UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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þ☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended December 31, 20172022 |
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o☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 1-14443
GARTNER, INC.
(Exact name of registrant as specified in its charter)
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| Delaware | 04-3099750 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| P.O. Box 10212 | |
| 56 Top Gallant Road | |
Stamford, CT | 06902-7700 |
| Connecticut | 06902-7700 |
| (Address of principal executive offices) | (Zip Code) |
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(203) 316-1111 | |
(Registrant’s telephone number, including area code) | |
Registrant’s telephone number, including area code: (203) 964-0096
Securities registered pursuant to Section 12(b) of the Act:
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| Title of each class | Trading Symbol | Name of each exchange
on which registered
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Common Stock, $.0005$0.0005 par value per share | IT | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ☑ No o☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o☐ No þ☑
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 þ☑ No o☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ☑ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ☐
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, as defined” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
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| Large accelerated filer | ☑ | | Accelerated filer | ☐ | | Non-accelerated filer | ☐ |
| Smaller reporting company | ☐ | | Emerging growth company | ☐ | | | |
Large accelerated filer þ
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Smaller reporting company o
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If an emerging growth company, indicate by check mark 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark ifwhether the financial statements of the registrant has elected notincluded in the filing reflect the correction of an error to usepreviously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the extended transitionregistrant’s executive officers during the relevant recovery period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o§240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No þ☑
As of June 30, 2017,2022, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $10,832,607,830,$18.6 billion, based on the closing sale price as reported on the New York Stock Exchange.
The numberAs of February 3, 2023, there were 79,060,595 shares outstanding of the registrant’s common stock was 90,833,817 as of January 31, 2018.outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive Proxy Statement for the Annual Meeting of Stockholders to be held on June 1, 2023 (the “2023 Proxy Statement”) is incorporated by reference into Part III to the extent described therein.
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Document | | Parts Into Which Incorporated |
Proxy Statement for the Annual Meeting of Stockholders to
be held (Proxy Statement)
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GARTNER, INC.
20172022 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS.
GENERAL
Gartner, Inc. (NYSE: IT) is the world’s leading researchdelivers actionable, objective insight to executives and advisory company and a member of the S&P 500. We equip business leaders with indispensable insights, advicetheir teams. Our expert guidance and tools to achieve their goalsenable faster, smarter decisions and build the successful organizations of tomorrow. stronger performance on an organization’s mission critical priorities.
We believe we have an unmatched combination of expert-led, practitioner-sourcedare a trusted advisor and data-driven research that steers clients toward the right decisions on the issues that matter most. We’re trusted as an objective resource and critical partner byfor more than 12,000 organizations15,000 enterprises in more than 100approximately 90 countries —and territories— across all major functions, in every industry and enterprise size.
Gartner delivers its products and services globally through fourthree business segments:segments – Research, Conferences and Consulting, Events,as described below.
Research equips executives and Talent Assessment & Other:
Research provides trusted, objective insightstheir teams from every function and advice on the mission-critical priorities of leaders across all functional areasindustries with actionable, objective insight, guidance and tools. Our experienced experts deliver all this value informed by a combination of the enterprise throughpractitioner-sourced and data-driven research and other reports, briefings, proprietary tools, access to our analysts, peer networking services and membership programs that enablehelp our clients to make better decisions. Gartner's traditional strengths in IT, marketingaddress their mission critical priorities.
Conferences provides executives and supply chain research were enhanced in 2017 with Gartner's acquisition of CEB, Inc. ("CEB"), which added CEB's best practice and talent management research insightsteams across a range of business functions, to include human resources, sales, legal and finance.
Consulting provides customized solutions to unique client needs through on-site, day-to-day support, as well as proprietary tools for measuring and improving IT performance with a focus on cost, performance, efficiency and quality.
Events provides business professionals across thean organization the opportunity to learn, share and network. From our flagship CIO event Gartner Symposium/ITxpo,Xpo series, to industry-leading conferences focused on specific business roles and topics, to member-drivenpeer-driven sessions, our eventsofferings enable attendees to experience the best of Gartner insight and advice live.
guidance.
Talent Assessment & Other helps organizations assess, engage, manageConsulting serves senior executives leading technology-driven strategic initiatives leveraging the power of Gartner’s actionable, objective insight. Through custom analysis and improve talent. Thison-the-ground support we enable optimized technology investments and stronger performance on our clients’ mission critical priorities.
The fiscal year of Gartner is accomplishedthe twelve-month period from January 1 through knowledgeDecember 31. All references to 2022, 2021 and skills assessments, training programs, workshops, and survey and questionnaire services.
For more information regarding Gartner and our products and services, visit gartner.com. References2020 herein refer to “the Company,the fiscal year unless otherwise indicated. When used in this Annual Report on Form 10-K, the terms “Gartner,” the “Company,” “we,” “our,” and “us” areor “our” refer to Gartner, Inc. and its consolidated subsidiaries. References to "heritage Gartner" operating results and business measurements refer to Gartner excluding CEB.
MARKET OVERVIEW
We are livingEnterprise leaders face enormous pressure to stay ahead and working in the midst ofgrow profitably amidst constant changes. Whether it is a revolution. Technology increasingly drives organizational strategies rather than just supporting them, and three megaforces - technology-driven industry disruption, the growing pervasiveness of technology across every part of the enterprise, and sustained macroeconomic and political volatility (such as commodity price swings, exchange rate flux, Brexit) - are rapidly changing how businesses anddigital transformation, a global health crisis, large-scale regulatory changes, or other organizations plan and operate.
To remain viable and competitive,unique challenges, business leaders must deal with this unprecedented level of disruption and change. No enterprise cantoday are facing significant disruptive changes. We believe that enterprises cannot be operationally effective unless it incorporatesthey incorporate the right strategy, management and technology decisions into every part of itstheir business. This means considering technology from many angles - how itrequirement affects all business levels, functions and roles. Chief Financial Officers, Heads of Human Resources, Chief Marketing Officers and other executives and leaders across the enterprise are more reliant on technology than ever. Given this critical need, business enterprises, governmentsExecutives and their agencies, and other organizationsteams turn to Gartner for decision-making and execution guidance to ensure they maximizeachieve their technology investments and meet their current and future needs.mission critical priorities.
Our legacy of expertise in IT has given way to a new position: Strategic research and advisory services operating across the entire organization. We believe our best-in-class Gartner content combined with CEB expertise in functional areas has strengthened our value proposition and increased our market opportunity to an all-time high.
OUR SOLUTION
We believe our unmatched combination of expert-led, practitioner-sourced and data-driven research steers clients toward the right decisions and actions on the issues that matter most. Organizations are overrun with data and information. Gartner helps eliminate this information chaos and provides clarity with actionable, objective insight. We employ a diversified business model that utilizes and leverages the breadth and depth of our differentiated 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, interactive tools, facilitated peer networking, briefings consulting and advisory services,direct communications with executives and their teams; our events,conferences, including the Gartner Symposium/ITxpo series.Xpo series; and consulting and advisory services.
We had over 1,900 research analysts as of December 31, 2017 located around the world who create compelling, relevant, independent and objective research and fact-based analysis on virtually every function across the enterprise. Through our robust product portfolio, our global research team provides thought leadership and insights that CIOs and other technology practitioners, HR, sales, legal, and finance executives, and supply chain and marketing professionals need to make the right decisions, every day.
In addition to our research analysts, as of December 31, 2017 we had 669 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 that include CIOs and other IT and C-suite executives, frontline IT architects and professionals, purchasers and providers of technology and supply chain products and services, business professionals, and other leaders across marketing, finance, legal, sales and HR.
PRODUCTS AND SERVICES
Our diversified business model provides multiple entry points and sources of value for our clients that facilitatelead to increased client spending on our research and advisory services, conferences and consulting services and events.services. A critical part of our long-term strategy is to increase business volume and penetration with our most valuable clients, identifying relationships with the greatest sales potential and expanding those relationships by offering strategically relevant research and advice.insight. 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. These initiatives have created additional revenue streams through more effective packaging, campaigning and cross-selling of our products and services. 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 through our fourthree business segments:segments, as described below.
•RESEARCH. Gartner delivers independent, objective advice to leaders across an enterprise through subscription services that include on-demand access to published research content, data and benchmarks, and direct access to a network of approximately 2,500 research experts located around the enterprise, primarily through a subscription-based digital media service.globe. Gartner research is the fundamental building block for all Gartner products and services. We combine our proprietary research methodologies with extensive industry and academic relationships to create Gartner solutionsproducts and services that address each role.
role across an enterprise. Within the Research segment, Global Technology Sales (“GTS”) sells products and services to users and providers of technology, while Global Business Sales (“GBS”) sells products and services to all other functional leaders, such as human resources, supply chain, finance, and marketing.
Our research agenda is defined by clients’ needs, focusing on the critical issues, opportunities and challenges they face every day. We are in steady contact with over 12,000more than 15,000 distinct organizationsclient enterprises worldwide. We publish tens of thousands of pages of original research annually, and our analysts answer over 380,000research experts had more than 460,000 direct client inquiries every year.interactions in 2022. Our size and scale allowenable us to commit vast resources toward broader and deeper analystresearch coverage and to deliver insight to our clients based on what they need and where they are. The ongoing interaction betweenof our research analysts andexperts with our clients enables us to identify the most pertinent topics to them and develop relevant product and service enhancements to meet the evolving needs of users of our research. Our proprietary research content, presented in the form of reports, briefings, updates and related tools, is delivered directly to the client’s desktopcomputer or mobile device via our website and/or product-specific portals.
Clients normally sign subscription contracts that provide access to our research content and advisory services for individual users over a defined period of time.period. We typically have a minimum contract period of 12twelve months for our research and advisory subscription contracts and, as ofat December 31, 2017, more than half2022, over 70% of our contracts arewere multi-year.
•CONFERENCES. Gartner conferences are designed for information technology (“IT”) and business executives as well as decision makers looking to adapt and evolve their organizations through disruption and uncertainty, navigate risks and prioritize investments. Attendees experience sessions led by Gartner research experts, and the sessions include cutting-edge technology solutions, peer exchange workshops, one-on-one analyst and advisor meetings, consulting diagnostic workshops, keynotes and more. Our conferences also provide attendees with an opportunity to interact with IT and business executives from the world’s leading companies. In addition to role-specific summits and workshop-style seminars, Gartner hosts the Gartner Symposium/Xpo series, including its unique, flagship IT Symposium/Xpo®, which is held at several locations worldwide annually. During 2022, Gartner successfully held 25 in-person and 16 virtual conferences with more than 60,000 attendees, including eight Symposiums/Xpos. In addition, during 2022 we hosted 350+ peer networking meetings, and through the Evanta brand we hosted 350+ exclusive C-level meetings with close to 200 in-person.
•CONSULTING. Through its experienced consultants, Gartner Consulting deepens relationships with our largest research clients by extending the reach of our research through custom consulting engagements.serves chief information officers and other senior executives who are driving technology-related strategic initiatives to optimize technology investments and drive business impact. Gartner Consulting brings together our uniquecombines the power of Gartner’s market-leading research insight, benchmarking data, problem-solving methodologieswith custom analysis and hands-on experience to improve the return on a client’s IT investment. Our consultants provide fact-based consulting serviceson-the-ground support to help clients useto turn insight and manage IT to optimize business performance.
advice into action and impact.
Consulting solutions capitalize on Gartner assets that are invaluable to IT decision making,decision-making, including: (1) our extensive research, which ensures that our consulting analyses and advice are based on a deep understanding of the IT environment and the business of IT; (2) our market independence, which keeps our consultants focused on our clients'clients’ success; and (3) our market-leading benchmarking capabilities, which provide relevant comparisons and best practices to assess and improve performance. Gartner Consulting provides solutions to CIOs and other IT executives, and to those professionals responsible for IT applications, enterprise architecture, go-to-market strategies, infrastructure and operations, program and portfolio management, and sourcing and vendor relationships. Consulting also provides targeted consulting services to professionals in specific industries. Finally,Additionally, we provide actionable solutions for a range of IT-related priorities, including IT cost optimization, technology modernizationdigital transformation and IT sourcing optimization initiatives.optimization.
EVENTS. Gartner attracts more than 75,000 technology and business professionals and 1,100 industry-leading technology providers to its 75+ conferences worldwide each year. Attendees experience sessions led by Gartner analysts, cutting-edge technology solutions, peer exchange workshops, one-on-one analyst meetings, consulting diagnostic workshops, keynotes and more. They also provide attendees with an opportunity to interact with business executives from the world’s leading technology companies. In addition to role-specific summits and workshop-style seminars, Gartner holds its unique, flagship Symposium/ITxpo in eight locations worldwide annually. Since the addition of CEB, we’ve expanded to host 700+ more intimate live events each year plus 220+ exclusive CxO gatherings through the Evanta brand.
TALENT ASSESSMENT & OTHER. Our offerings help organizations plan, recruit, assess, develop, engage and drive performance of their organizational talent against corporate objectives. Our talent assessment and development solutions help companies manage human capital investments. These offerings include cognitive ability assessments, skills and/or knowledge assessments, personality questionnaires, and job/role simulations and are generally implemented as pre-hire or post-hire applications. We also evaluate training programs and develop and offer workshops and technical training that enhance the potential of emerging leaders and their teams. Our proprietary workshops and technical training provide an executive education curriculum supported by e-learning resources for members seeking to enhance skill development for their staff. These tools and services use science and data to develop talent strategies for clients that are linked to business results.
On February 6, 2018, we announced that we had reached a definitive agreement to sell our CEB Talent Assessment business, which is a significant portion of the Talent Assessment & Other segment. Note 2 — Acquisitions and Divestiture and Note 16 — Subsequent Events in the Notes to the Consolidated Financial Statements provide additional information.
COMPETITION
We believe that the principal factors that differentiate us from our competitors are:are as follows:
•Superior research content - We believe that we create the broadest, highest-quality and most relevant research coverage across all major functional roles in thean enterprise. Our independent operating model and research analysis generates unbiased insight that we believe is timely, thought-provoking and comprehensive, and that is known for its high quality, independence and objectivity.
•Our leading brand name - We have provided critical, trusted insight under the Gartner name for over 35more than 40 years.
•Our global footprint and established customer base - We have a global presence with clients in more than 100approximately 90 countries and territories on six continents. A substantial portion of our revenue is derived from sales outside of the United States.
•Insight that creates connections - Our global community of experts, analysts and peers help provide the deep relationships that help clients stay ahead of the curve.
•Experienced management team - Our management team is composedcomprised of research veterans and experienced industry executives with long tenure at Gartner.
•Substantial operating leverage in our business model - We have the ability tocan distribute our intellectual property and expertise across multiple platforms, including research publications,and advisory subscription and membership programs, conferences and consulting engagements, conferences and executive programs, to derive incremental revenue and profitability.
•Vast network of analystsresearch experts and consultants - As of December 31, 2017,2022, we had over 1,900approximately 2,500 research analystsexperts and 669880 experienced consultants located around the world. Our analysts collectively speak 59 languages andresearch experts are located in 26more than 30 countries and territories, enabling us to cover allvast aspects of technologybusiness and businesstechnology on a global basis.
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 data and 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.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 positions 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.
INTELLECTUAL PROPERTY
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 and third parties 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.
EMPLOYEESHUMAN CAPITAL MANAGEMENT
We believe our people are our most valuable asset, enabling our long track record of global growth. From attracting diverse talent through our recruitment process, to cultivating that talent with learning and development opportunities and rewards for strong performers, to supporting overall wellness with meaningful benefits and engagement, we strive to put our people first. At December 31, 2022, we had approximately 19,500 employees globally, approximately 9,110 of which were outside of the U.S., and the overwhelming majority of our employees were full time.
Gartner is committed to providing equal employment opportunities to all applicants and employees without regard to any legally protected status. This commitment is formalized in our global and U.S. equal employment opportunity policies. We continually renew this commitment by seeking to optimize our recruitment and professional development processes, create networking and educational opportunities, celebrate heritage and history, celebrate community service, and create safe spaces for all employees. Our human capital management strategies are developed by executive management and overseen by the Compensation Committee of our Board of Directors.
Diversity, Equity and Inclusion
Gartner is committed to creating a totalculture of 15,131inclusion - which is critical to the objectivity and independence we provide our clients. We celebrate diversity of thought and we welcome and encourage diverse perspectives. We embed Diversity, Equity and Inclusion (“DEI”) concepts into our culture and our critical people processes. Our DEI efforts are all about building the confidence and conviction in all of our associates – but particularly in our leaders - to do the right things and building a
language of inclusion to foster this. Our DEI Executive Council, composed of our CEO, Chief Human Resources Officer, CFO, General Counsel, head of DEI, and other selected leaders, drives diversity, equity and inclusion as an imperative at all levels of the organization. In addition, the DEI Center of Excellence operationalizes strategy and establishes goals against key metrics to drive greater transparency and accountability. Our teams of employees are composed of individuals from different geographies, cultures, religions, ethnicities, races, genders, sexual orientations, abilities and generations working together to solve problems. Currently, 33% of our Board of Directors and 23% of our executive management team identifies as female, and 25% of our Board of Directors identifies as racially or ethnically diverse. As of December 31, 2017, a significant increase compared to 8,813 at December 31, 2016. The increase consists2022, approximately 47% of an 18% growth in heritage Gartner headcountour employees worldwide identified as we continued to invest for future growthfemale and the additional24% of employees resulting from our acquisitions.
We had 8,486 employees based in the U.S. at December 31, 2017: 1,335identified as racially or ethnically diverse. On a worldwide basis, our employees were located at our headquarters facilityrepresented by more than 85 self-identified nationalities working in Stamford, Connecticut38 different countries and nearby; 1,584 employees were located at our Ft. Myers, Florida offices; 1,657 were located in Arlington, Virginia;territories.
We emphasize the importance of inclusion to leaders and 3,910 employees were located elsewhere in the United States in 56 other offices. We had 6,645 employees located outside of the United States in 106 offices at December 31, 2017: 1,046 employees were located in Egham, the United Kingdom; 883 employees were located in Gurgaon, India;managers and the remaining 4,716value of fostering a sense of belonging within their teams. We also continue to invest in learning opportunities to develop DEI at Gartner. For example, in addition to our popular Embracing Diversity & Being Inclusive training module, which covers the importance of diversity and inclusion at Gartner and the role of unconscious bias, we added a new module this year called Equity vs. Equality, which focuses on fostering a more equitable workplace.
The Company supports a number of employee-driven Employee Resource Groups (“ERGs”) that bring employees together to foster a diverse, inclusive and supportive workplace. Gartner currently has six formal ERGs supporting underrepresented racial, ethnic and multicultural backgrounds, women, the LGBTQ+ community, veterans and employees with disabilities. Participation in ERGs is voluntary and open to all employees. In 2022, over 5,300 Gartner associates were locatedmembers of at least one ERG.
Health, Safety and Compensation
We seek to invest in 104 other offices.meaningful, innovative and inclusive compensation and benefit programs that support physical, financial and emotional well-being of our employees. In addition to salaries, these programs (which vary by country/region) include annual bonuses, stock awards, an employee stock purchase plan, 401(k) matching, healthcare and insurance benefits, tax savings programs, such as health and dependent care flexible spending accounts, health savings account and pretax commuter benefits, generous paid time off, paid parental leave, life and disability insurance, business travel accident insurance, charity matching, employee assistance programs, tuition assistance and on-site services, such as health centers and fitness centers, among others. We believe that our equity grants facilitate retention as well as encourage performance of key personnel.
OurWe operate under a hybrid virtual-first working arrangement, which provides additional flexibility to employees, may be subject to collective bargaining agreements at a company or industry level, or works councils, in those foreign countries where this is partenabling most of the local labor law or practice. We have experienced no work stoppages and consider our relations with our employees to be favorable.work remotely a substantial portion of the time. We also provide a number of free mental and behavioral health resources, including access to the Employee Assistance Program for employees and their dependents.
FINANCIAL INFORMATIONTalent Development, Retention and Training
The Company's financial informationGartner aims to foster a culture of lifelong learning, getting feedback and evolving. In addition to helping employees unlock their full potential through mechanisms like continuous feedback and performance appraisals, we have dedicated programs designed to develop effective leaders. We also offer rotational programs and an online learning experience platform for employees called GartnerYou. In 2022, GartnerYou offered more than 46,000 learning resources, with over 400,000 completions globally. Since our Sales and Research & Advisory teams make up approximately 50% of total employees worldwide, we also have formal, dedicated programs to help train and onboard new hires as well as more experienced managers and leaders within Sales and Research & Advisory. In 2021, Gartner transformed how we onboard new sales hires so they more quickly develop the core competencies tied to sales success. Rooted in learning and development best practices, the reimagined program operates in a scalable model that provides new sales hires in their first year with access to as many as 2,100 well-paced, just-in-time learning assets. In 2022, we expanded the program, and more than 3,100 sales associates participated. Through these programs, we believe our teams develop role-specific knowledge and skills, increase productivity and improve performance.
We also strive to develop an inclusive and engaging environment that makes Gartner a vibrant, exciting place to work. We believe the greatest catalyst to engagement comes from leadership — particularly their efforts to set direction, allocate resources, and build individual and organizational capability. We embed our associate survey efforts within our business units so that the insight we glean can help leaders understand the opportunities for effecting organizational growth. Business-unit-specific survey results are used for a number of leader-specific interventions, from individualized coaching to team-based skill-building to business-unit-wide initiatives targeting key areas of engagement. While we experienced a decrease in associate turnover in 2022, our average employee tenure decreased from 5.1 years in 2021 to 4.5 years in 2022, primarily due to increased new hires in 2022.
Our Communities and the Environment
Our associates have a long history of individual and team volunteering. Gartner facilitates a charity match program. In 2022, over 19% of associates made matched donations to more than 3,600 nonprofits, amounting to over $7.1 million donated by business segmentGartner and geographic area forits associates. In 2022, Gartner associates also logged approximately 24,300 hours supporting over 580 nonprofit organizations around the three-year period ended December 31, 2017 is providedworld. Finally, in Note 14 — Segment Information2022, we announced our commitment to achieve net-zero greenhouse gas emissions by 2035 in accordance with Science Based Target initiative’s (SBTi) Net-Zero Standard.
We encourage you to review our Corporate Responsibility Report located on our website at gartner.com, under the “Corporate Responsibilities” link in the Notes“About” tab for more detailed information regarding our Human Capital programs and initiatives. Nothing on our website, including our Corporate Responsibility Report or sections thereof, shall be deemed incorporated by reference into this Annual Report, or any other filing we make with the SEC.
GOVERNMENT CONTRACTS
Our U.S. government contracts are subject to the Consolidated Financial Statements.approval of appropriations by the U.S. Congress to fund the agencies contracting for our products and 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. Certain of these contracts may be terminated at any time by the government entity without cause or penalty.
AVAILABLE INFORMATION
Our Internetinternet address is www.gartner.comgartner.com and the Investor Relations section of our website is located at www.investor.gartner.cominvestor.gartner.com. We make available free of charge, on or through the Investor Relations section of our website, printable copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). Unless expressly noted, the information on our website or any other website is not incorporated by reference in this Form 10-K and should not be considered part of this Form 10-K or any other filing we make with the SEC.
Also available at www.investor.gartner.cominvestor.gartner.com, under the “Corporate Governance”“Governance” link, are printable and current copies of ourour: (i) CEO &and CFO Code of Ethics, which applies to our Chief Executive Officer, Chief Financial Officer, Controller and other financial managers,managers; (ii) Global Code of Conduct, which applies to all Gartner officers, directors and employees, wherever located,located; (iii) Board Principles and Practices of the Board of Directors of Gartner, Inc., the corporate governance principles that have been adopted by our BoardBoard; and (iv) charters for each of the Board’s standing committees: Audit, Compensation and Governance/Nominating.We will disclose any waiver we grant to an executive officer or director under our Code of Ethics, or certain amendments to the Code of Ethics, on our website at investor.gartner.com, under the “Governance” link.
ITEM 1A. RISK FACTORSFACTORS.
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 and trends. The following sections discuss many, but not all, of the risksaddress significant factors, events and uncertainties that may affectmake an investment in our future performance, but is not intendedsecurities risky. We urge you to be all-inclusive. Any ofconsider carefully the factors described below and the risks that they present for our operations, as well as the risks addressed in other reports and materials that we file with the SEC and the other information, included or incorporated by reference in this Form 10-K. When the factors, events and contingencies described below or elsewhere in this Form 10-K materialize, there could havebe a material adverse impact on ourbusiness, prospects, results of operations, financial condition, and cash flows, and couldtherefore have a potential negative effect on the trading price of our common stock. Additional risks not currently known to us or that we now deem immaterial mayalso harm us and negatively affect your investment.
In addition to the effects of the global economic and geopolitical climate on our business and operations discussed in Item 7 of this Form 10-K and in the risk factors below, additional or unforeseen effects from the global economic and geopolitical climate may give rise to or amplify many of these risks discussed below. Risks in this section are grouped in the following categories: (1) strategic and operational risks; (2) macroeconomic and industry risks; (3) legal and regulatory risks; and (4) risks related to our business
On April 5, 2017, Gartner acquired CEB Inc. ("CEB"). References to "heritage Gartner" operating resultsCommon Stock. Many risks affect more than one category, and business measurements refer to Gartner excluding CEB. References to CEB refer to the operating results and business measurements of CEB subsequent to the acquisition.
Our operating results could be negatively impacted by global economicconditions. Our business is impacted by general economic conditions and trends, in the United States and abroad. In its January 2018 Global Economic Prospects report, the World Bank
notes that global growth is expected to continue while substantial downside risks are present, to include financial stress, protectionism,not in order of significance or probability of occurrence because they have been grouped by categories.
Strategic and geopolitical change. We also believe that terrorist attacks around the world have added additional uncertainty and risks to the economic environment. A downturn in growth could negatively and materially affect future demand for our products and services in general, in certain geographic regions, or in particular countries or 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, and attract attendees and exhibitors to our events. Such developments could negatively impact our financial condition, results of operations, and cash flows.Operational Risks
We face significant competition and our failure to compete successfully couldmaterially 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 delivery of information, customer service, the ability to offer products to meet changing market needs for information and analysis, or price.
We may not be able to maintain the quality of our existing products and services. We operate in a rapidly evolving market, and our success depends uponon our ability to deliver high quality and timely research and analysis to our clients. Any failure to continue to provide credible and reliable information and advice that is useful to our clients could have a material adverse effect on future business and operating results. Further, if our published data, opinions or viewpoints proveare considered to be wrong, lack independence, or are not substantiated by appropriate research, our reputation maywill suffer and demand for our products and services may decline. In addition, we must continue to improve our methods for delivering our products and services in a cost-effective manner via the Internetinternet and mobile applications.applications in an inflationary economic environment. Failure to maintain state of the art electronic delivery capabilities could materially adversely affect our future business and operating results.
We may not be able to enhance and develop our existing products and servicesor introduce the new products and services that are needed to remaincompetitive. The market for our products and services is characterized by rapidly changing needs for information and analysis. 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,clients, develop, enhance and improve our existing products, 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 service releases or significant problems in creating new products or services could materially adversely affect our business, results of operations and financial position.
As a result of the acquisition of CEB in 2017, a portion of our revenue is now derived from products, services, and tools that relate to human talent assessment, management, and development, which were new products for the Company. Revenue from these activities is concentrated in our Talent Assessment & Other business segment. Revenue from these activities is affected in part by our ability to create new offerings as demand changes, and our ability to support existing offerings. If we fail to successfully manage and grow this new business, our operating results, financial condition, and liquidity could be negatively impacted. Also, economic downturns in certain segments or geographic regions may cause reductions in discretionary spending by our customers, which may adversely affect our ability to maintain or grow the volume of business.
Technology is rapidly evolving, and if we do not continue to develop new product and service offerings in response to these changes, our business could suffer. Disruptive technologies, including in areas of artificial intelligence and machine learning, are rapidly changing the environment in which we, our clients, and our competitors operate. operate and could affect the nature of how we generate revenue.Wewill need to continue to respond to and anticipate these changes by enhancing our product and service offerings in order to maintain our competitive position. However, we may not be successful in responding to these forces and enhanceenhancing our productsproduct and service offerings on a timely basis, and any enhancements we develop may not adequately address the changing needs of our clients. Our future success will depend upon our ability to develop and introduce in a timely manner new or enhancedenhance existing offerings that address the changing needs of this constantly evolving marketplace. Failure to develop products that meet the needs of our clients in a timely manner could have a material adverse effect on our business, results of operations, and financial position.
