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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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 March 31, 2021

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 (Zip Code)
(Address of principal executive offices) |  |

(617) 613-6000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class |  | Trading Symbol(s) |  | Name of Each Exchange on Which Registered
Common Stock, $.01 Par Value |  | FORR |  | Nasdaq Global Select Market

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer |  | ☐ |  | Accelerated filer |  | ☒
Non-accelerated filer |  | ☐ |  | Smaller reporting company |  | ☐
Emerging growth company |  | ☐ |  |  |  |

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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 May 3, 2021, 19,129,000 shares of the registrant’s common stock were outstanding.

FORRESTER RESEARCH, INC.

INDEX TO FORM 10-Q

|  | Page
PART I | FINANCIAL INFORMATION |
Item 1. | Financial Statements (Unaudited) | 3
| Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 | 3
| Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 | 4
| Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020 | 5
| Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 | 6
| Notes to Consolidated Financial Statements | 7
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26
Item 4. | Controls and Procedures | 26
PART II | OTHER INFORMATION |
Item 1. | Legal Proceedings | 27
Item 1A. | Risk Factors | 27
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 27
Item 3. | Defaults Upon Senior Securities | 27
Item 4. | Mine Safety Disclosures | 27
Item 5. | Other Information | 27
Item 6. | Exhibits | 28
SIGNATURES | 29

2

PART I.

ITEM 1. FINANCIAL STATEMENTS

FORRESTER RESEARCH, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data, unaudited)

|  | March 31, |  |  | December 31, |
|  | 2021 |  |  | 2020 |
ASSETS |  |  |  |  |  |  |  |
Current Assets: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 125,600 |  |  | $ | 90,257 |
Accounts receivable, net of allowance for expected credit losses of $731 and $708 as of March 31, 2021 and December 31, 2020, respectively |  |  | 68,822 |  |  |  | 84,695 |
Deferred commissions |  |  | 21,937 |  |  |  | 23,620 |
Prepaid expenses and other current assets |  |  | 19,913 |  |  |  | 18,588 |
Total current assets |  |  | 236,272 |  |  |  | 217,160 |
Property and equipment, net |  |  | 26,513 |  |  |  | 27,032 |
Operating lease right-of-use assets |  |  | 73,810 |  |  |  | 69,296 |
Goodwill |  |  | 245,691 |  |  |  | 247,211 |
Intangible assets, net |  |  | 73,898 |  |  |  | 77,995 |
Other assets |  |  | 7,535 |  |  |  | 5,524 |
Total assets |  | $ | 663,719 |  |  | $ | 644,218 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |  |  |  |
Current Liabilities: |  |  |  |  |  |  |  |
Accounts payable |  | $ | 380 |  |  | $ | 657 |
Accrued expenses and other current liabilities |  |  | 54,747 |  |  |  | 76,620 |
Current portion of long-term debt |  |  | 12,500 |  |  |  | 12,500 |
Deferred revenue |  |  | 216,522 |  |  |  | 179,968 |
Total current liabilities |  |  | 284,149 |  |  |  | 269,745 |
Long-term debt, net of deferred financing fees |  |  | 92,319 |  |  |  | 95,299 |
Non-current operating lease liabilities |  |  | 74,567 |  |  |  | 70,323 |
Other non-current liabilities |  |  | 20,447 |  |  |  | 23,085 |
Total liabilities |  |  | 471,482 |  |  |  | 458,452 |
Commitments and contingencies (Note 4, 13) |  |  |  |  |  |  |  |
Stockholders' Equity (Note 11): |  |  |  |  |  |  |  |
Preferred stock, $0.01 par value |  |  |  |  |  |  |  |
Authorized - 500 shares; issued and outstanding - none |  |  | — |  |  |  | — |
Common stock, $0.01 par value |  |  |  |  |  |  |  |
Authorized - 125,000 shares |  |  |  |  |  |  |  |
Issued - 23,755 and 23,648 shares as of March 31, 2021 and December 31, 2020, respectively |  |  |  |  |  |  |  |
Outstanding - 19,124 and 19,017 shares as of March 31, 2021 and December 31, 2020, respectively |  |  | 238 |  |  |  | 236 |
Additional paid-in capital |  |  | 234,752 |  |  |  | 230,128 |
Retained earnings |  |  | 131,937 |  |  |  | 127,981 |
Treasury stock - 4,631 shares as of March 31, 2021 and December 31, 2020 |  |  | (171,889 | ) |  |  | (171,889 | )
Accumulated other comprehensive loss |  |  | (2,801 | ) |  |  | (690 | )
Total stockholders’ equity |  |  | 192,237 |  |  |  | 185,766 |
Total liabilities and stockholders’ equity |  | $ | 663,719 |  |  | $ | 644,218 |

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

3

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data, unaudited)

|  | Three Months Ended |
|  | March 31, |
|  | 2021 |  |  | 2020 |
Revenues: |  |  |  |  |  |  |  |
Research |  | $ | 74,968 |  |  | $ | 74,267 |
Consulting |  |  | 38,550 |  |  |  | 31,988 |
Events |  |  | 263 |  |  |  | 90 |
Total revenues |  |  | 113,781 |  |  |  | 106,345 |
Operating expenses: |  |  |  |  |  |  |  |
Cost of services and fulfillment |  |  | 47,477 |  |  |  | 43,353 |
Selling and marketing |  |  | 39,279 |  |  |  | 40,273 |
General and administrative |  |  | 13,178 |  |  |  | 12,005 |
Depreciation |  |  | 2,290 |  |  |  | 2,406 |
Amortization of intangible assets |  |  | 3,903 |  |  |  | 4,712 |
Integration costs |  |  | 118 |  |  |  | 2,875 |
Total operating expenses |  |  | 106,245 |  |  |  | 105,624 |
Income from operations |  |  | 7,536 |  |  |  | 721 |
Interest expense |  |  | (1,129 | ) |  |  | (1,538 | )
Other income (expense), net |  |  | (470 | ) |  |  | 310 |
Gain on investments, net |  |  | — |  |  |  | 13 |
Income (loss) before income taxes |  |  | 5,937 |  |  |  | (494 | )
Income tax expense |  |  | 1,981 |  |  |  | 19 |
Net income (loss) |  | $ | 3,956 |  |  | $ | (513 | )
Basic income (loss) per common share |  | $ | 0.21 |  |  | $ | (0.03 | )
Diluted income (loss) per common share |  | $ | 0.21 |  |  | $ | (0.03 | )
Basic weighted average common shares outstanding |  |  | 19,061 |  |  |  | 18,705 |
Diluted weighted average common shares outstanding |  |  | 19,288 |  |  |  | 18,705 |

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

4

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands, unaudited)

| Three Months Ended |
| March 31, |
| 2021 |  |  | 2020 |
Net income (loss) | $ | 3,956 |  |  | $ | (513 | )
Other comprehensive loss net of tax: |  |  |  |  |  |  |
Foreign currency translation |  | (2,301 | ) |  |  | (1,920 | )
Net change in market value of interest rate swap |  | 190 |  |  |  | (1,181 | )
Other comprehensive loss |  | (2,111 | ) |  |  | (3,101 | )
Comprehensive income (loss) | $ | 1,845 |  |  | $ | (3,614 | )

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

5

FORRESTER RESEARCH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)

| Three Months Ended |
| March 31, |
| 2021 |  |  | 2020 |
Cash flows from operating activities: |  |  |  |  |  |  |
Net income (loss) | $ | 3,956 |  |  | $ | (513 | )
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |  |  |  |  |
Depreciation |  | 2,290 |  |  |  | 2,406 |
Impairment of property and equipment |  | — |  |  |  | 626 |
Amortization of intangible assets |  | 3,903 |  |  |  | 4,712 |
Net gains from investments |  | — |  |  |  | (13 | )
Deferred income taxes |  | (2,395 | ) |  |  | (251 | )
Stock-based compensation |  | 2,492 |  |  |  | 2,802 |
Operating lease right-of-use assets, amortization, and impairments |  | 2,666 |  |  |  | 4,535 |
Amortization of deferred financing fees |  | 232 |  |  |  | 244 |
Foreign currency (gains) losses |  | 521 |  |  |  | (229 | )
Changes in assets and liabilities: |  |  |  |  |  |  |
Accounts receivable |  | 15,181 |  |  |  | 24,556 |
Deferred commissions |  | 1,683 |  |  |  | 1,723 |
Prepaid expenses and other current assets |  | (1,255 | ) |  |  | (6,943 | )
Accounts payable |  | (275 | ) |  |  | (143 | )
Accrued expenses and other liabilities |  | (22,235 | ) |  |  | (27,264 | )
Deferred revenue |  | 36,505 |  |  |  | 18,574 |
Operating lease liabilities |  | (2,718 | ) |  |  | (2,999 | )
Net cash provided by operating activities |  | 40,551 |  |  |  | 21,823 |
Cash flows from investing activities: |  |  |  |  |  |  |
Purchases of property and equipment |  | (1,468 | ) |  |  | (2,401 | )
Net cash used in investing activities |  | (1,468 | ) |  |  | (2,401 | )
Cash flows from financing activities: |  |  |  |  |  |  |
Payments on borrowings |  | (3,125 | ) |  |  | (16,344 | )
Proceeds from issuance of common stock under employee equity incentive plans |  | 2,614 |  |  |  | 1,955 |
Taxes paid related to net share settlements of stock-based compensation awards |  | (480 | ) |  |  | (902 | )
Net cash used in financing activities |  | (991 | ) |  |  | (15,291 | )
Effect of exchange rate changes on cash, cash equivalents and restricted cash |  | (478 | ) |  |  | (2,683 | )
Net change in cash, cash equivalents and restricted cash |  | 37,614 |  |  |  | 1,448 |
Cash, cash equivalents and restricted cash, beginning of period |  | 90,652 |  |  |  | 69,192 |
Cash, cash equivalents and restricted cash, end of period | $ | 128,266 |  |  | $ | 70,640 |
Supplemental disclosure of cash flow information: |  |  |  |  |  |  |
Cash paid for interest | $ | 902 |  |  | $ | 1,286 |
Cash paid for income taxes | $ | 1,719 |  |  | $ | 1,356 |

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 generally accepted accounting principles 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 GAAP. 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, 2020. 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 (loss), and cash flows as of the dates and for the periods presented have been included. The results of operations for the three months ended March 31, 2021 may not be indicative of the results for the year ending December 31, 2021, or any other period.

