Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, product development, possible acquisitions, future dividends, future share repurchases, future growth rates, operating income and cash from operations, future tax rates, future remittance of unremitted earnings, 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, the anticipated impact of accounting standards, planned renovations of our Cambridge, Massachusetts office space and anticipated capital expenditures, any future impairment charges we may incur, and anticipated future declines in consulting revenue. 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, any adverse economic conditions, including from trade policies and tariffs, 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, our business with the U.S. Government, the impact of our outstanding debt, competition and industry consolidation, possible variations in our quarterly operating results, the actual cost of capital expenditures that we undertake, 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, any weakness identified in our system of internal controls, and any future impairment charge we incur. These risks are described more completely in our Annual Report on Form 10-K for the year ended December 31, 2025 and in this Quarterly Report on Form 10-Q. 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, subscriptions to, and individual licenses of, electronic "reprints" of our Research, performing consulting projects and advisory services, and hosting events. We offer contracts for our products as either multi-year contracts or annual contracts, which are typically payable in advance on an annual basis. For certain contracts, we offer to invoice the contract price in multiple invoices throughout the year. Billings in excess of revenue recognized are recorded as deferred revenue. Subscription products are recognized as revenue over the term of the contract. Individual reprint licenses include an obligation to deliver a customer-selected research document and certain usage data provided through our 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. 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. Events revenues consist of ticket and sponsorship sales for a Forrester-hosted event, and revenue is recognized 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). Our CV products make up essentially all of our research revenues, and research revenues as a percentage of total revenues increased from approximately 76% for the three months ended March 31, 2025 to approximately 78% for the three months ended March 31, 2026.

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 planned 2026 foreign currency rates. We have included the recast metrics below for the three months ended March 31, 2025, and we have also provided recast metrics dating back to the first quarter of 2024, 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:

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):

Contract value at March 31, 2026 decreased by 3% 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 increased by 5 percentage points at March 31, 2026 compared to the prior year period, and increased by 1 percentage point compared to the prior quarter. We attribute the increase in client retention to our ongoing retention initiatives and to the launch of our AI Access product in the third quarter of 2025. Wallet retention increased by 3 percentage points at March 31, 2026 compared to the prior year period, and increased by 2 percentage points compared to the prior quarter. The increase in wallet retention compared to the prior year period was primarily due to improved client retention.

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, credit losses on the note receivable, and goodwill. 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, 2025.

Results of Operations

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

Three Months Ended March 31, 2026 and 2025

Revenues

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 2% during the three months ended March 31, 2026 compared to the prior year period, primarily due to the decrease in CV, as discussed above. From a product perspective, the decrease in revenues during the three months ended March 31, 2026 was primarily due to a decline in revenue from subscriptions to our research, partially offset by an increase in reprint revenue.

Consulting revenues decreased 13% during the three months ended March 31, 2026 compared to the prior year period. The decrease in revenues was due to a decrease in delivery of consulting services due to lower client bookings. In February 2026, we announced that we would discontinue selling strategy consulting engagements and would fulfill our backlog of strategy consulting engagements during 2026. Our ongoing consulting business will consist of content marketing consulting and advisory. We anticipate that, on a year over year basis, our 2026 consulting revenues will decline in the low 20 percent range due primarily to the cessation of strategy consulting in 2026.

Events revenues were insignificant during the three months ended March 31, 2026 and 2025 as no events were held during either period.

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

Cost of Services and Fulfillment

Cost of services and fulfillment expenses decreased 2% during the three months ended March 31, 2026 compared to the prior year period. The decrease was primarily due to a $1.1 million decrease in facilities costs primarily due to a decrease in lease expense.

Selling and Marketing

Selling and marketing expenses decreased 3% during the three months ended March 31, 2026 compared to the prior year period. The decrease was primarily due to a $0.9 million decrease in facilities costs primarily due to a decrease in lease expense.

General and Administrative

General and administrative expenses increased 10% during the three months ended March 31, 2026 compared to the prior year period. The increase was primarily due to a $1.4 million increase in professional services.

Depreciation

The fluctuation for depreciation expense was immaterial during the three months ended March 31, 2026 compared to the prior year period.

Amortization of Intangible Assets

The fluctuation for amortization expense was immaterial during the three months ended March 31, 2026 compared to the prior year period.

