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

 

As of June 30, 2014,2015, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $6,067,265,349$6,872,193,331 based on the closing sale price as reported on the New York Stock Exchange.

 

The number of shares outstanding of the registrant’s common stock was 87,522,46882,340,012 as of January 31, 2015.2016.

 

 

 

 

Gartner, Inc. (“Gartner”) (NYSE: IT) is the world’s leading information technology research and advisory company. We deliver the technology-related insight necessary for our clients to make the right decisions, every day. From CIOs and senior ITinformation technology (IT) leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to supply chain professionals, digital marketing professionals and technology investors, we are the valuable partner to clients in 9,95810,796 distinct enterprises. We work with clients to research, analyze and interpret the business of IT within the context of their individual roles. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and as of December 31, 2014,2015, had 6,7587,834 associates, including 1,5561,731 research analysts and consultants, and clients in over 90 countries.

 

The foundation for all Gartner products and services is our independent research on IT, and supply chain, and digital marketing issues. The findings from this research are delivered through our three business segments – Research, Consulting and Events: 

For more information regarding Gartner and our products and services, visit gartner.com.

References to “the Company,” “we,” “our,” and “us” are to Gartner, Inc. and its consolidated subsidiaries. 

 

Technological innovations are changing how businesses and organizations work and what they do at an increasingly rapid pace. Today, everyone is living and working in the midst of a technological revolution. The nexus of four powerful forces – social, mobile, cloud and information, coupled with the "Internet of things" – are blurring the line between the physical and digital worlds, creating unprecedented change on a scale not seen before facing every organization around the world, from business enterprises and units within enterprises of every size, to governments and government agencies, as well as other organizations. This change falls into three categories: optimizing the use of technology to improve performance across every function in the organization; managing disruptive technology-based innovation; and protecting the organization from security threats. This technology revolution will remain vibrant for decades to come.

 

Information technology (IT) is critical to supporting increased productivity, service and performance improvement, revenue growth and cyber-security. As the costs of IT solutions continue to rise, IT executives and professionals have realized the importance of making well-informed decisions and increasingly seek to maximize their returns on IT capital investments. As a result, every IT investment decision in an enterprise is subject to increased financial scrutiny, especially in the current challenging economic climate. In addition, today’s IT marketplace is dynamic and complex. Technology providers continually introduce new products with a wide variety of standards and features that are prone to shorter life cycles. Users of technology – a group that encompasses nearly all organizations – must keep abreast of new developments in technology to ensure that their IT systems are reliable, efficient, secure, and meet both their current and future needs.

 

Given the strategic and critical nature of technology decision-making and spending, business enterprises, governments and their agencies, and other organizations turn to Gartner for guidance in order to make the right decisions to maximize the value of their IT investments.

 

 

We provide IT decision makers with the insight they need to understand where – and how – to successfully harness technology to achieve their mission critical priorities. We employ a diversified business model that utilizes and leverages the breadth and depth of our intellectual capital. The foundation of our business model is our ability to create and distribute our proprietary research content as broadly as possible via published reports and briefings, consulting and advisory services, and our events, including the Gartner Symposium/ITxpo.ITxpo series.

 

We have 1,0211,125 analysts located around the world who create compelling, relevant, independent and objective research and fact-based analysis on every major IT initiative and all aspects of the IT industry, including supply chain and digital marketing. Through our robust product portfolio, our global research team provides thought leadership and technology insights that CIOs, supply chain professionals, digital marketing professionals, executives and other technology practitioners need to make the right decisions, every day. In addition to our analysts, we have 535606 experienced consultants who combine our objective, independent research with a practical business perspective focused on the IT industry. Finally, our events are the largest of their kind, gathering together highly qualified audiences ofthat include CIOs and other senior businessIT executives, frontline IT architects and IT professionals, supply chain leaders, digital marketing leaders, and purchasers and providers of technology and supply chain products and services.

 

 

Our diversified business model provides multiple entry points and synergies that facilitate increased client spending on our research, consulting services and events. A critical part of our long-term strategy is to increase business volume with our most valuable clients, identifying relationships with the greatest sales potential and expanding those relationships by offering strategically relevant research and advice. We also seek to extend the Gartner brand name to develop new client relationships, augment our sales capacity, and expand into new markets around the world. In addition, we seek to increase our revenue and operating cash flow through more effective pricing of our products and services. These initiatives have created additional revenue streams through more effective packaging, campaigning and cross-selling of our products and services.

 

Our principal products and services are delivered via our Research, Consulting and Events segments:

 

 

We believe that the principal factors that differentiate us from our competitors are the following:

 

Notwithstanding these differentiating factors, we face competition from a significant number of independent providers of information products and services. We compete indirectly with consulting firms and other information providers, including electronic and print media companies. These indirect competitors could choose to compete directly with us in the future. In addition, we face competition from free sources of information that are available to our clients through the Internet. Limited barriers to entry exist in the markets in which we do business. As a result, new competitors may emerge and existing competitors may start to provide additional or complementary services. While we believe the breadth and depth of our research assets position us well versus our competition, increased competition could result in loss of market share, diminished value in our products and services, reduced pricing, and increased sales and marketing expenditures.

 

 

Our success has resulted in part from proprietary methodologies, software, reusable knowledge capital and other intellectual property rights. We rely on a combination of patent, copyright, trademark, trade secret, confidentiality, non-compete and other contractual provisions to protect our intellectual property rights. We have policies related to confidentiality, ownership, and the use and protection of Gartner’s intellectual property. We also enter into agreements with our employees as appropriate that protect our intellectual property, and we enforce these agreements if necessary. We recognize the value of our intellectual property in the

marketplace and vigorously identify, create and protect it. Additionally, we actively monitor and enforce contract compliance by our end users.