Reclassification

Effective for the first quarter of 2021, the Company modified its key metrics, as further described in Item 2. Management’s Discussions and Analysis of Financial Condition and Results of Operations. As part of these changes, beginning January 1, 2021, the Company is classifying all components of its subscription research products within the Research revenues financial statement line on the Consolidated Statements of Operations. In prior periods, the separate advisory session performance obligations included in any of the Company’s subscription research products were classified within the Consulting revenues financial statement line. Prior periods have been reclassified to conform to the current presentation which resulted in approximately $1.4 million of revenue being reclassified from Consulting revenues to Research revenues during the three months ended March 31, 2020. This reclassification had no impact on the amount of total revenues previously reported.

Presentation of Restricted Cash

The following table summarizes the end-of-period cash and cash equivalents from the Company's Consolidated Balance Sheets and the total cash, cash equivalents and restricted cash as presented on the accompanying Consolidated Statements of Cash Flows (in thousands).

| Three Months Ended March 31, |
| 2021 |  |  | 2020 |
Cash and cash equivalents | $ | 125,600 |  |  | $ | 69,815 |
Restricted cash classified in (1): |  |  |  |  |  |  |
Prepaid expenses and other current assets |  | 360 |  |  |  | 787 |
Other assets |  | 2,306 |  |  |  | 38 |
Cash, cash equivalents and restricted cash shown in statement of cash flows | $ | 128,266 |  |  | $ | 70,640 |

(1) | Restricted cash consists of collateral required for leased office space, letters of credit, and credit card processing outside of the U.S. The short-term or long-term classification regarding the collateral for the leased office space and letters of credit is determined in accordance with the expiration of the underlying leases.

Adoption of New Accounting Pronouncements

The Company adopted the guidance in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes on January 1, 2021. The standard provides guidance to simplify the accounting for income taxes in certain areas, changes the accounting for select income tax transactions, and makes other minor improvements. The adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments (“Topic 326”). The standard amends the existing financial instrument incurred loss impairment model by requiring entities to use a forward-looking approach based on expected losses and to consider a broader range of reasonable and

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supportable information to estimate credit losses on certain types of financial instruments, including trade receivables. On January 1, 2020, t he Company adopted the standard using the modified retrospective method in which prior periods are not adjusted and recorded a cumulative effect adjustment of $0.2 million to decrease retained earnings.

The Company adopted the guidance in ASU No. 2017-04, Intangibles-Goodwill and Other: Simplifying the Test for Goodwill Impairment on January 1, 2020. The new standard simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test and requires that instead, an entity should perform its goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The adoption of this standard did not impact the Company’s financial position or results of operations.

The Company adopted the guidance in ASU No. 2018-13, Fair Value Measurement Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement on January 1, 2020. The new standard modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, including changes to fair value transfers and Level 3 fair value measurements. Changes required upon adoption of this standard are included in Note 7 – Fair Value Measurements and did not impact the Company’s financial position or results of operations.

The Company adopted the guidance in ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract on January 1, 2020. The new standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The adoption of this standard did not have a material impact on the Company’s financial position or results of operations.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Finance Reporting. The new standard provides optional guidance for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting due to the risk of cessation of the London Interbank Offered Rate (“LIBOR”). The updates apply to contracts, hedging relationships, and other transactions that reference LIBOR, or another reference rate expected to be discontinued because of reference rate reform, and as a result require a modification. An entity may elect to apply the amendments immediately or at any point through December 31, 2022. The Company is currently evaluating the potential impact that this standard may have on its financial position and results of operations, including the standard’s potential impact on any contractual changes in the future that may result from reference rate reform.

Note 2 — Goodwill and Other Intangible Assets

Goodwill

Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair values of the tangible and identifiable intangible net assets acquired. Goodwill is not amortized; however, it is required to be tested for impairment annually, which requires assessment of the potential impairment at the reporting unit level. Testing for impairment is also required on an interim basis if an event or circumstance indicates it is more likely than not an impairment loss has been incurred.

The Company performed its annual impairment testing as of November 30, 2020 utilizing a qualitative assessment to determine if it was more likely than not that the fair values of each of its reporting units was less than their respective carrying values and concluded that no impairments existed. Subsequent to completing the annual test and through March 31, 2021, there were no events or circumstances that required an interim impairment test. Accordingly, a s of March 31, 2021, the Company had no accumulated goodwill impairment losses. Approximately $8.2 million of goodwill is allocated to the Company’s Consulting reporting unit, which has a negative carrying value as of March 31, 2021.

The change in the carrying amount of goodwill for the three months ended March 31, 2021 is summarized as follows (in thousands):

| Total |
Balance at December 31, 2020 | $ | 247,211 |
Translation adjustments |  | (1,520 | )
Balance at March 31, 2021 | $ | 245,691 |

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Finite-Lived Intangible Assets

The carrying values of finite-lived intangible assets are as follows (in thousands):

| March 31, 2021 |
| Gross |  |  |  |  |  |  | Net |
| Carrying |  |  | Accumulated |  |  | Carrying |
| Amount |  |  | Amortization |  |  | Amount |
Amortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |
Customer relationships | $ | 78,375 |  |  | $ | 19,384 |  |  | $ | 58,991 |
Technology |  | 16,740 |  |  |  | 10,929 |  |  |  | 5,811 |
Trademarks |  | 12,463 |  |  |  | 3,367 |  |  |  | 9,096 |
Total | $ | 107,578 |  |  | $ | 33,680 |  |  | $ | 73,898 |

| December 31, 2020 |
| Gross |  |  |  |  |  |  | Net |
| Carrying |  |  | Accumulated |  |  | Carrying |
| Amount |  |  | Amortization |  |  | Amount |
Amortizable intangible assets: |  |  |  |  |  |  |  |  |  |  |
Customer relationships | $ | 78,450 |  |  | $ | 17,277 |  |  | $ | 61,173 |
Technology |  | 16,956 |  |  |  | 10,197 |  |  |  | 6,759 |
Trademarks |  | 12,495 |  |  |  | 2,432 |  |  |  | 10,063 |
Total | $ | 107,901 |  |  | $ | 29,906 |  |  | $ | 77,995 |

Estimated intangible asset amortization expense for each of the five succeeding years is as follows (in thousands):

2021 (remainder) | $ | 11,212 |
2022 |  | 13,179 |
2023 |  | 11,938 |
2024 |  | 9,895 |
2025 |  | 8,879 |
Thereafter |  | 18,795 |
Total | $ | 73,898 |

Note 3 — Debt

On January 3, 2019, the Company entered into a $200.0 million credit agreement (the “Credit Agreement”). The Credit Agreement provides for: (1) senior secured term loans in an aggregate principal amount of $125.0 million (the “Term Loans”) and (2) a senior secured revolving credit facility in an aggregate principal amount of $75.0 million (the “Revolving Credit Facility”). The Credit Agreement is scheduled to mature on January 3, 2024.

The Credit Agreement permits the Company to borrow incremental term loans and/or increase commitments under the Revolving Credit Facility in an aggregate principal amount up to $50.0 million, subject to approval by the administrative agent and certain customary terms and conditions.

The Term Loans and Revolving Credit Facility can be repaid early, in part or in whole, at any time and from time to time, without premium or penalty, other than customary breakage reimbursement requirements for LIBOR based loans. The Term Loans must be prepaid with net cash proceeds of (i) certain debt incurred or issued by Forrester and its restricted subsidiaries and (ii) certain asset sales and condemnation or casualty events, subject to certain reinvestment rights.