In addition, some of our content is exposed to Internet search engines, which help generate website traffic. Search engines often update their proprietary algorithms, which affects the placement of links to our websites. Some search engines also provide substantive content in search results, which, if expanded to the areas in which we operate, could reduce the need to enter our websites. When a major search engine changes its algorithms in a manner that negatively affects our placement in search results or makes it less likely for our target audience to enter our websites, our business, results of operations and financial position may be harmed.
Our Research business depends on renewals of subscription-based services and sales of newsubscription-based services for a significant portion of our revenue, and ourfailure to renew at historical rates or generate new sales of such servicescouldwill 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 approximately 70%76% and 71%79% of our total revenues from our on-going operations for 20172022 and 2016,2021, respectively. Generating new sales of our subscription-based products and services, both to new and existing clients, is a challenging, costly, and often time consumingtime-consuming process. If we are unable to generate new sales, due to competition or other factors, our revenues will be adversely affected.
Our research subscription contracts are typically for 12-monthstwelve months or longer. Our ability to maintain contract renewals is subject to numerous factors, including the following:
•delivering high-quality and timely analysis and advice to our clients;
•understanding and anticipating market trends and the changing needs of our clients; and
•providing products and services of the quality and timeliness necessary to withstand competition.
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 heritage Research client retention rate was 84% at86% for both December 31, 20172022 and 2016,2021, there can be no guarantee that we will continue to maintain this rate of client renewals.
The profitability and success of our conferences and other meetings are subject to external factors beyond our control. Our Conferences business constituted approximately 7% and 5% of total revenues from our on-going operations in 2022 and 2021, respectively. As a result of the COVID-19 pandemic, we cancelled in-person conferences scheduled for 2020 beginning in late February/early March 2020. We began holding virtual conferences during the second half of 2020. These virtual conferences resulted in significantly less revenue and gross contribution, but we believe aided in client retention and engagement. We had planned in-person conferences for 2021, but cancelled those conferences due to the ongoing pandemic. We re-launched in-person destination conferences during the second quarter of 2022 and expect to focus on in-person destination conferences in future periods as conditions permit. Although we have returned to offering some in-person conferences, our Conferences revenues may continue to be negatively impacted if in-person conferences are not permitted to be held in the jurisdictions of the conference venues, if client policies prohibit or restrict business travel or if there are public health concerns for attendees, exhibitors or our employees.
The market for desirable dates and locations for our activities has historically been highly competitive. If we cannot secure desirable dates and suitable venues for our conferences the profitability for these conferences will suffer, and our financial position and results of operations may be adversely affected. In addition, because our conferences are scheduled in advance and held at specific locations, the success of these activities can be affected by circumstances outside of our control, such as the occurrence of or concerns related to communicable diseases (such as COVID-19), labor strikes, transportation shutdowns and travel restrictions, economic slowdowns, reductions in government spending, geopolitical crises, terrorist attacks, war, weather, natural disasters,and other occurrences impacting the global, regional, or national economies, the occurrence of any of which could negatively impact the success of the conference or meeting. We also face the challenge of procuring venues that are sizeable enough at a reasonable cost to accommodate some of our major activities.
We also face risks related to insurance coverage for our cancelled 2020 and 2021 conferences. Our event cancellation insurance, including a two-year policy covering destination conferences during 2020 and 2021 and a policy covering Evanta conferences during 2020, provided up to $170 million in coverage for 2020 cancellations with the right to reinstate the policy limits one time if those limits are utilized. The insurer has contested our right to reinstate the limits and to use reinstated limits to cover losses resulting from conferences cancelled due to COVID-19. Gartner's two-year event cancellation policy also covered events that were planned for 2021 but cancelled, with limits of $150 million with the right to reinstate up to that amount one time if the initial limits are inadequate. The insurer has contested all coverage for events cancelled in 2021 due to COVID-19. We are in litigation with the insurer on these issues. In 2021, we received $166.9 million of insurance proceeds related to 2020 event cancellation claims and recorded a gain of $152.3 million. We received an additional $3.1 million related to 2020 event cancellation insurance claims in February 2023.
In its lawsuit against the insurer, Gartner is seeking to reinstate and recover up to an additional $20 million for cancelled 2020 Evanta meetings and to reinstate and recover up to an additional $150 million in losses from cancelled 2020 destination conferences. Gartner is also seeking $150 million in initial limits for events cancelled in 2021 and to reinstate those limits up to an additional $150 million. In 2022, Gartner also commenced litigation against the insurance broker who negotiated and procured our event cancellation insurance. It is difficult to predict how long it will take to resolve these lawsuits and the resolution could affect our financial results.
Our insurance coverage for 2022 (and likely beyond) excludes coverage for cancellations due to communicable diseases.
Our Consulting business depends on non-recurring engagements and our failure to secure newengagements could lead to a decrease in our revenues. Consulting segment revenues constituted 10%approximately 9% of our total revenues from our on-going operations in 2017both 2022 and 14% in 2016.2021. Consulting engagements typically are project-based and non-recurring. In addition, revenue from our contract optimization business can fluctuate significantly from period to period and is not predictable. Our ability to replace consulting engagements is subject to numerous factors, including the following:
•delivering consistent, high-quality consulting services to our clients;
•tailoring our consulting services to the changing needs of our clients; and
•our ability to match the skills and competencies of our consulting staff to the skills required for the fulfillment of existing or potential consulting engagements.
Any
A material decline in our ability to replace consulting engagements couldwill have an adverse impact on our revenues and our financial condition. In addition, revenue from our contract optimization business can fluctuate significantly from period to period and is not predictable.
The profitability and success of our conferences, symposia and events could beadversely affected by external factors beyond our control. Our Events business constituted 10% of our total revenues in 2017 and 11% in 2016. 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, geopolitical 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.
Our sales to governments are subject to appropriations and may be terminated. We derive significant revenues from research and consulting contracts with the United States government and its respective agencies, numerous state and local governments and their respective agencies, and foreign governments and their agencies. At December 31, 2017 and 2016, approximately $435.0 million and $355.0 million, respectively, of our contracts were attributable to government entities. Our U.S. government contracts are subject 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 by the government entity without cause or penalty (“termination for convenience”). In addition, 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 revenues.
We may not be able to attract and retain qualified personnel which couldjeopardize our future growth plans, as well as the quality of our products and services.services and our future growth plans. Our success dependsis based on attracting and retaining talented employees and we depend heavily upon the quality of our senior management, research analysts, consultants, sales and other key personnel. The market for highly skilled workers and leaders in our industry is extremely competitive. 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. Moreover, increasing wage inflation may affect our profit margin as we strive to provide compensation packages that are competitive. We face risks related to global labor shortages, and competitive markets have increased attrition throughout our sector. Additionally, some of the personnel that we attempt to hire are subject to non-compete agreements that could impede our short-term recruitment efforts. AnyOur employee hiring and retention also depend on our brand and reputation as well as our ability to build and maintain a diverse and inclusive workplace culture that enables our employees to thrive. We may also be limited in our ability to recruit internationally by restrictive domestic immigration laws, and changes to policies that restrain the flow of technical and professional talent could inhibit our ability to adequately staff our research and development and other efforts.
An 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 materially adversely affect the quality of our products and services, as well as future business and operating results.
We may not be able to maintain the equity in our brand name. We believe that our “Gartner” brand, in particular our independence, is critical to our efforts to attract and retain clients and that the importance of brand recognition will increase as competition increases. We may expand our marketing activities to promote and strengthen the Gartner brand and may need to increase our marketing budget, hire additional marketing and public relations personnel, and expend additional sums to protect our brand and otherwise increase expenditures to create and maintain client brand loyalty. If we fail to effectively promote, maintain, and protect the Gartner brand, or incur excessive expenses in doing so, our future business and operating results or stock price. In addition, effective succession planning is important to our long-term success, and failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution.
Additionally, as a result of the COVID-19 pandemic, the vast majority of our employees transitioned to working from home. In early 2022, we began to operate under a hybrid virtual-first working environment, meaning that most of our employees have the option to work remotely at least some of the time for the foreseeable future. The hybrid working environment may impair our ability to maintain our culture of collaboration and continuous improvement, and may cause disruptions among our employees, including lost productivity, communication challenges and, potentially, employee dissatisfaction and attrition.
If we are unable to enforce and protect our intellectual property rights, ourcompetitive position may be materially adversely impacted.
Our international operations expose us toharmed. We rely on a varietycombination of operationalcopyright, trademark, trade secret, patent, confidentiality, non-compete and other risks whichcould negatively impactcontractual provisions to protect our future revenueintellectual property rights. Despite our efforts to protect our intellectual property rights, unauthorized third parties may obtain and growth. We have clientsuse 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 and enforcement mechanisms of certain countries, particularly in more than 100 countries and a substantial amount ofemerging markets, do not protect our revenue is earned outsideproprietary rights to the same extent as the laws of the United States. Our operating results are subjectConducting business in certain foreign jurisdictions may require accepting compromised protections or yielding of rights 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, and the difficulty of enforcing client agreements, collecting accounts receivable and protectingtechnology, data or intellectual property rights or against economic espionage 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,order to access those markets. Accordingly, we may not be able to replace the arrangement on beneficial termsprotect our intellectual property against unauthorized or on a timely basis,undesired third-party copying or clients of the local distributor or sales agent may not want to continue to do business with us or our new agent.
Our business and operations may be conducted in countries where corruption has historically penetrated the economy. It is our policy to comply, and to require our local partners and those with whom we do business to comply, with all applicable anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and U.K. Bribery Act, and with applicable local laws of the foreign countries inuse, which we operate. Our business and reputation may be adversely affected if we fail to comply with such laws.
We are exposed to volatility in foreign currencyexchange rates from our international operations. For both the years ended December 31, 2017 and 2016, 42% of our revenues were derived from sales outside of the United States. 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.
Natural disasters, terrorist acts, war, and other geopolitical events could disrupt our business. We operate in numerous U.S. and international locations, and we have offices in a number of major cities across the globe. A major weather event, earthquake, flood, drought, volcanic activity, disease, or other catastrophic natural disaster could significantly disrupt our operations. In addition, acts of civil unrest, failure of critical infrastructure, terrorism, armed conflict, war, and abrupt political change, as well as responses by various governments and the international community to such acts, can have a negative effect on our business. Such events could cause delays in initiating or completing sales, impede delivery of our products and services to our clients, disrupt or shut down the Internet or other critical client-facing and business processes, impede the travel of our personnel and clients, dislocate our critical internal functions and personnel, and in general harm our ability to conduct normal business operations, any of which can negatively impact our financial condition and operating results. Such events could also impact the timing and budget decisions of our clients, which could materially adversely affect our business.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 restrictive covenant agreements (which include provisions related to employees’ ability to compete and solicit customers and employees) and assignment of invention agreements, to the extent permitted under applicable law. When the period expires relating to their particular restrictions, former employees may compete against us. If a former employee violates the provisions of the restrictive covenant agreement, we seek to enforce the restrictions but there is no assurance that we will be successful in our efforts.
Privacy concerns could damage our reputation and deter current and potential clients from using our products and services or attending our events.conferences. Concerns relating to global data privacy have the potential todamage our reputation and deter current and prospective clients from using our products and services or attending our events.conferences. 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;conference attendees, and (iii) from prospective clients. We collect only basic personal information from our clients
and prospects. While we believe our overall data privacy procedures are adequate, the theft or loss of such data, or concerns about our practices, even if unfounded, with regard to the collection, use, disclosure, or security of this personal information or other data protection related matters could damage our reputation and materially adversely affect our operating results. 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,conferences, as well as harm our reputation and brand and, therefore, our business.
In addition, new data protection laws and regulations, particularly the new European Union General Data Protection Regulation (“GDPR”) (effective in May 2018), pose increasingly complex compliance challenges.
We are closely monitoring these legal developments and are working towards timely GDPR compliance. In the meantime, Gartner will continueexposed to maintain and rely upon our comprehensive global data protection compliance program, which includes administrative, technical, and physical controlsrisks related to safeguard our associates’ and clients' personal data. The interpretation and application of these laws in the United States, the European Union and elsewhere are often uncertain, inconsistent and ever changing. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.
Internet and critical internal computer system failures, cyber-attacks, or compromises of our systems or security could damage our reputation and harm our business.cybersecurity. A significant portion of our business is conducted over the Internetinternet and we rely heavily on the secure processing, storage and transmission of confidential, sensitive, proprietary and other types of information relating to our business operations and confidential and sensitive information about our customers and employees in our computer systems to conductand networks, and in those of our operations.third-party vendors. Individuals, groups, and state-sponsored organizations may take steps that pose threats to our operations, our computer systems, our employees, and our customers. They may developThe cybersecurity risks we face range from cyber attacks common to most industries, such as the development and deploydeployment of malicious software to gain access to our networks and attempt to steal confidential information, launch distributed denial of service attacks, or attempt other coordinated disruptions. Thesedisruptions, to more advanced threats are constantly evolvingthat target us because of our prominence in the global research and becomingadvisory field.
Like many multinational corporations, we, and some third parties upon which we rely, have experienced cyber attacks on our computer systems and networks in the past and may experience them in the future, likely with more sophisticated, thereby increasingfrequency and sophistication, and involving a broader range of devices and modes of attack, all of which will increase the difficulty of detecting and successfully defending against them. To date, none have resulted in any material adverse impact to our business, operations, products, services or customers. We have implemented various security controls to both meet our security obligations, while also defending against constantly evolving security threats. Our security controls help to secure our information systems, including our computer systems, intranet, proprietary websites, email and other telecommunications and data networks, and we 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) are 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. As a result of transitioning to a virtual-first hybrid, remote-work environment, most of our employees are working remotely, which magnifies the importance of the integrity of our remote access security measures. Additionally, the security compliance landscape continues to evolve, requiring us to stay apprised of changes in cybersecurity laws, regulations, and security requirements required by our clients, such as the European Union General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA) and California Privacy Rights Act (CPRA), the Brazilian General Data Protection Law (LGPD), the Chinese Cybersecurity, Data Security and Personal Information Protection laws (and other new and proposed data protection laws), International Organization for Standardization (ISO), and National Institute of Standards and Technology (NIST). Recent well-publicized security breaches at other companies have led to enhanced government and regulatory scrutiny of the measures taken by companies to protect against cyber attacks, and may in the future result in heightened cybersecurity requirements, including additional regulatory expectations for oversight of vendors and service providers.
A cyber-attack,cyber attack, widespread Internetinternet failure or Internetinternet access limitations, or disruption of our critical information technology systems through denial of service, viruses, or other events could cause delays in initiating or completing sales, impede delivery of our products and services to our clients, disrupt other critical client-facing or business processes or dislocate our critical internal functions. Such events could significantly harm our ability to conduct normal business operations and negatively impact our financial results.
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 securityAdditionally, any material breaches 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 materially adversely affected if, as a result of a significant cyber eventcybersecurity or other technology-related catastrophe, or media reports of perceived security vulnerabilities to our operations are disruptedsystems or shutdown;those of our confidential, proprietary information is stolenthird parties, even if no breach has been attempted or disclosed; we incur costs or are requiredoccurred, could cause us to payexperience reputational harm, loss of customers and revenue, fines, in connection with stolen customer, employee,regulatory actions and scrutiny, sanctions or other confidential information; westatutory penalties, litigation, liability for failure to safeguard our customers’ information, or financial losses that are required to dedicate significant resources to system repairseither not insured against or increase cyber security protection; or we otherwise incur significant litigation, regulatory actionnot fully covered through any insurance maintained by us.
Any of the foregoing may have a material adverse effect on our business, operating results and scrutiny or other costs as a result of these occurrences.financial condition.
We may experience outages and disruptions of our online services if we fail tomaintain an adequate operations infrastructure. Our increasing user traffic and complexity of our products and services demand more computing power. We have spentinvested substantial amounts and expect to continue investing (as necessary) in access to spend substantial amounts to maintain data centers and equipment to upgradeand in moving more of our workload into cloud services, upgrading our technology and network infrastructure to handle increased traffic on our websites, and to deliverdelivering our products and services through emerging channels, such as mobile applications. However, any inefficiencies or operational failures could diminish the quality of our products, services, and user experience, resulting in damage to our reputation and loss of current and potential users, subscribers, and advertisers, potentially harming our financial condition and operating results.
We have grown, and may continue to grow, through acquisitions and strategicinvestments, 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, increase revenue or fully realize anticipated synergies,
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.
We face risks related to leased office space. We assumed a significant amount of leased office space, in particular in Arlington, Virginia, in connection with the acquisition of CEB Inc. in 2017. In Arlington, we have consolidated all our businesses into a single building and have sublet substantially all of the excess space in our other properties. Through our real estate consolidations and other related activities, we seek to secure quality subtenants with appropriate sublease terms. However, if we fail to secure quality subtenants, or subtenants default on their sublease obligations with us or otherwise terminate their subleases with us, we may experience a loss of planned sublease rental income, which could result in a material charge against our operating results. Additionally, the long-term impact of responses to COVID-19 on leased office space availability and rental costs of leased office space is not yet known.
To accommodate our growth going forward, we have moved to a global hoteling model to better manage our footprint and operating expenses, and will secure new space when the opportunities and need arise. If the new spaces are not completed on schedule, or if the landlord defaults on its commitments and obligations pursuant to the new leases, we may incur additional expenses. In addition, unanticipated difficulties in initiating operations in a new space, including construction delays, natural disasters, IT system interruptions, or other infrastructure support problems, could result in a delay in moving into the new space, resulting in a potential loss of employee and operational productivity and a loss of revenue and/or additional expenses, which could also have an adverse, material impact on our operating results.
Our sales to governments are subject to appropriations and some may be terminated early. We derive significant revenues from research and consulting contracts with the United States government and its respective agencies, numerous state and local governments and their respective agencies, and foreign governments and their agencies. At December 31, 2022 and 2021, approximately $932 million and $790 million, respectively, of our outstanding revenue contracts were attributable to government entities. Our U.S. government contracts are subject 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. Certain of these contracts may be terminated at any time by the government entity without cause or penalty (“termination for convenience”). In addition, contracts with U.S. federal, state and local, and foreign governments and their respective agencies are subject to increasingly complex bidding procedures and compliance requirements, as well as intense competition. Failure to adequately abide by these procedures and compliance requirements could result in an inability to contract with governments or their agencies, termination of existing contracts, or even suspension and disbarment from doing future business with a government or agency. Moreover, while terminations by governments for lack of funding have not been significant historically, should appropriations for the various 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 revenues.
We may not be able to maintain the equity in our brand name. We believe that our “Gartner” brand, in particular our independence, is critical to our efforts to attract and retain clients and top talent, and that the importance of brand recognition will increase as competition increases. We may also discover that our brand, though recognized, is not perceived to be relevant by new market segments we have targeted. We may expand our marketing activities to promote and strengthen the Gartner brand and may need to increase our marketing budget, hire additional marketing and public relations personnel, and expend additional sums to protect our brand and otherwise increase expenditures to create and maintain client brand loyalty. If we fail to effectively promote, maintain, and protect the Gartner brand, or incur excessive expenses in doing so, our future business and operating results could be materially adversely impacted.
Our outstanding debt obligations could negatively impact our financial condition and future operating results. As of December 31, 2017,2022, the Company had outstanding debt of $2.5 billion$282 million under its 20162020 term loan and revolving credit facility (the "2016“2020 Credit Agreement"Agreement”) and $800.0, $800 million of Senior Notes Due 2025 ("Senior Notes"due 2028 (the “2028 Notes”). The 2016 Credit Agreement was amended three times during 2017 and it currently provides for a $1.5 billion Term loan A facility, a $500.0, $600 million Term loan B facility, and a $1.2 billion revolving credit facility. The Company borrowed significant amounts in 2017 under the 2016 Credit Agreement, and issued theof Senior Notes in conjunction with the CEB acquisition.due 2029 (the “2029 Notes”) and $800 million of Senior Notes due 2030 (the “2030 Notes”). Additional information regarding the 20162020 Credit FacilityAgreement, the 2028 Notes, the 2029 Notes and the Senior2030 Notes is included in Note 56 — Debt in the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.Statements.
The debt service requirements of these credit arrangementsborrowings could impair our future financial condition and operating results. In addition, the affirmative, negative and financial covenants of the 20162020 Credit Agreement, as amended, as well as the covenants related to the Senior Notes, could limit our future financial flexibility. A failure to comply with these covenants could result in acceleration of all amounts outstanding, which could materially impact our financial condition unless accommodations could be
negotiated with our lenders and Noteholders.noteholders. No assurance can be given that we would be successful in doing so, or that any accommodations that we were able to negotiate would be on terms as favorable as those currently.currently in place. 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.
In addition, variable-rate borrowings under our 2020 Credit Agreement typically use LIBOR as a benchmark based on market participant judgments for establishing the rate of interest. We expect LIBOR to disappear entirely after June 2023 for rates applicable to the 2020 Credit Agreement and our existing derivatives contracts. The Alternative Reference Rates Committee (ARRC), which was convened by the Federal Reserve Board and the New York Fed, has identified the Secured Overnight Financing Rate (SOFR) as the recommended risk-free alternative rate for USD LIBOR. The future consequences of a transition away from LIBOR on our variable-rate borrowings, including the possible transition to rates based on observable transactions, such as SOFR, cannot be predicted at this time, but could include an increase in the cost of our variable-rate indebtedness and volatility in our earnings.
We may require additional cash resources which may not be available onfavorable terms or at all. We may require additional cash resources due to changed business conditions, implementation of our strategy and stock repurchase program, to repay indebtedness or to pursue future business opportunities requiring substantial investments of additional capital, including acquisitions. If our existing financial resources are insufficient to satisfy our requirements, we may seek additional borrowings or issue debt. Prevailing credit and debt market conditions may negatively affect debt availability and cost, and, as a result, financing may not be available in amounts or on terms acceptable to us, if at all. In addition, the incurrence of additional indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would further restrict our operations.
If we are unable to enforce and protect our intellectual property rights ourcompetitive position may be harmed. We rely on a combination of copyright, trademark, trade secret, patent, confidentiality, non-competeNatural disasters, pandemics, terrorist acts, war, actions by governments, and other contractual provisionsgeopolitical activities could disrupt our operations. We operate in numerous U.S. and international locations, and we have offices in a number of major cities across the globe. The occurrence of, or concerns related to, protect our intellectual property rights. Despite our efforts to protect our intellectual property rights, unauthorized third parties may obtain and use technologya major weather event, earthquake, hurricane, flood, drought, volcanic activity, disease or pandemic, or other information that we regardnatural disaster could significantly disrupt our operations. In addition, acts of civil unrest, failure of critical infrastructure, terrorism, armed conflict, war (including the war in Ukraine), and abrupt political change, as proprietary. Our intellectual property rights may not survivewell as responses by various governments and the international community to such acts, can have a legal challengenegative effect on our business. Such events could cause delays in initiating or completing sales, impede delivery of our products and services to their validityour clients, disrupt or provide significant protection for us. The lawsshut down the internet or other critical client-facing and business processes, impede the travel of certainour personnel and clients, dislocate our critical internal functions and personnel, and in general harm our ability to conduct normal business operations, any of which can negatively impact our financial condition and operating results. Such events could also impact the timing and budget decisions of our clients, which could materially adversely affect our business.
Macroeconomic and Industry Risks
We are subject to risks from operating globally. We have clients in approximately 90 countries particularly in emerging markets, do not protectand territories and a substantial amount of our proprietary rights to the same extent as the lawsrevenue is earned outside of the United States. Accordingly,Our operating results are subject to all of the risks typically inherent in international business activities, including general political and economic conditions in each country, challenges in staffing and managing foreign operations, changes in regulatory requirements, compliance with numerous and complex foreign laws and regulations, currency restrictions and fluctuations, the difficulty of enforcing client agreements, collecting accounts receivable and protecting intellectual property rights including against economic espionage in international jurisdictions. Further, 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.
Additionally, tariffs, trade barriers and restrictions, and other acts by governments to protect domestic markets or to retaliate against the trade tariffs and restrictions of other nations could negatively affect our intellectual property against unauthorized third-party copyingbusiness operations. In addition, the withdrawal of nations from existing common markets or use,trading blocs, such as the exit of the United Kingdom (UK) from the European Union (the EU), commonly referred to as Brexit, could be disruptive and negatively impact the business of our clients. We continue to monitor Brexit and its potential impacts on our results of operations and financial condition. Depending on the application of the terms of the trade and cooperation agreement, there could be near or long-term negative impacts on our clients who have significant operations in the UK. This may cause clients in the UK to forgo new purchases, and decrease renewals of subscription-based services and to request to cancel or renegotiate current subscription-based services. The impact of any of these effects of Brexit, among others, could materially harm our business and financial results.
Our operating results could be negatively impacted by global economicconditions. Our business is impacted by general economic conditions and trends in the United States and abroad, including without limitation inflation, slowing growth, rising interest rates and recession. In its recent report, Global Economics Prospects, January 2023, the World Bank reported that
global growth is projected to decelerate sharply in 2023, to its third weakest pace in nearly three decades, overshadowed only by the 2009 and 2020 global recessions. According to the World Bank, this reflects policy tightening aimed at containing very high inflation, worsening financial conditions, and continued disruptions from Russia’s invasion of Ukraine. The report also notes that further negative shocks – such as higher inflation, even tighter policy, financial stress, deeper weakness in major economies, or rising geopolitical tensions – could push the global economy into recession. The World Bank predicts that global growth is expected to decelerate sharply to 1.7% in 2023 and increase modestly to 2.7% in 2024. A downturn in growth could negatively and materially affect future demand for our products and services in general, in certain geographic regions, in particular countries, or industry sectors, or could reduce demand for our in-person conferences. In addition, U.S. federal, state and local government spending limits may reduce demand for our products and services from those governmental agencies as well as organizations that receive funding from those agencies and could negatively affect macroeconomic conditions in the United States, which could further reduce demand for our products and services. Such difficulties could negatively impact our ability to maintain or improve the various business measurements we utilize (which are defined in this Annual Report), such as contract value and consulting backlog growth, client retention, wallet retention, consulting utilization rates, and the number of attendees and exhibitors at our conferences and other meetings. Failure to achieve acceptable levels of these indicators or improve them will negatively impact our financial condition, results of operations, and cash flows.
We face significant competition and our failure to compete successfully couldmaterially adversely affect our competitive position. Additionally, there can be no assurance that another party will not assert thatresults of operations, financial condition, and cash flows. The markets for our products and services are characterized by intense competition and 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 have infringed its intellectual property rights.
Our employees are subject to restrictive covenant agreements (which include restrictions on employees' abilitygreater 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 solicit customers and employees) and assignmentexisting competitors may start to provide additional or complementary services. Additionally, technological advances may provide increased competition from a variety of invention agreements, to the extent permitted under applicable law. When the period expires relating to the particular restriction, former employees may compete against us. If a former employee violates the provisions of his/her restrictive covenant agreement, we seek to enforce the restrictions but there issources.
There can be no assurance that we will be successfulable to successfully compete against current and future competitors and our failure to do so will result in loss of market share, diminished value in our efforts.products and services, reduced pricing and increased marketing expenditures. Furthermore, we will not be successful if we cannot compete effectively on quality of research and analysis, timely delivery of information, customer service, the ability to offer products to meet changing market needs for information and analysis, or price.
We have grown,The COVID-19 pandemic had a material adverse impact on our operations and financial performance, specifically our Conferences segment, and may continue to grow, through acquisitionshave an adverse impact on our operations. We face challenges from evolving factors related to the COVID-19 pandemic that are not within our control, remain uncertain and strategicinvestments,to which we may not effectively respond. For example, our operations span numerous locations around the world, and many local governments and countries may impose various restrictions on our employees, partners and customers’ physical movement to limit the spread of COVID-19. These restrictions are constantly changing, and we cannot predict how long and to what extent they will continue. We also face increased operational hurdles as we make efforts to promote employee health and safety, including limiting travel and implementing a hybrid virtual-first work policy, meaning that most of our employees will have the option to work remotely at least some of the time, for the foreseeable future.