 

 

We had 6,7587,834 employees as of December 31, 2014,2015, an increase of 13%16% compared to the prior year end as we continued to invest for future growth. We have 1,291had 1,289 employees located at our headquarters in Stamford, Connecticut and a nearby office in Trumbull, Connecticut; 2,6053,194 employees located elsewhere in the United States in 3033 other offices; and 2,8623,351 employees located outside of the United States in 6560 offices. Our employees may be subject to collective bargaining agreements at a company or industry level, or works councils, in those foreign countries where this is part of the local labor law or practice. We have experienced no work stoppages and consider our relations with our employees to be favorable.

 

 

 

We operate in a highly competitive and rapidly changing environment that involves numerous risks and uncertainties, some of which are beyond our control. In addition, we and our clients are affected by global economic conditions. The following sections discuss many, but not all, of the risks and uncertainties that may affect our future performance, but is not intended to be all-inclusive. Any of the risks described below could have a material adverse impact on our business, prospects, results of operations, financial condition, and cash flows, and could therefore have a negative effect on the trading price of our common stock. Additionally risks not currently known to us or that we now deem immaterial may also harm us and negatively affect your investment.

Our operating results could be negatively impacted by global economic conditions. Our business is impacted by general economic conditions and trends, in the U.S and abroad. U.S. economic data continuesSevere downward pressures on global commodity prices and a lower growth rate in China have contributed to be mixed, but the overall economy continues to grow and unemployment continues to fall. However,a general outlook of weaker economic growth continues to be uneven globally, with continuing weakness across Europeboth in the U.S. and emerging markets, as recentabroad in 2016. Recent geopolitical events, addsuch as the terrorist attacks in France, have added to the uncertainty. These conditions could negatively and materially affect future demand for our products and services.services in general, in certain geographic regions, or in particular industry sectors. Such difficulties could include the ability to maintain client retention, wallet retention and consulting utilization rates, achieve contract value and consulting backlog growth, attract attendees and exhibitors to our events or obtain new clients. Such developments could negatively impact our financial condition, results of operations, and cash flows.

We face significant competition and our failure to compete successfully could materially and adversely affect our results of operations, financial condition, and cash flows. We face direct competition from a significant number of independent providers of information products and services, including information available on the Internet free of charge. We also compete indirectly against consulting firms and other information providers, including electronic and print media companies, some of which may have greater financial, information gathering and marketing resources than we do. These indirect competitors could also choose to compete directly with us in the future. In addition, low barriers to entry exist in the markets in which we do business. As a result, new competitors may emerge and existing competitors may start to provide additional or complementary services. Additionally, technological advances may provide increased competition from a variety of sources.

There can be no assurance that we will be able to successfully compete against current and future competitors and our failure to do so could result in loss of market share, diminished value in our products and services, reduced pricing and increased marketing expenditures. Furthermore, we may not be successful if we cannot compete effectively on quality of research and analysis, timely

We may not be able to enhance and develop our existing products and services, or introduce the new products and services that are needed to remain competitive. The market for our products and services is characterized by rapidly changing needs for information and analysis on the IT industry as a whole. The development of new products is a complex and time-consuming process. Nonetheless, to maintain our competitive position, we must continue to anticipate the needs of our client organizations, develop, enhance and improve our existing as well as new products and services to address those needs, deliver all products and services in a timely, user-friendly and state of the art manner, and appropriately position and price new products and services relative to the marketplace and our costs of developing them. Any failure to achieve successful client acceptance of new products and services could have a material adverse effect on our business, results of operations and financial position. Additionally, significant delays in new product or servicesservice releases or significant problems in creating new products or services could adversely affect our business, the results of operations and our financial position.

We depend on renewals of subscription-based services and sales of new subscription-based services for a significant portion of our revenue, and our failure to renew at historical rates or generate new sales of such services could lead to a decrease in our revenues. A large portion of our success depends on our ability to generate renewals of our subscription-based research products and services and new sales of such products and services, both to new clients and existing clients. These products and services constituted 72%approximately 73% and 71%72% of our total revenues for 20142015 and 2013,2014, respectively. Generating new sales of our subscription-based products and services, both to new and existing clients, is a challenging, costly, and often time consuming process. If we are unable to generate new sales, due to competition or other factors, our revenues will be adversely affected.

The majority of ourOur research subscription agreementscontracts are typically for twelve months. However, we do enter into multi-year agreements, which have been increasing in frequency.months or longer. Our ability to maintain contract renewals is subject to numerous factors, including the following:

Additionally, as we continue to adjust our products and service offerings to meet our clients’ continuing needs, we may shift the type and pricing of our products which may impact client renewal rates. While our Research enterprise client retention rate was 84% at December 31, 2015 and 85% at December 31, 2014, and 83% at December 31, 2013, there can be no guarantee that we will continue to maintain this rate of client renewals.

We depend on non-recurring consulting engagements and our failure to secure new engagements could lead to a decrease in our revenues. Consulting segment revenues constituted 17%15% of our total revenues in 20142015 and 18%17% in 2013.2014. Consulting engagements typically are project-based and non-recurring. Our ability to replace consulting engagements is subject to numerous factors, including the following:

Any material decline in our ability to replace consulting arrangements could have an adverse impact on our revenues and our financial condition. In addition, revenue infrom our contract optimization business can fluctuate significantly from period to period.period and is not predictable.