Amounts borrowed under the Credit Agreement bear interest, at Forrester’s option, at a rate per annum equal to either (i) LIBOR for the applicable interest period plus a margin that is between 1.75% and 2.50% based on Forrester’s consolidated total leverage ratio, or (ii) the alternate base rate plus a margin that is between 0.75% and 1.50% based on Forrester’s consolidated total leverage ratio. In addition, the Company pays a commitment fee that is between 0.25% and 0.35% per annum, based on Forrester’s consolidated total leverage ratio, on the average daily unused portion of the Revolving Credit Facility, payable quarterly, in arrears.

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The Term Loans require repayment of the outstanding principal balance in quarterly installments each year, with the balance repayable on the maturity date, subject to customary exceptions. A s of March 31, 2021, t he amount payable in each year is set forth in the table below (in thousands):

2021 (remainder) |  | 9,375 |
2022 |  | 12,500 |
2023 |  | 15,625 |
2024 |  | 68,750 |
Total remaining principal payments | $ | 106,250 |

The Revolving Credit Facility does not require repayment prior to maturity, subject to customary exceptions. The Company has $74.1 million of available borrowing capacity on the revolver (not including the expansion feature) as of March 31, 2021. Proceeds from the Revolving Credit Facility can be used towards working capital and general corporate purposes. Up to $5.0 million of the Revolving Credit Facility is available for the issuance of letters of credit, and any drawings under the letters of credit must be reimbursed within one business day. As of March 31, 2021, $0.9 million in letters of credit were issued under the Revolving Credit Facility.

Forrester incurred $1.8 million in costs related to the Revolving Credit Facility, which are recorded in other assets on the Consolidated Balance Sheets. These costs are being amortized as interest expense on the Consolidated Statements of Operations on a straight-line basis over the five-year term of the Revolving Credit Facility. Forrester incurred $2.8 million in costs related to the Term Loans, which are recorded as a reduction to the face value of long-term debt on the Consolidated Balance Sheets. These costs are being amortized as interest expense on the Consolidated Statements of Operations utilizing the effective interest rate method.

Outstanding Borrowings

The following table summarizes the Company’s total outstanding borrowings as of the dates indicated (in thousands):

Description: |  | March 31, 2021 |  |  | December 31, 2020 |
Principal amount outstanding (1) (2) |  | $ | 106,250 |  |  | $ | 109,375 |
Less: Deferred financing fees |  |  | (1,431 | ) |  |  | (1,576 | )
Net carrying amount |  | $ | 104,819 |  |  | $ | 107,799 |

(1) | This amount consists entirely of the outstanding Term Loan balance.

(2) | The contractual annualized interest rate as of March 31, 2021 on the Term loan facility was 2.125%, which consisted of LIBOR of 0.125% plus a margin of 2.000%. However, the Company has an interest rate swap that effectively converts the floating LIBOR base rates on a portion of the amounts outstanding to a fixed base rate. Refer to Note 6 – Derivatives and Hedging for further information on the swap. The weighted average annual effective rate on the Company's total debt outstanding for the three months ended March 31, 2021, was 2.146%.

The Credit Agreement contains certain customary restrictive loan covenants, including among others, financial covenants that apply a maximum leverage ratio and minimum fixed charge coverage ratio. The maximum leverage ratio is based on total debt outstanding at the measurement date divided by EBITDA (as defined in the Credit Agreement) and the fixed charge coverage ratio is based upon EBITDA (as defined in the Credit Agreement), less capital expenditures, as a ratio to certain fixed charges, including Term Loan amortization, cash interest expense and cash taxes. The negative covenants limit, subject to various exceptions, the Company’s ability to incur additional indebtedness, create liens on assets, merge, consolidate, liquidate or dissolve any part of the Company, sell assets, pay dividends or other payments in respect to capital stock, change fiscal year, or enter into certain transactions with affiliates and subsidiaries. The Credit Agreement also contains customary events of default, representations, and warranties.

As of March 31, 2021, the Company is in compliance with its financial covenants under the Credit Agreement. The Company currently forecasts that it will be in compliance with its financial covenants for at least one year from the issuance of these interim financial statements.

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All obligations under the Credit Agreement are unconditionally guaranteed by each of the Company’s existing and future, direct and indirect material wholly-owned domestic subsidiaries, other than certain excluded subsidiaries, and are collateralized by a first priority lien on substantially all tangible and intangible assets including intellectual property and all of the capital stock of the Company and its subsidiaries (limited to 65% of the voting equity of certain subsidiaries).

Note 4 — Leases

All of the Company’s leases are operating leases, the majority of which are for office space. Operating lease right-of-use (“ROU”) assets and non-current operating lease liabilities are included as individual line items on the Consolidated Balance Sheets, while short-term operating lease liabilities are recorded within accrued expenses and other current liabilities. Leases with an initial term of twelve months or less are not recorded on the Consolidated Balance Sheets and are not material.

The components of lease expense were as follows (in thousands):

| For the Three Months Ended March 31, |
| 2021 |  |  | 2020 |
Operating lease cost | $ | 3,819 |  |  | $ | 3,991 |
Short-term lease cost |  | 88 |  |  |  | 81 |
Variable lease cost |  | 1,436 |  |  |  | 1,356 |
Sublease income |  | (61 | ) |  |  | (61 | )
Total lease cost | $ | 5,282 |  |  | $ | 5,367 |

Additional lease information is summarized in the following table (in thousands, except lease term and discount rate):

| For the Three Months Ended March 31, |
| 2021 |  |  | 2020 |
Cash paid for amounts included in the measurement of operating lease liabilities | $ | 2,718 |  |  | $ | 2,999 |
Operating lease ROU assets obtained in exchange for lease obligations | $ | 7,433 |  |  | $ | 1,466 |
Weighted-average remaining lease term - operating leases (years) |  | 6.5 |  |  |  | 6.3 |
Weighted-average discount rate - operating leases |  | 4.4 | % |  |  | 5.1 | %

Future minimum lease payments under non-cancellable leases as of March 31, 2021 are as follows (in thousands):

2021 (remainder) | $ | 11,642 |
2022 |  | 16,623 |
2023 |  | 16,582 |
2024 |  | 16,208 |
2025 |  | 14,233 |
Thereafter |  | 27,076 |
Total lease payments |  | 102,364 |
Less imputed interest |  | (15,623 | )
Present value of lease liabilities | $ | 86,741 |

Lease balances as of March 31, 2021 are as follows (in thousands):

Operating lease ROU assets | $ | 73,810 |
Short-term operating lease liabilities (1) | $ | 12,174 |
Non-current operating lease liabilities |  | 74,567 |
Total operating lease liabilities | $ | 86,741 |

(1) | Included in accrued expenses and other current liabilities on the Consolidated Balance Sheets.

The Company’s leases do not contain residual value guarantees, material restrictions or covenants, and all sublease transactions are not material. The Company incurred $1.4 million of ROU asset impairments during the three months ended March 31, 2020 related to facility leases from the SiriusDecisions, Inc. acquisition that the Company no longer used as a result of the integration of SiriusDecisions. These impairments are recorded in integration costs on the Consolidated Statements of Operations.

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Note 5 – Revenue and Related Matters

Disaggregated Revenue

The Company disaggregates revenue as set forth in the following tables (in thousands):

Revenue by Geography

|  | For the Three Months Ended March 31, |
Revenues: (1) |  | 2021 |  |  | 2020 |
North America |  | $ | 90,896 |  |  | $ | 88,410 |
Europe |  |  | 15,081 |  |  |  | 11,787 |
Asia Pacific |  |  | 6,393 |  |  |  | 5,051 |
Other |  |  | 1,411 |  |  |  | 1,097 |
Total |  | $ | 113,781 |  |  | $ | 106,345 |

(1) | Revenue location is determined based on where the products and services are consumed.

Contract Assets and Contract Liabilities

Accounts Receivable

Accounts receivable includes amounts billed and currently due from customers. Since the only condition for payment of the Company’s invoices is the passage of time, a receivable is recorded on the date an invoice is issued. Also included in accounts receivable are unbilled amounts resulting from revenue exceeding the amount billed to the customer, where the right to payment is unconditional. If the right to payment for services performed was conditional on something other than the passage of time, the unbilled amount would be recorded as a separate contract asset. There were no contract assets as of March 31, 2021 or 2020.

The majority of the Company’s contracts are non-cancellable. However, for contracts that are cancellable by the customer, the Company does not record a receivable when it issues an invoice. The Company records accounts receivable on these contracts only up to the amount of revenue earned but not yet collected.

In addition, since the majority of the Company’s contracts are for a duration of one year and payment is expected within one year from the transfer of products and services, the Company does not adjust its receivables or transaction prices for the effects of a significant financing component.

Deferred Revenue

The Company refers to contract liabilities as deferred revenue on the Consolidated Balance Sheets. Payment terms in the Company’s customer contracts vary, but generally require payment in advance of fully satisfying the performance obligation(s). Deferred revenue consists of billings in excess of revenue recognized. Similar to accounts receivable, the Company does not record deferred revenue for unpaid invoices issued on a cancellable contract.

During the three months ended March 31, 2021 and 2020, the Company recognized $72.3 and $69.9 million of revenue, respectively, related to its deferred revenue balances at January 1 of each such period. To determine revenue recognized in each period from deferred revenue at the beginning of each period, the Company first allocates revenue to the individual deferred revenue balance outstanding at the beginning of each period, until the revenue equals that balance.