Additionally, for the continuing risks we face in our Conferences segment related to COVID-19, please refer above to the risk factor “The profitability and success of our conferences and other meetings are subject to external factors beyond our control.”
We are exposed to volatility in foreign currencyexchange rates from our international operations. A significant portion of our revenues are typically derived from sales outside of the United States. Revenues earned outside the United States are typically transacted in local currencies, which may fluctuate significantly against the U.S. dollar. While we use forward exchange contracts to a limited extent to seek to mitigate foreign currency risk, our revenues and results of operations could involve substantial risks.be adversely affected by unfavorable foreign currency fluctuations.
Our business could be negatively impacted by climate change. While we seek to mitigate the business risks associated with climate change for our operations, there are inherent climate-related risks wherever business is conducted. Access to clean water and reliable energy in the communities where we conduct our business, whether for our offices, clients, vendors or other stakeholders is a priority. We have madelarge offices in Connecticut, Florida, India, the United Kingdom, Spain and may continueAustralia, and other locations that are vulnerable to make acquisitionsclimate change effects. Changing market dynamics, global policy developments, and the increasing frequency and impact 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 stockextreme weather events on critical infrastructure in the acquisition, decreased working capital, increased indebtedness,U.S. and elsewhere have the assumption of undisclosed liabilities and unknown and unforeseen risks, the abilitypotential to retain key personnel of the acquired company, the inability to integratedisrupt our business, the business of our vendors, and the acquired company,business clients, and may cause us to experience higher attrition, losses and additional costs to maintain or resume operations.
Failure to achieve ESG commitments or meet stakeholder expectations in ESG could harm our reputation. We have committed to achieve net-zero greenhouse gas emissions by 2035 in accordance with the timeSBTi's Net-Zero Standard. Our ability to train the sales forceachieve this and other ESG goals is subject to market and sell the products of the acquired business, the potential disruptionnumerous risks outside of our ongoing business and the distraction of management fromcontrol. Our failure to achieve them or continue practices that meet evolving stakeholder expectations in ESG could harm our day to day business. The realization of any of these risks couldreputation, adversely affect our business. Additionally, we face competition in identifying acquisition targetsability to attract and consummating acquisitions.retain employees or clients and expose us to increased scrutiny from investors and regulatory authorities.
Legal and Regulatory Risks
Our failure to comply with complex U.S. and foreign laws and regulations could have a material adverse effect on our operations or financial condition.Our business and operations may be conducted in countries where corruption has increased significantlyhistorically penetrated the economy. It is our policy to comply, and to require our local partners, distributors, agents, and those with whom we do business to comply, with all applicable anti-bribery and anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act, the UK Bribery Act, regulations established by the Office of Foreign Assets Control (OFAC) and with applicable local laws of the foreign countries in which we operate. There can be no assurance that all of our employees, contractors and agents will comply with the CEB acquisition. Our success depends, in part, uponCompany’s policies that mandate compliance with these laws. Any determination that we have violated or are responsible for violations of these laws, even if inadvertent, could be costly and disrupt our ability to continue to integrate itsbusiness, which could have a material adverse effect on our business, results of operations, financial condition, liquidity and cash flows, as well as manageon our reputation. For example, during the overall expanded business, which poses substantial challenges for management, including challengessecond half of 2018 we fully cooperated with a South African government commission established to review a wide range of issues related to the managementcountry’s revenue service, including the procurement and monitoringfulfillment of newconsulting agreements we entered into with the revenue service through a sales agent from late 2014 through early 2017. In parallel, we commenced an internal investigation regarding this matter. We voluntarily disclosed the matter to the SEC and Department of Justice (DOJ) in November 2018. Since that time, we have cooperated fully with their review, and we are working toward a resolution. At this time, we do not believe the ultimate outcome of these matters will have a material effect on our financial results, however, an unexpected adverse resolution of these matters could negatively impact our financial condition, results of operations, new products, and associated increased costliquidity.
In addition, continuously evolving data protection laws and complexity. A failure to realizeregulations, such as the expected benefits fromEuropean Union General Data Protection Regulation (GDPR) and the acquisition or successfully manage the expanded operation could adversely and materially affect our future business and operating results.
We face risks related to leased office space. With the CEB acquisition we assumed a significant amount of additional leased office space, in particular in Arlington, Virginia, which formerly served as CEB's headquarters location, and where the majority of its staff is currently located. Gartner is continuing with a plan originally approved by CEB before the acquisition to relocate and consolidate its office space in Arlington into a new, nearby building, and sublease the entirety of the existing space. The consolidation into the new building is expected to be completeddecision in the first half of 2018Schrems II case, the California Consumer Privacy Act (CCPA) and California Privacy Rights Act (CPRA), the Brazilian General Data Protection Law (LGPD), the Chinese Cybersecurity, Data Security and Personal Information laws and other new and proposed data protection laws, pose increasingly complex compliance challenges. We have implemented GDPR, CCPA, CPRA and LGPD compliance programs, as well as policies and processes to comply with the first setapplicable Chinese data protection laws. In the meantime, Gartner will continue to maintain and rely upon our comprehensive global data protection compliance program, which includes administrative, technical, and physical controls to safeguard our associates’ and clients’ personal data. The interpretation and application of moves already completedthese laws in December 2017. We have also made significant progress in subleasing the existing spaceUnited States, the EU, China and we expectelsewhere are often uncertain, inconsistent and ever changing. Complying with these various laws could cause us to sublease all of the remaining space during 2018. However, if we are unableincur substantial costs or require us to sublease the remaining existing space at acceptable rents or at all, or if subtenants default on their sublease obligation with us or otherwise terminate the subleases with us, we may experience a loss of planned sublease rental income, which could resultchange our business practices in a material charge which could adversely affectmanner adverse to our operating results.business.
We are also in the process of adding new leased space. If the new spaces are not completed on schedule, or if the landlord defaults on its commitments and obligations pursuant to the new leases, we may incur additional expenses. In addition, unanticipated difficulties in initiating operations in this new space, including construction delays, IT system interruptions, or other infrastructure
support problems, could result in a delay in moving into the new space, resulting in a loss of employee and operational productivity and a loss of revenue and/or additional expenses, which could also have an adverse, material impact on our operating results.
We face risks related to litigation. We are, and in the future may be, subject to a variety of legal actions, such as employment, breach of contract, intellectual property-related, and business torts, including claims of unfair trade practices and misappropriation of trade secrets. Given the nature of our business, we are also subject to defamation (including libel and slander), negligence, or other claims relating to the information we publish. Regardless of the merits of any claim and despite vigorous efforts to defend any such claim, claims can affect our reputation, and responding to any such claim could be time consuming, result in costly litigation and require us to enter into settlements, royalty and licensing agreements which may not be offered or available on reasonable terms. If a claim is made against us whichthat we cannot defend or resolve on reasonable terms, our business, brand, and financial results could be materially adversely affected.
We face risks related to taxation. We are a global company and a substantial amount of our earnings is generated outside of the United States and taxed at rates lessother than the U.S. statutory federal income tax rate. Our effective tax rate, financial position and results of operations could be adversely affected by earnings being higher than anticipated in jurisdictions with higher statutory tax rates and, conversely, lower than anticipated in jurisdictions that have lower statutory tax rates, by changes in the valuation of our deferred tax assets and/or by changes in tax laws or accounting principles and their interpretation by relevant authorities.
At the present time, the United States Corporate tax reform, base-erosion efforts and other countriestax transparency continue to be high priorities in many countries. Tax reform legislation is being proposed or enacted in a number of jurisdictions where we do business have either changed orbusiness. The Organization for Economic Co-operation and Development (“the OECD”) has issued various proposals that would change long-standing global tax principles. These proposals include a two-pillar approach to global taxation (BEPS 2.0/ Pillar Two), focusing on global profit allocation and a global minimum tax rate. On December 12, 2022, the European Union member states agreed to implement the OECD’s global corporate minimum tax rate of 15%, to be effective as of January 2024. Other countries are also actively considering changes into their tax accountinglaws to adopt certain parts of the OECD’s proposals. In December 2022, South Korea
enacted new global minimum tax rules to align with Pillar Two. The enactment of this and other related laws. In the United States, recently enacted Tax Reform introduced several new complicated tax laws which could unfavorably impact our future effective tax rate. In 2014, Ireland modified its tax residency rules. While these changes are not effective until 2021 for many companies with Irish resident operations, including Gartner, the new rules could increase our effective tax rate at that future date. Likewise, during 2015, the Organization for Economic Cooperation and Development (“OECD”) released final reports on various actions items associated with its initiative to prevent Base Erosion and Profit Shifting (“BEPS”). Numerous countries have and continue to propose unilateral tax law changes intended to address BEPS. The future enactment by various governments of these and other proposalssimilar legislation 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, as regulationsWe will continue to monitor and guidance evolve with respect to the U.S. Tax Cuts and Jobs Act of 2017, and as we gather more information and perform additional analysis,reflect the impact of the new law may differ from previous estimates and may materially affect our results of operations andsuch legislative changes in future financial position in the future.statements as appropriate.
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 have 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, and France.flows.
As of December 31, 2017, we had approximately $194.0 million of accumulated undistributed earnings in our non-U.S. subsidiaries. Our cash and cash equivalents are held in numerous locations throughout the world. At December 31, 2017, 97% of our cash and cash equivalents was held overseas, with a substantial portion representing accumulated undistributed earnings of our non-U.S. subsidiaries. Under U.S. GAAP, no provision for income taxes that may result from the remittance of accumulated undistributed foreign earnings is required if the Company intends to reinvest such earnings overseas indefinitely. Our current liquidity requirements do not demonstrate a need to repatriate accumulated undistributed foreign earnings to fund our U.S. operations or otherwise satisfy the liquidity needs of our U.S. operations. Accordingly, the Company intends to continue to reinvest substantially all of its accumulated undistributed foreign earnings, except in instances in which the repatriation of those earnings would result in minimal additional tax. As a result, we have not recognized income tax expense on the amounts deemed permanently reinvested. However, with the recently enacted U.S Tax Cuts and Jobs Act of 2017, we envision that the income tax that would be payable if such earnings were repatriated would be minimal.
Our corporate compliance program cannot guarantee that we are in compliance with all applicable laws and regulations. We operate in a number of countries, including emerging markets, and as a result we are required to comply with numerous, and in many cases, changing international and U.S. federal, state and local laws and regulations. As a result,regulations, including regulations relating to the ongoing Russia-Ukraine war. Accordingly, we have a corporate compliance program whichthat includes the creation of appropriate policies defining employee behavior that mandate adherence to laws, employee training, annual affirmations, monitoring and enforcement. However, iffailure of any employee fails to comply with or intentionally disregards, any of these laws, regulations or our policies, could result in a range of liabilities could result for the employee and for
the Company, including, but not limited to, significant penalties and fines, sanctions and/or litigation, and the expenses associated with defending and resolving any of the foregoing, any of which could have a negative impact on our reputation and business.
Risks relatedRelated to our common stockOur Common Stock
Our operating results may fluctuate from period to period and/or the financial guidance we have given may not meet theexpectations of investors, 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, competition in our industry, the impact of our acquisitions, and general economic conditions. 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 maynot be able to resell shares of our common stock at or above the price youpaid. 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-political events, changes in the nature and composition of our stockholder base, changes in securities analysts’ recommendations regarding our securities and our performance relative to securities analysts’ expectations for any quarterly period, as well as other factors outside of our control including any and all factors that move the securities markets generally. These factors may materially adversely affect the market price of our common stock.
Future sales or issuances of our common stock in the public market could lower our stockprice. 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. The issuance of additional shares of our common stock could also lower the market price of our common stock. Furthermore, we have various equity incentive plans that provide for awards in the form of 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. We have a board-approved share repurchase program and at December 31, 2017, approximately $1.1 billion remained available for share purchases under this program. No assurance can be given that we will continue these share repurchase 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.
Future sales of our common stock from grants and awards could lower our stockprice. As of December 31, 2017, the aggregate number of shares of our common stock issuable pursuant to outstanding grants and awards under our equity incentive plans was approximately 2.8 million shares (approximately 1.3 million of which have vested). In addition, at the present time, approximately 5.6 million shares may be issued in connection with future awards under our equity incentive plans. Shares of common stock issued under these plans are freely transferable and have been registered under the Securities Act of 1933, as amended (the “Securities Act”), except for any shares held by affiliates (as that term is defined in Rule 144 under the Securities Act) which are subject to certain limitations. We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of shares of our common stock will have on the market price of our common stock.
Interests of certain of our significant stockholders may conflict with yours. To our knowledge, as of the date hereof, and based upon publicly-available SEC filings, five institutional investors each presently hold over 5% of our common stock. While no stockholder or institutional investor individually holds a majority of our outstanding shares, these significant stockholders may be able, either individually or acting together, to exercise significant influence over matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation, adoption or amendment of equity plans and approval of significant transactions such as mergers, acquisitions, consolidations and sales or purchases of assets. In addition, in the event of a proposed acquisition of the Company by a third party, this concentration of ownership may delay or prevent a change of control in us. Accordingly, the interests of these stockholders may not always coincide with our interests or the interests of other stockholders, or otherwise be in the best interests of us or all stockholders.
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: (i) the ability of our Board of Directors to issue and determine the terms of preferred stock; (ii) advance notice requirements for inclusion of stockholder proposals at stockholder meetings; and (iii) the anti-takeover provisions of Delaware law. 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.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
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.None.
ITEM 2. PROPERTIES.
Our acquisition of CEB in 2017 resulted in a significant increase in the number of properties where we have business operations. As of December 31, 2017,2022, we leased 59approximately 20 domestic and 10665 international active properties.office properties for our ongoing business operations. These offices, which exclude certain properties that we sublease to others, support our executive and administrative activities, research and consulting, sales, systems support, operations, and other functions. We have a significant presenceOur corporate office is based in Stamford, Connecticut; Ft.Connecticut. We also maintain an important presence in: Fort Myers, Florida; Arlington, Virginia; Egham, the United KingdomKingdom; Gurgaon, India; Irving, Texas; and Gurgaon, India.Barcelona, Spain. The Company does not own any real properties.property.
Our Stamford corporate headquarters are located in 213,000 square feetis comprised of leased office space in threetwo buildings located on the same campus. The Company'sOur lease onfor the Stamford headquarters facility expires in 2027 and contains three five-year renewal options at fair value.
In 2016early 2022, we leased an additional 21,179 square feet of space in a fourth building adjacentbegan to our Stamford headquarters facilityoperate under a five-year lease.
In Ft. Myers we lease 257,795 square feet in two buildings located on the same campus and we also have an additional 41,590 square feet of leased space in two separate but nearby buildingshybrid virtual-first working environment, meaning that house staff training and other facilities. Our Ft. Myers leases expire in 2030. To accommodate future growth in Ft. Myers we have also signed a lease (20 year lease with a termination option at 15 years) with a new multi-building development just south of our current campus for an additional 242,000 square feet to be delivered in phases in 2018 and 2019. This site also offers us options for further growth as necessary.
In Arlington, which was the heritage CEB corporate headquarters location, we are progressing with a strategy to consolidate multiple heritage CEB and Gartner offices that occupied 439,354 square feet across 4 different locations into 290,215 square feet of space in a single building which is a heritage CEB lease for a 15 year term that expires at the end of 2032. We expect to complete this consolidation by the end of 2018.
In Egham, we have consolidated most of our operations into a new 107,540 square foot building that opened in September 2017. The Egham lease has a term of 15 years. We also continueemployees have the option to maintainwork remotely at least some operations in an adjacent legacy building. In Gurgaon we have two locations, a 30,000 square foot office and a 48,468 square foot office that was part of the heritage CEB business. To accommodate future growth in Gurgaon and consolidate our operations we have signed an agreement to lease 250,000 square feet in a new development to be delivered in 2019. This development, which is close to our current locations, also offers us potentialtime for further growth as necessary.
In addition to the above locations, we have also announced the creation of a new Center of Excellence to be located in Irving, TX. To support the growth of this site we have signed a lease (15 year lease with termination option at 10 years) for 152,000 square feet that will be occupied in a phased manner from 2018 through 2020.
We expect to continue to invest in our business by adding headcount, and asforeseeable future. 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.our current real estate footprint is sufficient to support future growth.
ITEM 3. LEGAL PROCEEDINGS.
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, weWe believe that the ultimate resolutionpotential liability, if any, in excess of these matters, after considering amounts already accrued from all proceedings, claims and insurance coverage,litigation will not have a material adverse effect on our financial position, cash flows or results of operations or cash flowswhen resolved in a future periods.period.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock is listed on the New York Stock Exchange under the symbol "IT"“IT”. As of January 31, 2018,February 3, 2023, there were 1,263969 holders of record of our common stock. Our 20182023 Annual Meeting of Stockholders will be held virtually on May 24, 2018 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 2017.
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:
|
| | | | | | | | | | | | | | | |
| | 2017 | | 2016 |
| | High | | Low | | High | | Low |
| Quarter ended March 31 | $ | 112.42 |
| | $ | 90.37 |
| | $ | 89.73 |
| | $ | 77.80 |
|
| Quarter ended June 30 | 124.92 |
| | 107.70 |
| | 103.00 |
| | 86.17 |
|
| Quarter ended September 30 | 130.02 |
| | 115.86 |
| | 100.74 |
| | 87.86 |
|
| Quarter ended December 31 | $ | 126.22 |
| | $ | 115.01 |
| | $ | 105.45 |
| | $ | 84.54 |
|
DIVIDEND POLICY
We currently do not pay cash dividends on our common stock. In addition, our 2016 Credit Agreement contains a negative covenant which may limit our ability to pay dividends.June 1, 2023.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The equity compensation plan information set forth in Part III, Item 12 of this Annual Report on Form 10-K is hereby incorporated by reference into this Part II, Item 5.
SHARE REPURCHASES
The Company hasIn May 2015, our Board of Directors (the “Board”) authorized a $1.2 billion board authorizationshare repurchase program to repurchase up to $1.2 billion of our common stock. The Board authorized incremental share repurchases of up to an additional $1.6 billion and $1.0 billion of the Company’s common stock during 2021 and 2022, respectively. On February 2, 2023, the Company's Board of Directors authorized incremental share repurchases of up to an additional $400 million of Gartner's common stock. The Company may repurchase its common stock from time-to-time in amounts, and at prices and in the manner that 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 (which may include repurchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended), accelerated share repurchases, private transactions or other transactions and will be funded fromby cash on hand and borrowings under the Company’s 2016 Credit Agreement.borrowings. Repurchases may also be made from time-to-time in connection with the settlement of the Company's share-basedCompany’s stock-based compensation awards.
The following table below summarizes the repurchases of our outstanding common stock induring the three months ended December 31, 20172022 pursuant to our $1.2 billion share repurchase authorizationprogram and pursuant to the settlement of share-basedstock-based compensation awards: awards.
|
| | | | | | | | | | | |
| Period | | Total Number of Shares Purchased (#) | | Average Price Paid Per Share ($) | | | Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in billions) |
| October | | 5,685 | | $ | 124.07 |
| | | |
|
| November | | 14,987 | | 118.40 |
| | | |
|
| December | | 13,275 | | 120.89 |
| | | |
|
| Total (1) | | 33,947 | | $ | 120.32 |
| | | $ | 1.1 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Total Number of Shares Purchased
(#) | | Average Price Paid Per Share
($) | | Total Number of Shares Purchased Under Announced Programs
(#) | | Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
(in thousands) |
| October 1, 2022 to October 31, 2022 | | 24,587 | | | $ | 279.60 | | | 24,196 | | | $ | 606,007 | |
| November 1, 2022 to November 30, 2022 | | 9,392 | | | 320.65 | | | — | | | 606,007 | |
| December 1, 2022 to December 31, 2022 | | 4,189 | | | 344.30 | | | — | | | $ | 606,007 | |
| Total for the quarter (1) | | 38,168 | | | $ | 296.80 | | | 24,196 | | | |
| |
(1) | For the year ended December 31, 2017, the Company repurchased a total of 0.4 million shares, all of which were repurchased pursuant to the settlement of share-based compensation awards. No shares were repurchased under the Company's publicly-announced $1.2 billion share repurchase program. |
(1)The repurchased shares during the three months ended December 31, 2022 included purchases for both the settlement of stock-based compensation awards and open market purchases.
ITEM 6. SELECTED FINANCIAL DATA[RESERVED]
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.
|
| | | | | | | | | | | | | | | | | | | | |
| (In thousands, except per share data) | | 2017 | | 2016 | | 2015 | | 2014 | | 2013 |
| STATEMENT OF OPERATIONS DATA: | | |
| | | | | | |
| | |
|
| Revenues: | | |
| | | | | | |
| | |
|
| Research | | $ | 2,471,280 |
| | $ | 1,857,001 |
| | $ | 1,614,904 |
| | $ | 1,479,976 |
| | $ | 1,303,984 |
|
| Consulting | | 327,661 |
| | 318,934 |
| | 296,317 |
| | 313,758 |
| | 281,284 |
|
| Events | | 337,903 |
| | 268,605 |
| | 251,835 |
| | 227,707 |
| | 198,945 |
|
| Talent Assessment & Other | | 174,650 |
| | — |
| | — |
| | — |
| | — |
|
| Total revenues | | 3,311,494 |
| | 2,444,540 |
| | 2,163,056 |
| | 2,021,441 |
| | 1,784,213 |
|
| Operating (loss) income | | (6,329 | ) | | 305,141 |
| | 287,997 |
| | 286,162 |
| | 275,492 |
|
| Net income | | $ | 3,279 |
| | 193,582 |
| | $ | 175,635 |
| | $ | 183,766 |
| | $ | 182,801 |
|
| | | | | | | | | | | |
| PER SHARE DATA: | | |
| | | | | | | | |
|
| Basic income per share | | $ | 0.04 |
| | $ | 2.34 |
| | $ | 2.09 |
| | $ | 2.06 |
| | $ | 1.97 |
|
| Diluted income per share | | $ | 0.04 |
| | $ | 2.31 |
| | $ | 2.06 |
| | $ | 2.03 |
| | $ | 1.93 |
|
| | | | | | | | | | | |
| Weighted average shares outstanding: | | |
| | | | | | | | |
|
| Basic | | 88,466 |
| | 82,571 |
| | 83,852 |
| | 89,337 |
| | 93,015 |
|
| Diluted | | 89,790 |
| | 83,820 |
| | 85,056 |
| | 90,719 |
| | 94,830 |
|
| | | | | | | | | | | |
| OTHER DATA: | | |
| | | | | | | | |
|
| Cash and cash equivalents | | $ | 538,908 |
| | 474,233 |
| | $ | 372,976 |
| | $ | 365,302 |
| | $ | 423,990 |
|
| Total assets | | 7,283,173 |
| | 2,367,335 |
| | 2,168,517 |
| | 1,904,351 |
| | 1,783,582 |
|
| Long-term debt | | 2,943,341 |
| | 672,500 |
| | 790,000 |
| | 385,000 |
| | 136,250 |
|
| Stockholders’ equity (deficit) | | 983,465 |
| | 60,878 |
| | (132,400 | ) | | 161,171 |
| | 361,316 |
|
| Cash provided by operating activities | | $ | 254,517 |
| | 365,632 |
| | $ | 345,561 |
| | $ | 346,779 |
| | $ | 315,654 |
|
The following items impact the comparability and presentation of our consolidated data:
In April 2017 the Company acquired CEB. The operating results of CEB were included in our operating results beginning on the acquisition date. The Company also made other acquisitions in 2017, 2016 and 2015. See Note 2 — Acquisitions and Divestiture in the Notes to the Consolidated Financial Statements for additional information.
In December 2017 we recorded a $59.6 million one-time tax benefit related to the Tax Cuts and Jobs Act of 2017 which increased our diluted earnings per share by approximately $0.66 per share. See Note 10 — Income Taxes in the Notes for additional information.
In 2017 we repurchased 0.4 million of our common shares. We also repurchased 0.6 million, 6.2 million, 5.9 million, and 3.4 million of our common shares in 2016, 2015, 2014, and 2013, respectively. We used $41.3 million, $59.0 million, $509.0 million, $432.0 million, and $181.7 million in cash for share repurchases in 2017, 2016, 2015, 2014, and 2013, respectively. See Note 7 — Stockholders’ Equity in the Notes for additional information.
In 2017 we borrowed additional amounts under an amended credit facility as well as the issuance of Senior Notes. Note 5 — Debt in the Notes provides additional information.
In 2017 we added the Talent Assessment & Other segment as a result of the CEB acquisition. Note 14 — Segments in the Notes provides additional information. In February 2018 we announced a definitive agreement to sell a significant portion of this segment. Additional information related to the sale is provided in Notes 2 and 16.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The purpose of the followingthis Management’s Discussion and Analysis (“MD&A”) is to facilitate an understanding of significant factors influencing the operating results, financial condition and cash flows of Gartner, Inc. Additionally, the MD&A 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 Annual Report on Form 10-K. Historical results and percentage relationships are not necessarily indicative of operating results for future periods. References to "Gartner,"“Gartner,” the "Company,“Company,” “we,” “our” and “us” in this MD&A are to Gartner, Inc. and its consolidated subsidiaries.
AcquisitionsThis MD&Aprovides an analysis of CEB Inc.our consolidated financial results, segment results and Other Businesses
On April 5, 2017,cash flows for 2022 and 2021 under the Company completed its acquisitionheadings “Results of CEB Inc. ("CEB"). Note 2 — AcquisitionsOperations,” “Segment Results” and Divestiture“Liquidity and Capital Resources.”For a similar detailed discussion comparing 2021 and 2020, refer to those headings under Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Notes to Consolidated Financial Statements provides additional information regarding the CEB acquisition. Our operating results discussed belowour Annual Report on Form 10-K for the year ended December 31, 2017 include2021.
In addition to GAAP results, we provide foreign currency neutral dollar amounts and percentages for our revenues, certain expenses, contract values and other metrics. These foreign currency neutral dollar amounts and percentages eliminate the resultseffects of CEB beginning on the acquisition date. References to "heritage Gartner" operating resultsexchange rate fluctuations and business measurements below refer to Gartner excluding CEB. References to "CEB" below refer to the operating resultsthus provide a more accurate and business measurements of CEB subsequent to the acquisition.
We also acquired other businesses in 2017, 2016 and 2015, which are also described in Note 2 — Acquisitions and Divestituremeaningful trend in the Notesunderlying data being measured. We calculate foreign currency neutral dollar amounts by converting the underlying amounts in local currency for different periods into U.S. dollars by applying the same foreign exchange rates to Consolidated Financial Statements included in this Annual Report on Form 10-K. The operating results of these other acquired businesses were not material to our consolidated or segment results.all periods presented.
Talent Assessment Business - Announcement of a Definitive Agreement to Sell
On February 6, 2018, the Company announced that it had reached a definitive agreement to sell its CEB Talent Assessment business to Exponent Private Equity, a UK-based private equity firm, for $400.0 million. The agreement comes at the end of a previously announced process to evaluate strategic alternatives for CEB Talent Assessment, formerly SHL, which was acquired by Gartner as part of the CEB acquisition. The transaction is expected to close in the first half of 2018 and is subject to customary closing conditions.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report on Form 10-K contains certain forward-looking 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, projections 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.