The profitability and success of our conferences, symposia and events could be adversely affected by external factors beyond our control. The market for desirable dates and locations for conferences, symposia and events is highly competitive. If we cannot secure desirable dates and suitable venues for our conferences, symposia and events their profitability could suffer, and our financial condition and results of operations may be adversely affected. In addition, because our events are scheduled in advance and held at specific locations, the success of these events can be affected by circumstances outside of our control, such as labor strikes, transportation shutdowns and travel restrictions, economic slowdowns, reductions in government spending, geo-political crises, terrorist attacks, war, weather, natural disasters, communicable diseases, and other occurrences impacting the global, regional, or national economies, the occurrence of any of which could negatively impact the success of the event. We also face the challenge of procuring venues that are sizeable enough at a reasonable cost to accommodate some of our major events.

to the approval of appropriations by the U.S. Congress to fund the agencies contracting for our services. Additionally, our contracts at the state and local levels, as well as foreign government contracts, are subject to various governmental authorizations and funding approvals and mechanisms. In general, most if not all of these contracts may be terminated at any time without cause or penalty (“termination for convenience”). Similarly, contracts with U.S. federal, state and local, and foreign governments and their respective agencies are subject to increasingly complex bidding procedures, compliance requirements and intense competition. Should appropriations for the governments and agencies that contract with us be curtailed, or should our government contracts be terminated for convenience, we may experience a significant loss of consolidated and segment and consolidated revenues.

We may not be able to attract and retain qualified personnel which could jeopardize our future growth plans, as well as the quality of our products and services. Our success depends heavily upon the quality of our senior management, research analysts, consultants, sales and other key personnel. We face competition for qualified professionals from, among others, technology companies, market research firms, consulting firms, financial services companies and electronic and print media companies, some of which have a greater ability to attract and compensate these professionals. Recent improvements in the U.S economy have heightened this competition. Additionally, some of the personnel that we attempt to hire are subject to non-compete agreements that could impede our short-term recruitment efforts. Any inability to retain key personnel, or to hire and train additional qualified personnel to support the evolving needs of clients or the projected growth in our business, could adversely affect the quality of our products and services, as well as future business and operating results.

Our international operations expose us to a variety of operational and other risks which could negatively impact our future revenue and growth. We have clients in over 90 countries and a substantial amount of our revenuesrevenue is earned outside of the U.S. Our operating results are subject to the risks inherent in international business activities, including general political and economic conditions in each country, changes in market demand as a result of tariffs and other trade barriers, challenges in staffing and managing foreign operations, changes in regulatory requirements, compliance with numerous foreign laws and regulations, differences between U.S. and foreign tax rates and laws, and the difficulty of enforcing client agreements, collecting accounts receivable and protecting intellectual property rights in international jurisdictions. Furthermore, we rely on local distributors or sales agents in some international locations. If any of these arrangements are terminated by our agent or us, we may not be able to replace the arrangement on beneficial terms or on a timely basis, or clients of the local distributor or sales agent may not want to continue to do business with us or our new agent.

We are exposed to volatility in foreign currency exchange rates from our international operations. Revenues earned outside the U.S. are typically transacted in local currencies, which may fluctuate significantly against the U.S. dollar. While we may use forward exchange contracts to a limited extent to seek to mitigate foreign currency risk, our revenues and results of operations could be adversely affected by unfavorable foreign currency fluctuations. Additionally, our effective tax rate is increased as the U.S dollar strengthens against foreign currencies, which could impact our operating results.

Privacy concerns could damage our reputation and deter current and potential clients from using our products and services or attending our events. Concerns relating to global data privacy have the potential to damage our reputation and deter current and

prospective clients from using our products and services or attending our events. In the ordinary course of our business and in accordance with applicable laws, we collect personal information (i) from our employees (ii) from the users of our products and services, including event attendees; and (iii) from prospective clients. We collect only basic personal information from our clients and prospects (name, email address, job title) and do not as a rule collect sensitive personal information like SSNs andthe social security numbers used in the U.S. While we may collect credit card numbers on a limited basis from some clients to facilitate payment, we do not store such numbers.

Even if unfounded, concerns about our practices with regard to the collection, use, disclosure, or security of this personal information or other data privacy related matters, could damage our reputation and adversely affect our operating results. In addition, because many of our products and services are web-based, the amount of data we store on our servers (including personal information) has been increasing. Any systems failure or compromise of our security that results in the disclosure of our users’ personal data could seriously limit the consumption of our products and services and the attendance at our events, as well as harm our reputation and brand and, therefore, our business.

The interpretation and application of these laws in the U.S., Europethe EU and elsewhere are often uncertain, inconsistent and ever changing. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data privacy practices. Complying with these various laws, as well as the yet to be issued definitive guidance for U.S. companies concerning the transmission of personal data between the EU and U.S., could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

We take steps to secure our management information systems, including our computer systems, intranet, proprietary websites, email and other telecommunications and data networks, and we carefully scrutinize the security of outsourced website and service providers prior to retaining their services. However, the security measures implemented by us or by our outside service providers may not be effective and our systems (and those of our outside service providers) may be vulnerable to theft, loss, damage and interruption from a number of potential sources and events, including unauthorized access or security breaches, cyber-attacks, computer viruses, power loss, or other disruptive events. Our reputation, brand, financial condition and operating results could be adversely affected if, as a result of a significant cyber event or other technology-related catastrophe, our operations are disrupted or shutdown; our confidential, proprietary information is stolen or disclosed; we incur costs or are required to pay fines in connection with stolen customer, employee, or other confidential information; we are required to dedicate significant resources to system repairs or increase cyber security protection; or we otherwise incur significant litigation or other costs as a result of these occurrences.

