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  • 10-Q (Aug 8, 2017)
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Forrester Research 10-Q 2016

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
forr-10q_20160930.htm

 

 

FORM 10-Q

 

(MARK ONE)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE QUARTERLY PERIOD ENDED September 30, 2016

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

COMMISSION FILE NUMBER: 000-21433

 

FORRESTER RESEARCH, INC.

(Exact name of registrant as specified in its charter)

 

 

DELAWARE

 

04-2797789

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

 

 

60 Acorn Park Drive

CAMBRIDGE, MASSACHUSETTS

 

02140

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (617) 613-6000

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

As of November 3, 2016 18,218,000 shares of the registrant’s common stock were outstanding.

 

 

 

 

 


 

FORRESTER RESEARCH, INC.

INDEX TO FORM 10-Q

 

 

  

PAGE

 

PART I. FINANCIAL INFORMATION

  

3

 

ITEM 1. Financial Statements (Unaudited)

  

3

 

Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015

  

3

 

Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2016 and 2015

  

4

 

Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2016 and 2015

  

5

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and 2015

  

6

 

Notes to Consolidated Financial Statements

  

7

 

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

16

 

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

  

24

 

ITEM 4. Controls and Procedures

  

24

 

PART II. OTHER INFORMATION

  

25

 

ITEM 1A. Risk Factors

  

25

 

ITEM 6. Exhibits

  

26

  

 

 

 

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORRESTER RESEARCH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data, unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

ASSETS

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

70,136

 

 

$

53,331

 

Marketable investments (Note 3)

 

 

63,104

 

 

 

47,775

 

Accounts receivable, net

 

 

36,024

 

 

 

67,355

 

Deferred commissions

 

 

9,639

 

 

 

13,529

 

Prepaid expenses and other current assets

 

 

12,590

 

 

 

15,737

 

Total current assets

 

 

191,493

 

 

 

197,727

 

Property and equipment, net

 

 

24,846

 

 

 

27,569

 

Goodwill

 

 

74,607

 

 

 

74,071

 

Intangible assets, net

 

 

1,705

 

 

 

2,334

 

Other assets

 

 

16,988

 

 

 

17,290

 

Total assets

 

$

309,639

 

 

$

318,991

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

634

 

 

$

525

 

Accrued expenses and other current liabilities

 

 

29,654

 

 

 

41,252

 

Deferred revenue

 

 

126,178

 

 

 

140,676

 

Total current liabilities

 

 

156,466

 

 

 

182,453

 

Non-current liabilities

 

 

10,254

 

 

 

9,236

 

Total liabilities

 

 

166,720

 

 

 

191,689

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity (Note 7):

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value

 

 

 

 

 

 

 

 

Authorized - 500 shares; issued and outstanding - none

 

 

 

 

 

 

Common stock, $0.01 par value

 

 

 

 

 

 

 

 

Authorized - 125,000 shares

 

 

 

 

 

 

 

 

Issued - 21,517 and 21,063 shares as of September 30, 2016 and December 31, 2015, respectively

 

 

 

 

 

 

 

 

Outstanding - 18,207 and 17,752 shares as of September 30, 2016 and December 31, 2015, respectively

 

 

215

 

 

 

211

 

Additional paid-in capital

 

 

148,411

 

 

 

134,967

 

Retained earnings

 

 

119,300

 

 

 

117,135

 

Treasury stock - 3,311 shares as of September 30, 2016 and December 31, 2015,

  at cost

 

 

(120,185

)

 

 

(120,185

)

Accumulated other comprehensive loss

 

 

(4,822

)

 

 

(4,826

)

Total stockholders’ equity

 

 

142,919

 

 

 

127,302

 

Total liabilities and stockholders’ equity

 

$

309,639

 

 

$

318,991

 

 

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

 

 

3


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data, unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2016

 

 

2015

 

2016

 

 

2015

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research services

$

52,727

 

 

$

52,205

 