We operate in a very competitive and rapidly changing environment that involves numerous known and unknown risks and uncertainties, some of which are beyond our control. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future quarterly and annual revenues, operating income, results of operations and cash flows, as well as any forward-looking statement, are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in our filings with the Securities and Exchange Commission. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include, among others, the following: the impact of general economic conditions, including inflation (and related monetary policy by governments in response to inflation), on economic activity and our operations; changes in macroeconomic and market conditions and market volatility, including interest rates and the effect on the credit markets and access to capital; the impact of global economic and geopolitical conditions, including inflation, recession and the COVID-19 pandemic; our ability to carry out our strategic initiatives and manage associated costs; our ability to recover potential claims under our event cancellation insurance; the timing of conferences and meetings, in particular our Gartner Symposium/Xpo series that normally occurs during the fourth quarter; our ability to achieve and effectively manage growth, including our ability to integrate our acquisitions and consummate and integrate future acquisitions; our ability to pay our debt obligations; our ability to maintain and expand our products and services; our ability to expand or retain our customer base; our ability to grow or sustain revenue from individual customers; our ability to attract and retain a professional staff of research analysts and consultants as well as experienced sales personnel upon whom we are dependent, especially in light of increasing labor competition; our ability to achieve continued customer renewals and achieve new contract value, backlog and deferred revenue growth in light of competitive pressures; our ability to successfully compete with existing competitors and potential new competitors; our ability to enforce and protect our intellectual property rights; additional risks associated with international operations, including foreign currency fluctuations; the impact on our business resulting from changes in international conditions, including those resulting from the war in Ukraine and current and future sanctions imposed by governments or other authorities; the impact of restructuring and other charges on our businesses and operations; cybersecurity incidents; risks associated with the creditworthiness, budget cuts, and shutdown of governments and agencies; our ability to meet ESG commitments; the impact of changes in tax policy(including the recently enacted Inflation Reduction Act of 2022) and heightened scrutiny from various taxing authorities globally; changes to laws and regulations; and other risks and uncertainties. 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. A description of the risk factors associated with our business is included under “Risk Factors” in Item 1A. of this Annual Report on Form 10-K, which is incorporated herein by reference.
Forward-looking statements are subject to risks, estimates 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 discussedlisted above or described under “Risk Factors” in Part 1, Item 1A Risk Factors included inof this Annual Report on Form 10-K. 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. Forward-looking statements in this Annual Report on Form 10-K speak only as of the date hereof, and forward-looking statements in documents attached that are incorporated by reference speak only as of the date of those documents. 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 carefully review our risk factors described in this Annual Report on Form 10-K.
BUSINESS OVERVIEW
Gartner, Inc. (NYSE: IT) is the world’s leading researchdelivers actionable, objective insight to executives and advisory company and a member of the S&P 500. We equip business leaders with indispensable insights, advicetheir teams. Our expert guidance and tools to achieve their mission-critical prioritiesenable faster, smarter decisions and build the successful organizations of tomorrow.stronger performance on an organization’s mission critical priorities.
We believe our unmatched combination of expert-led, practitioner-sourcedare a trusted advisor and data-driven research steers clients toward the right decisions on the issues that matter most. We’re trusted as an objective resource and critical partner byfor more than 12,000 organizations15,000 enterprises in more than 100approximately 90 countries and territories — across all major functions, in every industry and enterprise size. Gartner is headquartered in Stamford, Connecticut, U.S.A. and, as of December 31, 2017, we had more than 15,000 associates, including 2,650 research analysts and consultants.
Gartner delivers its products and services globally through fourthree business segments:segments – Research, Conferences and Consulting, Events,as described below.
•Research equips executives and Talent Assessment & Other:
Research provides trusted, objective insightstheir teams from every function and advice on the mission-critical priorities of leaders across all functional areasindustries with actionable, objective insight, guidance and tools. Our experienced experts deliver all this value informed by a combination of the enterprise throughpractitioner-sourced and data-driven research and other reports, briefings, proprietary tools, access to our analysts, peer networking services and membership programs that enablehelp our clients to make better decisions. Gartner's traditional strengths in IT, marketingaddress their mission critical priorities.
•Conferences provides executives and supply chain research were enhanced in 2017 with Gartner's acquisition of CEB, Inc., which added CEB's best practice and talent management research insightsteams across a range of business functions, to include human resources, sales, legal and finance.
Consulting provides customized solutions to unique client needs through on-site, day-to-day support, as well as proprietary tools for measuring and improving IT performance with a focus on cost, performance, efficiency and quality.
Events provides business professionals across thean organization the opportunity to learn, share and network. From our flagship CIO event Gartner Symposium/ITxpo,Xpo series, to industry-leading conferences focused on specific business roles and topics, to member-drivenpeer-driven sessions, our eventsofferings enable attendees to experience the best of Gartner insight and advice live.
guidance.
•Consulting serves senior executives leading technology-driven strategic initiatives leveraging the power of Gartner’s actionable, objective insight. Through custom analysis and on-the-ground support we enable optimized technology investments and stronger performance on our clients’ mission critical priorities.
Recent Events
The invasion of Ukraine by Russia and the sanctions and other measures being imposed in response to this conflict have increased the level of economic and political uncertainty. In March 2022, we began winding down our business in Russia. Russia has not composed a material portion of our consolidated revenues, net income, net assets or workforce. We do not have a business in Ukraine. Other impacts due to this evolving situation are currently unknown and could subject our business to materially adverse consequences should the situation escalate or cause an expansion of economic disruption beyond its current scope to the rest of Europe, where a material portion of our business is carried out. A prolonged disruption may adversely affect our business operations, financial performance and results of operations.
Inflation rates, particularly in North America and Europe, have increased significantly in the past year. Inflation has not had a material effect on our business operations, financial performance and results of operations, other than its impact on the general economy. However, if our costs, in particular personnel-related costs, were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases in future periods. Our inability or failure to realize these offsets could adversely affect our business operations, financial performance and results of operations.
On August 16, 2022, the Inflation Reduction Act of 2022 was enacted into law in the United States. The statute includes a 15% corporate alternative minimum tax on U.S. corporations with adjusted financial statement income in excess of $1.0 billion which is effective for taxable years beginning after December 31, 2022. The statute also includes a 1% excise tax on publicly traded U.S. corporations for the value of any of its stock that is repurchased by the corporation, excluding certain excepted repurchases. We do not expect it will have a material impact on our future U.S. tax expense, cash taxes and effective tax rate. We also do not expect it to have a material impact on the amount of potential future share repurchases.
In November 2022, we entered into a definitive agreement to sell our TalentNeuron business. As of December 31, 2022, the assets and liabilities of TalentNeuron were considered held for sale, resulting in $49.0 million of assets held for sale and $30.8 million of liabilities held for sale on the Consolidated Balance Sheet. The majority of the held for sale assets were goodwill, intangible assets, net and accounts receivable, with carrying amounts of $16.0 million, $9.5 million and $15.9 million, respectively, while the majority of the held for sale liabilities was deferred revenues, with a carrying amount of $27.1 million. TalentNeuron is included in our Research segment.
On February 2, 2023, we completed the sale of TalentNeuron for approximately $164.0 million, prior to final working capital adjustments.
Talent Assessment & Other helps organizations assess, engage, manage and improve talent. This is accomplished through knowledge and skills assessments, training programs, workshops, and survey and questionnaire services.20
BUSINESS MEASUREMENTS
We believe that the following business measurements are important performance indicators for our business segments: |
| | | | | | | |
| BUSINESS SEGMENT | | BUSINESS MEASUREMENTSMEASUREMENT |
| Research | | Total contractContract value represents the dollar value attributable to all of our subscription-related contracts. It is calculated as the annualized value of all contracts in effect at a specific point in time, without regard to the duration of the contract. Total contractContract value primarily includes Research deliverables for which revenue is recognized on a ratable basis, as well as other deliverables (primarily EventsConferences tickets) for which revenue is recognized when the deliverable is utilized. Comparing contract value year-over-year not only measures the short-term growth of our business, but also signals the long-term health of our Research subscription business since it measures revenue that is highly likely to recur over a multi-year period. Our contract value consists of Global Technology Sales contract value, which includes sales to users and providers of technology, and Global Business Sales contract value, which includes sales to all other functional leaders.
|
| | |
| | Client retention rate represents a measure of client satisfaction and renewed business relationships at a specific point in time. Client retention is calculated on a percentage basis by dividing our current clients, who were also clients a year ago, by all clients from a year ago. Client retention is calculated at an enterprise level, which represents a single company or customer. |
| | |
| | Wallet retention rate represents a measure of the amount of contract value we have retained with clients over a twelve-month period. Wallet retention is calculated on a percentage basis by dividing the contract value of our current clients, who were also clients onea year ago, by the total contract value from a year ago, excluding the impact of foreign currency exchange. When wallet retention exceeds client retention, it is an indication of retention of higher-spending clients, or increased spending by retained clients, or both. Wallet retention is calculated at an enterprise level, which represents a single company or customer. |
| | |
ConsultingConferences | | Number of destination conferences represents the total number of hosted virtual or in-person conferences completed during the period. Single day, local meetings are excluded. |
| | |
| | Number of destination conferences attendees represents the total number of people who attend virtual or in-person conferences. Single day, local meetings are excluded. |
| | |
| | |
| Consulting | | Consulting backlog represents future revenue to be derived from in-process consulting and measurementbenchmark analytics engagements. |
| | |
| | Utilization rate represents a measure of productivity of our consultants. Utilization rates are calculated for billable headcount on a percentage basis by dividing total hours billed by total hours available to bill. |
| | |
| | Billing rate represents earned billable revenue divided by total billable hours. |
| | |
| | Average annualized revenue per billable headcount represents a measure of the revenue generating ability of an average billable consultant and is calculated periodically by multiplying the average billing rate per hour times the utilization percentage times the billable hours available for one year. |
| | |
Events | | Number of events represents the total number of hosted events completed during the period. Single day, local events are excluded.
|
| | |
| | Number of attendees represents the total number of people who attend events. Single day, local events are excluded.
|
EXECUTIVE SUMMARY OF OPERATIONS AND FINANCIAL POSITION
We have executed a consistent growth strategy since 2005 to drive revenue and earnings growth. The fundamentals of our strategy include a focus on creating extraordinary research insight,actionable insights for executive leaders and their teams, 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 also continue to focus on maximizing shareholder value. During 2017, we repurchased 0.4 million shares of our outstanding common stock and we acquired CEB, an industry leader in providing best practice and talent management insights, and L2, Inc. ("L2"), a subscription-based research business that benchmarks the digital performance of brands. Note 2 — Acquisitions and Divestiture in the Notes to Consolidated Financial Statements provides additional information regarding these acquisitions.
We had total revenues of $3.3$5.5 billion in 2017,2022, an increase of 35% over 201616% compared to 2021 on both a reported basis and adjusted for20% excluding the foreign exchangecurrency impact. On a reported basis, CEB contributed $522.9 million of the increase in total revenues. Net income declinedincreased to $3.3$807.8 million in 20172022 from $193.6$793.6 million in 20162021 and as a result, diluted earnings per share was $0.04$9.96 in 20172022 compared to $2.31$9.21 in 2016. See Note 10 — Income Taxes in the Notes to Consolidated Financial Statements for information concerning the net favorable impact of $59.6 million on the Company's 2017 income tax provision from the Tax Cuts and Jobs Act of 2017.2021.
Research revenues increased to $2.5$4.6 billion during 2017, or 33%in 2022, an increase of 12% compared to 20162021 on both a reported basis and adjusted for16% excluding the impact of foreign currency exchange. Heritage Gartner revenues increased $304.7 million in 2017 compared to 2016, which represents a 16% increase on a reported basis, with approximately one point of the increase due to L2, which we acquired in the first quarter of 2017. Adjusted for the foreign exchange impact, heritage Gartner revenues also increased by 16% year-over-year. On a reported basis, CEB contributed $309.6 million of the 2017 increase in Research revenues.impact. The Research gross contribution margin declined by two points during 2017, primarily due to the impact of the deferred revenue fairwas 74% in both 2022 and 2021. Contract value accounting adjustment resulting from the CEB acquisition. Heritage Gartner client retention and wallet retention both remained strongwas $4.7 billion at 84% and 106%, respectively, as of December 31, 2017.2022, an increase of 12% compared to December 31, 2021 on a foreign currency neutral basis.
Conferences revenues increased to $389.3 million in 2022, an increase of 82% compared to 2021 on a reported basis and 90% excluding the foreign currency impact. The Conferences gross contribution margin was 54% and 62% in 2022 and 2021, respectively. We held 25 in-person and 16 virtual conferences in 2022, and 39 virtual conferences in 2021.
Consulting revenues increased to $327.7$481.8 million in 2017, or 3%2022, an increase of 15% compared to 20162021 on both a reported basis and adjusted for22% excluding the impact of foreign currency exchange.impact. The Consulting gross contribution margin was 29%39% and 38% in 2017 compared to 28% in 2016. Consultant utilization was 64%2022 and 66% in 2017 and 2016,2021, respectively. We had 682 billable consultants at December 31, 2017 compared to 628 at December 31, 2016. Backlog was $95.2$139.7 million at December 31, 2017.2022.
Events revenues increased to $337.9 million in 2017, or 26% compared to 2016 on a reported basis and 25% adjusted for the impact of foreign currency exchange. Heritage Gartner revenues increased $30.7 million in 2017 compared to 2016, an 11% increase on a reported basis and 10% adjusted for the foreign exchange impact. CEB contributed $38.6 million of the revenue increase on a reported basis. The heritage Gartner Events gross contribution margin was 49% and 51% for 2017 and 2016, respectively. In the heritage Gartner business, we held 65 events and 66 events in 2017 and 2016, respectively, while the number of attendees for 2017 increased 17% and exhibitors increased 3% compared to 2016, with average revenue per exhibitor up by 5% while average revenue per attendee was flat. CEB held four events during 2017 with 3,578 attendees.
As a result of the CEB acquisition, we added a new reportable segment in second quarter 2017 called Talent Assessment & Other, which contributed $174.7 million of revenues during 2017.
For a more complete discussion of our results by segment, see Segment Results below.
Cash provided by operating activities was $254.5 million$1.1 billion and $365.6 million$1.3 billion during 20172022 and 2016,2021, respectively. As of December 31, 2017,2022, we had $538.9$698.0 million of cash and cash equivalents which excludes amounts deemed to be held-for-sale, and $558.0 millionapproximately $1.0 billion of available borrowing capacity on our revolving credit facility. For a more complete discussion of our cash flows and financial position, see Liquidity and Capital Resources below.
FLUCTUATIONS IN QUARTERLY RESULTS
Our quarterly and annual revenues, operating income (loss) and cash flows fluctuate as a result of many factors, including: the timing of our Symposium/ITxpo series that normally occurs during the fourth quarter, as well as our other events; the timing and amount of new business generated, including from acquisitions; the mix of domestic and international business; domestic and international economic conditions; changes in market demand for our products and services; changes in foreign currency rates; the timingDuring 2022, we repurchased 3.8 million shares of the development, introduction and marketingCompany’s common stock for an aggregate purchase price of new products and services; competition in the industry; the payment of performance compensation; and other factors that are beyond our control. The potential fluctuations in our operating income (loss) 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.approximately $1.0 billion.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our consolidated financial statements requires the application of appropriate accounting policies and the use of estimates. Our significant accounting policies are described in Note 1 — Business and Significant Accounting Policies in the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.Statements. Management considers the policies discussed below to be critical to an understanding of our consolidated financial statements because their application requires complex and subjective management judgments and estimates. Specific risks for these critical accounting policies are also described below.
The preparation of our consolidated financial statements 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 estimatesthey may ultimately differ materially from actual results. Ongoing changes in our estimates could be material and would be reflected in the Company’s consolidated financial statements in future periods.
Our critical accounting policies pertaining to the years presented in the consolidated financial statements included in this Annual Report on Form 10-Kand estimates are as follows:described below.
Revenue recognition — Revenue is recognized in accordance with the requirements of U.S. GAAP, as well as SEC Staff Accounting Bulletin No. 104, Revenue Recognition. Revenue is only recognized when all required criteria forOur revenue recognition have been met. Revenue by significant source is accounted for as follows:
•Research revenues are mainly derived from subscription contracts for research products. The related revenues are deferred and recognized ratably over the applicable contract term. Fees derived from assisting organizations in selecting the right business software for their needs are recognized when the leads are provided to vendors.
•Conferences revenues are deferred and recognized upon the completion of the related conference or meeting.
•Consulting revenues are principally generated from fixed fee andor time and materialmaterials engagements. Revenues from fixed fee contracts are recognized on a proportionalas we work to satisfy our performance basis.obligations. Revenues from time and materials engagements are recognized as work is delivered and/or services are provided. Revenues related to contract optimization contractsengagements are contingent in nature and are only recognized upon satisfaction of all conditions related to their payment.
Events revenues are deferred and recognized upon the completion of the related symposium, conference or exhibition.
Talent Assessment & Other revenues arising from knowledge and skill assessment services are recognized depending on the nature of the underlying contract: (i) ratably over the term of the service period; (ii) upon delivery; or (iii) on a proportional performance basis. Revenues from training programs and survey and questionnaire products are primarily recognized upon delivery of the service.
The majority of researchour Research contracts are billable upon signing, absent special terms granted on a limited basis from time to time. All researchResearch contracts are generally non-cancelable and non-refundable, except for government contracts that may have cancellation or fiscal funding clauses. It is our policy to record the amount of thea subscription contract that is billable as a fee receivable at the time the contract is signed with a corresponding amount as deferred revenue because the contract represents a legally enforceable claim.
The Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers," on January 1, 2018. See Note 1 — Business and Significant Accounting Policies and Note 9 — Revenue and Related Matters in the Notes to Consolidated Financial Statements forprovide additional information regarding our adoption of this accounting standard and its impact on the Company's revenue recognition policies.revenues.
Uncollectible fees receivable — We maintain an allowance for losses that is comprised of a bad debt allowance and a sales reserve. Provisions are charged against earnings, either as a reduction in revenues or an increase to expense. The determination of the allowance for losses is based on historical loss experience, an assessment of current economic conditions, the aging of outstanding receivables, the financial health of specific clients and probable losses. This evaluation is inherently judgmental and requires estimates. The valuation reserves are periodically re-evaluated and adjusted as more information about the ultimate collectability of fees receivable becomes available. Circumstances that could cause our valuation reserves to increase include changes in our clients’ liquidity and credit quality, other factors negatively impacting our clients’ ability to pay their obligations as they come due and the effectiveness of our collection efforts.
The following table presents our total fees receivable and the related allowance for losses (in thousands):
|
| | | | | | | |
| | December 31, |
| | 2017 | | 2016 |
| Total fees receivable | $ | 1,189,543 |
| | $ | 650,413 |
|
| Allowance for losses | (12,700 | ) | | (7,400 | ) |
| Fees receivable, net | $ | 1,176,843 |
| | $ | 643,013 |
|
Goodwill and other intangible assets — When we acquire a business, we determine the fair value of the assets acquired and liabilities assumed on the date of acquisition, which may include a significant amount of intangible assets such as customer relationships, software, content and other intangible assets, as well as resulting goodwill. When determining the fair values of the acquired intangible assets, we consider, among other factors, analyses of historical financial performance and an estimate of the future performance of the acquired business. The fair values of the acquired intangible assets are primarily calculated using an income approach that relies on discounted cash flows. This method starts with a forecast of the expected future net cash flows associated with the asset and then adjusts the forecast to present value by applying an appropriate discount rate that reflects the risk factors associated with the cash flow streams. We consider this approach to be the most appropriate valuation technique because the inherent value of the acquired intangible assets is their ability to generate future income. In a typical acquisition, we engage a third-party valuation expert to assist us with the fair value analyses for acquired intangible assets.
Determining the fair values of acquired intangible assets requires us to exercise significant judgment. We select reasonable estimates and assumptions based on evaluating a number of factors, including, but not limited to, marketplace participants, consumer awareness and brand history. Additionally, there are significant judgments inherent in discounted cash flows such as estimating the amount and timing of projected future cash flows, the selection of appropriate discount rates, hypothetical royalty rates and contributory asset capital charges. Specifically, the discount rates used in discounted cash flow analyses are intended to reflect the risk inherent in the projected future cash flows generated by the underlying acquired intangible assets.
Determining an acquired intangible asset's useful life requires significant judgment and is based on evaluating a number of factors, including, but not limited to, the expected use of the asset, historical client retention rates, consumer awareness and trade name history, as well as any contractual provisions that could limit or extend an asset's useful life.
The Company evaluates recorded goodwill in accordance with FASB Accounting Standards Codification ("ASC") Topic 350, which requires goodwill to be assessed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. In addition, an impairment evaluation of our amortizable intangible assets may also be performed if events or circumstances indicate potential impairment. Among the factors that could trigger an impairment review are our current operating results relative to our annual plan or historical performance; changes in our strategic plan or use of our assets; restructuring charges or other changes in our business segments; competitive pressures and changes in the general economy or in the markets in which we operate; and a significant decline in our stock price and our market capitalization relative to our net book value.
FASB ASC Topic 350 requires an annual assessment of the recoverability of recorded goodwill, which can be either quantitative or qualitative in nature, or a combination of the two approaches. Both methods utilize estimates which, in turn, require judgments and assumptions regarding future trends and events. As a result, both the precision and reliability of the resulting estimates are subject to uncertainty. If our goodwill impairment evaluation determines that the fair value of a reporting unit is less than its related carrying amount, we may recognize an impairment charge. Among the factors that we consider in a qualitative assessment 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 management to consider each of the factors relevant to a qualitative assessment, as well as the utilization of detailed financial projections, to include the rate of revenue growth, profitability and cash flows, as well as assumptions regarding discount rates, the Company's weighted average cost of capital and other data, in order to determine a fair value for our reporting units. We conducted a qualitative assessment of the fair value of all of the Company's reporting units during the quarter ended September 30, 2017. The results of this test determined that the fair values of the Company's reporting units continue to exceed their respective carrying values and as a result, no goodwill impairment was indicated. See Note 1 — Business and Significant Accounting Policies in the Notes to Consolidated Financial Statements for additional information regarding goodwill and amortizable intangible assets.
Accounting for income taxes — The Company uses the asset and liability method of accounting for income taxes. We estimate our income taxes in each of the jurisdictions where we operate.the Company operates. This process involves estimating our current tax expense or benefit together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. InWhen assessing the realizability of
deferred tax assets, we consider if it is more likely than not that some or all of the deferred tax assets will not be realized. In making this assessment, we consider the availability of loss carryforwards, projected reversals of deferred tax liabilities, projected future taxable income, and ongoing prudent and feasible tax planning strategies. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained based on the technical merits of the position. Recognized tax positions are measured at the largest amount of benefit with greater than a 50% likelihood of being realized. The Company uses estimates in determining the amount of unrecognized tax benefits associated with uncertain tax positions. Significant judgment is required in evaluating tax law and measuring the benefits likely to be realized. Uncertain tax positions are periodically re-evaluated and adjusted as more information about their ultimate realization becomes available.
Accounting for stock-based compensation — The Company accounts for stock-based compensation awards in accordance with FASB ASC Topics 505 and 718 and SEC Staff Accounting Bulletins No. 107 and No. 110. The Company recognizes stock-based compensation expense, which is based on the fair value of the award on the date of grant, over the related service period (seeperiod. Note 810 — Stock-Based Compensation in the Notes to Consolidated Financial Statements forprovides additional information).information regarding stock-based compensation. Determining the appropriate fair value model and calculating the fair value of stock-based compensation awards requires the use of certain complex and subjective assumptions, including the expected life of a stock-based compensation award and the Company’s common stock price volatility. In addition, determining the appropriate periodic stock-based compensation expense requires management to estimate the likelihood of the achievement of certain performance targets. The assumptions used in calculating the fair values of stock-based compensation awards and the related periodic expense represent management’s best estimates, which involve inherent uncertainties and the application of judgment. As a result, if circumstances 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-based compensation expense could be materially different from what has been recorded in the current period.
Restructuring and other accruals — We may record accrualsA change in any of the terms or conditions of stock-based compensation awards is accounted for severance costs, costs associated with excess facilities that we have leased, contract terminations, asset impairments and other costs as a resultmodification of ongoing actions we undertake to streamline our organization, reposition certain businesses and reduce ongoing costs. Estimatesthe award. Incremental compensation cost is measured as the excess, if any, of costs to be incurred to complete these actions, such as future lease payments, sublease income, the fair value of assets, and severance and related benefits,the modified award over the fair value of the original award immediately before its terms are modified, measured based on assumptionsthe fair value of the awards at the timemodification date. For vested awards, we recognize incremental compensation cost in the actions are initiated. These accruals may need to be adjusted toperiod the extent actual costs differ from such estimates. In addition, these actions may be revised due to changes in business conditions thatmodification occurs. For unvested awards, we did not foreseerecognize any incremental compensation expense at the time such plans were approved. We also record accruals duringmodification date or ratably over the year for our various employee cash incentive programs. Amounts accrued atrequisite remaining service period, as appropriate. If the endfair value of each reporting period are based on our estimates and may require adjustment as the ultimate amount paid for these incentives are sometimes not known with certainty untilmodified award is lower than the endfair value of our fiscal year.
the original award immediately before modification, the minimum compensation cost we recognize is the cost of the original award.
RESULTS OF OPERATIONS
Consolidated Results
2017 VERSUS 2016
The table below presents an analysis of selected line items and year-over-year changes in our Consolidated Statements of Operations for the two years ended December 31, 2017indicated (in thousands). The operating results of CEB are included beginning on April 5, 2017, the date of the acquisition.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended December 31, 2022 | | Year Ended December 31, 2021 | | Increase (Decrease) | | Percentage Increase
(Decrease) |
| Total revenues | | $ | 5,475,846 | | | $ | 4,733,962 | | | $ | 741,884 | | | 16 | % |
| Costs and expenses: | | | | | | | | |
| Cost of services and product development | | 1,693,771 | | | 1,444,093 | | | 249,678 | | | 17 | |
| Selling, general and administrative | | 2,480,944 | | | 2,155,658 | | | 325,286 | | | 15 | |
| Depreciation | | 93,410 | | | 102,802 | | | (9,392) | | | (9) | |
| Amortization of intangibles | | 98,536 | | | 109,603 | | | (11,067) | | | (10) | |
| Acquisition and integration charges | | 9,079 | | | 6,055 | | | 3,024 | | | 50 | |
| Operating income | | 1,100,106 | | | 915,751 | | | 184,355 | | | 20 | |
| Interest expense, net | | (121,323) | | | (116,620) | | | 4,703 | | | 4 | |
| Gain on event cancellation insurance claims | | — | | | 152,310 | | | (152,310) | | | nm |
| | | | | | | | |
| Other income, net | | 48,412 | | | 18,429 | | | 29,983 | | | 163 | |
| Less: Provision for income taxes | | 219,396 | | | 176,310 | | | 43,086 | | | 24 | |
| Net income | | $ | 807,799 | | | $ | 793,560 | | | $ | 14,239 | | | 2 | % |
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Income Increase (Decrease) $ | | Increase (Decrease) % |
| Total revenues | $ | 3,311,494 |
| | $ | 2,444,540 |
| | $ | 866,954 |
| | 35 | % |
| Costs and expenses: | |
| | |
| | |
| | |
|
| Cost of services and product development | 1,320,198 |
| | 945,648 |
| | (374,550 | ) | | (40 | ) |
| Selling, general and administrative | 1,599,004 |
| | 1,089,184 |
| | (509,820 | ) | | (47 | ) |
| Depreciation | 63,897 |
| | 37,172 |
| | (26,725 | ) | | (72 | ) |
| Amortization of intangibles | 176,274 |
| | 24,797 |
| | (151,477 | ) | | >(100) |
|
| Acquisition and integration charges | 158,450 |
| | 42,598 |
| | (115,852 | ) | | >(100) |
|
| Operating (loss) income | (6,329 | ) | | 305,141 |
| | (311,470 | ) | | >(100) |
|
| Interest expense, net | (124,936 | ) | | (25,116 | ) | | (99,820 | ) | | >(100) |
|
| Other income, net | 3,448 |
| | 8,406 |
| | (4,958 | ) | | (59 | ) |
| (Benefit) provision for income taxes | (131,096 | ) | | 94,849 |
| | 225,945 |
| | >100 |
|
| Net income | $ | 3,279 |
| | $ | 193,582 |
| | $ | (190,303 | ) | | (98 | )% |
TOTAL REVENUESTotal revenues for the year ended December 31, 2017 increased $867.0 million, to $3.32022 were $5.5 billion, an increase of 35%$741.9 million compared to the year ended December 31, 20162021, or 16% on both a reported basis and adjusted for20% excluding the foreign exchangecurrency impact. CEB contributed approximately $522.9 million of the revenue increase.