We may experience outages and disruptions of our online services if we fail to maintain an adequate operations infrastructure. Our increasing user traffic and complexity of our products and services demand more computing power. We have spent and expect

The affirmative, negative and financial covenants of the 2014 Credit Agreement could limit our future financial flexibility. Additionally, a failure to comply with these covenants could result in acceleration of all amounts outstanding under the arrangement,2014 Credit Agreement, which would materially impact our financial condition unless accommodations could be negotiated with our lenders. No assurance can be given that we would be successful in doing so, in this current financial climate, or that any accommodations that we were able to negotiate would be on terms as favorable as those presently contained in the credit arrangement. The associated debt service costs of this credit arrangement could impair our future operating results. The outstanding debt may limit the amount of cash or additional credit available to us, which could restrain our ability to expand or enhance products and services, respond to competitive pressures or pursue future business opportunities requiring substantial investments of additional capital.

We may require additional cash resources which may not be available on favorable terms or at all. We believe that our existing cash balances, projected cash flow from operations, and the borrowing capacity we have under our revolving credit facility will be sufficient to fund our plans for the next 12 months and the foreseeable future.

If we are unable to enforce and protect our intellectual property rights our competitive position may be harmed. We rely on a combination of copyright, trademark, trade secret, patent, confidentiality, non-compete and other contractual provisions to protect our intellectual property rights. Despite our efforts to protect our intellectual property rights, unauthorized third parties may obtain and use technology or other information that we regard as proprietary. Our intellectual property rights may not survive a legal challenge to their validity or provide significant protection for us. The laws of certain countries, particularly in emerging markets, do not protect our proprietary rights to the same extent as the laws of the United States. Accordingly, we may not be able to protect our intellectual property against unauthorized third-party copying or use, which could adversely affect our competitive position. Additionally, there can be no assurance that another party will not assert that we have infringed its intellectual property rights.

Our employees are subject to non-compete agreements, non-solicitation agreements and assignment of invention agreements, to the extent permitted under applicable law. When the non-competition period expires, former employees may compete against us. If a former employee chooses to compete against us prior to the expiration of the non-competition period, we seek to enforce these non-compete provisions but there is no assurance that we will be successful in our efforts.

We have grown, and may continue to grow, through acquisitions and strategic investments, which could involve substantial risks. We have made and may continue to make acquisitions of, or significant investments in, businesses that offer complementary products and services or otherwise support our growth objectives. The risks involved in each acquisition or investment include the possibility of paying more than the value we derive from the acquisition, dilution of the interests of our current stockholders should we issue stock in the acquisition, decreased working capital, increased indebtedness, the assumption of undisclosed liabilities and unknown and unforeseen risks, the ability to retain key personnel of the acquired company, the inability to integrate the business of the acquired company, the time to train the sales force to market and sell the products of the acquired business, the potential disruption of our ongoing business and the distraction of management from our day to day business. The realization of any of these risks could adversely affect our business. Additionally, we face competition in identifying acquisition targets and consummating acquisitions.

At the present time, the United States and other countries where we do business have either changed or are actively considering changes in their tax, accounting and other related laws. In the United States, proposed and other tax law changes, particularly those directed at taxing unremitted and future foreign earnings, could increase our effective tax rate. In addition,2014, Ireland recently modified its tax residency rules. While at the present time, these changes are not effective until 20202021 for many companies with Irish resident operations, including Gartner, the new rules could increase our effective tax rate at that future date. Likewise, certain international organizations such asduring 2015, the Organization for Economic Development and Cooperation are actively considering(“OECD”) released final reports on various actions items associated with its initiative to prevent Base Erosion and Profit Shifting (“BEPS). The future enactment by various governments of these and future OECD proposals certain of which, if enacted by foreign governments, could significantly increase our tax obligations in many countries where we do business. These actual, potential, and other changes, both individually and collectively, could materially increase our effective tax rate and negatively impact our financial position, results of operations, and cash flows.

In addition, our tax filings for various years are subject to examination by domestic and international taxing authorities and, during the ordinary course of business, we are under audit by various tax authorities. Recent and future actions on the part of the OECD and various governments will likely result in increased scrutiny of our tax filings. Although we believe that our tax filings and related accruals are reasonable, the final resolution of tax audits may be materially different from what is reflected in our historical tax provisions and accruals and could have a material adverse effect on our effective tax rate, financial position, results of operations, and cash flows, particularly in major taxing jurisdictions including, but not limited to: the United States, Ireland, India, Canada, United Kingdom, Japan, France, and Italy.France.

 

Our operating results may fluctuate from period to period andand/or the financial guidance we have given may not meet the expectations of investors, or the financial guidance we have given,which may cause the price of our Common Stock to decline. Our quarterly and annual operating results may fluctuate in the future as a result of many factors, including the timing of the execution of research contracts, the extent of completion of consulting engagements, the timing of symposia and other events, the amount of new business generated, the mix of domestic and international business, currency fluctuations, changes in market demand for our products and services, the timing of the development, introduction and marketing of new products and services, and competition in our industry, and the industry.impact of our acquisitions. An inability to generate sufficient earnings and cash flow, and achieve our forecasts, may impact our operating and other activities. The potential fluctuations in our operating results could cause period-to-period comparisons of operating results not to be meaningful and may provide an unreliable indication of future operating results. Furthermore, our operating results may not meet the expectations of investors or the financial guidance we have previously provided. If this occurs, the price of our Common Stock could decline.

