Forrester Research, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. Although the request identifies 2020 Q4, this filing reports full-year results, not standalone fourth-quarter financial statements. Forrester is a global research and advisory firm generating revenue from research subscriptions and data, consulting, and events.
Financial performance
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $449.0 million | $461.7 million |
| Operating income (loss) | $16.2 million | $(1.1) million |
| Operating margin | 3.6% | (0.2)% |
| Net income (loss) | $10.0 million | $(9.6) million |
| Diluted EPS | $0.53 | $(0.52) |
| Cash from operating activities | $47.8 million | $48.4 million |
- Revenue mix: research $294.5 million, down 1%; consulting $144.4 million, up 6%; events $10.1 million, down 63%.
- Cost of services and fulfillment fell 8% to $180.9 million, equal to 40.3% of revenue versus 42.6% in 2019. Selling and marketing declined 4% to $166.2 million; general and administrative expense declined 5% to $50.4 million.
- Cash and cash equivalents were $90.3 million at year-end, up from $67.9 million. Investing activities used $4.6 million, principally capital expenditures of $8.9 million, partly offset by a $4.3 million investment distribution. Financing activities used $23.7 million, primarily for debt repayments.
- Debt principal was $109.4 million, down from $132.8 million. The company had $74.1 million of available revolver capacity and reported compliance with debt covenants. Current debt maturities are $12.5 million in 2021; facilities mature January 2024.
- Deferred revenue was $180.0 million, essentially unchanged. Agreement value fell 4% to $345.3 million; client retention declined to 65% from 72%, dollar retention to 88% from 90%, enrichment to 100% from 106%, and client count to 2,697 from 2,880.
Changes versus 2019
- Total revenue declined 3%, with the sharp event-revenue drop partly offset by consulting growth. The company held nine events in 2020 versus 19 in 2019, converting events to virtual formats amid COVID-19.
- Forrester returned to operating and net profitability from 2019 losses. Lower travel and event costs, lower interest expense, and reduced acquisition and integration costs contributed. A $2.5 million investment gain also supported 2020 results.
- Comparisons are affected by purchase-accounting adjustments to SiriusDecisions deferred revenue in 2019; management said these adjustments favorably affected the 2020 comparison by 2% for total revenue.
- Management reorganized reporting into Research, Consulting, and Events during 2020. Prior-period segment figures were revised to conform.
Outlook, risks and unusual items
- Management reported a rebound in contract bookings in Q4 2020 and expected the trend to continue in 2021. This is commentary, not quantified financial guidance. All first-half 2021 events were planned as virtual; management hoped to hold hybrid events in the second half.
- Management said cash and operating cash flows should cover working capital, financing activities, and capital expenditures for the next 12 months, and forecast covenant compliance for at least a year from issuance. COVID-19’s duration and financial impact remained uncertain.
- COVID-19 contributed to lower bookings and event revenue. Cost reductions in travel, hiring, and incentive compensation were largely restored for 2021, apart from travel restrictions in the first half.
- Unusual items included $3.4 million of lease and leasehold-asset impairments related to an unused facility following the SiriusDecisions integration, partly offset by a $3.5 million landlord incentive for early lease termination. No goodwill impairment was recorded.
- Key risks include subscription renewal and retention, demand for project-based consulting, economic and technology-spending weakness, competition, international and foreign-exchange exposure, privacy and cybersecurity, and debt and covenant constraints. The CEO owned approximately 41% of outstanding shares, giving him significant influence over stockholder matters.
- The quarterly dividend program remained suspended; no dividends or share repurchases occurred in 2020. The board’s repurchase authorization had approximately $60.1 million remaining at year-end.
Important facts for investors to verify
- Whether the Q4 booking rebound translated into stronger 2021 agreement value, renewals, and dollar retention.
- Whether consulting growth can persist and whether event revenue and sponsorship recover under virtual or hybrid formats.
- Debt repayment, interest-rate exposure, covenant headroom, and the company’s ability to sustain cash generation.
- The comparability of reported growth given the 2019 SiriusDecisions deferred-revenue purchase-accounting adjustment and 2020 segment realignment.
- Any subsequent developments affecting COVID-19, international operations, lease commitments, or the company’s outlook; the filing provides no quantified revenue or earnings guidance.
Audit: PwC issued unqualified opinions on the financial statements and internal control over financial reporting. Revenue recognition, particularly identification of distinct performance obligations, was identified as a critical audit matter.