The tabletables below presents totalpresent (i) revenues by geographic region for(based on where the years indicated (in thousands):
|
| | | | | | | | | | | | | | | | |
| Geographic Region | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Increase (Decrease) $ | | Increase (Decrease) % | |
| U.S. and Canada | | $ | 2,037,111 |
| | $ | 1,519,748 |
| | $ | 517,363 |
| | 34 | % | |
| Europe, Middle East and Africa | | 850,352 |
| | 616,721 |
| | 233,631 |
| | 38 |
| |
| Other International | | 424,031 |
| | 308,071 |
| | 115,960 |
| | 38 |
| |
| Totals | | $ | 3,311,494 |
| | $ | 2,444,540 |
| | $ | 866,954 |
| | 35 | % | |
The table below presents oursale is fulfilled) and (ii) revenues by segment for the years indicated (in thousands):.
|
| | | | | | | | | | | | | | | | |
| Segment | | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Increase (Decrease) $ | | Increase (Decrease) % | |
| Research | | $ | 2,471,280 |
| | $ | 1,857,001 |
| | $ | 614,279 |
| | 33 | % | |
| Consulting | | 327,661 |
| | 318,934 |
| | 8,727 |
| | 3 |
| |
| Events | | 337,903 |
| | 268,605 |
| | 69,298 |
| | 26 |
| |
| Talent Assessment & Other | | 174,650 |
| | — |
| | 174,650 |
| | 100 |
| |
| Totals | | $ | 3,311,494 |
| | $ | 2,444,540 |
| | $ | 866,954 |
| | 35 | % | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Primary Geographic Market | | Year Ended December 31, 2022 | | Year Ended December 31, 2021 | | Increase | | Percentage Increase | |
| United States and Canada | | $ | 3,619,382 | | | $ | 3,048,902 | | | $ | 570,480 | | | 19 | % | |
| Europe, Middle East and Africa | | 1,234,659 | | | 1,130,979 | | | 103,680 | | | 9 | | |
| Other International | | 621,805 | | | 554,081 | | | 67,724 | | | 12 | | |
| Total revenues | | $ | 5,475,846 | | | $ | 4,733,962 | | | $ | 741,884 | | | 16 | % | |
Please refer | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Segment | | Year Ended December 31, 2022 | | Year Ended December 31, 2021 | | Increase | | Percentage Increase | |
| Research | | $ | 4,604,791 | | | $ | 4,101,392 | | | $ | 503,399 | | | 12 | % | |
| Conferences | | 389,273 | | | 214,449 | | | 174,824 | | | 82 | | |
| Consulting | | 481,782 | | | 418,121 | | | 63,661 | | | 15 | | |
| Total revenues | | $ | 5,475,846 | | | $ | 4,733,962 | | | $ | 741,884 | | | 16 | % | |
Refer to the section of this MD&A below entitled “Segment Results” for a discussion of revenues and results by segment.
COST OF SERVICES AND PRODUCT DEVELOPMENTCost of services and product development was $1.3$1.7 billion in 2017,2022, an increase of $374.6$249.7 million compared to 2016,2021, or 40%17% on both a reported basis and 21% excluding the impactforeign currency impact. The increase in Cost of foreign exchange. Approximately $238.0 million of the increase was attributable to CEB. The $136.6 million increase attributable to heritage Gartnerservices and product development was primarily due to: (i) increased compensation costs as a result of higher headcount, (ii) increased conference related expenses, due to higher payrollthe return to in-person destination conferences and related benefits costs resulting from(iii) increased headcount, which increased 20%.research program expenses. Cost of services and product development as a percentagepercent of revenues was 40%31% for both 2022 and 39% for 20172021, respectively.
Selling, general and 2016, respectively.
SELLING, GENERAL AND ADMINISTRATIVEadministrative (“SG&A”) expense was $1.6$2.5 billion in 2017,2022, an increase of $509.8$325.3 million compared to 2016,2021, or 47%15% on both a reported basis and 19% excluding the impact of foreign exchange. Approximately $283.8 million of thecurrency impact. The increase was attributable to CEB. Heritage Gartnerin SG&A costs for 2017 increased $226.0 million, primarily due to $107.4 million in higher payroll and related benefits costs, reflecting a 17% overall headcount increase; $33.8 million in higher commissions due to increased sales bookings; and $84.8 million in higher corporate costs and foreign exchange impact. The overall headcount growth includes a 16% increase in quota-bearing sales associates, which increased to 2,807 atduring the year ended December 31, 2017 from 2,423 at December 31, 2016.
DEPRECIATION increased $26.7 million during 2017 when2022, as compared to 2016, due to property, equipment and leasehold improvements acquired with CEB and additional heritage Gartner investment.
AMORTIZATION OF INTANGIBLES increased $151.5 million during 2017 when compared to 2016 due to additional amortization from the intangibles recorded in connection with our recent acquisitions.
ACQUISITION AND INTEGRATION CHARGES increased $115.9 million during 2017 when compared to 2016. This increase reflects the additional charges resulting from our recent acquisitions and primarily consist of higher professional fees, severance, stock-based compensation charges and accruals for exit costs for certain office space that the Company does not intend to occupy in Arlington, Virginia.
OPERATING (LOSS) INCOME was an operating loss of $(6.3) million during 2017 compared to operating income of $305.1 million in 2016. The decline reflects several factors. We had a lower segment contribution margin in our Research business resulting from a CEB deferred revenue fair value adjustment. We also had higher SG&A and acquisition-related costs, including depreciation, amortization of intangibles, and acquisition and integration charges.
INTEREST EXPENSE, NET increased $99.8 million during 2017 when compared to 2016. The increaseprior fiscal year, was primarily due to higher borrowingspersonnel costs in the current year, including higher salary expense due to increased headcount, as well as higher commission expense, following strong contract value growth in 2021, which is amortized as the related revenue is recognized. These increases were partially offset by a reduction in facilities expense, related to a reduction of our real estate footprint. We expect to continue to evaluate our real estate footprint globally. If we determine there is any additional excess property, there is no assurance that we will be able to sublease any such excess properties or that we will not incur costs in connection with such exit activities, which may be material. During 2022, we incurred charges associated with the impairment of right-of-use assets and other long-lived assets, related to certain office locations we no longer intend to use, of $54.0 million, compared to $49.5 million in 2021. The year ended December 31, 2021 also included expenses related to cancelled conferences.
The number of quota-bearing sales associates in Global Technology Sales increased by 18% to 3,630 and in Global Business Sales increased by 22% to 1,144, compared to December 31, 2021. On a combined basis, the total number of quota-bearing sales associates increased by 19% when compared to December 31, 2021. SG&A expense as a percent of revenues was 45% and 46% during 2017.2022 and 2021, respectively.
OTHER INCOME, NETDepreciation decreased by 9% during 2022 compared to 2021. The decrease for the year ended December 31, 2022 was $3.4primarily due to a reduction in leasehold improvements depreciation as a result of the impairment losses recorded in the fourth quarter of 2021 and the year ended December 31, 2022.
Amortization of intangibles decreased by 10% during 2022 compared to 2021 due to certain intangible assets that became fully amortized in 2021.
Acquisition and integration charges increased by $3.0 million during 2017,the year ended December 31, 2022, compared to the same period in 2021. The increase is primarily reflectingdue to expenses related to the pending divestiture of our TalentNeuron business.
Operating income was $1.1 billion and $915.8 million during 2022 and 2021, respectively. The increase in operating income was due to increased revenue, partially offset by an increase in cost of services and product development and selling, general and administrative expenses.
Interest expense, net increased by $4.7 million during 2022 compared to 2021. The increase in interest expense, net was primarily due to an increase in debt as a result of the issuance of the 2029 Notes in June 2021 and higher interest rates on our term loan, partially offset by increased interest income, as well as lower interest expense due to the maturation of $700.0 million in fixed-for-floating interest rate swap contracts in March 2022.
Gain on event cancellation insurance claims of $152.3 million during the year ended December 31, 2021 reflected proceeds, net of expense recoveries, related to the 2020 conference cancellation insurance claims.
Other income, net for the years presented herein included the net impact of foreign currency gains and losses from our hedging activities, as well as the salesales of certain state tax credits and the recognition of other tax incentives. During 2022 and 2021, Other income, net was $8.4 million in 2016, which included a $52.3 million and a $20.2 million gain of $2.5on de-designated interest rate swaps, respectively.
Provision for income taxes was $219.4 million from the extinguishment of a portion ofand $176.3 million during 2022 and 2021, respectively, with an economic development loan from the State of Connecticut, the sale of certain state tax credits and the recognition of other tax incentives, and the net impact of gains and losses from our foreign currency hedging activities.
(BENEFIT) PROVISION FOR INCOME TAXES in 2017 was a benefit of $(131.1) million on a pretax loss of $(127.8) million compared to an expense of $94.8 million on pretax income of $288.4 million in 2016. The effective income tax rate of 21.4% and 18.2% for 2022 and 2021, respectively. The 2021 effective tax rate includes a benefit of approximately $54.1 million from intercompany sales of certain intellectual property, while no such benefit occurred in 2022. This benefit represents the value of future tax deductions for amortization of the assets in the acquiring jurisdiction, net of any tax recognized in the selling jurisdiction. The Company’s intellectual property footprint continues to evolve and may result in tax rate volatility in the future. Note 12 — Income Taxes in the Notes to Consolidated Financial Statements provides additional information regarding the Company’s income taxes.
Net income was 102.6%$807.8 million and $793.6 million during 2022 and 2021, respectively. Additionally, our diluted net income per share increased by $0.75 in 20172022 compared to 32.9% in 2016. The change in2021. These year-over-year changes reflect the effective income tax rate was primarily attributable to the favorable impact of U.S. tax reform, the recognition in 2017 of unrealized capital losses on the planned divestiture of the Talent Assessment business, and increases in tax benefits associated with equity compensation.
NET INCOME was $3.3 million and $193.6 million during 2017 and 2016, respectively. The year-over-year change primarily reflects declinesincrease in our 2022 operating profitabilityincome and higher interest expense,Other income, net, partially offset by the gain on event cancellation insurance claims recognized in 2021 and increased income tax benefitsexpense in 2017, including the impact of the Tax Cuts and Jobs Act of 2017. As a result of substantially lower net income and a 7% increase in the number of weighted average shares outstanding, diluted earnings per share declined to $0.04 in 2017 from $2.31 in 2016.
2016 VERSUS 2015
The table below presents an analysis of selected line items and year-over-year changes in our Consolidated Statements of Operations for the two years ended December 31, 2016 (in thousands).
|
| | | | | | | | | | | | | | |
| | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | Income Increase (Decrease) $ | | Increase (Decrease) % |
| Total revenues | $ | 2,444,540 |
| | $ | 2,163,056 |
| | $ | 281,484 |
| | 13 | % |
| Costs and expenses: | |
| | |
| | |
| | |
|
| Cost of services and product development | 945,648 |
| | 839,076 |
| | (106,572 | ) | | (13 | ) |
| Selling, general and administrative | 1,089,184 |
| | 962,677 |
| | (126,507 | ) | | (13 | ) |
| Depreciation | 37,172 |
| | 33,789 |
| | (3,383 | ) | | (10 | ) |
| Amortization of intangibles | 24,797 |
| | 13,342 |
| | (11,455 | ) | | (86 | ) |
| Acquisition and integration charges | 42,598 |
| | 26,175 |
| | (16,423 | ) | | (63 | ) |
| Operating income | 305,141 |
| | 287,997 |
| | 17,144 |
| | 6 |
|
| Interest expense, net | (25,116 | ) | | (20,782 | ) | | (4,334 | ) | | (21 | ) |
| Other income, net | 8,406 |
| | 4,996 |
| | 3,410 |
| | 68 |
|
| (Benefit) provision for income taxes | 94,849 |
| | 96,576 |
| | 1,727 |
| | 2 |
|
| Net income | $ | 193,582 |
| | $ | 175,635 |
| | $ | 17,947 |
| | 10 | % |
TOTAL REVENUES for the year ended December 31, 2016 increased $281.5 million, to $2.4 billion, an increase of 13%2022 compared to the year ended December 31, 2015 and 14% adjusted for the impact of foreign currency exchange.2021.
The table below presents total revenues by geographic region for the years indicated (in thousands):
|
| | | | | | | | | | | | | | | | |
| Geographic Region | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | Increase (Decrease) $ | | Increase (Decrease) % | |
| U.S. and Canada | | $ | 1,519,748 |
| | $ | 1,347,676 |
| | $ | 172,072 |
| | 13 | % | |
| Europe, Middle East and Africa | | 616,721 |
| | 557,165 |
| | 59,556 |
| | 11 |
| |
| Other International | | 308,071 |
| | 258,215 |
| | 49,856 |
| | 19 |
| |
| Totals | | $ | 2,444,540 |
| | $ | 2,163,056 |
| | $ | 281,484 |
| | 13 | % | |
The table below presents our revenues by segment for the years indicated (in thousands):
|
| | | | | | | | | | | | | | | | |
| Segment | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | Increase (Decrease) $ | | Increase (Decrease) % | |
| Research | | $ | 1,857,001 |
| | $ | 1,614,904 |
| | $ | 242,097 |
| | 15 | % | |
| Consulting | | 318,934 |
| | 296,317 |
| | 22,617 |
| | 8 |
| |
| Events | | 268,605 |
| | 251,835 |
| | 16,770 |
| | 7 |
| |
| Totals | | $ | 2,444,540 |
| | $ | 2,163,056 |
| | $ | 281,484 |
| | 13 | % | |
Please refer to the section of this MD&A below entitled “Segment Results” for a discussion of revenues and results by segment.
COST OF SERVICES AND PRODUCT DEVELOPMENT (“COS") increased $106.6 million, or 13%, in 2016 compared to 2015, to $945.6 million compared to $839.1 million in 2015. COS increased 14% in 2016 when compared to 2015 adjusted for the impact of foreign exchange. The year-over-year increase in COS was due to $88.0 million in higher payroll and related benefits costs from additional headcount and merit salary increases, and $28.6 million in higher charges in 2016 for events costs and other program related expenses. Partially offsetting these increased expenses was approximately $10.0 million in foreign exchange impact. Overall COS headcount increased 13%, which was primarily in our Research segment. COS as a percentage of revenues was 39% in both 2016 and 2015.
SELLING, GENERAL AND ADMINISTRATIVE (“SG&A”) expense increased by $126.5 million in 2016, or 13%, to $1,089.2 million compared to $962.7 million in 2015. Excluding the impact of foreign currency exchange, SG&A expense increased 15% year-over-year. The increase was primarily due to $115.0 million in higher payroll and related benefits costs from additional headcount, higher sales commissions, and merit salary increases, and we also had $27.5 million in additional legal, recruiting and training, and workplace costs. Partially offsetting these additional charges was approximately $16.0 million in foreign exchange impact. SG&A headcount increased 13% overall, with the majority of the increase in additional quota-bearing sales associates and related support staff. Quota-bearing sales associates increased 12% year-over-year, to 2,423 at December 31, 2016 from 2,171 at December 31, 2015.
DEPRECIATION increased 10% in 2016 compared to 2015, which reflects our additional investment in fixed assets.
AMORTIZATION OF INTANGIBLES increased to $24.8 million in 2016 from $13.3 million in 2015 due to the additional intangibles resulting from our acquisitions.
ACQUISITION AND INTEGRATION CHARGES were $42.6 million in 2016 compared to $26.2 million in 2015. 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 6% in 2016 compared to 2015, to $305.1 million in 2016 from $288.0 million in 2015. Operating income as a percentage of revenues was 12% in 2016 and 13% in 2015 with the decline due to a number of factors, to include lower gross contribution margins in our Consulting and Events segments and higher charges from acquisitions.
INTEREST EXPENSE, NET increased 21% year-over-year due to higher average borrowings in 2016.
OTHER INCOME, NET was $8.4 million in 2016, which included a gain of $2.5 million from the extinguishment of a portion of an economic development loan from the State of Connecticut, the sale of certain state tax credits and the recognition of other tax incentives, and the net impact of gains and losses from our foreign currency hedging activities. Other income, net was $5.0 million in 2015, which consisted of a $6.8 million gain from the sale of certain state tax credits, partially offset by a net loss from foreign currency hedging activities.
(BENEFIT) PROVISION FOR INCOME TAXES was $94.8 million in 2016 compared to $96.6 million in 2015 and the effective tax rate was 32.9% in 2016 compared to 35.5% in 2015. The decrease in the 2016 effective income tax rate was primarily attributable to the early adoption of FASB ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting," partially offset by increases in non-deductible expenses relating to acquisitions.
NET INCOME was $193.6 million in 2016 and $175.6 million in 2015, an increase of 10%. Diluted earnings per share increased 12% year-over-year, to $2.31 in 2016 compared to $2.06 in 2015 due to higher net income and, to a lesser extent, a decrease in the number of weighted average shares outstanding in 2016.
SEGMENT RESULTS
We evaluate reportable segment performance and allocate resources based on gross contribution margin. Gross contribution is defined as operating income (loss),or loss excluding certain Cost of services and product development charges,expenses, SG&A expenses, Depreciation, Amortization of intangibles, and Acquisition and integration charges, and Amortization of intangibles.charges. Gross contribution margin is defined as gross contribution as a percentagepercent of revenues.
On April 5, 2017, Gartner completed its acquisition of CEB. With the CEB acquisition, Gartner began reporting four business segments reflecting the Company’s enlarged scale and breadth of advisory services. The Company's reportable segments are as follows:Reportable Segments
Research provides trusted, objective insights and advice on the mission-critical priorities of leaders across all functional areas of the enterprise through research and other reports, briefings, proprietary tools, access to our analysts, peer networking services and membership programs that enable our clients to make better decisions. Gartner's traditional strengths in IT, marketing and supply chain research were enhanced in 2017 with Gartner's acquisition of CEB, Inc., which added CEB's best practice and talent management research insights across a range of business functions, to include human resources, sales, legal and finance.
Consulting provides customized solutions to unique client needs through on-site, day-to-day support, as well as proprietary tools for measuring and improving IT performance with a focus on cost, performance, efficiency and quality.
Events provides business professionals across the organization the opportunity to learn, share and network. From our flagship CIO event Gartner Symposium/ITxpo, to industry-leading conferences focused on specific business roles and topics, to member-driven sessions, our events enable attendees to experience the best of Gartner insight and advice live.
Talent Assessment & Other helps organizations assess, engage, manage and improve talent. This is accomplished through knowledge and skills assessments, training programs, workshops, and survey and questionnaire services.
The sections below present the results of these fourthe Company’s three reportable business segments. References to "heritage Gartner" operating resultssegments: Research, Conferences and business measurements below refer to Gartner excluding CEB. References to "CEB" operating results and business measurements below refer to CEB subsequent to the acquisition.Consulting.
Research
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| | | | | | | | | | | | | | | | | | | | | | | | | |
| | As Of And For The Year Ended December 31, 2017 | | As Of And For The Year Ended December 31, 2016 | | Increase (Decrease) | | Percentage Increase (Decrease) | | As Of And For The Year Ended December 31, 2016 | | As Of And For The Year Ended December 31, 2015 | | Increase (Decrease) | | Percentage Increase (Decrease) |
| Financial Measurements: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Revenues (1), (2) | $2,471,280 | | $1,857,001 | | $ | 614,279 |
| | 33 | % | | $1,857,001 | | $1,614,904 | | $ | 242,097 |
| | 15 | % |
Gross contribution (1) | $1,653,014 | | $1,285,611 | | $ | 367,403 |
| | 29 | % | | $1,285,611 | | $1,117,534 | | $ | 168,077 |
| | 15 | % |
| Gross contribution margin | 67 | % | | 69 | % | | (2) points |
| | — |
| | 69 | % | | 69 | % | | — |
| | — |
|
| Business Measurements: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Heritage Gartner: | | | | | | | | | | | | | | | |
| Total contract value (1) | $2,213,000 | | $1,930,000 | | $ | 283,000 |
| | 15 | % | | $1,930,000 | | $1,768,300 | | $ | 161,700 |
| | 9 | % |
| Client retention | 84 | % | | 84 | % | | — |
| | — |
| | 84 | % | | 84 | % | | — |
| | — |
|
| Wallet retention | 106 | % | | 104 | % | | 2 points |
| | — |
| | 104 | % | | 105 | % | | (1) point |
| | — |
|
| CEB: | | | | | | | | | | | | | | | |
| Total contract value (1) (3) | $557,000 | | $549,000 | | $ | 8,000 |
| | 1 | % | | $549,000 | | na | | — |
| | — |
|
| Wallet retention | 96 | % | | 90 | % | | 6 points |
| | — |
| | 90 | % | | na |
| | — |
| | — |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | The Year Ended December 31, 2022 | | The Year Ended December 31, 2021 | | Increase
(Decrease) | | Percentage
Increase
(Decrease) |
| Financial Measurements: | | | | | | | |
| Revenues (1) | $ | 4,604,791 | | | $ | 4,101,392 | | | $ | 503,399 | | 12 | % |
| Gross contribution (1) | $ | 3,414,574 | | | $ | 3,036,925 | | | $ | 377,649 | | 12 | % |
| Gross contribution margin | 74 | % | | 74 | % | | — | point | | — | |
| Business Measurements: | | | | | | | |
| Global Technology Sales (2): | | | | | | | |
| Contract value (1), (3) | $ | 3,632,200 | | | $ | 3,300,600 | | | $ | 331,600 | | 10 | % |
| Client retention | 86 | % | | 86 | % | | — | point | | — | |
| Wallet retention | 105 | % | | 106 | % | | (1) | point | | — | |
| Global Business Sales (2): | | | | | | | |
| Contract value (1), (3) | $ | 1,028,200 | | | $ | 864,600 | | | $ | 163,600 | | 19 | % |
| Client retention | 89 | % | | 87 | % | | 2 | points | | — | |
| Wallet retention | 112 | % | | 115 | % | | (3) | points | | — | |
| |
(2) | In 2017 the Company began reporting the results of its Strategic Advisory Services ("SAS") business in Research whereas previously the SAS business was reported with Consulting. Although the impact of the reclassification was not significant, |
(1)Dollars in thousands.
(2)Global Technology Sales includes sales to users and providers of technology. Global Business Sales includes sales to all other functional leaders.
the operating results of the SAS business for 2016 and 2015 were reclassified from Consulting to Research to be comparable with the current year presentation.
| |
(3) | The 2016 CEB contract value was calculated using Gartner's methodology as well as 2017 foreign exchange rates. |
na - not applicable or not available.
2017 VERSUS 2016
Research segment revenues increased $614.3 million on a reported basis during 2017 compared to 2016, or 33% on both a reported basis and adjusted for the impact of foreign currency exchange. Heritage Gartner revenues increased $304.7 million in 2017 compared to 2016, which represents a 16% increase on a reported basis, with approximately one point of the increase due to L2, which we acquired in the first quarter of 2017. Adjusted for the foreign exchange impact, heritage Gartner revenues also increased by 16% year-over-year. On a reported basis, CEB contributed $309.6 million of the 2017 increase in Research segment revenues. The gross contribution margin declined by two points during 2017, primarily due to the impact of the deferred revenue fair value accounting adjustment resulting from the CEB acquisition.
Heritage Gartner total contract value was $2.2 billion at December 31, 2017, an increase of 15% as reported and 16%(3)Contract values are on a foreign exchange neutral basis. Contract values as of December 31, 2021 have been calculated using the same foreign currency rates as 2022.
Research revenues increased by $503.4 million during 2022 compared to 2021, or 12% on a reported basis and 16% excluding the foreign currency impact. The gross contribution margin was 74% in both 2022 and 2021. The increase in revenues during 2022 was primarily due to strong Research contract value growth in 2021 and 2022.
Contract value increased to $4.7 billion at December 31, 2022, or 12% compared to December 31, 2016. Heritage Gartner2021 on a foreign currency neutral basis. All industry sectors grew at double-digit rates, other than technology and media, which grew at high single digit rates. The fastest growth was in the transportation, retail and manufacturing sectors. Global Technology Sales (“GTS”) contract value increased by 10% at December 31, 2022 when compared to December 31, 2021. The increase in GTS contract value was primarily due to new business from new and existing clients. GTS contract value increased by double-digits for the majority of sectors. Global Business Sales (“GBS”) contract value increased by 19% year-over-year, also primarily driven by new business from new and existing clients. Nearly all of our GBS practices achieved double-digit growth rates, with the majority of enterprise size and sectors growing more than 15% year-over-year.
GTS client retention was 84%86% as of both December 31, 20172022 and 2016,2021, while wallet retention was 106%105% and 104% at December 31, 2017 and 2016, respectively. Heritage Gartner total contract value at December 31, 2017 increased by double-digits across all of the Company’s sales regions and client sizes and virtually every industry segment compared to December 31, 2016. We increased the number of our research client enterprises by 7% in 2017. As106%, as of December 31, 2017, CEB contract value2022 and 2021, respectively. GBS client retention was $557.0 million89% and 87% as of December 31, 2022 and 2021, respectively, while wallet retention was 96%.112% and 115% as of December 31, 2022 and 2021, respectively.
Conferences | | | | | | | | | | | | | | | | | | | | | | | |
| | The Year Ended December 31, 2022 | | The Year Ended December 31, 2021 | | Increase
(Decrease) | | Percentage
Increase
(Decrease) |
| Financial Measurements: | | | | | | | |
| Revenues (1) | $ | 389,273 | | | $ | 214,449 | | | $ | 174,824 | | 82 | % |
| Gross contribution (1) | $ | 210,726 | | | $ | 133,748 | | | $ | 76,978 | | 58 | % |
| Gross contribution margin | 54 | % | | 62 | % | | (8) | points | | — | |
| Business Measurements: | | | | | | | |
| Number of destination conferences (2) | 41 | | 39 | | 2 | | 5 | % |
| Number of destination conferences attendees (2) | 60,104 | | 57,145 | | 2,959 | | 5 | % |
(1)Dollars in thousands.
(2)Includes both virtual and in-person conferences. Single day, local meetings are excluded.
Conferences revenues increased 15% in 2016by $174.8 million during 2022 compared to 2015. Excluding2021, or 82% on a reported basis and 90% excluding the impact of foreign currency exchange, Researchimpact. We re-launched in-person destination conferences during the second quarter of 2022 and expect to hold in-person destination conferences in future periods as conditions permit. We held 25 in-person destination conferences and 16 virtual conferences during the year ended December 31, 2022. We held 39 virtual conferences during the year ended December 31, 2021. The increase in revenues increased approximately 17% in 2016.for the year ended December 31, 2022 was primarily due the return to in-person destination conferences. The segment gross contribution margin was 69%54% and 62% in both annual periods.2022 and 2021, respectively. The lower gross contribution margin remained at 69%during 2022 was primarily due to the return to in-person destination conferences. We expect Conferences gross contribution margin to decrease from 2021 and 2022 levels as the mix of in-person destination conferences increases.
Consulting | | | | | | | | | | | | | | | | | | | | | | | |
| | As Of And For The Year Ended December 31, 2022 | | As Of And For The Year Ended December 31, 2021 | | Increase
(Decrease) | | Percentage
Increase
(Decrease) |
| Financial Measurements: | | | | | | | |
| Revenues (1) | $ | 481,782 | | | $ | 418,121 | | | $ | 63,661 | | 15 | % |
| Gross contribution (1) | $ | 189,834 | | | $ | 158,843 | | | $ | 30,991 | | 20 | % |
| Gross contribution margin | 39 | % | | 38 | % | | 1 | point | | — | |
| Business Measurements: | | | | | | | |
| Backlog (1), (2) | $ | 139,700 | | | $ | 113,000 | | | $ | 26,700 | | 24 | % |
| Average billable headcount | 827 | | 749 | | 78 | | 10 | % |
| Consultant utilization | 70 | % | | 68 | % | | 2 | points | | — | |
(1)Dollars in 2016 despite a 14% increase in segment headcount, which was mostly driven by new hires and, to a lesser extent, the additional employees resulting from our acquisitions. The headcount increase reflects our continued investment in this business. Total contract value increased 9%thousands.
(2)Backlog is on a reported basis in 2016 to $1.9 billion, and increased 14% year-over-year adjusted for the impact of foreign currency exchange. The growth in contract value was broad-based, with every region and client size and virtually every industry sector growing at double-digit percentage rates. We increased the number of our research client enterprises by 3% in 2016 to 11,122. Both client retention and wallet retention remained strong at 84% and 104%, respectively,neutral basis. Backlog as of December 31, 2016.2021 has been calculated using the same foreign currency rates as 2022. We changed our method of calculating backlog beginning in 2022 to include multi-year contracts.