$

160,998

 

 

$

156,667

 

Advisory services and events

 

24,700

 

 

 

22,548

 

 

81,651

 

 

 

76,084

 

Total revenues

 

77,427

 

 

 

74,753

 

 

242,649

 

 

 

232,751

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services and fulfillment

 

29,889

 

 

 

29,222

 

 

95,429

 

 

 

92,543

 

Selling and marketing

 

27,751

 

 

 

27,460

 

 

87,490

 

 

 

85,572

 

General and administrative

 

10,086

 

 

 

9,530

 

 

30,359

 

 

 

28,564

 

Depreciation

 

1,941

 

 

 

2,048

 

 

5,982

 

 

 

6,251

 

Amortization of intangible assets

 

208

 

 

 

224

 

 

627

 

 

 

669

 

Reorganization costs

 

 

 

 

928

 

 

1,026

 

 

 

4,433

 

Total operating expenses

 

69,875

 

 

 

69,412

 

 

220,913

 

 

 

218,032

 

Income from operations

 

7,552

 

 

 

5,341

 

 

21,736

 

 

 

14,719

 

Other income, net

 

229

 

 

 

159

 

 

374

 

 

 

342

 

Gains (losses) on investments, net

 

(1,085

)

 

 

245

 

 

(1,139

)

 

 

236

 

Income before income taxes

 

6,696

 

 

 

5,745

 

 

20,971

 

 

 

15,297

 

Income tax provision

 

3,584

 

 

 

1,295

 

 

9,110

 

 

 

5,321

 

Net income

$

3,112

 

 

$

4,450

 

$

11,861

 

 

$

9,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per common share

$

0.17

 

 

$

0.25

 

$

0.66

 

 

$

0.55

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted income per common share

$

0.17

 

 

$

0.25

 

$

0.65

 

 

$

0.55

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

18,062

 

 

 

17,892

 

 

17,896

 

 

 

17,986

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average common shares outstanding

 

18,435

 

 

 

18,065

 

 

18,168

 

 

 

18,231

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share

$

0.18

 

 

$

0.17

 

$

0.54

 

 

$

0.51

 

 

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

 

 

4


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Net income

$

3,112

 

 

$

4,450

 

 

$

11,861

 

 

$

9,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation

 

(120

)

 

 

(129

)

 

 

(68

)

 

 

(2,062

)

Net change in market value of investments

 

(48

)

 

 

 

 

 

72

 

 

 

47

 

Other comprehensive income (loss)

 

(168

)

 

 

(129

)

 

 

4

 

 

 

(2,015

)

Comprehensive income

$

2,944

 

 

$

4,321

 

 

$

11,865

 

 

$

7,961

 

 

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

 

 

5


 

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

 

 

Nine Months Ended

 

 

September 30,

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

11,861

 

 

$

9,976

 

Adjustments to reconcile net income to net cash provided by operating

   activities:

 

 

 

 

 

 

 

Depreciation and asset write offs

 

5,982

 

 

 

6,408

 

Amortization of intangible assets

 

627

 

 

 

669

 

Net (gains) losses from investments

 

1,139

 

 

 

(236

)

Deferred income taxes

 

(413

)

 

 

(2,463

)

Stock-based compensation

 

5,731

 

 

 

5,885

 

Amortization of premium on investments

 

267

 

 

 

556

 

Foreign currency losses

 

98

 

 

 

64

 

Changes in assets and liabilities

 

 

 

 

 

 

 

Accounts receivable

 

31,078

 

 

 

29,511

 

Deferred commissions

 

3,890

 

 

 

4,422

 

Prepaid expenses and other current assets

 

1,977

 

 

 

(148

)

Accounts payable

 

133

 

 

 

(284

)

Accrued expenses and other liabilities

 

(12,170

)

 

 

(7,115

)

Deferred revenue

 

(14,309

)

 

 

(19,027

)

Net cash provided by operating activities

 

35,891

 