Goodwill Impairment

As a result of the substantial and sustained decline in our stock price and our overall market capitalization from December 31, 2025 through March 31, 2026, it was determined that a triggering event occurred as of March 31, 2026, indicating goodwill may be impaired. Accordingly, we conducted a quantitative impairment test of our goodwill as of March 31, 2026 for our two reporting units (Research and Consulting) that have goodwill. As a result of the quantitative impairment test performed, we determined goodwill was impaired for our Research reporting unit and recorded a goodwill impairment charge of $10.8 million during the period ended March 31, 2026, which is not deductible for tax purposes.

As a result of the substantial and sustained decline in our stock price and our overall market capitalization from mid-February 2025 through March 31, 2025, along with other qualitative considerations, including the continued impact from the conditions in the macroeconomic environment, uncertainty created by changes in the United States' trade policies, and the larger than expected decline

in contract bookings during the first quarter of 2025, it was determined that a triggering event occurred as of March 31, 2025, indicating goodwill may be impaired. Accordingly, we conducted a quantitative impairment test of our goodwill as of March 31, 2025 for our Research and Consulting reporting units. As a result of the quantitative impairment test, we determined goodwill was impaired for our Research reporting unit and recorded a goodwill impairment charge of $83.9 million during the period ended March 31, 2025, which is not deductible for tax purposes.

Restructuring and Related Costs

In January 2025, we implemented a reduction in our workforce of approximately 6% across various geographies and functions to better align our cost structure with the revenue outlook for the year. We recorded $4.2 million of severance and related costs for this action during the fourth quarter of 2024, $1.5 million during the first quarter of 2025, $0.4 million during the second quarter of 2025, and $(0.1) million during the third quarter of 2025.

In February 2026, we implemented a reduction in our workforce of approximately 8% across various geographies and functions to better align our cost structure with the revenue outlook for the year. We recorded $8.8 million of severance and related costs for this action during the fourth quarter of 2025 and $1.2 million during the first quarter of 2026. In addition, we incurred approximately $1.1 million for contract termination costs during the fourth quarter of 2025 and $0.6 million during the first quarter of 2026. We also approved plans to close certain of our smaller offices both inside and outside the United States, resulting in a non-cash charge of $0.4 million for accelerated ROU asset amortization in the first quarter of 2026.

Interest Expense

Interest expense consists of interest on our borrowings. The fluctuation in interest expense was immaterial during the three months ended March 31, 2026 compared to the prior year period.

Loss on Investments, Net

Loss on investments, net primarily represents our share of equity method investment gains and losses from our technology-related investment funds. The fluctuation for loss on investments, net was immaterial during the three months ended March 31, 2026 compared to the prior year period.

Credit Loss Expense on Note Receivable

Credit loss expense on note receivable recorded in the quarter ended March 31, 2025 consists of an allowance for credit losses on a note receivable from the divestiture of FeedbackNow during the third quarter of 2024.

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 $0.3 million during the three months ended March 31, 2026 compared to the prior year period primarily due to a decrease in interest income.

Income Tax Expense (Benefit)

The decrease in the effective tax rate during the 2026 period was primarily due to (1) a significant decrease in the forecasted effective tax rate before discrete items in 2026, resulting in a negative tax rate in 2026, compared to positive rate in 2025, primarily due to a reduction in forecasted pre-tax income exclusive of discrete items in 2026 and (2) a decrease in the pre-tax loss in 2026 due to the goodwill impairment charge in 2025, which is not deductible for tax purposes. For the full year 2026, we anticipate that our effective tax rate will be in the range of negative 5% to negative 10%.

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 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 that is responsible for product pricing and packaging, and the launch of new products.

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. As of January 1, 2025, we realigned our events sponsorship sales team and as such the costs of this team were not reported as a direct expense of the Events segment during the first and second quarters of 2025. During the third quarter of 2025, the events sponsorship sales team was aligned back to Events and the costs of this team are now being reported as a direct expense of the Events segment. The three months ended March 31, 2025 have been conformed to the current presentation.

We evaluate reportable segment performance and allocate resources based on segment operating income (loss). 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, goodwill impairment, restructuring costs, interest expense, credit loss expense on note receivable, other income, and losses on investments. The accounting policies used by the segments are the same as those used in the consolidated financial statements.

Research segment revenues decreased 2% during the three months ended March 31, 2026 compared to the prior year period. For the three months ended March 31, 2026, research product revenues within this segment decreased 2% primarily due to the decrease in CV, partially offset by an increase in reprint revenue. For the three months ended March 31, 2026, consulting product revenues within this segment decreased 4% primarily due to decreased delivery of consulting services by our research analysts.