Consulting
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As Of And For The Year Ended December 31, 2017 | | As Of And For The Year Ended December 31, 2016 | | Increase (Decrease) | | Percentage Increase (Decrease) | | As Of And For The Year Ended December 31, 2016 | | As Of And For The Year Ended December 31, 2015 | | Increase (Decrease) | | Percentage Increase (Decrease) |
| Financial Measurements: | |
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| Revenues (1), (2) | $327,661 | | $318,934 | | $ | 8,727 |
| | 3 | % | | $318,934 | | $296,317 | | $ | 22,617 |
| | 8 | % |
| Gross contribution (1) | $93,643 | | $89,734 | | $ | 3,909 |
| | 4 | % | | $89,734 | | $86,486 | | $ | 3,248 |
| | 4 | % |
| Gross contribution margin | 29 | % | | 28 | % | | 1 point |
| | — |
| | 28 | % | | 29 | % | | (1) point |
| | — |
|
| Business Measurements: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Backlog (1) (3) | $95,200 | | $88,600 | | $ | 6,600 |
| | 7 | % | | $88,600 | | $100,800 | | $ | (12,200 | ) | | (12 | )% |
| Billable headcount | 669 | | 628 | | 41 |
| | 7 | % | | 628 | | 606 | | 22 |
| | 4 | % |
| Consultant utilization | 64 | % | | 66 | % | | (2) points |
| | — |
| | 66 | % | | 66 | % | | — |
| | — |
|
| Average annualized revenue per billable headcount (1) | $ | 366 |
| | $ | 383 |
| | $ | (17 | ) | | (4 | )% | | $ | 383 |
| | $ | 391 |
| | $ | (8 | ) | | (2 | )% |
| |
(2) | In 2017 the Company began reporting the results of its SAS business in Research whereas previously the SAS business was reported with Consulting. Although the impact of the reclassification was not significant, the operating results of the SAS business for 2016 and 2015 were reclassified from Consulting to Research to be comparable with the current year presentation. |
| |
(3) | The heritage Gartner backlog of $88.6 million and $100.8 million at December 31, 2016 and 2015, respectively, have been restated to reflect the reclassification of the SAS business. |
2017 VERSUS 2016
Consulting revenues increased 3%15% during 20172022 compared to 2016 on both a reported basis and adjusted for the impact of foreign currency exchange, with revenue improvements in both core consulting and contract optimization. Gross contribution margin was 29% and 28% for 2017 and 2016, respectively. The margin improvement in 2017 was primarily due to additional contract optimization revenue, which has a higher contribution margin than our labor-based core consulting, partially offset by lower consultant utilization and our investment in additional managing partners. Backlog increased by $6.6 million, or 7%, year-over-year. The $95.2 million of backlog at December 31, 2017 represented approximately four months of backlog, which is in line with the Company's operational target.
2016 VERSUS 2015
Consulting revenue increased 8% year-over-year to $318.9 million, with the increase mostly in our core consulting practice. Additionally, revenue in our contract optimization practice increased slightly during 2016 compared to 2015. The impact of foreign currency exchange was not significant. The year-over-year gross contribution margin declined by one point due to several factors, including higher payroll costs resulting from higher headcount and severance. Backlog decreased by $12.2 million year-over-year, or 12%, mostly due to a large individual contract booked in 2015. Excluding that contract, backlog decreased approximately 3% year-over-year. The $88.6 million of backlog at December 31, 2016 represented approximately four months of forward backlog, which is in line with the Company's operational target.
Events
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| | As Of And For The Year Ended December 31, 2017 | | As Of And For The Year Ended December 31, 2016 | | Increase (Decrease) | | Percentage Increase (Decrease) | | As Of And For The Year Ended December 31, 2016 | | As Of And For The Year Ended December 31, 2015 | | Increase (Decrease) | | Percentage Increase (Decrease) |
| Financial Measurements: | |
| | |
| | | | |
| | |
| | |
| | |
| | |
|
| Revenues (1) | $337,903 | | $268,605 | | $ | 69,298 |
| | 26 | % | | $268,605 | | $251,835 | | $ | 16,770 |
| | 7 | % |
| Gross contribution (1) | $163,480 | | $136,655 | | $ | 26,825 |
| | 20 | % | | $136,655 | | $130,527 | | $ | 6,128 |
| | 5 | % |
| Gross contribution margin | 48 | % | | 51 | % | | (3) points |
| | — |
| | 51 | % | | 52 | % | | (1) point |
| | — |
|
| Business Measurements: | |
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| Heritage Gartner: | | | | | | | | | | | | | | | |
| Number of events (2) | 65 |
| | 66 |
| | (1 | ) | | (2 | )% | | 66 |
| | 65 |
| | 1 |
| | 2 | % |
| Number of attendees (2) | 63,823 |
| | 54,602 |
| | 9,221 |
| | 17 | % | | 54,602 |
| | 52,595 |
| | 2,007 |
| | 4 | % |
| CEB: | | | | | | | | | | | | | | | |
| Number of events (2) | 4 |
| | na |
| | — |
| | — |
| | na |
| | na |
| | — |
| | — |
|
| Number of attendees (2) | 3,578 |
| | na |
| | — |
| | — |
| | na |
| | na |
| | — |
| | — |
|
| |
(2) | Single day, local events are excluded. |
na - not applicable or not available.
2017 VERSUS 2016
Events revenues increased $69.3 million, or 26%, during 2017 compared to 20162021 on a reported basis and 25% adjusted for22% excluding the impact of foreign currency exchange. Heritage Gartnerimpact. The increase in revenues increased $30.7 million in 2017 compared to 2016, an 11% increase on a reported basis and 10% adjusted for the foreign exchange impact, as both attendee and exhibitor increased, with attendee revenue growing at double-digits. We held 65 events in 2017 in the heritage Gartner business, withwas due to a 17%13% increase in the number of attendeeslabor-based consulting, and a 3%25% increase in exhibitors compared to 2016, while the averagecontract optimization. Contract optimization revenue per exhibitor was up by 5%may vary significantly and, average revenue per attendee was flat. CEB contributed $38.6 millionas such, 2022 revenues may not be indicative of the revenue increase with four events held with 3,578 attendees.future results. The segment gross contribution margin declined 3 pointswas 39% and 38% in 2017 compared to 2016, primarily driven by additional investment2022 and 2021, respectively. The increase in headcount and higher program expenses in heritage Gartner, and to a lesser extent, a dilutive effect from the CEB events.
2016 VERSUS 2015
Events revenues increased $16.8 million, or 7%, when comparing 2016 to 2015. Excluding the impact of foreign currency exchange, revenues increased 6% year-over-year. We held 66 events in 2016, consisting of 59 ongoing events and 7 new events, compared to 65 events in 2015. The year-over-year revenue increase was primarily attributable to higher exhibitor revenue at our on-going events, which increased 9%, while attendee revenue increased 2%. The number of attendees in 2016 increased 4% to 54,602. Average revenue per attendee declined slightly while average revenue per exhibitor increased 9%. The gross contribution margin decreased one point year-over-year.during 2022 was primarily due to the increase in revenue.
Backlog increased by $26.7 million, or 24%, from December 31, 2021 to December 31, 2022. The change in our method of calculating backlog noted above contributed approximately 13 percentage points to the backlog growth rate.
Talent Assessment & Other
|
| | | | |
| | As Of And For The Year Ended December 31, 2017 | |
| Financial Measurements: | | |
| Revenues (1) | $ | 174,650 |
| |
| Gross contribution (1) | $ | 90,249 |
| |
| Gross contribution margin | 52 | % | |
See Note 2 — Acquisitions and Divestiture and Note 16 — Subsequent Events in the Notes to Consolidated Financial Statements for information concerning the pending disposal of a significant component of this reportable segment.
LIQUIDITY AND CAPITAL RESOURCES
We finance our operations through cash generated from our operating activities and borrowings (Note 5borrowings. Note 6 — Debt in the Notes to the Consolidated Financial Statements provides additional information regarding the Company's 2016 Credit Agreement and otherCompany’s outstanding debt obligations).obligations. At December 31, 2017,2022, we had $538.9$698.0 million of cash and cash equivalents and $558.0 millionapproximately $1.0 billion of available borrowing capacity on the revolving credit facility portion ofunder our 20162020 Credit Agreement. We believe that the Company has adequate liquidity and access to capital markets to meet its currently anticipated needs to includefor both the payment ofnext twelve months and the transition tax liability related to the Tax Cuts and Jobs Act of 2017. Note 10 — Income Taxes in the Notes to the Consolidated Financial Statements provides information related to the Tax Cuts and Jobs Act of 2017.foreseeable future.
We have historically generated significant cash flows from our operating activities. Our operating cash flow has been continuously maintained and enhanced by the leverage characteristics of our subscription-based business model in our Research segment, which is our largest business segment. Revenues in our Research segment increased 33% in 2017 compared to 2016, and historically has constituted 75%a significant portion of our total revenues in both 2017 and 2016.revenues. The majority of our Research customer contracts are paid in advance and, combined with a strong customer retention rate and high incremental margins, has resulted in continuously strong operating cash flow. Our cashCash flow generation has also benefited from our continuingongoing 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.sales.
As of December 31, 2017, we had approximately $194.0 million of accumulated undistributed earnings in our non-U.S. subsidiaries. Our cash and cash equivalents are held in numerous locations throughout the world. Atworld with 30% held overseas at December 31, 2017, 97% of our cash and cash equivalents was held overseas, with a substantial portion representing accumulated undistributed earnings of our non-U.S. subsidiaries.2022. The Company intends to continue to reinvest substantially all of its accumulated undistributed foreign earnings, except in instances in which thewhere repatriation would result in minimal additional tax. As a result of the recently enacted U.S. Tax Cuts and Jobs Act of 2017, we envision that the income tax that would be payable if such earnings were repatriated would be minimal.
The following table below summarizes and explains the significant changes in ourthe Company’s cash and cash equivalentsbalances for the three-years ended December 31, 2017years indicated (in thousands): .
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | 2017 vs. 2016 | | 2016 vs. 2015 |
| | Year Ended December 31, 2017 | | Year Ended December 31, 2016 | | Increase (Decrease) | | Year Ended December 31, 2016 | | Year Ended December 31, 2015 | | Increase (Decrease) |
| Cash provided by operating activities | $ | 254,517 |
| | $ | 365,632 |
| | $ | (111,115 | ) | | $ | 365,632 |
| | $ | 345,561 |
| | $ | 20,071 |
|
| Cash used in investing activities | (2,745,574 | ) | | (84,049 | ) | | (2,661,525 | ) | | (84,049 | ) | | (242,357 | ) | | 158,308 |
|
| Cash provided by (used in) financing activities | 2,539,830 |
| | (174,686 | ) | | 2,714,516 |
| | (174,686 | ) | | (67,690 | ) | | (106,996 | ) |
| Net increase (decrease) in cash and cash equivalents | 48,773 |
| | 106,897 |
| | (58,124 | ) | | 106,897 |
| | 35,514 |
| | 71,383 |
|
| Effects of exchange rate changes | 25,902 |
| | (5,640 | ) | | 31,542 |
| | (5,640 | ) | | (27,840 | ) | | 22,200 |
|
| Beginning cash and cash equivalents | 474,233 |
| | 372,976 |
| | 101,257 |
| | 372,976 |
| | 365,302 |
| | 7,674 |
|
| Ending cash and cash equivalents (1) | $ | 548,908 |
| | $ | 474,233 |
| | $ | 74,675 |
| | $ | 474,233 |
| | $ | 372,976 |
| | $ | 101,257 |
|
| | | | | | | | | | | | | | | | | |
| | Year Ended December 31, | | Increase
(Decrease) |
| | 2022 | | 2021 | |
| Cash provided by operating activities | $ | 1,101,422 | | | $ | 1,312,470 | | | $ | (211,048) | |
| Cash used in investing activities | (117,558) | | | (80,467) | | | (37,091) | |
| Cash used in financing activities | (1,027,442) | | | (1,157,609) | | | 130,167 | |
| Net (decrease) increase in cash and cash equivalents and restricted cash | (43,578) | | | 74,394 | | | (117,972) | |
| Effects of exchange rates | (18,425) | | | (26,375) | | | 7,950 | |
| Beginning cash and cash equivalents and restricted cash | 760,602 | | | 712,583 | | | 48,019 | |
| Ending cash and cash equivalents and restricted cash | $ | 698,599 | | | $ | 760,602 | | | $ | (62,003) | |
(1) As of December 31, 2017, the Company had $538.9 million of cash and cash equivalents and an additional $10.0 million of cash classified as held-for-sale in its Consolidated Balance Sheet, for an ending cash and cash equivalents balance of $548.9 million.
2017 VERSUS 2016
Operating
Cash provided by operating activities was $254.5 million$1.1 billion and $1.3 billion in 2017 compared to $365.6 million in 2016.2022 and 2021, respectively. The declineyear-over-year decrease was primarily due to (i) a decline in net income, which was $3.3$166.9 million of insurance proceeds received in the 20172021 period comparedrelated to $193.6 million2020 event cancellation claims, as well as higher commission and interest payments in the 2016 period; (ii) unfavorable changes in working capital in 2017 compared to 2016; and (iii) substantially higher cash payments for bonuses, commissions, interest on our borrowings, and acquisition and integration costs in the 2017 period compared to 2016.2022, partially offset by reduced income tax payments.
Investing
Cash used in investing activities was $2.7 billion$117.6 million and $80.5 million in 2017 compared2022 and 2021, respectively. The increase from 2021 to $84.0 million2022 was the result of cash used in 2016. increased capital expenditures primarily due to higher capitalized software and computer equipment additions, partially offset by lower spending on acquisitions.
Financing
Cash used in 2017financing activities was substantially higher primarily$1.0 billion and $1.2 billion in 2022 and 2021, respectively. During the 2022 period, we used $1.0 billion of cash for share repurchases and paid a net $5.9 million in debt principal repayments. During the 2021 period, we issued $600.0 million of 3.625% Senior Notes due 2029, and repaid $100.0 million on our term loan facility under the 2020 Credit Agreement with a portion of the proceeds from the issuance of the 2029 Notes. During 2021, we used $1.7 billion for share repurchases. Additionally during 2021, we paid $7.3 million in deferred financing fees related to the acquisitions of CEB and L2 in April 2017 and March 2017, respectively.our financing activities. See Note 26 — Acquisitions and DivestitureDebt in the Notes to the Consolidated Financial Statements provides additional information regarding the Company's acquisitions. We also made additional investment in capital expenditures in 2017, with $110.8 million invested in 2017 compared to $49.9 million in 2016.
Financing
Cash provided byCompany’s financing activities was $2.5 billion in 2017 compared to cash used of $174.7 million in 2016. During the 2017 period, the Company borrowed a total of approximately $3.0 billion and paid: (i) $404.4 million in principal repayments, including $300.0 million for the senior unsecured 364-day Bridge Credit Facility; (ii) $51.2 million for deferred financing fees on borrowings; and (iii) $41.3 million for share repurchases. During the 2016 period, the Company used $59.0 million in cash for share repurchases and $125.0 million for debt.2021.
2016 VERSUS 2015
Operating
Operating cash flow increased by $20.1 million, or 6%, in 2016 compared to 2015. The 2016 increase was primarily due to higher net income and the adoption of ASU No. 2016-09. Partially offsetting these increases were higher cash payments for acquisition and integration costs, bonus and commissions, and interest on our borrowings.
Investing
We used $84.0 million of cash in our investing activities in 2016 compared to $242.4 million of cash used in 2015. Cash used in 2015 was substantially higher due to additional expenditures for acquisitions.
Financing
Cash used was $174.7 million in 2016, which consisted of $59.0 million paid for share repurchases and $125.0 million for payments and fees on debt, which was partially offset by $9.3 million in cash realized from employee share-related activities. In the 2015 period the Company used $67.7 million in cash in its financing activities, with $509.0 million in cash used for share repurchases, while net borrowings on debt and employee share-related activities provided cash of $441.3 million.
OBLIGATIONS AND COMMITMENTS
Debt
As of December 31, 2017,2022, the Company had $3.3$2.5 billion of principal amount of debt outstanding. Note 56 — Debt in the Notes to the Consolidated Financial Statements provides additional information regarding the Company'sCompany’s outstanding debt obligations.
Off-Balance Sheet Arrangements
Through December 31, 2017, we have2022, the Company has not entered into any material off-balance sheet arrangements or transactions with unconsolidated entities or other persons.
Contractual Cash Commitments
The Company has certain commitments that contractually require future cash payments. The table below summarizes the Company'sCompany’s future contractual cash commitments as of December 31, 20172022 (in thousands):.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Commitment Description | | Due In Less Than
1 Year | | Due In 2-3
Years | | Due In 4-5
Years | | Due In More Than
5 Years | | Total |
| Debt – principal, interest, and commitment fees (1) | | $ | 114,557 | | | $ | 482,490 | | | $ | 178,861 | | | $ | 2,361,026 | | | $ | 3,136,934 | |
| Operating leases (2) | | 148,675 | | | 247,687 | | | 218,485 | | | 299,612 | | | 914,459 | |
| Deferred compensation arrangements (3) | | 10,352 | | | 13,814 | | | 10,115 | | | 62,360 | | | 96,641 | |
| Other (4) | | 26,715 | | | 59,813 | | | 133,758 | | | 45,954 | | | 266,240 | |
| Totals | | $ | 300,299 | | | $ | 803,804 | | | $ | 541,219 | | | $ | 2,768,952 | | | $ | 4,414,274 | |
|
| | | | | | | | | | | | | | | | | | | | |
| Commitment Description: | | Due In Less Than 1 Year | | Due In 2-3 Years | | Due In 4-5 Years | | Due In More Than 5 Years | | Total |
| Debt – principal and interest (1) | | $ | 469,392 |
| | $ | 492,579 |
| | $ | 1,691,395 |
| | $ | 1,396,750 |
| | $ | 4,050,116 |
|
| Operating leases (2) | | 129,570 |
| | 235,155 |
| | 203,596 |
| | 727,405 |
| | 1,295,726 |
|
| Deferred compensation arrangements (3) | | 27,821 |
| | 13,968 |
| | 9,296 |
| | 46,798 |
| | 97,883 |
|
| Tax Cuts and Job Act - transition tax (4) | | 3,066 |
| | 6,132 |
| | 6,132 |
| | 23,010 |
| | 38,340 |
|
| Other (5) | | 18,980 |
| | 37,083 |
| | 17,987 |
| | 32,706 |
| | 106,756 |
|
| Totals | | $ | 648,829 |
| | $ | 784,917 |
| | $ | 1,928,406 |
| | $ | 2,226,669 |
| | $ | 5,588,821 |
|
| |
(1) | Principal repayments of the Company's debt obligations are classified in the table based on the contractual repayment dates. However, the Due In Less Than 1 Year category includes a $255.0 million revolver principal payment the Company made in January 2018 which was not contractually due until 2022 (Due In 4-5 Years). Interest payments due were based on the effective interest rates as of December 31, 2017. Note 5 — Debt in the Notes to the Consolidated Financial Statements provides information regarding the Company's debt obligations. |
| |
(2) | The Company leases various facilities, furniture, computer equipment, automobiles , and equipment under non-cancelable operating lease agreements expiring between 2018 and 2032. See Note 1 — Business and Significant Accounting Policies in the Notes to the Consolidated Financial Statements for additional information on the Company's leases. The total commitment excludes approximately $284.0 million of estimated income from the subleasing of certain facilities. |
| |
(3) | The Company has supplemental deferred compensation arrangements with certain of its employees. Amounts payable with known payment dates have been classified in the above table based on those scheduled payment dates. Amounts payable whose payment dates are unknown have been included in the Due In More Than 5 Years category since the Company cannot determine when the amounts will be paid. See Note 13 — Employee Benefits in the Notes to the Consolidated Financial Statements for additional information regarding the arrangement. |
| |
(4) | The amount due represents the Company's provisional estimate of the one-time transition tax liability under the Tax Cut and Jobs Act of 2017. The Company currently expects to pay the transition tax over approximately eight years. |
| |
(5) | The Other category includes (i) contractual commitments for software, building maintenance, telecom, and other services; and (ii) projected cash contributions to the Company's defined benefit pension plans. See Note 13 — Employee Benefits in the Notes to the Consolidated Financial Statements for additional information regarding the Company's defined benefit pension plans. |
(1)Principal repayments of the Company’s debt obligations were classified in the above table based on the contractual repayment dates. Interest payments were based on the effective interest rates as of December 31, 2022. Commitment fees were based on unused balances and commitment rates as of December 31, 2022. Note 6 — Debt in the Notes to Consolidated Financial Statements provides information regarding the Company’s debt obligations and interest rate swap contracts.
(2)The Company leases various facilities, automobiles, computer equipment and other assets under non-cancelable operating lease agreements expiring between 2023 and 2038. The total commitment excludes approximately $252.3 million of estimated future cash receipts from the Company’s subleasing arrangements. Note 1 — Business and Significant Accounting Policies and Note 7 — Leases in the Notes to Consolidated Financial Statements provide additional information regarding the Company’s leases.
(3)The Company has supplemental deferred compensation arrangements with certain of its employees. Amounts payable with known payment dates have been classified in the above table based on those scheduled payment dates. Amounts payable whose payment dates are unknown have been included in the Due In More Than 5 Years category because the Company cannot determine when the amounts will be paid. Note 15 — Employee Benefits in the Notes to Consolidated Financial Statements provides additional information regarding the Company’s supplemental deferred compensation arrangements.
(4)Other includes: (i) contractual commitments (a) for software, telecom and other services and (b) to secure sites for our Conferences business; and (ii) projected cash contributions to the Company’s defined benefit pension plans. Note 15 — Employee Benefits in the Notes to Consolidated Financial Statements provides additional information regarding the Company’s defined benefit pension plans.
In addition to the contractual cash commitments included in the above table, above, the Company has other payables and liabilities that may be legally enforceable but are not considered contractual commitments. Information regarding the Company'sCompany’s payables and liabilities is included in Note 45 — Accounts Payable and Accrued and Other Liabilities in the Notes to the Consolidated Financial Statements.
QUARTERLY FINANCIAL DATA
The following tables present our quarterly operating results for the two-year period ended December 31:
|
| | | | | | | | | | | | | | | | |
| 2017 | | | | | | | | |
| (In thousands, except per share data) | | First | | Second | | Third | | Fourth |
| Revenues | | $ | 625,169 |
| | $ | 843,731 |
| | $ | 828,085 |
| | $ | 1,014,509 |
|
| Operating income (loss) | | 53,514 |
| | (98,388 | ) | | (24,349 | ) | | 62,894 |
|
| Net income (loss) (1) | | 36,433 |
| | (92,281 | ) | | (48,180 | ) | | 107,307 |
|
| Net income (loss) per share (1), (2): | | |
| | |
| | | | |
|
| Basic | | $ | 0.44 |
| | $ | (1.03 | ) | | $ | (0.53 | ) | | $ | 1.18 |
|
| Diluted | | $ | 0.43 |
| | $ | (1.03 | ) | | $ | (0.53 | ) | | $ | 1.16 |
|
|
| | | | | | | | | | | | | | | | |
| 2016 | | | | | | | | |
| (In thousands, except per share data) | | First | | Second | | Third | | Fourth |
| Revenues | | $ | 557,266 |
| | $ | 609,998 |
| | $ | 574,059 |
| | $ | 703,217 |
|
| Operating income | | 64,429 |
| | 83,299 |
| | 48,726 |
| | 108,687 |
|
| Net income | | 44,987 |
| | 51,626 |
| | 30,484 |
| | 66,485 |
|
| Net income per share (2) | | |
| | |
| | | | |
|
| Basic | | $ | 0.55 |
| | $ | 0.63 |
| | $ | 0.37 |
| | $ | 0.80 |
|
| Diluted | | $ | 0.54 |
| | $ | 0.62 |
| | $ | 0.36 |
| | $ | 0.79 |
|
| |
(1) | In December 2017 the Company recorded a $59.6 million one-time tax benefit related to the Tax Cuts and Jobs Act of 2017. The tax benefit increased our net income and our basic and diluted income per share for the fourth quarter of 2017 by approximately $0.66 per share and $0.65 per share, respectively. See Note 10 — Income Taxes in the Notes to the Consolidated Financial Statements for additional information regarding the impact of the Tax Cuts and Jobs Act of 2017. |
| |
(2) | The aggregate of the four quarters’ basic and diluted earnings per common share may not equal the reported full calendar year amounts due to the effects of share repurchases, dilutive equity compensation, and rounding. |
RECENTLY ISSUED ACCOUNTING STANDARDS
The FASB has issued accounting standards that havehad not yet become effective as of December 31, 2022 and that may impact the Company’s consolidated financial statements or relatedits disclosures in future periods. Note 1 — Business and Significant Accounting Policies in the Notes to the Consolidated Financial Statements herein provides information regarding thesethose accounting standards.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
INTEREST RATE RISK
AtAs of December 31, 2017,2022, the Company had $3.3$2.5 billion in total debt principal outstanding. Note 6 — Debt in the Notes to Consolidated Financial Statements provides additional information regarding the Company’s outstanding debt. debt obligations.
Approximately $2.5 billion$282.0 million of the Company'sCompany’s total debt outstanding as of December 31, 20172022 was based on a floating base rate of interest, which potentially exposes the Company to increases in interest rates. However, we partially reduce our overall exposure to changes in interest ratesrate increases through our interest rate swap contracts,contract, which effectively convertsconvert the floating base interest raterates on a portionall of theseour variable rate borrowings to fixed rates. Thus we are exposed to base interest rate risk on floating rate borrowings only in excess of any amounts that are not hedged. At December 31, 2017, we had unhedged interest rate risk on approximately $1.1 billion of borrowings. As an indication of our potential exposure to changes in interest rates, a hypothetical 25 basis point increase or decrease in interest rates could change our annual pre-tax interest expense by approximately $2.8 million.
FOREIGN CURRENCY RISK
For both years ended December 31, 2017 and 2016, 42%A significant portion of our revenues wereare typically derived from sales outside of the United States. Among the major foreign currencies in which we conduct business are the Euro, the British Pound, the Japanese Yen, the Australian dollar and the Canadian dollar. The reporting currency of our consolidated financial statementsConsolidated Financial Statements is the U.S. dollar. As the values
of the foreign currencies in which we operate fluctuate over time relative to the U.SU.S. dollar, the Company is exposed to both foreign currency translation and transaction risk.
Translation risk arises as our foreign currency assets and liabilities are translated into U.S. dollars sincebecause the functional currencies of our foreign operations are generally denominated in the local currency. Adjustments resulting from the translation of these assets and liabilities are deferred and recorded as a component of stockholders’ equity (deficit).equity. A measure of the potential impact of foreign currency translation can be determined through a sensitivity analysis of our cash and cash equivalents. At December 31, 2017,2022, we had $538.9$698.0 million of cash and cash equivalents, (excluding cash held-for-sale), with a substantial portion denominated in foreign currencies. If the exchange rates of the foreign currencies we hold all changed in comparison to the U.S. dollar by 10%, the amount of cash and cash equivalents we would have reported on December 31, 2017 would2022 could have increased or decreased by approximately $28.0$42.9 million. The translation of our foreign currency revenues and expenses historically has not had a material impact on our consolidated earnings sincebecause movements in and among the major currencies in which we operate tend to impact our revenues and expenses fairly equally. However, our earnings could be impacted during periods of significant exchange rate volatility, or when some or all of the major currencies in which we operate move in the same direction against the U.SU.S. dollar.
Transaction risk arises when our foreign subsidiarieswe enter into transactionsa transaction that areis denominated in a currency that may differ from the local functional currency. As these transactions are translated into the local functional currency, a gain or loss may result, which is recorded in current period earnings. We typically enter into foreign currency forward exchange contracts to mitigate the effects of some of this foreign currency transaction risk. Our outstanding foreign currency forward exchange contracts as of December 31, 20172022 had an immaterial net unrealized loss. gain.