 

Our stock price may be impacted by factors outside of our control and you may not be able to resell shares of our Common Stock at or above the price you paid. The price of our Common Stock is subject to significant fluctuations in response to, among other factors, developments in the industries in which we do business, general economic conditions, general market conditions, geo-

 

Future sales of our Common Stock in the public market could lower our stock price. Sales of a substantial number of shares of Common Stock in the public market by our current stockholders, or the threat that substantial sales may occur, could cause the market price of our Common Stock to decrease significantly or make it difficult for us to raise additional capital by selling stock. Furthermore, we have various equity incentive plans that provide for awards in the form of stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards which have the effect of adding shares of Common Stock into the public market. At the present time, we are executing against a board-approved share repurchase program to reduce the number of outstanding shares of our Common Stock. At December 31, 2014, $413.3 million2015, approximately $1.1 billion remained available for share purchases under this program. No assurance can be given that we will continue these activities in the future when the program is completed, or in the event that the price of our Common Stock reaches levels at which repurchases are not accretive.

Our anti-takeover protections may discourage or prevent a change of control, even if a change in control would be beneficial to our stockholders. Provisions of our restated certificate of incorporation and bylaws and Delaware law may make it difficult for any party to acquire control of us in a transaction not approved by our Board of Directors. These provisions include:

These provisions could discourage or prevent a change of control or change in management that might provide stockholders with a premium to the market price of their Common Stock.

 

The Company has no unresolved written comments that were received from the SEC staff 180 days or more before the end of our fiscal year relating to our periodic or current reports under the Exchange Act.

 

 

We currently lease 3235 domestic and 6560 international offices and weoffices. We have a significant presence in Stamford, Connecticut; Ft. Myers, Florida; and Egham, the United Kingdom. The Company does not own any properties.

 

Our corporate headquarters isare located in 213,000 square feet of leased office space in three buildings located on the same campus in Stamford. This facility also accommodates research and analysis, marketing, sales, client support, production, corporate services, and administration. The Company's lease on the Stamford facility expires in 20282027 and we havecontains three five-year renewal options to renew the lease at fair market value for five years each.

 

Our existing and planned facility expansions are adequate for our currently anticipated needs. However, we expect to continue to invest in our business by adding headcount. As a result, we may need additional office space in various locations. Should additional space be necessary, we believe that it will be available and at reasonable terms.  

We are involved in various legal and administrative proceedings and litigation arising in the ordinary course of business. The outcome of these individual matters is not predictable at this time. However, we believe that the ultimate resolution of these matters, after considering amounts already accrued and insurance coverage, will not have a material adverse effect on our financial position, results of operations, or cash flows in future periods.

 

Not applicable.

Our Common Stock is listed on the New York Stock Exchange under the symbol IT. As of January 31, 2015,2016, there were 1,4931,429 holders of record of our Common Stock. Our 20152016 Annual Meeting of Stockholders will be held on May 28, 201526, 2016 at the Company’s corporate headquarters in Stamford, Connecticut. We did not submit any matter to a vote of our stockholders during the fourth quarter of 2014.2015.

 

The following table sets forth the high and low sale prices for our Common Stock as reported on the New York Stock Exchange for the periods indicated:  

We currently do not pay cash dividends on our Common Stock. In addition, our 2014 Credit Agreement contains a negative covenant which may limit our ability to pay dividends.

 

The equity compensation plan information set forth in Part III, Item 12 of this Form 10-K is hereby incorporated by reference into this Part II, Item 5.

 

The Company has an $800.0 million sharea $1.2 billion board authorization to repurchase program, of which $413.3 million remained available for repurchases as of December 31, 2014.the Company's common stock. The Company may repurchase its common stock from time-to-time in amounts and at prices the Company deems appropriate, subject to the availability of stock, prevailing market conditions, the trading price of the stock, the Company’s financial performance and other conditions. Repurchases may be made through open market purchases, private transactions or other transactions and will be funded from cash on hand and borrowings under the Company’s credit agreement.2014 Credit Agreement. Repurchases may also be made from time-to-time in connection with the settlement of the Company's share-based compensation awards.

The following table summarizes the repurchases of our outstanding Common Stock in the three months ended December 31, 20142015 pursuant to our $800.0 million$1.2 billion share repurchase authorization and pursuant to the settlement of share-based compensation awards:  

The fiscal years presented below are for the respective twelve-month period from January 1 through December 31. Data for all years was derived or compiled from our audited consolidated financial statements included herein or from submissions of our Form 10-K in prior years. The selected consolidated financial data should be read in conjunction with our consolidated financial statements and related notes contained in this Annual Report on Form 10-K.

 

 

The following items impact the comparability and presentation of our consolidated data:

 

The purpose of the following Management’s Discussion and Analysis (“MD&A”) is to help facilitate the understanding of significant factors influencing the operating results, financial condition and cash flows of Gartner, Inc. Additionally, the MD&A also conveys our expectations of the potential impact of known trends, events or uncertainties that may impact future results. You should read this discussion in conjunction with our consolidated financial statements and related notes included in this report. Historical results and percentage relationships are not necessarily indicative of operating results for future periods. References to “the Company,” “we,” “our,” and “us” are to Gartner, Inc. and its consolidated subsidiaries.

 

In addition to historical information, this Annual Report on Form 10-K contains certain forward-looking statements.statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are any statements other than statements of historical fact, including statements regarding our expectations, beliefs, hopes, intentions or strategies regarding the future. In some cases, forward-looking statements can be identified by the use of words such as “may,” “will,” “expect,” “should,” “could,” “believe,” “plan,” “anticipate,” “estimate,” “predict,” “potential,” “continue,” or other words of similar meaning.

 

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in Part 1, Item 1A, Risk Factors. Readers should not place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date on which they were made. Except as required by law, we disclaim any obligation to review or update these forward-looking statements to reflect events or circumstances as they occur. Readers should review carefully any risk factors described in other reports we filed with the SEC.

