Forrester Research, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with Q1 2023 unless noted. Amounts are in U.S. dollars. Forrester sells research subscriptions and related services, consulting and advisory services, and events.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $100.1 million | $113.7 million; down 12% |
| Research revenue | $76.6 million | $80.9 million; down 5% |
| Consulting revenue | $23.1 million | $31.8 million; down 27% |
| Events revenue | $0.4 million | $1.0 million; no events were held in either period |
| Operating loss and margin | $9.3 million loss; 9.3% negative margin | $5.1 million loss; 4.5% negative margin |
| Net loss and diluted loss per share | $6.7 million; $0.35 | $4.1 million; $0.21 |
| Cash from operating activities | $0.6 million | $12.3 million |
| Cash, cash equivalents and marketable investments | $118.5 million | At March 31, 2024 |
| Debt | $35.0 million | Revolving credit facility; matures December 2026 |
Cost of services and fulfillment was $44.7 million, or 44.7% of revenue, versus $49.3 million, or 43.4%, a year earlier. Restructuring costs increased to $6.6 million from $1.6 million. The Q1 2024 tax benefit was $2.1 million; management anticipates an approximately 50% effective tax rate for full-year 2024.
At March 31, current assets were $218.6 million and current liabilities were $241.1 million. Deferred revenue was $193.7 million, up from $156.8 million at December 31, 2023. The company had $114.4 million of available borrowing capacity under its $150 million facility, excluding the expansion feature, and reported compliance with its debt covenants. Cash, cash equivalents and marketable investments included $77.8 million held outside the U.S.
Material changes and management commentary
- Contract value (CV) was $323.1 million, down 4% year over year. Client retention fell to 72% from 74%, wallet retention to 88% from 90%, and clients to 2,308 from 2,678. Management attributed pressure to client budget and funding constraints, uncertain economic conditions, and the transition to Forrester Decisions.
- About 70% of CV was in Forrester Decisions at quarter-end; management anticipates approximately 80% over the longer term. Management expects macroeconomic conditions and the product transition to pressure key metrics through 2024.
- Consulting revenue declined primarily because of lower client bookings and reduced delivery of advisory and consulting services. Research subscription revenue declined 3%; research revenue was also affected by lower reprint and smaller or discontinued product revenue.
- Operating cash flow fell by $11.7 million year over year. Management cited lower cash generated from accounts receivable and deferred revenue, reflecting lower contract bookings, and higher prepaid expenses and other current assets, mainly due to payment timing.
- The company recorded $6.6 million in restructuring costs, including $2.8 million in severance from a February 2024 workforce reduction of approximately 3% and $3.8 million related to closing a San Francisco office floor. The company expects associated remaining costs to be paid by year-end 2024.
- The company repurchased 202,000 shares for approximately $4.1 million in Q1. In April, the board authorized a further $25 million increase to the repurchase program.
Outlook, risks and contingencies
Management said current cash and expected operating cash flows should meet working capital, financing and capital expenditure needs for the next 12 months and known long-term cash requirements. This is management’s assessment, not a guarantee of future results. Forward-looking risks identified include weaker client demand or technology spending, subscription retention and enrichment, consulting bookings, event demand, competition, international and foreign-exchange exposure, debt obligations, staffing, cybersecurity and privacy, and the use of generative AI. The filing reports no material change in market-risk assessment and says disclosure controls were effective.
The company reported ordinary-course legal claims as contingencies. A previously accrued $4.8 million wage-related settlement was paid in Q1 2024. The filing does not identify another specific material legal loss or quantified contingency.
Important facts for investors to verify
- Whether CV, client retention, wallet retention and client counts stabilize or continue to weaken, and progress toward the Forrester Decisions transition.
- Whether consulting bookings and revenue recover, and whether research subscription declines persist.
- Whether operating cash flow improves as deferred revenue, receivables and prepaid expenses change.
- Restructuring execution and costs, including expected 2024 payments and any additional office or workforce actions.
- Liquidity, cash held outside the U.S., debt-facility covenant compliance and the effects of the approximately 50% full-year tax-rate estimate.
- Use of the expanded repurchase authorization relative to cash needs and operating performance.