CREDIT RISK
Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of short-term, highly liquid investments classified as cash equivalents, accountsfees receivable, interest rate swap contracts and foreign currency forward exchange contracts. The majority of the Company’s cash and cash equivalents, interest rate swap contracts and its foreign currency forward exchange contracts are with large investment grade commercial banks. AccountsFees receivable balances deemed to be collectible from customers have limited concentration of credit risk due to our diverse customer base and geographic dispersion.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our consolidated financial statements for 2017, 2016,2022, 2021 and 2015,2020, together with the reports of KPMG LLP, our independent registered public accounting firm, are included herein in this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURESPROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
Management conducted an evaluation, as of December 31, 2017,2022, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a- 15(e)13a-15(e) and 15d- 15(e)15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), under the supervision and with the participation of our chief executive officer and chief financial officer. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that ourthe Company’s disclosure controls and procedures are effective in alerting them in a timely manner to material Company information required to be disclosed by us in reports filed or submitted under the Exchange Act.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Gartner management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Gartner’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017.2022. In making this assessment, management used the criteria set forth in the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment was reviewed with the Audit Committee of the Board of Directors.
Based on its assessment of internal control over financial reporting, management has concluded that, as of December 31, 2017,2022, Gartner’s internal control over financial reporting was effective. The effectiveness of management’s internal control over financial reporting as of December 31, 20172022 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report, which is included in this Annual Report on Form 10-K in Part IV, Item 15.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
The Company acquired two businesses in 2017, L2 and CEB. We are currentlyThere have been no changes in the process of integrating these businesses, evaluating their internal controls, and implementing the Company's internal control structure over these operations. Due to the timing of these acquisitions, we have excluded them from the scope of our Sarbanes-Oxley Section 404 report on internal control over financial reporting for our fiscal year ending December 31, 2017. This exclusion is in accordance with the general guidance issued by the Staff of the Securities and Exchange Commission that an assessment of a recent business acquisition may be omitted from management's report on internal control over financial reporting in the first year of consolidation. We expect to complete the implementation of our internal control structure over these acquisitions in 2018.
Other than the changes noted above, there has been no change in ourCompany’s internal control over financial reporting during the quarter ended December 31, 2017,2022 that hashave materially affected, or isare reasonably likely to materially affect, ourthe Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATIONINFORMATION.
Not applicable.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE GOVERNANCE.
The information required to be furnished pursuant to this item will beis incorporated by reference from the information set forth under the captions “The Board of Directors,” “Proposal One: Election of Directors,” “Executive Officers,” “Corporate Governance,” “Section“Delinquent Section 16(a) Beneficial Ownership Reporting Compliance”Reports” (if necessary) and “Miscellaneous“Proxy and Voting Information — Available Information” in the Company’s 2023 Proxy Statement to be filed with the SEC no later than April 30, 2018. If the Proxy Statement is not filed with the SEC by April 30, 2018, such information will be included in an amendment to this Annual Report filed by April 30, 2018.Statement. See also Item 1. Business — Available Information.
ITEM 11. EXECUTIVE COMPENSATION.
The information required to be furnished pursuant to this item is incorporated by reference from the information set forth under the caption “Executive Compensation”captions “Compensation Discussion & Analysis,” “Compensation Tables and Narrative Disclosures,” “The Board of Directors - Compensation of Directors,” “The Board of Directors - Director Compensation Table,” “Corporate Governance - Risk Oversight - Risk Assessment of Compensation Policies and Practices,” and “Corporate Governance - Compensation Committee” in the Company’s 2023 Proxy Statement to be filed with the SEC no later than April 30, 2018. If the Proxy Statement is not filed with the SEC by April 30, 2018, such information will be included in an amendment to this Annual Report filed by April 30, 2018. Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The information required to be furnished pursuant to this item will beis incorporated by reference from the information set forth under the captioncaptions “Compensation Tables and Narrative Disclosures — Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management” in the Company’s 2023 Proxy Statement to be filed with the SEC by April 30, 2018. If the Proxy Statement is not filed with the SEC by April 30, 2018, such information will be included in an amendment to this Annual Report filed by April 30, 2018. Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
The information required to be furnished pursuant to this item will beis incorporated by reference from the information set forth under the captions “Transactions With Related Persons” and “Corporate Governance — Director Independence” in the Company’s 2023 Proxy Statement to be filed with the SEC by April 30, 2018. If the Proxy Statement is not filed with the SEC by April 30, 2018, such information will be included in an amendment to this Annual Report filed by April 30, 2018. Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required to be furnished pursuant to this item will beis incorporated by reference from the information set forth under the caption “Principal Accountant Fees and Services”“Proposal Five: Ratification of Appointment of Independent Registered Public Accounting Firm” in the Company’s 2023 Proxy Statement to be filed with the SEC no later than April 30, 2018. If the Proxy Statement is not filed with the SEC by April 30, 2018, such information will be included in an amendment to this Annual Report filed by April 30, 2018.Statement.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) 1. and 2. Consolidated Financial Statements and Schedules
The reports of our independent registered public accounting firm and consolidated financial statements listed in the Index to Consolidated Financial Statements herein are filed as part of this report.
All financial statement schedules not listed in the Index have been omitted because the information required is not applicable or is shown in the consolidated financial statements or notes thereto.
3. Exhibits
|
| | | | | | | |
| EXHIBIT NUMBER | | DESCRIPTION OF DOCUMENT |
| | Agreement and Plan of Merger by and among the Company, Cobra Acquisition Corp. and CEB Inc., dated as of January 5, 2017. |
| | |
| | Restated Certificate of Incorporation of the Company. |
| | |
| | Bylaws asBy-laws of Gartner, Inc. (as amended through February 2, 2012.April 29, 2021). |
| | |
| | FormIndenture (including form of Certificate for Common StockNotes), dated as of June 2, 2005.22, 2020, among Gartner, Inc., the guarantors named therein and U.S. Bank National Association, as a trustee, relating to the $800,000,000 aggregate principal amount of 4.500% Senior Notes due 2028. |
| | |
| | Indenture (including form of Notes), dated as of September 28, 2020, among Gartner, Inc., the guarantors named therein and U.S. Bank National Association, as a trustee, relating to the $800,000,000 aggregate principal amount of 3.750% Senior Notes due 2030. |
| | |
| | Amended and Restated Credit Agreement, dated as of June 17, 2016,September 28, 2020, among the Company, the several lenders from time to time parties thereto, and JPMorgan Chase Bank, N.A. as administrative agent. |
| | |
| | Guarantee and Collateral Agreement, dated as of June 17, 2016, among the Company and certain of its subsidiaries, in favor of JPMorgan Chase Bank, N.A. as administrative agent. |
| | |
| | Commitment Letter among the Company, JPMorgan Chase Bank, N.A. and Goldman Sachs Bank USA, dated January 5, 2017. |
| | |
| | First Amendment to Credit Agreement, dated as of January 20, 2017, among the Company, the several lenders from time to time parties thereto, and JPMorgan Chase Bank, N.A. as administrative agent, filed as of January 24, 2017.
|
| | |
| | Second Amendment, dated as of March 20, 2017, among the Company, each other Loan Party party thereto,Gartner, Inc., the Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.
|
| | |
| | Incremental Amendment,Amended and Restated Guarantee and Collateral Agreement, dated as of April 5, 2017,September 28, 2020, among the Company,Gartner, Inc. each other Loan Party party thereto, the Lenderssubsidiary guarantor party thereto and JPMorgan Chase Bank, N.A., as administrative agent.
|
| | |
| | 364-Day Bridge Credit Agreement, dated as of April 5, 2017, among the Company, each other Loan Party party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.
|
| | |
| | Indenture (including form of Notes), dated as of March 30, 2017,June 18, 2021, among the Company,Gartner, Inc., the guarantors named therein and U.S. Bank National Association, as a trustee, relating to the $800,000,000$600,000,000 aggregate principal amount of 5.125%3.625% Senior Notes due 2025.
2029. |
| | |
| | Amended and Restated Lease dated April 16, 2010 between Soundview Farms and the Company for premises at 56 Top Gallant Road, 70 Gatehouse Road, and 88 Gatehouse Road, Stamford, Connecticut.Description of Gartner, Inc.’s Common Stock. |
| | |
| | First Amendment to Amended and Restated Lease dated April 16, 2010 between Soundview Farms and the Company for premises at 56 Top Gallant Road, 70 Gatehouse Road, and 88 Gatehouse Road, Stamford, Connecticut. |
| | |
| | 2011 Employee Stock Purchase Plan.Plan, as amended and restated, as of September 1, 2021. |
| | |
| | 2003 Long -TermLong-Term Incentive Plan, as amended and restated effective June 4, 2009.January 31, 2019. |
| | |
| | Gartner, Inc. Long-Term Incentive Plan, effective August 1, 2017. |
| | |
| | Second Amended and Restated Employment Agreement between Eugene A. Hall and the Company dated as of March 19, 2016.February 14, 2019. |
| | |
| | Amendment to Employment Agreement between Eugene A. Hall and the Company dated as of April 29, 2021. |
| | |
| | Company Deferred Compensation Plan, effective January 1, 2009. |
| | |
| | Form of 20172020 Stock Appreciation Right Agreement for executive officers. |
|
| | |
| | |
| | Form of 20172020 Performance Stock Unit Agreement for executive officers. |
| | |
| | Form of 20172021 Stock Appreciation Right Agreement for executive officers. |
| | |
| | Form of 2021 Performance Stock Unit Agreement for executive officers. |
| | |
| | Form of 2022 Stock Appreciation Right Agreement for executive officers. |
| | |
| | Form of 2022 Performance Stock Unit Agreement for executive officers. |
| | |
| | Form of 2023 Stock Appreciation Right Agreement for executive officers. |
| | |
| | Form of 2023 Performance Stock Unit Agreement for executive officers. |
| | |
| | Form of Restricted Stock Unit Agreement for Certain Officers.
non-employee directors. |
| | |
| | Enhanced Executive Rewards Policy. |
| | |
| | | | | | | | |
| | Separation Agreement and Release of Claims, dated October 12, 2017,July 13, 2022, between the Company and Per Anders Waern.
Jules Kaufman |
| | |
| | Subsidiaries of Registrant. |
| | |
| | Consent of Independent Registered Public Accounting Firm. |
| | |
| | Power of Attorney (see Signature Page). |
| | |
| | Certification of chief executive officer under Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
| | Certification of chief financial officer under Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
| | Certification under Section 906 of the Sarbanes-Oxley Act of 2002. |
|
| | |
*101.INS* | | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| | |
| 101.SCH* | | XBRL Taxonomy Extension Schema Document. |
| | |
| 101.CAL* | | XBRL Taxonomy Extension Calculation Linkbase Document. |
| | |
| 101.LAB* | | XBRL Taxonomy Extension Label Linkbase Document. |
| | |
| 101.PRE* | | XBRL Taxonomy Extension Presentation Linkbase Document. |
| | |
| 101.DEF* | | XBRL Taxonomy Extension Definition Linkbase Document. |
| | |
| 104* | | Cover Page Interactive Data File, formatted in Inline XBRL (included as Exhibit 101). |
| | | | | |
| * | Filed with this document. |
| + | |
+ | Management compensation plan or arrangement. |
| (1) | |
(1) | Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 5, 2017. |
| |
(2) | Incorporated by reference from the Company’s Current Report on Form 8-K filed on July 6, 2005. |
| (2) | Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 5, 2021. |
| (3) | Incorporated by reference from the Company’s Current Report on Form 8-K filed on February 7,2012.June 23, 2020. |
| (4) | |
(4) | Incorporated by reference from the Company’s QuarterlyCurrent Report on form 10-QForm 8-K filed on August 4, 2016.September 28, 2020. |
| |
| (5) | Incorporated by reference from the Company’s Current Report on formForm 8-K filed on January 24, 2017.June 21, 2021. |
| (6) | |
(6) | Incorporated by reference from the Company’s CurrentAnnual Report on form 8-KForm 10-K filed on March 21, 2017.February 23, 2022. |
| (7) | |
(7) | Incorporated by reference from the Company’s Current Report on form 8-K filed on April 6, 2017. |
| |
(8) | Incorporated by reference from the Company’s Current Report on form 8-K filed on March 30, 2017. |
| |
(9) | Incorporated by reference from the Company’s Quarterly Report on form 10-Q filed on August 9, 2010. |
| |
(10) | Incorporated by reference from the Company’s Proxy Statement (Schedule 14A) filed on April 18, 2011.19, 2021. |
| (8) | |
(11) | Incorporated by reference from the Company’s Proxy Statement (Schedule 14A) filed on April 21, 2009 |
| |
(12) | Incorporated by reference from the Company’s Current Report on form 8-K filed on August 2, 2017. |
| |
(13) | Incorporated by reference from the Company’s QuarterlyAnnual Report on Form 10-Q10-K filed on May 5, 2016.February 22, 2019. |
| (9) | |
(14) | Incorporated by reference from the Company’s Annual Report on Form 10-K filed on February 20, 2009. |
| |
(15)(10) | Incorporated by reference from the Company’s CurrentAnnual Report on Form 8-K dated10-K filed on February 7, 2017.19, 2020. |
| (11) | Incorporated by reference from the Company’s Annual Report on Form 10-K filed on February 24, 2021. |
(16)(12) | Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on NovemberAugust 1, 2018. |
| (13) | Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on August 2, 2017.2022. |
| |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
GARTNER, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
All financial statement schedules have been omitted because the information required is not applicable or is shown in the consolidated financial statementsConsolidated Financial Statements or notes thereto.
Report of Independent Registered Public Accounting Firm
To the stockholdersStockholders and boardBoard of directorsDirectors
Gartner, Inc.:
Opinion on the ConsolidatedFinancial Statements
We have audited the accompanying consolidated balance sheets of Gartner, Inc. and subsidiaries (the Company) as of December 31, 20172022 and 2016,2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity, (deficit), and cash flows for each of the years in the three‑yearthree-year period ended December 31, 2017,2022, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172022 and 2016,2021, and the results of its operations and its cash flows for each of the years in the three‑yearthree-year period ended December 31, 2017,2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017,2022, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission”,Commission, and our report dated February 22, 201816, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Unrecognized tax benefits
As discussed in Note 1 to the consolidated financial statements, the Company recognizes the tax benefit from an uncertain tax position when it believes such position is more likely than not of being sustained if challenged. As of December 31, 2022, the Company has recorded gross unrecognized tax benefits of $137.2 million. Recognized tax positions are measured at the largest amount of benefit with greater than a 50 percent likelihood of being realized. The Company uses estimates and assumptions in determining the amount of unrecognized tax benefits.
We identified the assessment of unrecognized tax benefits related to transfer pricing as a critical audit matter. Complex auditor judgment was required in evaluating the Company’s interpretation of tax law and its estimate of the ultimate resolution of its tax positions.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s unrecognized tax benefits process, including transfer pricing. We involved tax and transfer pricing professionals with specialized skills and knowledge, who assisted in assessing unrecognized tax benefits by:
•evaluating the Company’s interpretation of tax laws and income tax consequences of intercompany transactions
•assessing transfer pricing practices for compliance with relevant tax laws and regulations
•analyzing the Company’s tax positions and determination of unrecognized tax benefits, including the associated effect in other jurisdictions
In addition, we evaluated the Company’s ability to estimate its unrecognized tax benefits by comparing historical unrecognized tax benefits to actual results upon conclusion of examinations by applicable taxing authorities.
/s/ KPMG LLP
We have served as the Company’s auditor since 1996.
New York, New York
February 22, 201816, 2023
Report of Independent Registered Public Accounting Firm
To the stockholdersStockholders and boardBoard of directorsDirectors
Gartner, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Gartner, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2017,2022, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2022, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 20172022 and 2016,2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity, (deficit), and cash flows for each of the years in the three-year period ended December 31, 2017,2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 22, 201816, 2023 expressed an unqualified opinion on those consolidated financial statements.
The Company acquired L2, Inc. on March 9, 2017 and CEB, Inc. on April 5, 2017. Management excluded these businesses from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2017. L2, Inc. and CEB, Inc. represented approximately 12% and 16% of the Company’s total consolidated assets and total consolidated revenues, respectively, as of and for the year ended December 31, 2017. Our audit of internal control over financial reporting of Gartner, Inc. and subsidiaries also excluded an evaluation of the internal control over financial reporting of L2, Inc. and CEB, Inc.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
New York, New York
February 22, 2018
16, 2023
GARTNER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
|
| | | | | | | |
| | December 31, |
| | 2017 | | 2016 |
| ASSETS | |
| | |
|
| Current assets: | |
| | |
|
| Cash and cash equivalents | $ | 538,908 |
| | $ | 474,233 |
|
| Fees receivable, net of allowances of $12,700 and $7,400 respectively | 1,176,843 |
| | 643,013 |
|
| Deferred commissions | 205,260 |
| | 141,410 |
|
| Prepaid expenses and other current assets | 124,632 |
| | 84,540 |
|
| Assets held-for-sale | 542,965 |
| | — |
|
| Total current assets | 2,588,608 |
| | 1,343,196 |
|
| Property, equipment and leasehold improvements, net | 221,507 |
| | 121,606 |
|
| Goodwill | 2,987,294 |
| | 738,453 |
|
| Intangible assets, net | 1,292,022 |
| | 76,801 |
|
| Other assets | 193,742 |
| | 87,279 |
|
| Total Assets | $ | 7,283,173 |
| | $ | 2,367,335 |
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | |
|
| Current liabilities: | |
| | |
|
| Accounts payable and accrued liabilities | $ | 666,821 |
| | $ | 440,771 |
|
| Deferred revenues | 1,630,198 |
| | 989,478 |
|
| Current portion of long-term debt | 379,721 |
| | 30,000 |
|
| Liabilities held-for-sale | 145,845 |
| | — |
|
| Total current liabilities | 2,822,585 |
| | 1,460,249 |
|
| Long-term debt, net of deferred financing fees | 2,899,124 |
| | 664,391 |
|
| Other liabilities | 577,999 |
| | 181,817 |
|
| Total Liabilities | 6,299,708 |
| | 2,306,457 |
|
| Stockholders’ Equity: | |
| | |
|
| Preferred stock: | |
| | |
|
| $.01 par value, authorized 5,000,000 shares; none issued or outstanding | — |
| | — |
|
| Common stock: | |
| | |
|
| $.0005 par value, authorized 250,000,000 shares for both periods; 163,602,067 shares issued at December 31, 2017 and 156,234,415 shares issued at December 31, 2016 | 82 |
| | 78 |
|
| Additional paid-in capital | 1,761,383 |
| | 863,127 |
|
| Accumulated other comprehensive income (loss), net | 1,508 |
| | (49,683 | ) |
| Accumulated earnings | 1,647,284 |
| | 1,644,005 |
|
| Treasury stock, at cost, 72,779,205 and 73,583,172 common shares, respectively | (2,426,792 | ) | | (2,396,649 | ) |
| Total Stockholders’ Equity | 983,465 |
| | 60,878 |
|
| Total Liabilities and Stockholders’ Equity | $ | 7,283,173 |
| | $ | 2,367,335 |
|
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 697,999 | | | $ | 756,493 | |
| Fees receivable, net of allowances of $9,000 and $6,500, respectively | 1,556,786 | | | 1,365,180 | |
| Deferred commissions | 363,079 | | | 380,569 | |
| Prepaid expenses and other current assets | 119,207 | | | 117,838 | |
| Assets held-for-sale | 49,036 | | | — | |
| Total current assets | 2,786,107 | | | 2,620,080 | |
| Property, equipment and leasehold improvements, net | 264,581 | | | 273,562 | |
| Operating lease right-of-use assets | 436,592 | | | 548,258 | |
| Goodwill | 2,930,211 | | | 2,951,317 | |
| Intangible assets, net | 584,714 | | | 714,418 | |
| Other assets | 297,531 | | | 308,689 | |
| Total Assets | $ | 7,299,736 | | | $ | 7,416,324 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable and accrued liabilities | $ | 1,115,198 | | | $ | 1,134,814 | |
| Deferred revenues | 2,443,762 | | | 2,238,035 | |
| Current portion of long-term debt | 7,800 | | | 5,931 | |
| Liabilities held-for-sale | 30,840 | | | — | |
| Total current liabilities | 3,597,600 | | | 3,378,780 | |
| Long-term debt, net of deferred financing fees | 2,453,607 | | | 2,456,833 | |
| Operating lease liabilities | 597,267 | | | 697,766 | |
| Other liabilities | 423,464 | | | 511,887 | |
| Total Liabilities | 7,071,938 | | | 7,045,266 | |
| Stockholders’ Equity: | | | |
| Preferred stock: | | | |
| $0.01 par value, authorized 5,000,000 shares; none issued or outstanding | — | | | — | |
| Common stock: | | | |
| $0.0005 par value, 250,000,000 shares authorized; 163,602,067 shares issued for both periods | 82 | | | 82 | |
| Additional paid-in capital | 2,179,604 | | | 2,074,896 | |
| Accumulated other comprehensive loss, net | (101,610) | | | (81,431) | |
| Accumulated earnings | 3,856,826 | | | 3,049,027 | |
| Treasury stock, at cost, 84,428,513 and 81,205,504 common shares, respectively | (5,707,104) | | | (4,671,516) | |
| Total Stockholders’ Equity | 227,798 | | | 371,058 | |
| Total Liabilities and Stockholders’ Equity | $ | 7,299,736 | | | $ | 7,416,324 | |
See Notes to Consolidated Financial Statements.
GARTNER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| | | | Year Ended December 31, | | Year Ended December 31, |
| | 2017 | | 2016 | | 2015 | | 2022 | | 2021 | | 2020 |
| Revenues: | |
| | |
| | |
| Revenues: | | | | | |
| Research | $ | 2,471,280 |
| | $ | 1,857,001 |
| | $ | 1,614,904 |
| Research | $ | 4,604,791 | | | $ | 4,101,392 | | | $ | 3,602,892 | |
| Conferences | | Conferences | 389,273 | | | 214,449 | | | 120,140 | |
| Consulting | 327,661 |
| | 318,934 |
| | 296,317 |
| Consulting | 481,782 | | | 418,121 | | | 376,371 | |
| Events | 337,903 |
| | 268,605 |
| | 251,835 |
| |
| Talent Assessment & Other | 174,650 |
| | — |
| | — |
| |
| | Total revenues | 3,311,494 |
| | 2,444,540 |
| | 2,163,056 |
| Total revenues | 5,475,846 | | | 4,733,962 | | | 4,099,403 | |
| Costs and expenses: | |
| | |
| | |
| Costs and expenses: | | | | | |
| Cost of services and product development | 1,320,198 |
| | 945,648 |
| | 839,076 |
| Cost of services and product development | 1,693,771 | | | 1,444,093 | | | 1,345,024 | |
| Selling, general and administrative | 1,599,004 |
| | 1,089,184 |
| | 962,677 |
| Selling, general and administrative | 2,480,944 | | | 2,155,658 | | | 2,038,963 | |
| Depreciation | 63,897 |
| | 37,172 |
| | 33,789 |
| Depreciation | 93,410 | | | 102,802 | | | 93,925 | |
| Amortization of intangibles | 176,274 |
| | 24,797 |
| | 13,342 |
| Amortization of intangibles | 98,536 | | | 109,603 | | | 125,059 | |
| Acquisition and integration charges | 158,450 |
| | 42,598 |
| | 26,175 |
| Acquisition and integration charges | 9,079 | | | 6,055 | | | 6,282 | |
| Total costs and expenses | 3,317,823 |
| | 2,139,399 |
| | 1,875,059 |
| Total costs and expenses | 4,375,740 | | | 3,818,211 | | | 3,609,253 | |
| Operating (loss) income | (6,329 | ) | | 305,141 |
| | 287,997 |
| |
| Operating income | | Operating income | 1,100,106 | | | 915,751 | | | 490,150 | |
| Interest income | 3,011 |
| | 2,449 |
| | 1,766 |
| Interest income | 4,880 | | | 1,893 | | | 2,087 | |
| Interest expense | (127,947 | ) | | (27,565 | ) | | (22,548 | ) | Interest expense | (126,203) | | | (118,513) | | | (115,636) | |
| Other income, net | 3,448 |
| | 8,406 |
| | 4,996 |
| |
| (Loss) income before income taxes | (127,817 | ) | | 288,431 |
| | 272,211 |
| |
| (Benefit) provision for income taxes | (131,096 | ) | | 94,849 |
| | 96,576 |
| |
| Gain on event cancellation insurance claims | | Gain on event cancellation insurance claims | — | | | 152,310 | | | — | |
| | Loss on extinguishment of debt | | Loss on extinguishment of debt | — | | | — | | | (44,814) | |
| Other income (expense), net | | Other income (expense), net | 48,412 | | | 18,429 | | | (5,654) | |
| Income before income taxes | | Income before income taxes | 1,027,195 | | | 969,870 | | | 326,133 | |
| Provision for income taxes | | Provision for income taxes | 219,396 | | | 176,310 | | | 59,388 | |
| Net income | $ | 3,279 |
| | $ | 193,582 |
| | $ | 175,635 |
| Net income | $ | 807,799 | | | $ | 793,560 | | | $ | 266,745 | |
| | | | | | | | | | | | |
| Net income per share: | |
| | |
| | |
| Net income per share: | | | | | |
| Basic | $ | 0.04 |
| | $ | 2.34 |
| | $ | 2.09 |
| Basic | $ | 10.08 | | | $ | 9.33 | | | $ | 2.99 | |
| Diluted | $ | 0.04 |
| | $ | 2.31 |
| | $ | 2.06 |
| Diluted | $ | 9.96 | | | $ | 9.21 | | | $ | 2.96 | |
| Weighted average shares outstanding: | |
| | |
| | |
| Weighted average shares outstanding: | | | | | |
| Basic | 88,466 |
| | 82,571 |
| | 83,852 |
| Basic | 80,178 | | | 85,026 | | | 89,315 | |
| Diluted | 89,790 |
| | 83,820 |
| | 85,056 |
| Diluted | 81,067 | | | 86,177 | | | 90,017 | |
See Notes to Consolidated Financial Statements.
GARTNER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
| | | | Year Ended December 31, | | Year Ended December 31, |
| | 2017 | | 2016 | | 2015 | | 2022 | | 2021 | | 2020 |
| Net income | $ | 3,279 |
| | $ | 193,582 |
| | $ | 175,635 |
| Net income | $ | 807,799 | | | $ | 793,560 | | | $ | 266,745 | |
| Other comprehensive income (loss), net of tax | |
| | |
| | |
| |
| Other comprehensive income (loss), net of tax: | | Other comprehensive income (loss), net of tax: | | | | | |
| Foreign currency translation adjustments | 47,363 |
| | (5,986 | ) | | (23,089 | ) | Foreign currency translation adjustments | (39,679) | | | (6,621) | | | 10,375 | |
| Interest rate hedges - net change in deferred gain or loss | 3,892 |
| | 1,670 |
| | (1,339 | ) | |
| Pension plans - net change in deferred actuarial loss | (64 | ) | | (965 | ) | | 1,196 |
| |
| Interest rate swaps - net change in deferred gain or loss | | Interest rate swaps - net change in deferred gain or loss | 17,075 | | | 21,781 | | | (30,940) | |
| Pension plans - net change in deferred actuarial gain or loss | | Pension plans - net change in deferred actuarial gain or loss | 2,425 | | | 2,637 | | | (725) | |
| Other comprehensive income (loss), net of tax | 51,191 |
| | (5,281 | ) | | (23,232 | ) | Other comprehensive income (loss), net of tax | (20,179) | | | 17,797 | | | (21,290) | |
| Comprehensive income | $ | 54,470 |
| | $ | 188,301 |
| | $ | 152,403 |
| Comprehensive income | $ | 787,620 | | | $ | 811,357 | | | $ | 245,455 | |
See Notes to Consolidated Financial Statements.