Approximately $489.0 million of revenue is expected to be recognized during the next 24 months from remaining performance obligations as of March 31, 2021.

Reserves for Credit Losses

The allowance for expected credit losses on accounts receivable for the three months ended March 31, 2021 is summarized as follows (in thousands):

|  | Total Allowance |
Balance at December 31, 2020 |  | $ | 708 |
Provision for expected credit losses |  |  | 86 |
Write-offs |  |  | (63 | )
Balance at March 31, 2021 |  | $ | 731 |

When evaluating the adequacy of the allowance for expected credit losses, the Company makes judgments regarding the collectability of accounts receivable based, in part, on the Company’s historical loss rate experience, customer concentrations, management’s expectations of future losses as informed by current economic conditions, and changes in customer payment terms. If

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the expected financial condition of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. I f the expected financial condition of the Company’s customers were to improve, the allowances may be reduced accordingly.

Cost to Obtain Contracts

The Company capitalizes commissions paid to sales representatives and related fringe benefits costs that are incremental to obtaining customer contracts. These costs are included in deferred commissions on the Consolidated Balance Sheets. The Company accounts for these costs at a portfolio level as the Company’s contracts are similar in nature and the amortization model used closely matches the amortization expense that would be recognized on a contract-by-contract basis. Costs to obtain a contract are amortized to earnings over the initial contract term, which is the same period the related revenue is recognized. Amortization expense related to deferred commissions for the three months ended March 31, 2021 and 2020 was $8.8 million and $8.1 million, respectively. The Company evaluates the recoverability of deferred commissions at each balance sheet date and there were no impairments recorded during the three months ended March 31, 2021 and 2020.

Note 6 — Derivatives and Hedging

The Company has a derivative contract (an interest rate swap) to mitigate the cash flow risk associated with changes in interest rates on its variable rate debt (refer to Note 3 – Debt). The Company accounts for its derivative contract in accordance with FASB ASC Topic 815 – Derivatives and Hedging (“Topic 815”), which requires all derivatives, including derivatives designated as accounting hedges, to be recorded on the balance sheet at fair value.

Interest Rate Swap

At March 31, 2021, the Company had a single interest rate swap contract that matures in 2022, with an initial notional amount of $95.0 million. The notional amount at March 31, 2021 was $52.7 million. The Company pays a base fixed rate of 1.65275% and in return receives the greater of (1) 1-month LIBOR, rounded up to the nearest 1/16 of a percent, or (2) 0.00%. The fair value of the swap on March 31, 2021 was a liability of $0.9 million (refer to Note 7 – Fair Value Measurements for information on determining the fair value). The liability is included in other non-current liabilities on the Consolidated Balance Sheets.

The swap has been designated and accounted for as a cash flow hedge of the forecasted interest payments on the Company’s debt. As long as the swap continues to be a highly effective hedge of the designated interest rate risk, changes in the fair value of the swap are recorded in accumulated other comprehensive income (loss), a component of equity in the Consolidated Balance Sheets. Any ineffective portion of a change in the fair value of a hedge is recorded in earnings.

As required under Topic 815, the swap’s effectiveness is assessed on a quarterly basis. Since its inception, and through March 31, 2021, the interest rate swap was considered highly effective. Accordingly, the entire negative fair value as of March 31, 2021 of $0.6 million, net of taxes, is recorded in accumulated other comprehensive loss. The Company expects $0.5 million of this loss, net of taxes, to be reclassified into earnings within the next 12 months. Realized gains or losses related to the interest rate swap are included as operating activities in the Consolidated Statements of Cash Flows.

The Company’s derivative counterparty is an investment grade financial institution. The Company does not have any collateral arrangements with this counterparty and the derivative contract does not contain credit risk related contingent features. The table below provides information regarding amounts recognized in the Consolidated Statements of Operations for the derivative contract for the periods indicated (in thousands):

|  | For the Three Months Ended |
|  | March 31, |
Amount recorded in: |  | 2021 |  |  | 2020 |
Interest expense (1) |  | $ | (259 | ) |  | $ | 13 |
Total |  | $ | (259 | ) |  | $ | 13 |

(1) | Consists of interest expense from the interest rate swap contract.

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Note 7 — Fair Value Measurements

The carrying amounts reflected on the Consolidated Balance Sheets for cash, accounts receivable, accounts payable, and accrued expenses approximate fair value due to their short-term maturities. The Company’s financial instruments also include its outstanding variable-rate borrowings (refer to Note 3 – Debt). The Company believes that the carrying amount of its variable-rate borrowings reasonably approximate their fair values because the rates of interest on those borrowings reflect current market rates of interest.

Additionally, the Company measures certain financial assets and liabilities at fair value on a recurring basis including cash equivalents and its derivative contract. The fair values of these financial assets and liabilities 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 and liabilities that are measured at fair value on a recurring basis (in thousands):

|  | As of March 31, 2021 |
|  | Level 1 |  |  | Level 2 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Money market funds (1) |  | $ | 503 |  |  | $ | — |  |  | $ | 503 |
Total Assets |  | $ | 503 |  |  | $ | — |  |  | $ | 503 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap (2) |  |  | — |  |  | $ | (880 | ) |  | $ | (880 | )
Total Liabilities |  | $ | — |  |  | $ | (880 | ) |  | $ | (880 | )

|  | As of December 31, 2020 |
|  | Level 1 |  |  | Level 2 |  |  | Total |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Money market funds (1) |  | $ | 503 |  |  | $ | — |  |  | $ | 503 |
Total Assets |  | $ | 503 |  |  | $ | — |  |  | $ | 503 |
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swap (2) |  |  | — |  |  | $ | (1,144 | ) |  | $ | (1,144 | )
Total Liabilities |  | $ | — |  |  | $ | (1,144 | ) |  | $ | (1,144 | )

(1) | Included in cash and cash equivalents on the Consolidated Balance Sheets.

(2) | The Company has an interest rate swap contract that hedges the risk of variability from interest payments on its borrowings (refer to Note 3 – Debt and Note 6 – Derivatives and Hedging). The fair value of the interest rate swap is based on valuations prepared by a third-party broker. Those valuations are based on observable interest rates and other observable market data, which the Company considers Level 2 inputs.

During the three months ended March 31, 2021, the Company did not transfer assets or liabilities between levels of the fair value hierarchy. Additionally, there have been no changes to the valuation techniques for Level 2 liabilities.

Note 8 — Income Taxes

Forrester provides for income taxes on an interim basis according to management’s estimate of the effective tax rate expected to be applicable for the full fiscal year. Certain items such as changes in tax rates, tax benefits or expense related to settlements of share-based payment awards, and foreign currency gains or losses are treated as discrete items and are recorded in the period in which they arise.

Income tax expense for the three months ended March 31, 2021 was $2.0 million resulting in an effective tax rate of 33.4% for the period. Income tax expense for the three months ended March 31, 2020 was $19 thousand resulting in an effective tax rate of

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negative 3.8% for the period. The increase in income tax expense during the 202 1 period was primarily due to the increase in overall U.S. profitability.

The Company anticipates that its effective tax rate for the full year 2021 will be approximately 32%.

On March 27, 2020, Congress enacted the Coronavirus Aid, Relief and Economic Security ("CARES") Act to provide certain relief as a result of the COVID-19 outbreak. The Company evaluated the impact of the CARES Act and determined it was not material to its financial position or results of operations.

Note 9 — Accumulated Other Comprehensive Income (Loss) (“AOCI/L”)

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

|  | Interest Rate |  |  | Translation |  |  |  |  |
|  | Swap |  |  | Adjustment |  |  | Total AOCI/L |
Balance at December 31, 2020 |  | $ | (821 | ) |  | $ | 131 |  |  | $ | (690 | )
Foreign currency translation (1) |  |  | — |  |  |  | (2,301 | ) |  |  | (2,301 | )
Unrealized gain before reclassification, net of tax of $(1) |  |  | 4 |  |  |  | — |  |  |  | 4 |
Reclassification of AOCI/L to income, net of tax of $(73) (2) |  |  | 186 |  |  |  | — |  |  |  | 186 |
Balance at March 31, 2021 |  | $ | (631 | ) |  | $ | (2,170 | ) |  | $ | (2,801 | )

|  | Interest Rate |  |  | Translation |  |  |  |  |
|  | Swap |  |  | Adjustment |  |  | Total AOCI/L |
Balance at December 31, 2019 |  | $ | (104 | ) |  | $ | (4,753 | ) |  | $ | (4,857 | )
Foreign currency translation (1) |  |  | — |  |  |  | (1,920 | ) |  |  | (1,920 | )
Unrealized loss, net of tax of $462 |  |  | (1,181 | ) |  |  | — |  |  |  | (1,181 | )
Balance at March 31, 2020 |  | $ | (1,285 | ) |  | $ | (6,673 | ) |  | $ | (7,958 | )

(1) | The Company does not record tax provisions or benefits for the net changes in foreign currency translation adjustments as it intends to permanently reinvest undistributed earnings of its foreign subsidiaries.

