ---: |
| Research revenues | $77,070 | $— | $— | $77,070 |
| Consulting revenues | 4,335 | 19,034 | — | 23,369 |
| Events revenues | — | — | 2,088 | 2,088 |
| Total segment revenues | 81,405 | 19,034 | 2,088 | 102,527 |
| Segment expenses | (27,886) | (9,580) | (3,042) | (40,508) |
| Year over year revenue change | (7%) | (12%) | (54%) | (10%) |
| Year over year expense change | (7%) | (11%) | (25%) | (10%) |

*(dollars in thousands)*

| Three Months Ended September 30, 2023 | Research Segment | Consulting Segment | Events Segment | Consolidated |
| --- | ---: | ---: | ---: | ---: |
| Research revenues | $80,606 | $— | $— | $80,606 |
| Consulting revenues | 6,517 | 21,720 | — | 28,237 |
| Events revenues | — | — | 4,588 | 4,588 |
| Total segment revenues | 87,123 | 21,720 | 4,588 | 113,431 |
| Segment expenses | (30,089) | (10,739) | (4,031) | (44,859) |

*(dollars in thousands)*

| Nine Months Ended September 30, 2024 | Research Segment | Consulting Segment | Events Segment | Consolidated |
| --- | ---: | ---: | ---: | ---: |
| Research revenues | $237,314 | $— | $— | $237,314 |
| Consulting revenues | 14,478 | 56,843 | — | 71,321 |
| Events revenues | — | — | 15,794 | 15,794 |
| Total segment revenues | 251,792 | 56,843 | 15,794 | 324,429 |
| Segment expenses | (90,080) | (29,181) | (15,043) | (134,304) |
| Year over year revenue change | (7%) | (17%) | (33%) | (11%) |
| Year over year expense change | (5%) | (15%) | (7%) | (7%) |

*(dollars in thousands)*

| Nine Months Ended September 30, 2023 | Research Segment | Consulting Segment | Events Segment | Consolidated |
| --- | ---: | ---: | ---: | ---: |
| Research revenues | $249,211 | $— | $— | $249,211 |
| Consulting revenues | 21,439 | 68,518 | — | 89,957 |
| Events revenues | — | — | 23,522 | 23,522 |
| Total segment revenues | 270,650 | 68,518 | 23,522 | 362,690 |
| Segment expenses | (94,477) | (34,521) | (16,186) | (145,184) |

28

Research segment revenues decreased 7% for both the three and nine months ended September 30, 2024 compared to the prior year periods. For the three and nine months ended September 30, 2024, research product revenues within this segment decreased 4% and 5%, respectively, primarily due to the decrease in CV, as discussed above. From a product perspective, the decrease in revenues was primarily due to a decline in revenue from our reprint product and our other smaller and discontinued products. In addition, revenue from our subscription research products declined 1% and 2% during the three and nine months ended September 30, 2024, respectively. For the three and nine months ended September 30, 2024, consulting product revenues within this segment decreased 33% and 32%, respectively, primarily due to decreased delivery of consulting and advisory services by our research analysts due primarily to lower client bookings for these services.

Research segment expenses decreased 7% and 5% during the three and nine months ended September 30, 2024, respectively, compared to the prior year periods. The decrease in expenses during the three months ended September 30, 2024 was primarily due to a $2.3 million decrease in compensation and benefit costs primarily due to a decrease in headcount. The decrease in expenses during the nine months ended September 30, 2024 was primarily due to a $4.5 million decrease in compensation and benefit costs primarily due to a decrease in headcount.

Consulting segment revenues decreased 12% and 17% during the three and nine months ended September 30, 2024, respectively, compared to the prior year periods. The decrease in revenues during the three and nine months ended September 30, 2024 was primarily due to a decrease in delivery of consulting services due to lower client bookings.

Consulting segment expenses decreased 11% and 15% during the three and nine months ended September 30, 2024, respectively, compared to the prior year periods. The decrease in expenses during the three months ended September 30, 2024 was primarily due to a $1.3 million decrease in compensation and benefit costs primarily due to a decrease in headcount. The decrease in expenses during the nine months ended September 30, 2024 was primarily due to (1) a $4.8 million decrease in compensation and benefit costs primarily due to a decrease in headcount and (2) a $0.6 million decrease in professional services primarily due to a decrease in contractor costs.

Event segment revenues decreased 54% and 33% during the three and nine months ended September 30, 2024, respectively, compared to the prior year periods. The decrease in revenues was primarily due to a decrease in sponsorship revenues and a decrease in event ticket revenue.

Event segment expenses decreased 25% and 7% during the three and nine months ended September 30, 2024, respectively, compared to the prior year periods. The decrease in expenses was primarily due to a decrease in event costs.