 

 

28,218

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

(3,334

)

 

 

(2,316

)

Purchases of marketable investments

 

(35,555

)

 

 

(20,587

)

Proceeds from sales and maturities of marketable investments

 

20,086

 

 

 

16,428

 

Other investing activity

 

(49

)

 

 

275

 

Net cash used in investing activities

 

(18,852

)

 

 

(6,200

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Dividends paid on common stock

 

(9,696

)

 

 

(9,163

)

Repurchases of common stock

 

 

 

 

(18,639

)

Proceeds from issuance of common stock under employee equity

   incentive plans

 

9,987

 

 

 

2,899

 

Excess tax benefits from stock-based compensation

 

345

 

 

 

32

 

Net cash provided by (used in) financing activities

 

636

 

 

 

(24,871

)

Effect of exchange rate changes on cash and cash equivalents

 

(870

)

 

 

(1,211

)

Net increase (decrease) in cash and cash equivalents

 

16,805

 

 

 

(4,064

)

Cash and cash equivalents, beginning of period

 

53,331

 

 

 

49,650

 

Cash and cash equivalents, end of period

$

70,136

 

 

$

45,586

 

 

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

 

 

 

6


 

FORRESTER RESEARCH, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 1 — Interim Consolidated Financial Statements

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures required for complete financial statements are not included herein. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. It is recommended that these financial statements be read in conjunction with the consolidated financial statements and related notes that appear in the Forrester Research, Inc. (“Forrester”) Annual Report on Form 10-K for the year ended December 31, 2015. 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 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, 2016 may not be indicative of the results for the year ending December 31, 2016, or any other period.

Fair Value Measurements

The carrying amounts reflected in the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term maturities. See Note 3 – Marketable Investments - for the fair value of the Company’s marketable investments.

 

 

Note 2 — Accumulated Other Comprehensive Income (Loss)

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

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Net Unrealized Gain

 

 

Cumulative

 

 

Accumulated

 

 

 

(Loss) on Marketable

 

 

Translation

 

 

Other Comprehensive

 

 

 

Investments

 

 

Adjustment

 

 

Income (Loss)

 

Balance at January 1, 2016

 

$

(100

)

 

$

(4,726

)

 

$

(4,826

)

Foreign currency translation

 

 

 

 

 

(68

)

 

 

(68

)

Unrealized gain on investments, net of tax of $46

 

 

72

 

 

 

 

 

 

72

 

Balance at September 30, 2016

 

$

(28

)

 

$

(4,794

)

 

$

(4,822

)

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Net Unrealized Gain

 

 

Cumulative

 

 

Accumulated

 

 

 

(Loss) on Marketable

 

 

Translation

 

 

Other Comprehensive

 

 

 

Investments

 

 

Adjustment

 

 

Income (Loss)

 

Balance at July 1, 2016

 

$

20

 

 

$

(4,674

)

 

$

(4,654

)

Foreign currency translation

 

 

 

 

 

(120

)

 

 

(120

)

Unrealized loss on investments, net of tax of ($33)

 

 

(48

)

 

 

 

 

 

(48

)

Balance at September 30, 2016

 

$

(28

)

 

$

(4,794

)

 

$

(4,822

)

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Net Unrealized Gain

 

 

Cumulative

 

 

Accumulated

 

 

 

(Loss) on Marketable

 

 

Translation

 

 

Other Comprehensive

 

 

 

Investments

 

 

Adjustment

 

 

Income (Loss)

 

Balance at January 1, 2015

 

$

(74

)

 

$

(1,539

)

 

$

(1,613

)

Foreign currency translation before reclassification

 

 

 

 

 

(2,380

)

 

 

(2,380

)

Reclassification adjustment for write-off of foreign

   currency translation loss

 

 

 

 

 

318

 

 

 

318

 

Unrealized gain on investments, net of tax of $29

 

 

47

 

 

 

 

 

 

47

 