 

Gartner, Inc. is the world’s leading information technology research and advisory company that helps executives use technology to build, guide and grow their enterprises. We offer independent and objective research and analysis on the information technology, computer hardware, software, communications and related technology industries. We provide comprehensive coverage of the IT industry to thousands of client organizations across the globe. Our client base consists primarily of CIOs, and other senior IT personnel, executives, and executivesothers from a wide variety of business enterprises, government agencies and the investment community. Gartner is headquartered in Stamford, Connecticut, U.S.A., and as of December 31, 2015, we had 7,834 associates, including 1,731 research analysts and consultants, and clients in over 90 countries.

 

We have three business segments: Research, Consulting and Events.

 

We believe the following business measurements are important performance indicators for our business segments:  

We have executed a consistent growth strategy since 2005 to drive double-digit annual revenue and earnings growth. The fundamentals of our strategy include a focus on creating extraordinary research content, delivering innovative and highly differentiated product offerings, building a strong sales capability, providing world class client service with a focus on client engagement and retention, and continuously improving our operational effectiveness.

 

We had total revenues of $2.021$2.163 billion in 2014,2015, an increase of 13%7% over 20132014 on a reported basis and 14%13% adjusted for the impact of foreign exchange impact.currency exchange. Diluted earnings per share increased by $.10to $2.06 per share or 5%, toin 2015 from $2.03 per share in 2014.

 

Research revenues rose 14%10% year-over-year, to $1.445$1.583 billion in 2014,2015, and the contribution margin was 69%, the same as 2013.2014. At December 31, 2014,2015, Research contract value was $1.603$1.761 billion, an increase of 13%10% over December 31, 20132014 on a reported basis and 14% adjusted for the impact of foreign currency exchange. EnterpriseBoth client retention was 85% and enterprise wallet retention was 106%remained strong, at 84% and 105%, respectively, at December 31, 2014.2015.

 

Consulting revenues in 2014 increased 11%2015 decreased 6% when compared to 2013, while2014 but were flat when adjusted for the foreign exchange impact. The gross contribution margin was 33% in 2015 compared to 34%, the same as 2013. in 2014. Consultant utilization was 68% for 2014 compareddeclined by 2 points in 2015, to 64% in 2013, and we66%. We had 535606 billable consultants at December 31, 20142015 compared to 509535 at year-end 2013.2014. Backlog decreased 3%increased 15% year-over-year, to $102.6$117.7 million at December 31, 2014.2015, which is the highest in the Company's history.

 

Events revenues increased 14%11% year-over-year, to $227.7 million, and 16% adjusted$251.8 million. Adjusted for the foreign currency impact.impact, Events revenues increased 18%. The segment contribution margin was 49%52% in 2014,2015, a 3 point increase over 2013.2014. We held 6165 events in 20142015 compared to 6461 in 2013,2014, while the number of attendees increased 9%7% year-over-year, to over 49,000.52,595.

For a more detailed discussion of our results, see the Segment Results section below.

 

Cash flow from our operating activities was $346.8$345.6 million in 2014, an increase of 10% compared to 2013. We continue to focus on maximizing shareholder value, and in 2014 we repurchased 5.9 million of our outstanding common shares.2015. We ended 20142015 with $365.3$373.0 million in cash and cash equivalents. We refinanced our existing credit facility during the fourth quarter of 2014 to take advantage of favorable market conditions, provide for additional liquidity, and extend the maturity of our debt. Our total borrowing capacity under the new arrangement is $1.5 billion, which consists of a $400.0equivalents while $656.0 million term loan and a $1.1 billion revolving credit arrangement. The new facility has a five year maturity. At December 31, 2014, approximately $1.1 billion was available for borrowing under the revolver.revolving credit line. We believe that we have adequate liquidity to meet our currently anticipated needs.

The Company completed threeWe continue to focus on maximizing shareholder value. During 2015 we repurchased 6.2 million of our outstanding common shares, and we also acquired Nubera eBusiness S.L., based in Barcelona, Spain ("Nubera"), and Capterra, Inc., based in Arlington, Virginia ("Capterra"), both of which help organizations find the right business acquisitions in 2014 (the "2014 Acquisitions"). These include Software Advice, Inc., which assists customers with software purchases; Market Visio Oy, a Finnish company and former sales agent for Gartner research in Finland and Russia; and SircleIT, Inc., a provider of cloud-based search technology that identifies subject-matter experts.to meet their needs. Note 2 - Acquisitions in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K provides additional information regarding the 2014 Acquisitions. The operating results of these acquisitions have been included in our consolidated and segment operating results beginning on their respective dates of acquisition. The results of these businesses were not material to our consolidated or segment results for the year ended December 31, 2014.  acquisitions.

 

Our quarterly and annual revenue, operating income, and cash flow fluctuate as a result of many factors, including: the timing of our Symposium/ITxpo series, which are normally held during the fourth calendar quarter, as well as other events; the timing and amount of new business generated; the mix between domestic and international business; changes in market demand for our products and services; changes in foreign currency rates; the timing of the development, introduction and marketing of our new products and services; competition in the industry; acquisitions; general economic conditions; and other factors which are beyond our control. The potential fluctuations in our operating income could cause period-to-period comparisons of operating results not to be meaningful and could provide an unreliable indication of future operating results and cash flows.

 

The preparation of financial statements requires the application of appropriate accounting policies and the use of estimates. Our significant accounting policies are described in Note 1 in the Notes to the Consolidated Financial Statements.Statements included in this Form 10-K. Management considers the policies discussed below to be critical to an understanding of our financial statements because their application requires complex and subjective management judgments and estimates. Specific risks for these critical accounting policies are described below.

 

The preparation of our financial statements also requires us to make estimates and assumptions about future events. We develop our estimates using both current and historical experience, as well as other factors, including the general economic environment and actions we may take in the future. We adjust such estimates when facts and circumstances dictate. However, our estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on our best judgment at a point in time and as such these estimates may ultimately differ materially from actual results. On-going

changes in our estimates could be material and would be reflected in the Company’s consolidated financial statements in future periods.