### Liquidity and Capital Resources

We have historically financed our operations primarily through funds generated from operations. Research revenues, which constituted approximately 73% of our revenues during the nine months ended September 30, 2024, are generally renewable and are typically payable in advance. We used $2.0 million of cash in operating activities during the nine months ended September 30, 2024 and generated $9.8 million of cash from operating activities during the nine months ended September 30, 2023. The $11.8 million decrease in cash from operations for the nine months ended September 30, 2024 compared to the prior year period was primarily due to a $9.9 million decrease in net income (loss), partially offset by the changes in non-cash items affecting net income (loss), and an increase in cash used for working capital.

During the nine months ended September 30, 2024, we generated cash from investing activities of $4.8 million primarily from $6.0 million in proceeds from the sale of the FeedbackNow product line and $1.6 million in net maturities and sales of marketable investments, partially offset by $2.7 million of purchases of property and equipment, primarily consisting of computer software. During the nine months ended September 30, 2023, we generated cash from investing activities of $6.3 million primarily from $10.2 million in net maturities of marketable investments, partially offset by $3.9 million of purchases of property and equipment, primarily consisting of computer software.

We used $13.0 million of cash from financing activities during the nine months ended September 30, 2024 primarily due to $13.0 million for purchases of our common stock and $2.5 million in taxes paid related to net share settlements of restricted stock units, partially offset by $2.4 million of net proceeds from the issuance of common stock under our stock-based incentive plans. We used $18.2 million of cash in financing activities during the nine months ended September 30, 2023 primarily due to $15.0 million of discretionary repayments on our revolving credit facility, $4.1 million for purchases of our common stock, and $2.6 million in taxes paid related to net share settlements of restricted stock units, partially offset by $3.5 million of net proceeds from the issuance of common stock under our stock-based incentive plans. As of September 30, 2024, our remaining stock repurchase authorization was approximately $82.9 million.

We have a credit facility that provides up to $150.0 million of revolving credit commitments. The credit facility has a balance of $35.0 million at September 30, 2024 and matures in December of 2026. The credit facility permits us to increase the revolving credit commitments in an aggregate principal amount up to $50.0 million, subject to approval by the administrative agent and certain customary terms and conditions.

The credit facility contains certain customary restrictive loan covenants, including among others, financial covenants that apply a maximum leverage ratio, minimum interest coverage ratio, and maximum annual capital expenditures. The negative covenants limit, subject to various exceptions, our ability to incur additional indebtedness, create liens on assets, merge, consolidate, liquidate or dissolve any part of the company, sell assets, change fiscal year, or enter into certain transactions with affiliates and subsidiaries. We were in full compliance with the covenants as of September 30, 2024 and expect to continue to be in compliance through the next 12 months.

Additional future contractual cash obligations extending over the next 12 months and beyond primarily consist of operating lease payments. We lease office space under non-cancelable operating lease agreements (refer to Note 6 – *Leases* in the Notes to Consolidated Financial Statements for additional information). The remaining duration of non-cancelable office space leases ranges from less than 1 year to 7 years. As of September 30, 2024, remaining non-cancelable lease payments are due as follows: $4.0 million in 2024, $26.4 million within 2025 and 2026, $8.8 million within 2027 and 2028, and $6.2 million beyond 2028.

In addition to the contractual cash commitments included above, we have other payables and liabilities that may be legally enforceable but are not considered contractual commitments.

As of September 30, 2024, we had cash, cash equivalents, and marketable investments of $114.9 million. This balance includes $81.0 million held outside of the U.S. If the cash outside of the U.S. is needed for operations in the U.S., we would be required to accrue and pay U.S. state taxes and may be required to pay withholding taxes to foreign jurisdictions to repatriate these funds. However, our intent is to permanently reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate these funds for our U.S. operations. We believe that our current cash balance and cash flows from operations will satisfy working capital, financing activities, and capital expenditure requirements for the next twelve months and to meet our known long-term cash requirements.

### Recent Accounting Pronouncements

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

### Critical Accounting Policies and Estimates

For information regarding our critical accounting policies and estimates, please refer to Note 1, "Summary of Significant Accounting Policies" and Item 7, “Critical Accounting Estimates” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no material changes to the critical accounting policies and estimates previously disclosed in that report.

## Market risk

As filed, 266 characters.

There have been no material changes in our assessment of our sensitivity to market risk since our presentation set forth in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, 2023.

## Controls and procedures

As filed, 1,814 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined under Securities Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024. Based upon their evaluation and subject to the foregoing, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance as of that date.

### Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) of the Exchange Act) that occurred during the quarter ended September 30, 2024, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 695 characters.

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A: Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, which could materially affect our business, financial condition or future results. The risk factors described in our Annual Report on Form 10-K remain applicable to our business. The risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Filed Nov 8, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-123723. Last ingested by Listed: Oct 29, 2026, 16:06 ET. No prices; not investment advice.