(2) | Reclassification is related to the Company’s interest rate swap (cash flow hedge) and was recorded in interest expense on the Consolidated Statements of Operations. Refer to Note 6 – Derivatives and Hedging.

Note 10 — Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the basic weighted average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the diluted weighted average number of common shares and common equivalent shares outstanding during the period. The weighted average number of common equivalent shares outstanding has been determined in accordance with the treasury-stock method. Common equivalent shares consist of common stock issuable on the exercise of outstanding stock options and the vesting of restricted stock units.

Basic and diluted weighted average common shares are as follows (in thousands):

|  | Three Months Ended |
|  | March 31, |
|  | 2021 |  |  | 2020 |
Basic weighted average common shares outstanding |  |  | 19,061 |  |  |  | 18,705 |
Weighted average common equivalent shares |  |  | 227 |  |  |  | — |
Diluted weighted average common shares outstanding |  |  | 19,288 |  |  |  | 18,705 |
Options and restricted stock units excluded from diluted weighted average share calculation as effect would have been anti-dilutive |  |  | 3 |  |  |  | 980 |

Note 11 — Stockholders’ Equity

The components of stockholders’ equity are as follows (in thousands):

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| Three Months Ended March 31, 2021 |
| Common Stock |  |  |  |  |  |  |  |  |  |  | Treasury Stock |  |  | Accumulated |  |  |  |  |
| Number of Shares |  |  | $0.01 Par Value |  |  | Additional Paid-in Capital |  |  | Retained Earnings |  |  | Number of Shares |  |  | Cost |  |  | Other Comprehensive Income (Loss) |  |  | Total Stockholders' Equity |
Balance at December 31, 2020 |  | 23,648 |  |  | $ | 236 |  |  | $ | 230,128 |  |  | $ | 127,981 |  |  |  | 4,631 |  |  | $ | (171,889 | ) |  | $ | (690 | ) |  | $ | 185,766 |
Issuance of common stock under stock plans, including tax effects |  | 107 |  |  |  | 2 |  |  |  | 2,132 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,134 |
Stock-based compensation expense |  | — |  |  |  | — |  |  |  | 2,492 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,492 |
Net income |  | — |  |  |  | — |  |  |  | — |  |  |  | 3,956 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3,956 |
Net change in interest rate swap, net of tax |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 190 |  |  |  | 190 |
Foreign currency translation |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,301 | ) |  |  | (2,301 | )
Balance at March 31, 2021 |  | 23,755 |  |  | $ | 238 |  |  | $ | 234,752 |  |  | $ | 131,937 |  |  |  | 4,631 |  |  | $ | (171,889 | ) |  | $ | (2,801 | ) |  | $ | 192,237 |

| Three Months Ended March 31, 2020 |
| Common Stock |  |  |  |  |  |  |  |  |  |  | Treasury Stock |  |  | Accumulated |  |  |  |  |
| Number of Shares |  |  | $0.01 Par Value |  |  | Additional Paid-in Capital |  |  | Retained Earnings |  |  | Number of Shares |  |  | Cost |  |  | Other Comprehensive Income (Loss) |  |  | Total Stockholders' Equity |
Balance at December 31, 2019 |  | 23,275 |  |  | $ | 233 |  |  | $ | 216,454 |  |  | $ | 118,147 |  |  |  | 4,631 |  |  | $ | (171,889 | ) |  | $ | (4,857 | ) |  | $ | 158,088 |
Issuance of common stock under stock plans, including tax effects |  | 114 |  |  |  | 1 |  |  |  | 1,052 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,053 |
Stock-based compensation expense |  | — |  |  |  | — |  |  |  | 2,802 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,802 |
Cumulative effect adjustment due to adoption of new accounting pronouncement, net of tax |  | — |  |  |  | — |  |  |  | — |  |  |  | (157 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (157 | )
Net loss |  | — |  |  |  | — |  |  |  | — |  |  |  | (513 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (513 | )
Net change in interest rate swap, net of tax |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,181 | ) |  |  | (1,181 | )
Foreign currency translation |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,920 | ) |  |  | (1,920 | )
Balance at March 31, 2020 |  | 23,389 |  |  | $ | 234 |  |  | $ | 220,308 |  |  | $ | 117,477 |  |  |  | 4,631 |  |  | $ | (171,889 | ) |  | $ | (7,958 | ) |  | $ | 158,172 |

Equity Plans

Restricted stock unit activity for the three months ended March 31, 2021 is presented below (in thousands, except per share data):

|  |  |  |  |  | Weighted- |
|  |  |  |  |  | Average |
|  | Number of |  |  | Grant Date |
|  | Shares |  |  | Fair Value |
Unvested at December 31, 2020 |  |  | 642 |  |  | $ | 38.99 |
Granted |  |  | 7 |  |  |  | 46.04 |
Vested |  |  | (38 | ) |  |  | 41.24 |
Forfeited |  |  | (13 | ) |  |  | 39.44 |
Unvested at March 31, 2021 |  |  | 598 |  |  | $ | 38.93 |

Stock option activity for the three months ended March 31, 2021 is presented below (in thousands, except per share data and contractual term):

|  |  |  |  |  | Weighted - |  |  | Weighted - |  |  |  |  |
|  |  |  |  |  | Average |  |  | Average |  |  |  |  |
|  |  |  |  |  | Exercise |  |  | Remaining |  |  | Aggregate |
|  | Number |  |  | Price Per |  |  | Contractual |  |  | Intrinsic |
|  | of Shares |  |  | Share |  |  | Term (in years) |  |  | Value |
Outstanding at December 31, 2020 |  |  | 292 |  |  | $ | 35.46 |  |  |  |  |  |  |  |  |
Exercised |  |  | (30 | ) |  |  | 36.04 |  |  |  |  |  |  |  |  |
Outstanding at March 31, 2021 |  |  | 262 |  |  | $ | 35.40 |  |  |  | 3.15 |  |  | $ | 1,859 |
Vested and Exercisable at March 31, 2021 |  |  | 262 |  |  | $ | 35.40 |  |  |  | 3.15 |  |  | $ | 1,859 |

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No stock options were granted or forfeited during the three months ended March 31, 2021.

Stock-Based Compensation

Forrester recognizes the fair value of stock-based compensation over the requisite service period of the individual grantee, which generally equals the vesting period. Stock-based compensation was recorded in the following expense categories on the Consolidated Statements of Operations (in thousands):

|  | Three Months Ended |
|  | March 31, |
|  | 2021 |  |  | 2020 |
Cost of services and fulfillment |  | $ | 1,435 |  |  | $ | 1,593 |
Selling and marketing |  |  | 449 |  |  |  | 362 |
General and administrative |  |  | 608 |  |  |  | 847 |
Total |  | $ | 2,492 |  |  | $ | 2,802 |

Forrester utilizes the Black-Scholes valuation model for estimating the fair value of shares subject to purchase under the employee stock purchase plan, which were valued using the following assumptions:

|  | Three Months Ended |
|  | March 31, |
|  | 2021 |  |  | 2020 |
Average risk-free interest rate |  |  | 0.05 | % |  |  | 0.30 | %
Expected dividend yield |  |  | 0.0 | % |  |  | 0.0 | %
Expected life |  | 0.5 Years |  |  | 0.5 Years |
Expected volatility |  |  | 35 | % |  |  | 26 | %
Weighted average fair value |  | $ | 11.50 |  |  | $ | 8.10 |

Dividends

In 2019, the Company suspended its dividends program as a result of the acquisition of SiriusDecisions, Inc. and the related debt incurred to fund the acquisition (refer to Note 3 – Debt). The Company did not declare or pay any dividends in the three months ended March 31, 2021 and 2020, respectively.

Treasury Stock

As of March 31, 2021, Forrester’s Board of Directors had authorized an aggregate $535.0 million to purchase common stock under its stock repurchase program. The shares repurchased may be used, among other things, in connection with Forrester’s equity incentive and purchase plans. In the three months ended March 31, 2021 and 2020, the Company did not repurchase any shares of common stock. From the inception of the program through March 31, 2021, the Company repurchased 16.3 million shares of common stock at an aggregate cost of $474.9 million.

Note 12 — Operating Segments

The Company’s operations are grouped into three segments: Research, Consulting, and Events. These segments are based on the management structure of the Company and how management uses financial information to evaluate performance and determine how to allocate resources. The Company’s products and services are delivered through each segment as described below. Additionally, the tables below include the reclassification of revenues for the components of the Company’s CV subscription research products, as described further in Note 1: Interim Consolidated Financial Statements.

The Research segment includes the revenues from all of the Company’s research products as well as consulting revenues from advisory services (such as speeches and advisory days) delivered by the Company’s 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 responsible for product pricing and packaging, and the launch of new products. In May 2021, the Company announced the launch of a new research portfolio called Forrester Decisions, anticipated to be available in August 2021. This new portfolio of products will help executives, functional leaders, and their teams, across technology, marketing, customer experience, sales, and product management, plan ​and pursue initiatives for driving growth. The Forrester Decisions product combines the research, frameworks, models, and methodologies of the Company’s Forrester Research and SiriusDecisions Research product offerings, as well as features of the Company’s Connect and Analytics products. In connection with the launch of Forrester Decisions, the Company will no longer provide disaggregation of revenue by its research products in the segment tables below (refer to Note 5 – Revenue and Related Matters for disclosure of disaggregated revenue).