 

The majority of research contracts are billable upon signing, absent special terms granted on a limited basis from time to time. All research contracts are non-cancelable and non-refundable, except for government contracts that may have cancellation or fiscal funding clauses. It is our policy to record the entire amount of the contract that is billable as a fee receivable at the time the contract is signed with a corresponding amount as deferred revenue, since the contract represents a legally enforceable claim.

 

 

The following table provides our total fees receivable and the related allowance for losses (in thousands):

TheASC Topic No. 350 requires an annual assessment of the recoverability of recorded goodwill, which can be based on either a quantitative or qualitative assessmentin nature, or a combination of the two. Both methods require the use of estimates which in turn contain judgments and assumptions regarding future trends and events. As a result, both the precision and reliability of the resulting estimates are subject to uncertainty. In 2014, we completed the requiredIf our annual goodwill impairment test utilizingevaluation determines that the fair value of a reporting unit is less than its related carrying amount, we may recognize an impairment charge against earnings. Among the factors we consider in a qualitative approach. Based onassessment are general economic conditions and the competitive environment; actual and projected reporting unit financial performance; forward-looking business measurements; and external market assessments. A quantitative analysis requires

We conducted a quantitative assessment of the fair value of all of the Company's reporting units during the third quarter of 2015. The results of this assessment, the Company believestest determined that the fair values of the Company’sCompany's reporting units continue to exceed their respective carrying amounts.values. See Note 1 — Business and Significant Accounting Policies in the Notes to the Consolidated Financial Statements for additional discussion.information regarding goodwill and amortizable intangible assets.

 

 

Determining the appropriate fair value model and calculating the fair value of stock compensation awards requires the input of certain complex and subjective assumptions, including the expected life of the stock compensation award and the Company’s Common Stock price volatility. In addition, determining the appropriate amount of associated periodic expense requires management to estimate the rate of employee forfeitures and the likelihood of achievement of certain performance targets. The assumptions used in calculating the fair value of stock compensation awards and the associated periodic expense represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change and the Company deems it necessary in the future to modify the assumptions it made or to use different assumptions, or if the quantity and nature of the Company’s stock-based compensation awards changes, then the amount of expense may need to be adjusted and future stock compensation expense could be materially different from what has been recorded in the current period.

 

 

 

The following table presents the changes in selected line items in our Consolidated Statements of Operations for the two years ended December 31, 2014 (in thousands):  

 

TOTAL REVENUES for the twelve months ended December 31, 2014 increased $237.2 million, or 13%, compared to the twelve months ended December 31, 2013. Total revenues increased 14% excluding the unfavorable impact of foreign currency. Revenues increased in all three of our business segments and across all geographic regions.

The following table presents total revenues by geographic region for the twelve months ended (in thousands):  

The following table presents our revenues by segment for the twelve months ended (in thousands):

COST OF SERVICES AND PRODUCT DEVELOPMENT (“COS”) expense increased 12% in 2014 compared to 2013, or $84.4 million, to $797.9 million compared to $713.5 million in 2013. The impact of foreign currency exchange for the full year was not significant. The increase was primarily due to higher payroll and related benefits costs from additional headcount, which increased 12%. The headcount increase reflects our continued investment in our Research business and includes the additional employees resulting from the 2014 Acquisitions. COS as a percentage of revenues was 39% in the 2014 period compared to 40% in the 2013 period.

SELLING, GENERAL AND ADMINISTRATIVE (“SG&A”) expense increased by $115.6 million in 2014, or 15%, to $876.1 million compared to $760.5 million in 2013. Excluding the favorable impact of foreign currency exchange, SG&A expense increased 16% year-over-year. The increase was primarily due to higher payroll and related benefits costs from additional headcount, higher sales commissions, and merit salary increases. The increased headcount includes our investment in additional quota-bearing sales associates, which increased to 1,881 at December 31, 2014, a 14% increase over year-end 2013.

ACQUISITION AND INTEGRATION CHARGES was $21.9 million in 2014 compared to $0.3 million in 2013. These charges are directly-related to our acquisitions and primarily include amounts accrued for payments contingent on the achievement of certain employment conditions, legal, consulting, and severance costs.

OPERATING INCOME increased $10.7 million year-over-year, or 4%, to $286.2 million in 2014 from $275.5 million in 2013. The increased operating income was attributable to higher segment contributions from our Research and Events businesses. Operating income as a percentage of revenues was 14% in 2014 and 15% in 2013.

 

PROVISION FOR INCOME TAXES was $90.9 million in 2014 compared to $83.6 million in 2013 and the effective tax rate was 33.1% for 2014 compared to 31.4% for 2013. The higher effective tax rate in 2014 was primarily due to the impact of certain favorable items in 2013, as well as the unfavorable mix of pretax income by jurisdiction in 2014 which was partially offset by foreign tax credit benefits in 2014. The favorable items in 2013 included the enactment of certain beneficial legislation in 2013, the release of tax reserves due to audit settlements, and increased tax exempt income.

NET INCOME was $183.8 million in 2014 and $182.8 million in 2013, an increase of 1%, as the increased operating income in 2014 was substantially offset by additional income tax charges. Diluted earnings per share increased 5% year-over-year, to $2.03 in 2014, primarily due to a lower number of weighted-average shares outstanding.

 

We evaluate reportable segment performance and allocate resources based on gross contribution margin. Gross contribution is defined as operating income excluding certain Cost of services and product development charges, SG&A, Depreciation, Acquisition and integration charges, and Amortization of intangibles. Gross contribution margin is defined as gross contribution as a percentage of revenues.