Research segment expenses increased 2% during the three months ended March 31, 2026 compared to the prior year period. The increase in expenses was primarily due to a $0.6 million increase in compensation and benefit costs.

Consulting segment revenues decreased 16% during the three months ended March 31, 2026 compared to the prior year period. The decrease in revenues was due to a decrease in delivery of consulting services due to lower client bookings and due to the discontinuation of selling strategy consulting engagements.

Consulting segment expenses were consistent during the three months ended March 31, 2026 compared to the prior year period.

Event segment revenues and expenses were insignificant during the three months ended March 31, 2026 and 2025 as no events were held during either period.

Liquidity and Capital Resources

We have historically financed our operations primarily through funds generated from operations. Research revenues, which constituted approximately 78% of our revenues during the three months ended March 31, 2026, are generally renewable and are typically payable in advance. We generated cash from operating activities of $25.6 million during the three months ended March 31, 2026, which was consistent with the $26.7 million of cash generated from operating activities during the three months ended March 31, 2025.

During the three months ended March 31, 2026, we used cash in investing activities of $14.1 million primarily from $7.8 million in net purchases of marketable investments and $6.2 million of purchases of property and equipment, which included approximately $5.4 million of leasehold improvements and furniture and fixtures for the renovation of our headquarters. During the three months ended March 31, 2025, we used cash in investing activities of $8.5 million primarily from $9.1 million in net purchases of marketable investments and $0.6 million of purchases of property and equipment, primarily consisting of computer software, partially offset by a $1.4 million distribution received from an equity method investment.

On April 11, 2025, we entered into a third amendment of our lease, and a new lease, for our principal headquarters located in Cambridge, Massachusetts. The effect of these agreements was to early terminate the original lease with respect to the first, second and third floors of the facility by the end of the second quarter of 2026, while also extending the lease term with respect to the fourth, fifth and six floors of the facility through June 30, 2039. As a result of reducing the number of floors that we will occupy, we are renovating floors four to six and currently expect to incur additional cash outflows for capital expenditures of $21.0 million to $22.0 million during the remainder of 2026. Under the terms of the lease agreement, the landlord is providing a tenant improvement allowance of $17.2 million, which is expected to be received in the second and third quarters of 2026. Future cash receipts for the tenant improvement allowance will be classified as operating cash flows in the Consolidated Statement of Cash Flows.

During the three months ended March 31, 2026, we generated cash from financing activities of $0.1 million primarily due to $0.5 million of net proceeds from the issuance of common stock under our stock-based incentive plans, partially offset by $0.2 million in taxes paid related to net share settlements of restricted stock units. During the three months ended March 31, 2025, we generated cash from financing activities of $0.2 million primarily due to $0.7 million of net proceeds from the issuance of common stock under our stock-based incentive plans, partially offset by $0.4 million in taxes paid related to net share settlements of restricted stock units. As of March 31, 2026, our remaining stock repurchase authorization was approximately $77.5 million.

On March 12, 2026, we executed a third amendment of the credit facility in order to extend its maturity period and to reduce the size of the facility in order to decrease ongoing costs of the facility. The key terms of the amendment include (a) an extension of the maturity date from December 2026 until March 2029, (b) a reduction in the facility from $150.0 million to $50.0 million, (c) a reduction in the amount that the we are permitted, subject to approval by the administrative agent, to increase commitments under the facility from $50.0 million to $15.0 million, and (d) the addition of a minimum liquidity covenant.

The credit facility contains certain customary restrictive loan covenants, including among others, financial covenants that apply a maximum leverage ratio, minimum interest coverage ratio, minimum liquidity amount, 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 March 31, 2026 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 13 years. Remaining lease payments within one year, within two to three years, within four to five years, and after five years from March 31, 2026, are $6.1 million, $14.7 million, $13.1 million, and $37.7 million respectively.

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 March 31, 2026, we had cash, cash equivalents, and marketable investments of $145.5 million. This balance includes $102.2 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.

As of March 31, 2026, we did not have any significant unrecognized tax benefits for uncertain tax positions.

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. There have been no material changes to the critical accounting policies and estimates previously disclosed in that report.

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, 2025. There have been no material changes to the critical accounting policies and estimates previously disclosed in that report.