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The Consulting segment includes the revenues and the related costs of the Company’s project consulting organization. The project consulting organization delivers a majority of the Company’s project consulting revenue and certain advisory services.

The Events segment includes the revenues and the costs of the organization responsible for developing and hosting in-person and virtual events.

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, interest and other expense, and gains on investments. The accounting policies used by the segments are the same as those used in the consolidated financial statements.

The Company provides information by reportable segment in the tables below (in thousands):

|  | Research Segment |  |  | Consulting Segment |  |  | Events Segment |  |  | Consolidated |
Three Months Ended March 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Research revenues |  | $ | 74,968 |  |  | $ | — |  |  | $ | — |  |  | $ | 74,968 |
Consulting revenues |  |  | 12,731 |  |  |  | 25,819 |  |  |  | — |  |  |  | 38,550 |
Events revenues |  |  | — |  |  |  | — |  |  |  | 263 |  |  |  | 263 |
Total segment revenues |  |  | 87,699 |  |  |  | 25,819 |  |  |  | 263 |  |  |  | 113,781 |
Segment expenses |  |  | (30,717 | ) |  |  | (12,325 | ) |  |  | (714 | ) |  |  | (43,756 | )
Selling, marketing, administrative and other expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (58,468 | )
Amortization of intangible assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (3,903 | )
Integration costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (118 | )
Interest expense, other expense, and gains on investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (1,599 | )
Loss before income taxes |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 5,937 |

|  | Research Segment |  |  | Consulting Segment |  |  | Events Segment |  |  | Consolidated |
Three Months Ended March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Research revenues |  | $ | 74,267 |  |  | $ | — |  |  | $ | — |  |  | $ | 74,267 |
Consulting revenues |  |  | 12,582 |  |  |  | 19,406 |  |  |  | — |  |  |  | 31,988 |
Events revenues |  |  | — |  |  |  | — |  |  |  | 90 |  |  |  | 90 |
Total segment revenues |  |  | 86,849 |  |  |  | 19,406 |  |  |  | 90 |  |  |  | 106,345 |
Segment expenses |  |  | (27,464 | ) |  |  | (10,021 | ) |  |  | (677 | ) |  |  | (38,162 | )
Selling, marketing, administrative and other expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (59,875 | )
Amortization of intangible assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (4,712 | )
Integration costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (2,875 | )
Interest expense, other income, and gains on investments |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (1,215 | )
Loss before income taxes |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | (494 | )

Note 13 — Contingencies

From time to time, the Company may be subject to legal proceedings and civil and regulatory claims that arise in the ordinary course of its business activities. Regardless of the outcome, litigation can have a material adverse effect on the Company because of defense and settlement costs, diversion of management resources, and other factors.

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ITEM 2. 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 possible acquisitions, future dividends, future share repurchases, future growth rates, results from operations and tax rates, the launch of Forrester Decisions, 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, and the anticipated impact of accounting standards. 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, our ability to generate and increase demand for the Events we host, technology spending, our ability to mitigate the adverse impact from the widespread outbreak of COVID-19 which could disrupt or restrict our ability to sell or fulfill, or reduce demand for, our products, services, and events, the risks and challenges inherent in international business activities including any impact of Brexit, our ability to offer new products and services, 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, the impact of our outstanding debt, competition and industry consolidation, possible variations in our quarterly operating results, 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, and any weakness identified in our system of internal controls. These risks are described more completely in our Annual Report on Form 10-K for the year ended December 31, 2020. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

The COVID-19 pandemic significantly affected us beginning in March 2020 primarily through lower contract bookings and a reduction in revenues from the conversion of our events from in-person events to virtual events. While the duration and severity of the pandemic is uncertain, we did experience a rebound in contract bookings beginning in the fourth quarter of 2020 and continuing through the first quarter of 2021. We expect that trend to continue in 2021. Our events business continues to be negatively affected by the pandemic. As we previously announced, all events in the first half of 2021 will be held as virtual events, including two of our flagship events, B2B Summit North America and CX North America. We hope to hold our events during the second half of 2021 as hybrid events, consisting of both in-person and virtual experiences.

The extent to which the COVID-19 pandemic ultimately impacts our business, financial condition, results of operations, cash flows, and liquidity may differ from our current estimates due to inherent uncertainties regarding the duration and further spread of the outbreak, its severity, actions taken to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

We derive revenues from subscriptions to our Research products and services, licensing electronic “reprints” of our Research, performing consulting projects and advisory services, and hosting Events. We offer contracts for our Research products that are typically renewable annually and payable in advance. Subscription products are recognized as revenue ratably over the term of the contract. Accordingly, a substantial portion of our billings are initially recorded as deferred revenue. Reprints include an obligation to deliver a customer-selected research document and certain usage data provided through an on-line 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. Billings for licensing of reprints are initially recorded as deferred revenue. 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 or the customer receives the agreed upon deliverable. Billings attributable to consulting projects and advisory services are initially recorded as deferred revenue. Events revenues consist of ticket and sponsorship sales for a Forrester-hosted event. Billings for Events are also initially recorded as deferred revenue and are recognized as revenue 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

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salaries, bonuses, employee benefits, and stock-based compensation expense. Overhead costs such as facilities and annual fees for cloud-based information technology systems are allocated to these categories according to the number of employees in each group.

Effective for the first quarter of 2021, we have modified our key metrics to focus on our contract value (“CV”) products (as described below) in comparison to our prior metrics which included measures of our broader product portfolio. For 2021, we have focused on increasing our CV product bookings and have modified our compensation programs and metrics accordingly. 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.

We have included the historical calculation of the metrics below, dating back to the first quarter of 2019, 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:

| • | Contract value (CV) — is defined as the value attributable to all of our recurring research-related contracts. Contract value is calculated as the annualized value of all contracts in effect at a specific point in time, without regard to how much revenue has already been recognized. Contract value primarily consists of subscription-based contracts for which revenue is recognized on a ratable basis, except for the entitlements embedded in our subscription products, such as event tickets and advisory sessions, for which the revenue is recognized when the item is utilized. Contract value also includes our reprint products, as these products are used throughout the year by our clients and are typically renewed.

| • | Client retention — represents the percentage of client companies (defined as all clients that buy a CV product) at the prior year measurement date that have active contracts at the current year measurement date.

| • | Wallet retention — represents a measure of the CV we have retained with clients over a twelve-month period. Wallet retention is calculated on a percentage basis by dividing the annualized contract value of our current clients, who were also clients a year ago, by the total annualized contract value from a year ago.

| • | Clients — is calculated at the enterprise level as all clients that have an active CV contract.

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):

|  | As of |  |  | Absolute |  |  | Percentage |
|  | March 31, |  |  | Increase |  |  | Increase |
|  | 2021 |  |  | 2020 |  |  | (Decrease) |  |  | (Decrease) |
Contract value |  | $ | 307.3 |  |  | $ | 308.0 |  |  | $ | (0.7 | ) |  |  | — |
Client retention |  |  | 75 | % |  |  | 74 | % |  |  | 1 |  |  |  | 1 | %
Wallet retention |  |  | 89 | % |  |  | 90 | % |  |  | (1 | ) |  |  | (1 | %)
Number of clients |  |  | 2,907 |  |  |  | 2,835 |  |  |  | 72 |  |  |  | 3 | %

Contract value and our retention metrics were essentially flat at March 31, 2021 compared to the prior year period. These metrics were at their lows during the second and third quarters of 2020 as contract booking declined during 2020 due to the pandemic. We have seen an improvement in these metrics from their lows in the middle of 2020 as contract bookings expanded during the second half of 2020 and the first quarter of 2021.

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 policies and estimates, including but not limited to, those related to our revenue recognition, leases, goodwill, intangible and other long-lived assets, and income taxes. 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 policies and estimates are described in our Annual Report on Form 10-K for the year ended December 31, 2020.

