Forrester Research, Inc. — Q2 2023 Form 10-Q
Business context and period. The filing covers the quarter and six months ended June 30, 2023, compared with the corresponding 2022 periods. Forrester sells research subscriptions and related products, consulting and advisory services, and events. Figures below are in millions of dollars unless stated otherwise.
Financial performance
| Metric | Q2 2023 | Q2 2022 | First half 2023 | First half 2022 |
|---|---|---|---|---|
| Revenue | $135.6 | $148.2 | $249.3 | $273.2 |
| Operating income | $8.3 | $20.7 | $3.1 | $27.2 |
| Net income | $5.3 | $13.9 | $1.2 | $18.0 |
| Diluted EPS | $0.28 | $0.72 | $0.06 | $0.94 |
| Operating margin | 6.1% | 14.0% | 1.3% | 9.9% |
| Net margin | 3.9% | 9.4% | 0.5% | 6.6% |
| Operating cash flow | Not separately stated | Not separately stated | $15.8 | $34.8 |
Q2 revenue declined 9% year over year. Research revenue fell 2% to $87.7 million, consulting fell 24% to $30.0 million, and events fell 8% to $17.9 million. For the first half, revenue decreased 9%; research declined 4%, consulting 21%, and events 7%. First-half operating cash flow fell $19.0 million year over year, which management attributed primarily to lower net income, payment timing, and higher income-tax payments.
Financial position and liquidity
- At June 30, cash and cash equivalents were $110.0 million and marketable investments were $13.7 million, totaling $123.6 million. The company said $90.8 million was held outside the United States and intended to remain permanently reinvested abroad.
- Total assets were $570.7 million; current assets were $210.2 million and current liabilities were $243.5 million. Deferred revenue was $179.6 million. Approximately $362.2 million of revenue was expected to be recognized over the next 24 months from remaining performance obligations.
- Debt was $35.0 million, down from $50.0 million at year-end 2022. The $150 million revolving facility matures in December 2026; $114.4 million of capacity remained available, excluding its expansion feature. The June 30 annualized contractual interest rate was 6.452%. The company reported covenant compliance and expected compliance for the next 12 months.
- Operating lease liabilities totaled $59.0 million. First-half capital expenditures were $2.7 million. Management said cash and operating cash flows should meet working-capital, financing, capital-expenditure, and known long-term needs.
Material changes and management commentary
- Contract value, a key recurring-research metric, was $344.0 million, broadly unchanged year over year. Client retention was 74% versus 76%; wallet retention was 92% versus 99%; and clients numbered 2,604, down 11%. Management linked pressure to customer budget conditions and the transition to Forrester Decisions, and anticipated pressure on these metrics through 2023.
- Consulting declines reflected lower bookings and delivery amid economic uncertainty, as well as a policy of generally selling consulting only to contract-value clients. Events revenue was affected by lower sponsorship revenue and attendance. Subscription research revenue grew 2% in both the quarter and first half, offset by declines in reprints and smaller or discontinued products.
- Restructuring charges were $10.5 million in Q2 and $12.1 million in the first half. The May action reduced the workforce by approximately 8% and included office closures; a separate January action reduced the workforce by approximately 4%. Most accrued costs were expected to be paid by year-end.
- First-half general and administrative expense included a $4.8 million provision following an agreement in principle in a wage-related matter. The company said it believed it had meritorious defenses and did not expect pending legal matters, based on currently available information, to materially affect its overall financial position, results, or cash flows, though effects could be material in an interim period.
- The first-half effective tax rate was 54.3%, primarily due to tax expense related to share-based award settlements. Management anticipated a full-year 2023 effective tax rate of approximately 43%. The filing provides no specific full-year revenue or earnings guidance.
- The company repurchased approximately 27,500 shares for $0.8 million in Q2; approximately $74.1 million remained under the repurchase authorization. First-half discretionary debt repayments were $15.0 million.
Key investor verification points
- Track contract value alongside client and wallet retention, client count, and the continued transition to Forrester Decisions.
- Assess whether consulting bookings and delivery, event attendance and sponsorship, and research revenue trends stabilize.
- Monitor cash conversion and working-capital movements: first-half operating cash flow declined materially despite positive net income.
- Verify restructuring execution, expected cash payments, and whether cost reductions offset revenue weakness without impairing delivery capacity.
- Follow the wage-related matter and other contingencies, as well as debt interest costs, covenant headroom, and the effective tax rate.
- The company disclosed that operating cash flow and property-and-equipment purchases reported in its July 27, 2023 earnings release and Form 8-K were adjusted in this 10-Q to $15.8 million and $2.7 million, respectively; verify against the earlier release.