Balance at September 30, 2015

 

$

(27

)

 

$

(3,601

)

 

$

(3,628

)

 

7


 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Net Unrealized Gain

 

 

Cumulative

 

 

Accumulated

 

 

 

(Loss) on Marketable

 

 

Translation

 

 

Other Comprehensive

 

 

 

Investments

 

 

Adjustment

 

 

Income (Loss)

 

Balance at July 1, 2015

 

$

(27

)

 

$

(3,472

)

 

$

(3,499

)

Foreign currency translation

 

 

 

 

 

(129

)

 

 

(129

)

Balance at September 30, 2015

 

$

(27

)

 

$

(3,601

)

 

$

(3,628

)

 

 

 

Note 3 — Marketable Investments

The following table summarizes the Company’s marketable investments (in thousands):

 

 

 

As of  September 30, 2016

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Federal agency obligations

 

$

1,801

 

 

$

 

 

$

(1

)

 

$

1,800

 

Corporate obligations

 

 

61,350

 

 

 

20

 

 

 

(66

)

 

 

61,304

 

Total

 

$

63,151

 

 

$

20

 

 

$

(67

)

 

$

63,104

 

 

 

 

As of December 31, 2015

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Market

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate obligations

 

$

47,939

 

 

$

 

 

$

(164

)

 

$

47,775

 

 

Realized gains and losses on securities are included in earnings and are determined using the specific identification method. Realized gains or losses on the sale of the Company’s corporate obligations were not material in the three and nine months ended September 30, 2016 or 2015.

The following table summarizes the maturity periods of the marketable securities in the Company’s portfolio as of September 30, 2016 (in thousands).

 

 

 

FY 2016

 

 

FY 2017

 

 

FY 2018

 

 

Total

 

Federal agency obligations

 

$

 

 

$

 

 

$

1,800

 

 

$

1,800

 

Corporate obligations

 

 

3,000

 

 

 

37,220

 

 

 

21,084

 

 

 

61,304

 

Total

 

$

3,000

 

 

$

37,220

 

 

$

22,884

 

 

$

63,104

 

 

The following table shows the gross unrealized losses and market value of Forrester’s available-for-sale securities with unrealized losses that are not deemed to be other-than-temporary, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

 

 

 

As of  September 30, 2016

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

 

Market

 

 

Unrealized

 

 

Market

 

 

Unrealized

 

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

Federal agency obligations

 

$

1,800

 

 

$

1

 

 

$

 

 

$

 

Corporate obligations

 

 

45,562

 

 

 

66

 

 

 

 

 

 

 

Total

 

$

47,362

 

 

$

67

 

 

$

 

 

$

 

 

 

 

As of December 31, 2015

 

 

 

Less Than 12 Months

 

 

12 Months or Greater

 

 

 

Market

 

 

Unrealized

 

 

Market

 

 

Unrealized

 

 

 

Value

 

 

Losses

 

 

Value

 

 

Losses

 

Corporate obligations

 

$

45,748

 

 

$

158

 

 

$

2,027

 

 

$

6

 

 

 

8


 

Fair Value

The Company measures certain financial assets at fair value on a recurring basis, including cash equivalents and available-for-sale securities. The fair values of these financial assets have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.

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

Level 2 — Fair value based on inputs other than Level 1 inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Fair value based on unobservable inputs that are supported by little or no market activity and such inputs are significant to the fair value of the assets or liabilities.

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

 

 

 

As of  September 30, 2016

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Money market funds (1)

 

$

528

 

 

$

 

 

$

 

 

$

528

 

Federal agency obligations

 

 

 

 

 

1,800

 

 

 

 

 

 

1,800

 

Corporate obligations

 

 

 

 

 

61,304

 

 

 

 

 

 

61,304

 

Total

 

$

528

 

 

$

63,104

 

 

$

 

 

$

63,632

 

 

 

 

As of December 31, 2015

 

 

 

Level 1

 

 

Level 2