The following sections present the results of our three business segments.segments as of and for the three years-ended December 31, 2015.

Research segment revenues in 2014 increased 14% compared to 2013. The impact of foreign exchange translation was not significant. The segment gross contribution margin was 69% for both periods. Contribution margin remained at 69% in spite of a 16% increase in segment headcount, which includes the additional employees from the 2014 Acquisitions.

The following table presents the financial results and business measurements of our Consulting segment as of and for the twelve months ended December 31:

2014 VERSUS 2013

 

Consulting revenues increased 11% year-over-year and 12% when adjusted for the impact of foreign exchange. The increase was primarily due to higher core consulting revenues and to a lesser extent, higher contract optimization revenues. Contract optimization revenues can fluctuate from period to period but are generally about 10-15% of total annual Consulting segment revenues. The gross contribution margin was 34% for both periods. Backlog decreased $3.5 million, or 3%, year-over-year, to $102.6 million at December 31, 2014.

  

Events revenues increased $28.8 million when comparing 2014 to 2013, or 14%. Excluding the impact of foreign currency translation, revenues increased 16% year-over-year. We held 61 events in 2014, consisting of 59 ongoing events and 2 new events, compared to 64 events in 2013. Five events that were held in 2013 were discontinued in 2014. The year-over-year revenue increase was primarily attributable to higher exhibitor revenue at our ongoing events and to a lesser extent, higher attendee revenue. The overall number of attendees increased 9%, while the number of exhibitors increased 10%. Average revenue per attendee rose 6% and average revenue per exhibitor increased 9%. The gross contribution margin increased 3 points year-over-year.

We financehad $373.0 million of cash and cash equivalents at December 31, 2015 and $656.0 million of available borrowing capacity under our operations primarily through2014 Credit Agreement. In addition, the 2014 Credit Agreement contains an expansion feature by which the Company may borrow up to an additional $500.0 million in the aggregate under certain conditions. We believe that our consistently strong operating cash generated fromflow, as well as our operating activities. Forexisting cash balances and our available borrowing capacity under our 2014 Credit Agreement, provide us with adequate liquidity to meet our currently anticipated needs. However, should we need to borrow additional amounts, we believe we would be able to do so on reasonable terms.

We had operating cash flow of $346.8$345.6 million which wasin 2015. In addition, we also borrowed an additional $420.0 million on a net basis under our 2014 Credit Agreement. During 2015 we used $196.2 million in cash to acquire other businesses and we also used $509.0 million in cash to repurchase our common shares. We currently have a $1.2 billion board approved authorization to repurchase the highest in the Company’s historyCompany's common stock, and represented an increaseas of 10% over 2013.December 31, 2015, approximately $1.1 billion of this authorization remains.

We have historically generated significant cash flows from our operating activities. Our operating cash flow has been continuously enhanced by the leverage characteristics of our subscription-based business model as well as our focus on operational efficiencies. Revenues in our Research segment, which is our largest business segment, increased 14%10% in 20142015 compared to 2013,2014, and constituted 72%73% and 71%72% of our total revenues in 20142015 and 2013,2014, respectively. The majority of our research contracts renew annually and typically are paid in advance and renew annually, and combined with a strong customer retention rate and high incremental margins, has generally resulted in continuously strong growth in operating cash flow each year.flow. Our cash flow generation has also benefited from our continuing efforts to improve the operating efficiencies of our businesses as well as a focus on the optimal management of our working capital as we increase our sales volume.

   

The following disclosuretable summarizes and explains the changes in our cash and cash equivalents for the three years ended December 31, 20142015 (in thousands): 

Operating cash flow increased by $31.1 million, or 10%, when comparing 2014 to 2013. The increase was primarily due to additional cash collections in our Research and Events businesses and other positive working capital changes. Partially offsetting the additional collections were higher cash payments for bonuses, commissions, and income taxes.

We used an additional $126.3 million of cash in our investing activities in 2014 compared to 2013, principally due to the 2014 Acquisitions, in which we paid a total of $109.9 million (net of the cash acquired), and an additional $14.4$14.3 million was placed in escrow. The Company used both existing cash and additional borrowings to finance theits 2014 Acquisitions.acquisitions. We also used an additional $2.0 million in cash for capital expenditures in the 2014 period.

We used $208.7 million of cash in our financing activities during 2014 compared to $153.9 million of cash used in 2013. During 2014, the Company used $432.0 million of cash for share repurchases, which was partially offset by $195.4 million of net proceeds from debt issuance and related debt issuance costs and $28.0 million from employee share-based activity. During 2013, the Company used $182.0 million of cash for share repurchases and $4.0 million for debt refinancing fees, which was partially offset by $32.0 million from employee share-based activities.

The Company has a five-year credit arrangement that it entered into in December 2014 that provides for a $400.0 million term loan and a $1.1 billion revolving credit facility (the “2014 Credit Agreement”). Under the revolving credit facility, amounts may be borrowed, repaid, and re-borrowed through the maturity date of the agreement in December 2019. The term and revolving facilities may be increased, at the Company's option, by up to an additional $500.0 million in the aggregate. As of December 31, 2014,2015, the Company had $400.0$380.0 million outstanding under the term facility and zero$440.0 million under the revolver. See Note 5 - Debt in the Notes to the Consolidated Financial Statements for additional information regarding the 2014 Credit Agreement.

Through December 31, 2014,2015, we have not entered into any off-balance sheet arrangements or transactions with unconsolidated entities or other persons.

The Company has certain contractual commitments that contractually require future cash payments. The following table summarizes thesethe contractual cash commitments due after December 31, 20142015 (in thousands):