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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, |
|  | 2021 |  |  | 2020 |
Revenues: |  |  |  |  |  |  |  |
Research revenues |  |  | 65.9 | % |  |  | 69.8 | %
Consulting revenues |  |  | 33.9 |  |  |  | 30.1 |
Events revenues |  |  | 0.2 |  |  |  | 0.1 |
Total revenues |  |  | 100.0 |  |  |  | 100.0 |
Operating expenses: |  |  |  |  |  |  |  |
Cost of services and fulfillment |  |  | 41.7 |  |  |  | 40.8 |
Selling and marketing |  |  | 34.5 |  |  |  | 37.9 |
General and administrative |  |  | 11.6 |  |  |  | 11.3 |
Depreciation |  |  | 2.1 |  |  |  | 2.2 |
Amortization of intangible assets |  |  | 3.4 |  |  |  | 4.4 |
Integration costs |  |  | 0.1 |  |  |  | 2.7 |
Income from operations |  |  | 6.6 |  |  |  | 0.7 |
Interest expense |  |  | (1.0 | ) |  |  | (1.4 | )
Other income (expense), net |  |  | (0.4 | ) |  |  | 0.2 |
Gain on investments, net |  |  | — |  |  |  | — |
Income (loss) before income taxes |  |  | 5.2 |  |  |  | (0.5 | )
Income tax expense |  |  | 1.7 |  |  |  | — |
Net income (loss) |  |  | 3.5 | % |  |  | (0.5 | %)

Three Months Ended March 31, 2021 and 2020

Revenues

|  | Three Months Ended |  |  | Absolute |  |  | Percentage |
|  | March 31, |  |  | Increase |  |  | Increase |
|  | 2021 |  |  | 2020 |  |  | (Decrease) |  |  | (Decrease) |
|  | (dollars in millions) |  |  |  |  |  |  |  |  |
Total revenues |  | $ | 113.8 |  |  | $ | 106.3 |  |  | $ | 7.4 |  |  |  | 7 | %
Research revenues |  | $ | 75.0 |  |  | $ | 74.3 |  |  | $ | 0.7 |  |  |  | 1 | %
Consulting revenues |  | $ | 38.6 |  |  | $ | 32.0 |  |  | $ | 6.6 |  |  |  | 21 | %
Events revenues |  | $ | 0.3 |  |  | $ | 0.1 |  |  | $ | 0.2 |  |  |  | 192 | %
Revenues attributable to customers outside of the U.S. |  | $ | 26.8 |  |  | $ | 21.4 |  |  | $ | 5.5 |  |  |  | 26 | %
Percentage of revenue attributable to customers outside of the U.S. |  |  | 24 | % |  |  | 20 | % |  |  | 4 |  |  |  | 20 | %
Number of events |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |

Total revenues increased 7% during the three months ended March 31, 2021 compared to the prior year period, with 1% of the increase due to changes in foreign currencies. Revenues from customers outside the U.S. increased 25% during the three months ended March 31, 2021, due to an increase in revenues in the United Kingdom, Asia Pacific region, Europe and Canada. Approximately 7% of the increase was due to changes in foreign currencies.

Research revenues are recognized as revenue primarily on a ratable basis over the term of the contracts, which are generally twelve-month periods. Research revenues increased 1% during the three months ended March 31, 2021 compared to the prior year period, which primarily resulted from flat contract value growth during this period.

Consulting revenues increased 21% during the three months ended March 31, 2021 compared to the prior year period due to continued strong demand for our content marketing offerings and growth in our advisory services.

Events revenues were insignificant and remained essentially consistent during the three months ended March 31, 2021 compared to the prior year period as no events took place during either period.

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

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Cost of Services and Fulfillment

|  | Three Months Ended |  |  | Absolute |  |  | Percentage |
|  | March 31, |  |  | Increase |  |  | Increase |
|  | 2021 |  |  | 2020 |  |  | (Decrease) |  |  | (Decrease) |
Cost of services and fulfillment (dollars in millions) |  | $ | 47.5 |  |  | $ | 43.4 |  |  | $ | 4.1 |  |  |  | 10 | %
Cost of services and fulfillment as a percentage of total revenues |  |  | 41.7 | % |  |  | 40.8 | % |  |  | 0.9 |  |  |  | 2 | %
Service and fulfillment employees (at end of period) |  |  | 760 |  |  |  | 786 |  |  |  | (26 | ) |  |  | (3 | %)

Cost of services and fulfillment expenses increased 10% during the three months ended March 31, 2021 compared to the prior year period. The increase was primarily due to (1) a $4.0 million increase in compensation and benefit costs due to reinstating incentive bonus programs that were eliminated as part of the cost-reduction measures implemented in 2020 as a result of the impact of the COVID-19 pandemic, merit increases, and severance costs, and (2) a $2.3 million increase in professional services costs primarily due to increases in outsourced services related to revenue delivery and survey costs. These increases were partially offset by a $1.5 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic.

Selling and Marketing

|  | Three Months Ended |  |  | Absolute |  |  | Percentage |
|  | March 31, |  |  | Increase |  |  | Increase |
|  | 2021 |  |  | 2020 |  |  | (Decrease) |  |  | (Decrease) |
Selling and marketing expenses (dollars in millions) |  | $ | 39.3 |  |  | $ | 40.3 |  |  | $ | (1.0 | ) |  |  | (2 | %)
Selling and marketing expenses as a percentage of total revenues |  |  | 34.5 | % |  |  | 37.9 | % |  |  | (3.4 | ) |  |  | (9 | %)
Selling and marketing employees (at end of period) |  |  | 746 |  |  |  | 771 |  |  |  | (25 | ) |  |  | (3 | %)

Selling and marketing expenses decreased 2% during the three months ended March 31, 2021 compared to the prior year period. The decrease was primarily due to (1) a $1.7 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic, and (2) a $0.4 million decrease in bad debt expense. These decreases were partially offset by a $1.5 million increase in compensation and benefit costs due to reinstating incentive bonus programs that were eliminated as part of the cost-reduction measures implemented in 2020 as a result of the impact of the COVID-19 pandemic, an increase in commissions expense, and merit increases.

General and Administrative

|  | Three Months Ended |  |  | Absolute |  |  | Percentage |
|  | March 31, |  |  | Increase |  |  | Increase |
|  | 2021 |  |  | 2020 |  |  | (Decrease) |  |  | (Decrease) |
General and administrative expenses (dollars in millions) |  | $ | 13.2 |  |  | $ | 12.0 |  |  | $ | 1.2 |  |  |  | 10 | %
General and administrative expenses as a percentage of total revenues |  |  | 11.6 | % |  |  | 11.3 | % |  |  | 0.3 |  |  |  | 3 | %
General and administrative employees (at end of period) |  |  | 243 |  |  |  | 237 |  |  |  | 6 |  |  |  | 3 | %

General and administrative expenses increased 10% during the three months ended March 31, 2021 compared to the prior year period. The increase was primarily due to a $1.3 million increase in compensation and benefit costs due to reinstating incentive bonus programs that were eliminated as part of the cost-reduction measures implemented in 2020 as a result of the impact of the COVID-19 pandemic and merit increases.

Depreciation

Depreciation expense during the three months ended March 31, 2021 was consistent with the prior year period.

Amortization of Intangible Assets

Amortization expense decreased by $0.8 million during the three months ended March 31, 2021 compared to the prior year period primarily due to a certain intangible asset becoming fully amortized in 2020.

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Integration Costs

Integration costs consist of direct and incremental costs to integrate acquired companies and in 2020 primarily consisted of certain fair value adjustments, consulting, severance, accounting and tax professional fees, and expenses related to unused lease facilities.

Integration costs decreased by $2.8 million during the three months ended March 31, 2021 compared to the prior year period due to the substantial completion of the integration of SiriusDecisions, Inc. (acquired at the beginning of 2019) during 2020. Integration costs in 2021 relate to unused lease facilities from the SiriusDecisions acquisition.

We expect to incur integration costs in a range of $0.3 million to $0.5 million for the year ending December 31, 2021.

Interest Expense

Interest expense consists of interest on our borrowings and realized gains (losses) on the related interest rate swap. Interest expense decreased by $0.4 million during the three months ended March 31, 2021 compared to the prior year period due to lower average outstanding borrowings and a lower effective interest rate.

Other Income (Expense), Net

Other income (expense), net primarily consists of gains (losses) on foreign currency and interest income. The decrease in other income (expense), net of $0.8 million during the three months ended March 31, 2021 compared to the prior year period was primarily due to an increase in foreign currency losses.

Gain on Investments, Net

Gain on investments, net primarily represents our share of equity method investment gains and losses from our technology-related investment funds. Gain on investments, net remained consistent during the three months ended March 31, 2021 compared to the prior year period.

Income Tax Expense

|  | Three Months Ended |  |  | Absolute |  |  | Percentage |
|  | March 31, |  |  | Increase |  |  | Increase |
|  | 2021 |  |  | 2020 |  |  | (Decrease) |  |  | (Decrease) |
Provision for income taxes (dollars in millions) |  | $ | 2.0 |  |  | $ | — |  |  | $ | 2.0 |  |  |  | 100 | %
Effective tax rate |  |  | 33.4 | % |  |  | (3.8 | %) |  |  | 37.2 |  |  |  | 968 | %

Income tax expense increased by $2.0 million during the three months ended March 31, 2021 compared to the prior year period primarily due to the increase in overall U.S. profitability. For the full year 2021, we anticipate that our effective tax rate will be approximately 32%.

Segment Results

Our operations are grouped into three segments: Research, Consulting, and Events. These 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. Additionally, the tables below include the reclassification of revenues for the components of our CV subscription research products, as described further in Note 1: Interim Consolidated Financial Statements in the Notes to Consolidated Financial Statements.

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 cost of the product management organization that is responsible for product pricing and packaging and the launch of new products. In May 2021, we announced the launch of a new research portfolio called Forrester Decisions, anticipated to be available in August 2021. This new portfolio of products will help executives, functional leaders, and their teams, across technology, marketing, customer experience, sales, and product management, plan ​and pursue their initiatives for driving growth. The Forrester Decisions product combines the research, frameworks, models, and methodologies of our Forrester Research and SiriusDecisions Research product offerings, as well as features of our Connect and Analytics 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 and certain advisory services.

The Events segment includes the revenues and the costs of the organization responsible for developing and hosting in-person and virtual events.

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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, interest and other expense, and gains on investments. The accounting policies used by the segments are the same as those used in the consolidated financial statements.

|  | Research Segment |  |  | Consulting Segment |  |  | Events Segment |  |  | Consolidated |
|  | (dollars in thousands) |
Three Months Ended March 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Research revenues |  | $ | 74,968 |  |  | $ | — |  |  | $ | — |  |  | $ | 74,968 |
Consulting revenues |  |  | 12,731 |  |  |  | 25,819 |  |  |  | — |  |  |  | 38,550 |
Events revenues |  |  | — |  |  |  | — |  |  |  | 263 |  |  |  | 263 |
Total segment revenues |  |  | 87,699 |  |  |  | 25,819 |  |  |  | 263 |  |  |  | 113,781 |
Segment expenses |  |  | (30,717 | ) |  |  | (12,325 | ) |  |  | (714 | ) |  |  | (43,756 | )
Year over year revenue change |  |  | 1 | % |  |  | 33 | % |  |  | 192 | % |  |  | 7 | %
Year over year expense change |  |  | 12 | % |  |  | 23 | % |  |  | 5 | % |  |  | 15 | %

|  | Research Segment |  |  | Consulting Segment |  |  | Events Segment |  |  | Consolidated |
|  | (dollars in thousands) |
Three Months Ended March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Research revenues |  | $ | 74,267 |  |  | $ | — |  |  | $ | — |  |  | $ | 74,267 |
Consulting revenues |  |  | 12,582 |  |  |  | 19,406 |  |  |  | — |  |  |  | 31,988 |
Events revenues |  |  | — |  |  |  | — |  |  |  | 90 |  |  |  | 90 |
Total segment revenues |  |  | 86,849 |  |  |  | 19,406 |  |  |  | 90 |  |  |  | 106,345 |
Segment expenses |  |  | (27,464 | ) |  |  | (10,021 | ) |  |  | (677 | ) |  |  | (38,162 | )

Research segment revenues increased 1% during the three months ended March 31, 2021 compared to the prior year period. Research revenues within this segment increased 1% which primarily resulted from flat contract value growth during this period. Consulting revenues increased 1% within this segment due to increased delivery of advisory services.

Research segment expenses increased 12% during the three months ended March 31, 2021 compared to the prior year period. The increase in expenses during the three months ended March 31, 2021 was primarily due to (1) a $3.6 million increase in compensation and benefit costs primarily due to reinstating incentive bonus programs that were eliminated as part of the cost-reduction measures implemented in 2020 as a result of the impact of the COVID-19 pandemic, merit increases, and severance costs and (2) a $0.9 million increase in professional services costs due to an increase in survey costs and new product development. These increases were partially offset by a $1.1 million decrease in travel and entertainment expenses due to reduced travel as a result of the COVID-19 pandemic.

Consulting segment revenues increased 33% during the three months ended March 31, 2021 compared to the prior year period driven by continued strong demand for our content marketing offerings.

Consulting segment expenses increased 23% during the three months ended March 31, 2021 compared to the prior year period. The increase in expenses during the three months ended March 31, 2021 was primarily due to (1) a $1.5 million increase in professional services primarily due to an increase in outsourced services related to revenue delivery, and (2) a $1.1 million increase in compensation and benefit costs primarily due to reinstating incentive bonus programs that were eliminated as part of the cost-reduction measures implemented in 2020 as a result of the impact of the COVID-19 pandemic.

Event segment revenues and expenses remained essentially consistent during the three months ended March 31, 2021 compared to the prior year period. 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 66% of our revenues during the three months ended March 31, 2021, are generally renewable annually and are typically payable in advance. We generated cash from operating activities of $40.6 million and $21.8 million during the three months ended March 31, 2021 and 2020, respectively. The $18.8 million increase in cash provided from operations for the three months ended March 31, 2021 compared to the prior year period was primarily due to a $10.8 million reduction in cash used for working capital (excluding accounts receivable and deferred revenue) and an $8.6 million increase in cash generated from accounts receivable and deferred revenue due to an increase in contract bookings and strong collections activity.

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During the three months ended March 31, 2021, we used cash in investing a cti vities of $1.5 million for purchases of property and equipment, primarily consisting of computer software and equipment. During the three months ended March 31, 2020, we used cash in investing activities of $2.4 million for purchases of property and equipment, primarily consisting of computer software and leasehold improvements.

We used $1.0 million of cash from financing activities during the three months ended March 31, 2021 primarily due to $3.1 million of repayments of our term loan, partially offset by $2.1 million of net proceeds from the issuance of common stock under our stock-based incentive plans. We used $15.3 million of cash in financing activities during the three months ended March 31, 2020 primarily due to $16.3 million of repayments of debt that included $14.0 million of discretionary payments on our revolving credit facility.

We entered into a $200.0 million credit agreement on January 3, 2019. The credit agreement provides for: (1) senior secured term loans in an aggregate principal amount of $125.0 million (the “Term Loans”) and, (2) a senior secured revolving credit facility in an aggregate principal amount of $75.0 million (the “Revolving Credit Facility” and, together with the Term Loans, the “Facilities”). Additional information is provided in Note 3 – Debt in the Notes to Consolidated Financial Statements. The Facilities mature on January 3, 2024. As of March 31, 2021, we had remaining principal payments on the Facilities totaling $106.3 million, contractually due as follows: $9.4 million in 2021, $28.1 million within 2022 and 2023, and $68.8 million in 2024. We were in full compliance with the covenants as of March 31, 2021 and expect to continue to be in compliance through the next 12 months.

The Facilities contain certain customary restrictive loan covenants, including among others, financial covenants that apply a maximum leverage ratio and minimum fixed charge coverage ratio. 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, pay dividends or other payments in respect to capital stock, change fiscal year, or enter into certain transactions with affiliates and subsidiaries.

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-cancellable operating lease agreements (refer to Note 4 – Leases in the Notes to Consolidated Financial Statements for additional information). The remaining duration of non-cancellable office space leases ranges from less than 1 year to 11 years. As of March 31, 2021, remaining non-cancelable lease payments are due as follows: $11.6 million in 2021, $33.2 million within 2022 and 2023, $30.4 million within 2024 and 2025, and $27.1 million beyond 2025.

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, 2021, we had cash and cash equivalents of $125.6 million. This balance includes $60.2 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.

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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our assessment of our sensitivity to market risk since our presentation set forth in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined under Securities Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2021. Based upon their evaluation and subject to the foregoing, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance as of that date.

Changes in Internal Control Over Financial Reporting

Except as noted below, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) of the Exchange Act) that occurred during the quarter ended March 31, 2021, which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. In response to COVID-19, we have undertaken measures to protect our employees, partners, and clients, including encouraging employees to work remotely. These changes have compelled us to modify some of our control procedures. However, these changes have so far not been material.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be subject to legal proceedings and civil and regulatory claims that arise in the ordinary course of our business activities. Regardless of the outcome, litigation can have a material adverse effect on us because of defense and settlement costs, diversion of management resources, and other factors.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A: Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, which could materially affect our business, financial condition or future results. The risk factors described in our Annual Report on Form 10-K remain applicable to our business. The risks described in our Annual Report on Form 10-K are not the only risks that we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Through March 31, 2021, our Board of Directors authorized an aggregate $535.0 million to purchase common stock under our stock repurchase program. During the quarter ended March 31, 2021, we did not purchase any shares of our common stock under the stock repurchase program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

3.1 |  | Restated Certificate of Incorporation of Forrester Research, Inc. (see Exhibit 3.1 to Registration Statement on Form S-1A filed on November 5, 1996)
3.2 |  | Certificate of Amendment of the Certificate of Incorporation of Forrester Research, Inc. (see Exhibit 3.1 to Annual Report on Form 10-K for the year ended December 31, 1999)
3.3 |  | Certificate of Amendment to Restated Certificate of Incorporation of Forrester Research, Inc.
3.4 |  | Amended and Restated By-Laws of Forrester Research, Inc.
4.1 |  | Specimen Certificate for shares of Common Stock, $.01 par value, of Forrester Research, Inc. (see Exhibit 4 to Registration Statement on Form S-1A filed on November 5, 1996)
31.1 |  | Certification of the Principal Executive Officer. (filed herewith)
31.2 |  | Certification of the Principal Financial Officer. (filed herewith)
32.1 |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith)
32.2 |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith)
101.INS |  | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. (filed herewith)
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document. (filed herewith)
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document. (filed herewith)
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document. (filed herewith)
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document. (filed herewith)
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document. (filed herewith)
104 |  | Cover Page Interactive Data File (embedded within the Inline XBRL Document). (filed herewith)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FORRESTER RESEARCH, INC.
By: |  | /s/ SCOTT R. CHOUINARD
|  | Scott R. Chouinard
|  | Interim Chief Financial Officer (Principal financial and accounting officer)

Date: May 6, 2021

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