GARTNER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(IN THOUSANDS)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss), Net | | Accumulated Earnings | | Treasury Stock | | Total Stockholders’ Equity (Deficit) |
| Balance at December 31, 2014 | $ | 78 |
| | $ | 764,433 |
| | $ | (21,170 | ) | | $ | 1,275,049 |
| | $ | (1,857,219 | ) | | $ | 161,171 |
|
| Net income | — |
| | — |
| | — |
| | 175,635 |
| | — |
| | 175,635 |
|
| Other comprehensive loss | — |
| | — |
| | (23,232 | ) | | — |
| | — |
| | (23,232 | ) |
| Issuances under stock plans | — |
| | (5,964 | ) | | — |
| | — |
| | 13,495 |
| | 7,531 |
|
| Stock compensation tax benefits | — |
| | 13,928 |
| | — |
| | — |
| | — |
| | 13,928 |
|
| Common share repurchases | — |
| | — |
| | — |
| | — |
| | (513,582 | ) | | (513,582 | ) |
| Stock compensation expense | — |
| | 46,149 |
| | — |
| | — |
| | — |
| | 46,149 |
|
| Balance at December 31, 2015 | $ | 78 |
| | $ | 818,546 |
| | $ | (44,402 | ) | | $ | 1,450,684 |
| | $ | (2,357,306 | ) | | $ | (132,400 | ) |
| Adoption of ASU No. 2016-09 | — |
| | — |
| | — |
| | (261 | ) | | — |
| | (261 | ) |
| Net income | — |
| | — |
| | — |
| | 193,582 |
| | — |
| | 193,582 |
|
| Other comprehensive loss | — |
| | — |
| | (5,281 | ) | | — |
| | — |
| | (5,281 | ) |
| Issuances under stock plans | — |
| | (2,080 | ) | | — |
| | — |
| | 12,419 |
| | 10,339 |
|
| Common share repurchases | — |
| | — |
| | — |
| | — |
| | (51,762 | ) | | (51,762 | ) |
| Stock compensation expense | — |
| | 46,661 |
| | — |
| | — |
| | — |
| | 46,661 |
|
| Balance at December 31, 2016 | $ | 78 |
| | $ | 863,127 |
| | $ | (49,683 | ) | | $ | 1,644,005 |
| | $ | (2,396,649 | ) | | $ | 60,878 |
|
| Net income | — |
| | — |
| | — |
| | 3,279 |
| | — |
| | 3,279 |
|
| Other comprehensive income | — |
| | — |
| | 51,191 |
| | — |
| | — |
| | 51,191 |
|
| Issuances under stock plans and for acquisition | 4 |
| | 819,313 |
| | — |
| | — |
| | 11,129 |
| | 830,446 |
|
| Common share repurchases | — |
| | — |
| | — |
| | — |
| | (41,272 | ) | | (41,272 | ) |
| Stock compensation expense | — |
| | 78,943 |
| | — |
| | — |
| | — |
| | 78,943 |
|
| Balance at December 31, 2017 | $ | 82 |
| | $ | 1,761,383 |
| | $ | 1,508 |
| | $ | 1,647,284 |
| | $ | (2,426,792 | ) | | $ | 983,465 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common
Stock | | Additional
Paid-In
Capital | | Accumulated
Other
Comprehensive
Loss, Net | | Accumulated
Earnings | | Treasury
Stock | | Total
Stockholders’
Equity |
| Balance at December 31, 2019 | $ | 82 | | | $ | 1,899,273 | | | $ | (77,938) | | | $ | 1,988,722 | | | $ | (2,871,546) | | | $ | 938,593 | |
| Net income | — | | | — | | | — | | | 266,745 | | | — | | | 266,745 | |
| Other comprehensive loss | — | | | — | | | (21,290) | | | — | | | — | | | (21,290) | |
| Issuances under stock plans | — | | | 7,117 | | | — | | | — | | | 11,026 | | | 18,143 | |
| Common share repurchases | — | | | — | | | — | | | — | | | (174,303) | | | (174,303) | |
| Stock-based compensation expense | — | | | 62,540 | | | — | | | — | | | — | | | 62,540 | |
| Balance at December 31, 2020 | 82 | | | 1,968,930 | | | (99,228) | | | 2,255,467 | | | (3,034,823) | | | 1,090,428 | |
| Net income | — | | | — | | | — | | | 793,560 | | | — | | | 793,560 | |
| Other comprehensive income | — | | | — | | | 17,797 | | | — | | | — | | | 17,797 | |
| Issuances under stock plans | — | | | 7,396 | | | — | | | — | | | 10,854 | | | 18,250 | |
| Common share repurchases | — | | | — | | | — | | | — | | | (1,647,547) | | | (1,647,547) | |
| Stock-based compensation expense | — | | | 98,570 | | | — | | | — | | | — | | | 98,570 | |
| Balance at December 31, 2021 | 82 | | | 2,074,896 | | | (81,431) | | | 3,049,027 | | | (4,671,516) | | | 371,058 | |
| Net income | — | | | — | | | — | | | 807,799 | | | — | | | 807,799 | |
| Other comprehensive loss | — | | | — | | | (20,179) | | | — | | | — | | | (20,179) | |
| Issuances under stock plans | — | | | 14,142 | | | — | | | — | | | 8,154 | | | 22,296 | |
| Common share repurchases | — | | | — | | | — | | | — | | | (1,043,742) | | | (1,043,742) | |
| Stock-based compensation expense | — | | | 90,566 | | | — | | | — | | | — | | | 90,566 | |
| Balance at December 31, 2022 | $ | 82 | | | $ | 2,179,604 | | | $ | (101,610) | | | $ | 3,856,826 | | | $ | (5,707,104) | | | $ | 227,798 | |
See Notes to Consolidated Financial Statements.
GARTNER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS) | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| Operating activities: | | | | | |
| Net income | $ | 807,799 | | | $ | 793,560 | | | $ | 266,745 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | 191,946 | | | 212,405 | | | 218,984 | |
| Stock-based compensation expense | 90,566 | | | 98,570 | | | 62,540 | |
| Deferred taxes | (30,702) | | | (41,567) | | | (53,190) | |
| | | | | |
| Loss on impairment of lease related assets, net | 53,970 | | | 49,537 | | | — | |
| Loss on extinguishment of debt | — | | | — | | | 44,814 | |
| | | | | |
| Reduction in the carrying amount of operating lease right-of-use assets | 70,086 | | | 75,125 | | | 81,851 | |
| Amortization and write-off of deferred financing fees | 4,574 | | | 4,162 | | | 8,424 | |
| Amortization of deferred swap losses from de-designation | — | | | — | | | 10,320 | |
| Gain on de-designated swaps | (52,308) | | | (20,204) | | | (2,157) | |
| Changes in assets and liabilities, net of acquisitions and divestitures: | | | | | |
| Fees receivable, net | (240,696) | | | (145,346) | | | 99,409 | |
| Deferred commissions | 5,574 | | | (124,874) | | | 8,656 | |
| Prepaid expenses and other current assets | (3,039) | | | (15,913) | | | 37,895 | |
| Other assets | 8,440 | | | (18,287) | | | (8,950) | |
| Deferred revenues | 297,124 | | | 324,059 | | | 15,998 | |
| Accounts payable and accrued and other liabilities | (101,912) | | | 121,243 | | | 111,939 | |
| Cash provided by operating activities | 1,101,422 | | | 1,312,470 | | | 903,278 | |
| Investing activities: | | | | | |
| Additions to property, equipment and leasehold improvements | (108,050) | | | (59,834) | | | (83,888) | |
| Acquisitions - cash paid (net of cash acquired) | (9,508) | | | (22,939) | | | — | |
| Other | — | | | 2,306 | | | — | |
| | | | | |
| Cash used in investing activities | (117,558) | | | (80,467) | | | (83,888) | |
| Financing activities: | | | | | |
| Proceeds from employee stock purchase plan | 22,231 | | | 18,173 | | | 18,085 | |
| Proceeds from borrowings | — | | | 600,000 | | | 2,000,000 | |
| Early redemption premium payment | — | | | — | | | (30,752) | |
| Payments for deferred financing fees | — | | | (7,320) | | | (25,786) | |
| Proceeds from revolving credit facility | — | | | — | | | 332,000 | |
| Payments on revolving credit facility | — | | | (5,000) | | | (475,000) | |
| Payments on borrowings | (5,931) | | | (107,915) | | | (2,058,469) | |
| Purchases of treasury stock | (1,043,742) | | | (1,655,547) | | | (176,302) | |
| Cash used in financing activities | (1,027,442) | | | (1,157,609) | | | (416,224) | |
| Net (decrease) increase in cash and cash equivalents and restricted cash | (43,578) | | | 74,394 | | | 403,166 | |
| Effects of exchange rates on cash and cash equivalents and restricted cash | (18,425) | | | (26,375) | | | 28,581 | |
| Cash and cash equivalents and restricted cash, beginning of year | 760,602 | | | 712,583 | | | 280,836 | |
| Cash and cash equivalents and restricted cash, end of year | $ | 698,599 | | | $ | 760,602 | | | $ | 712,583 | |
| | | | | |
| Supplemental disclosures of cash flow information: | | | | | |
| Cash paid during the year for: | | | | | |
| Interest | $ | 112,825 | | | $ | 101,885 | | | $ | 112,249 | |
| Income taxes, net of refunds received | $ | 174,802 | | | $ | 253,379 | | | $ | 33,921 | |
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| | 2017 | | 2016 | | 2015 |
| Operating activities: | |
| | |
| | |
|
| Net income | $ | 3,279 |
| | $ | 193,582 |
| | $ | 175,635 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | |
| | |
|
| Depreciation and amortization | 240,171 |
| | 61,969 |
| | 47,131 |
|
| Stock-based compensation expense | 78,943 |
| | 46,661 |
| | 46,149 |
|
| Excess tax benefits from stock-based compensation exercises | — |
| | — |
| | (13,860 | ) |
| Deferred taxes | (217,414 | ) | | (2,648 | ) | | 344 |
|
| Gain on extinguishment of debt | — |
| | (2,500 | ) | | — |
|
| Amortization and write-off of deferred financing fees | 15,062 |
| | 3,082 |
| | 1,512 |
|
| Changes in assets and liabilities, net of acquisitions: | |
| | |
| | |
|
| Fees receivable, net | (368,516 | ) | | (68,661 | ) | | (44,476 | ) |
| Deferred commissions | (61,393 | ) | | (18,673 | ) | | (13,236 | ) |
| Prepaid expenses and other current assets | 13,251 |
| | (21,604 | ) | | (13,268 | ) |
| Other assets | (18,529 | ) | | 20,005 |
| | (14,733 | ) |
| Deferred revenues | 382,852 |
| | 97,979 |
| | 91,840 |
|
| Accounts payable, accrued, and other liabilities | 186,811 |
| | 56,440 |
| | 82,523 |
|
| Cash provided by operating activities | 254,517 |
| | 365,632 |
| | 345,561 |
|
| Investing activities: | |
| | |
| | |
|
| Additions to property, equipment and leasehold improvements | (110,765 | ) | | (49,863 | ) | | (46,128 | ) |
| Acquisitions - cash paid (net of cash acquired) | (2,634,809 | ) | | (34,186 | ) | | (196,229 | ) |
| Cash used in investing activities | (2,745,574 | ) | | (84,049 | ) | | (242,357 | ) |
| Financing activities: | |
| | |
| | |
|
| Proceeds from employee stock purchase plan | 11,711 |
| | 9,250 |
| | 7,499 |
|
| Proceeds from borrowings | 3,025,000 |
| | 715,000 |
| | 440,000 |
|
| Payments for deferred financing fees | (51,171 | ) | | (4,975 | ) | | — |
|
| Payments on borrowings | (404,438 | ) | | (835,000 | ) | | (20,000 | ) |
| Purchases of treasury stock | (41,272 | ) | | (58,961 | ) | | (509,049 | ) |
| Excess tax benefits from stock-based compensation exercises | — |
| | — |
| | 13,860 |
|
| Cash provided by (used in) financing activities | 2,539,830 |
| | (174,686 | ) | | (67,690 | ) |
| Net increase in cash and cash equivalents | 48,773 |
| | 106,897 |
| | 35,514 |
|
| Effects of exchange rates on cash and cash equivalents | 25,902 |
| | (5,640 | ) | | (27,840 | ) |
| Cash and cash equivalents, beginning of period | 474,233 |
| | 372,976 |
| | 365,302 |
|
| Cash and cash equivalents, end of period | $ | 548,908 |
| | $ | 474,233 |
| | $ | 372,976 |
|
| | | | | | |
| Supplemental disclosures of cash flow information: | |
| | |
| | |
|
| Cash paid during the period for: | |
| | |
| | |
|
| Interest | $ | 98,500 |
| | $ | 23,400 |
| | $ | 21,200 |
|
| Income taxes, net of refunds received | $ | 76,100 |
| | $ | 86,300 |
| | $ | 83,500 |
|
See Notes to Consolidated Financial Statements.
GARTNER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — BUSINESS AND SIGNIFICANT ACCOUNTING POLICIESBusiness and Significant Accounting Policies
Business. Gartner, Inc. (NYSE:IT) is the world’s leading researchdelivers actionable, objective insight to executives and advisory company and a member of the S&P 500. We equip business leaders with indispensable insights, advicetheir teams. Our expert guidance and tools to achieve their mission-critical prioritiesenable faster, smarter decisions and build the successful organizations of tomorrow. stronger performance on an organization’s mission critical priorities.
We believe we have an unmatched combination of expert-led, practitioner-sourcedare a trusted advisor and data-driven research that steers clients toward the right decisions on the issues that matter most. We’re trusted as an objective resource and critical partner byfor more than 12,000 organizations15,000 enterprises in more than 100approximately 90 countries and territories — across all major functions, in every industry and enterprise size. To learn more about how we help decision makers fuel
Segments. Gartner delivers its products and services globally through three business segments: Research, Conferences and Consulting. Note 9 — Revenue and Related Matters and Note 16 — Segment Information describe the futureproducts and services offered by each of business, visit gartner.com.our segments and provide additional financial information for those segments.
Basis of presentation. The accompanying consolidated financial statementsConsolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), as defined in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 270, for financial information and with the applicable instructions of U.S. Securities &and Exchange Commission (“SEC”) Regulation S-X.
The fiscal year of Gartner is the twelve-month period from January 1 through December 31. All references to 2017, 20162022, 2021 and 20152020 herein refer to the fiscal year unless otherwise indicated.
Gartner delivers its principal products and services globally through four business segments: Research, Consulting, Events and Talent Assessment & Other. The Company acquired two businesses during 2017, L2, Inc. ("L2") and CEB Inc. ("CEB"). Note 2 — Acquisitions and Divestiture provides additional information regarding these acquisitions. When used in these notes, the terms “Gartner,” the “Company,” “we,” “us,”“us” or “our” refer to Gartner, Inc. and its consolidated subsidiaries.
Principles of consolidation. The accompanying consolidated financial statementsConsolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated.
Use of estimates. The preparation of the accompanying consolidated financial statementsConsolidated Financial Statements requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of fees receivable, goodwill, intangible assets and other long-lived assets, as well as tax accruals and other liabilities. In addition, estimates are used in revenue recognition, income tax expense or benefit, performance-based compensation charges, depreciation and amortization. Management believes its use of estimates in the accompanying consolidated financial statementsConsolidated Financial Statements to be reasonable.
Management continually evaluates and revises its estimates using historical experience and other factors, including the general economic environment and actions it may take in the future. Management adjusts these estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time. As a result, differences between our estimates and actual results could be material and would be reflected in the Company’s consolidated financial statementsConsolidated Financial Statements in future periods.
Business Acquisitions. The Company completed acquisitions in each of the three years ended December 31, 2017 and detailed information related to these acquisitions is included in Note 2 — Acquisitions and Divestiture. acquisitions. The Company accounts for business acquisitions in accordance with the acquisition method of accounting as prescribed by FASB ASC Topic No. 805, Business Combinations.Combinations. The acquisition method of accounting requires the Company to record the net assets acquired and liabilities acquiredassumed based on their estimated fair values as of the acquisition date, with anycertain exceptions. Any excess of the consideration transferred over the estimated fair value of the net assets acquired, including identifiable intangible assets, to beis recorded toas goodwill. Under the acquisition method, the operating results of acquired companies are included in the Company's consolidated financial statementsCompany’s Consolidated Financial Statements beginning on the date of acquisition. The Company completed business acquisitions in both 2022 and 2021. Note 2 — Acquisitions and Divestiture provides additional information regarding those business acquisitions.
The determination of the fair values of intangible and other assets acquired in acquisitionsan acquisition requires management judgment and the consideration of a number of factors, significant among themincluding the historical financial performance of the acquired businesses and their projected future performance, and estimates surrounding customer turnover, as well as assumptions regarding the level of competition and the costcosts necessary to reproduce certain assets. Establishing the useful lives of the intangiblesintangible assets also requires management judgment and the evaluation of a number of factors, among them projected cash flowsincluding the expected use of an asset, historical client retention rates, consumer awareness and the likelihood of competition.trade name history, as well as any contractual provisions that could limit or extend an asset’s useful life.
The Company classifies charges
Charges that are directly-relateddirectly related to itsthe Company’s acquisitions in the lineand divestitures are expensed as incurred and classified as Acquisition and integration charges in the Consolidated Statements of Operations. The Company recorded $158.5 million, $42.6 millionNote 2 — Acquisitions and $26.2 million of such charges in 2017, 2016 and 2015, respectively. Included in these directly-related and incremental charges are legal, consulting, retention,
severance, and accruals for cash payments subject to the continuing employment of certain key employees of the acquired companies.
Revenue Recognition. Revenue is recognized in accordance with U.S. GAAP and SEC Staff Accounting Bulletin No. 104, Revenue Recognition (“SAB 104”). Revenues are only recognized once all required criteria for recognition have been met. The accompanying Consolidated Statements of Operations present revenues net of any sales or value-added taxes that we collect from customers and remit to government authorities.
On January 1, 2018, the Company adopted FASB Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers" ("ASU No. 2014-09") which requires changes in revenue recognition policies as well as enhanced disclosures. The adoption of ASU No. 2014-09 did not have a material impact on the Company’s consolidated financial statements. AdditionalDivestiture provides additional information regarding the Company's adoption of ASU No. 2014-09 is provided below in the section titled Accounting standards issued but not yet adopted.Company’s Acquisition and integration charges.
Revenue recognition.The Company’s revenuesrevenue by significant source areis accounted for as follows:
Research
•Research revenues are mainly derived from subscription contracts for research products. The related revenues are deferred and recognized ratably over the applicable contract term. Fees derived from assisting organizations in selecting the right business software for their needs are recognized as earned when the leads are provided to vendors.
The Company typically enters into subscription contracts for research products for twelve-month periods or longer. The majority of research contracts•Conferences revenues are billabledeferred and recognized upon signing, absent special terms granted on a limited basis from time to time. Research contracts are non-cancelable and non-refundable, except for government contracts that may have cancellation or fiscal funding clauses, which historically have not produced material cancellations. It is our policy to record the amountcompletion 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.related conference or meeting.
Consulting
•Consulting revenues primarily derived from custom consulting and measurement services, are principally generated from fixed fee or time and materials engagements. Revenues from fixed fee engagementscontracts are recognized on a proportionalas the Company works to satisfy its performance basis, while revenuesobligations. Revenues from time and materialmaterials engagements are recognized as work is delivered and/or services are provided. Revenues related to contract optimization engagements are contingent in nature and are only recognized upon satisfaction of all conditions related to their payment. Unbilled
The majority of the Company’s Research contracts are billable upon signing, absent special terms granted on a limited basis from time to time. Research contracts are generally non-cancelable and non-refundable, except for government contracts that may have cancellation or fiscal funding clauses. It is the Company’s policy to record the amount of a subscription contract that is billable as a fee receivable at the time the contract is signed with a corresponding amount as deferred revenue because the contract represents a legally enforceable claim.
Note 9 — Revenue and Related Matters provides additional information regarding the Company’s business and revenues.
Allowance for losses. The Company estimates uncollectible amounts on its fees receivable associated with consulting engagements were $66.2 million at December 31, 2017 and $45.7 million at December 31, 2016.
Events
Events revenues are deferred and recognized upon the completion of the related symposium, conference or exhibition. In addition, the Company defers certain costs directly related to events and expenses these costs in the period during which the related symposium, conference or exhibition occurs. The Company's policy is to defer only those costs, primarily prepaid site and production services costs, which are incremental and are directly attributable tousing a specific event. Other costs of organizing and producing our events, primarily Company personnel and non-event specific expenses, are expensed in the period incurred. At the end of each fiscal quarter, the Company assesses on an event-by-event basis whether the expected direct costs of producing a scheduled event will exceed the expected revenues. If such costs are expected to exceed revenues, the Company records the expected loss in the period determined.
Talent Assessment & Other
Talent Assessment & Other revenues arising from knowledge and skill assessment services are recognized depending on the nature of the underlying contract: (i) ratably over the term of the service period; (ii) upon delivery; or (iii) on a proportional performance basis. Revenues from training programs and survey and questionnaire products are primarily recognized upon delivery of the service.
Allowance for losses. The Company maintains an allowance for losses which is composed of a bad debt allowance and a sales reserve. Provisions are charged against earnings, either as a reduction in revenues or an increase to expense. The determination
of the allowance for losses is based on historical loss experience, an assessment of current economic conditions, the aging of outstanding receivables, the financial health of specific clients, and probable losses.rate method.
Cost of services and product development (“COS”). COS expense includes the direct costs incurred in the creation and delivery of ourthe Company’s products and services. These costs primarily relate to personnel.
Selling, general and administrative (“SG&A”). SG&A expense includes direct and indirect selling costs, general and administrative costs, facility costs and charges against earnings related to uncollectible accounts.bad debt expense.
Commission expense. The Company records deferred commissions upon the signing ofa customer contractscontract and amortizes the deferred amount as commission expense over a period that aligns with the period intransfer to the customer of the services to which the related revenues are earned. Commission expense is included in SG&A incommissions relate. Note 9 — Revenue and Related Matters provides additional information regarding deferred commissions and the Consolidated Statementsamortization of Operations.such costs.
Stock-based compensation expense. The Company accounts for stock-based compensation awards in accordance with FASB ASC Topics 505 and 718 and SEC Staff Accounting Bulletins No. 107 and No. 110. Stock-based compensation expense for equity awards is based on the fair value of the award on the date of grant. The Company recognizes stock-based compensation expense over the period that the related service is performed, which is generally the same as the vesting period of the underlying award. During 2017, 2016 and 2015,Forfeitures are recognized as they occur. A change in any of the Company recognized $78.9 million, $46.7 million and $46.1 million, respectively,terms or conditions of stock-based compensation expense.
Effective January 1, 2016,awards is accounted for as a modification of the award. Incremental compensation cost is measured as the excess, if any, of the fair value of the modified award over the fair value of the original award immediately before its terms are modified, measured based on the fair value of the awards at the modification date. For vested awards, the Company adopted FASB ASU No. 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU No. 2016-09"). ASU No. 2016-09 mandated certain changesrecognizes incremental compensation cost in accounting forthe period the modificationoccurs. For unvested awards, the Company recognizes any incremental compensation expense at the modificationdate or ratably over the requisite remaining service period, as appropriate. If the fair value of the modified award is lower than the fair value of the original award immediately before modification, the minimum compensation cost the Company recognizes is the cost of the original award. Note 10 — Stock-Based Compensation provides additional information regarding the Company’s stock-based compensation including a requirement that excess tax benefits or deficiencies resulting from stock-based compensation awards be recognized in income tax expense or benefit subsequent to the date of adopting the new accounting standard. Previously, an entity’s excess tax benefits or deficiencies were recorded in additional paid-in capital. ASU No. 2016-09 also requires that excess tax benefits related to stock-based compensation awards be reported as an operating activity in an entity’s statement of cash flows. Previously, excess tax benefits were reported as financing activities. As permitted by ASU No. 2016-09, the Company elected to apply these changes prospectively, commencing on January 1, 2016. The provisions of ASU No. 2016-09 had no impact on our financial results for periods prior to 2016. If the Company had applied ASU No. 2016-09 to 2015: (i) income tax expense would have declined by $13.9 million; (ii) basic and diluted income per share would have increased by $0.17 and $0.16, respectively; and (iii) cash provided by operating activities would have increased by $13.9 million.activity.
ASU No. 2016-09 also permits companies to make an entity-wide accounting policy election to recognize forfeitures of share-based compensation awards as they occur or make an estimate by applying a forfeiture rate each quarter. The Company previously estimated forfeitures but optionally elected to change its accounting policy and account for forfeitures as they occur. ASU No. 2016-09 requires this change in accounting policy to be applied using a cumulative effect adjustment to accumulated earnings as of the beginning of the period in which the rule is adopted. Accordingly, the Company recorded a $0.3 million decrease to its opening accumulated earnings effective January 1, 2016.
Income taxes. The Company uses the asset and liability method of accounting for income taxes. We estimate ourThe Company estimates its income taxes in each of the jurisdictions where we operate.it operates. This process involves estimating ourthe Company’s current tax expense or benefit together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our consolidated balance sheets. Inin the Consolidated Balance Sheets. When assessing the realizability of deferred tax assets, managementthe Company considers if it is more likely than not that some or all of the deferred tax assets will not be realized. We considerIn making this assessment, the Company considers the availability of loss carryforwards, projected reversalreversals of deferred tax liabilities, projected future taxable income, and ongoing prudent and feasible
tax planning strategies in making this assessment.strategies. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained based on the technical merits of the position. Recognized tax positions are measured at the largest amount of benefit with greater than a 50% likelihood of being realized. The Company uses estimates in determining the amount of unrecognized tax benefits associated with uncertain tax positions. Significant judgment is required in evaluating tax law and measuring the benefits likely to be realized. Uncertain tax positions are periodically re-evaluated and adjusted as more information about their ultimate realization becomes available. Note 12 — Income Taxes provides additional information regarding the Company’s income taxes.
Cash and cash equivalents. Includesequivalents and restricted cash. Cash and cash equivalents includes cash and all highly liquid investments with original maturities of three months or less, which are considered to be cash equivalents. The carrying value of cash equivalents approximates fair value due to theirthe short-term maturity.maturity of such instruments. Investments with maturities of more than three months are classified as marketable securities. Interest earned is classifiedrecorded in Interest income in the Consolidated Statements of Operations. As of December 31, 2017, the Company had $538.9 million of
U.S. GAAP requires that amounts generally described as restricted cash and restricted cash equivalents be presented with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on an additional $10.0 millionentity’s statement of cash classified as held-for-sale in itsflows. Below is a table presenting the beginning-of-period and end-of-period cash amounts from the Company’s Consolidated Balance Sheet, for aSheets and the total cash balance of $548.9 million, which was reported as the ending cash balanceamounts presented in the Consolidated StatementStatements of Cash Flows.Flows (in thousands).
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 | | 2020 | | 2019 |
| Cash and cash equivalents | | $ | 697,999 | | | $ | 756,493 | | | $ | 712,583 | | | $ | 280,836 | |
| Restricted cash classified in (1): | | | | | | | | |
| Prepaid expenses and other current assets | | — | | | 4,109 | | | — | | | — | |
| Other assets | | 600 | | | — | | | — | | | — | |
| Cash and cash equivalents and restricted cash per the Consolidated Statements of Cash Flows | | $ | 698,599 | | | $ | 760,602 | | | $ | 712,583 | | | $ | 280,836 | |
| | | | | | | | |
| | | | | | | | |
(1)Restricted cash consists of escrow accounts established in connection with certain of the Company’s business acquisitions. Generally, such cash is restricted to use due to provisions contained in the underlying stock or asset purchase agreement. The Company will disburse the restricted cash to the sellers of the businesses upon satisfaction of any contingencies described in such agreements (e.g., potential indemnification claims, etc.).
Leases. ASC 842 requires accounting for leases under a right-of-use model whereby a lessee must record a right-of-use asset and a related lease liability on its balance sheet for most of its leases. Under ASC 842, leases are classified as either operating or finance arrangements, with such classification affecting the pattern of expense recognition in an entity’s income statement. For operating leases, ASC 842 requires recognition in an entity’s income statement of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis.During the years ended December 31, 2022 and 2021, as a result and in consideration of the changing nature of the Company’s use of office space for its workforce and the transitioning to a virtual-first hybrid, remote-work environment, the Company evaluated its existing real estate lease portfolio. As a result of the evaluation, the Company recognized impairment losses of $54.0 million and $49.5 million during the years ended December 31, 2022 and 2021, respectively. Note 7 — Leases provides additional information regarding the Company’s leases.
Property, equipment and leasehold improvements. The Company leases all of its facilities and certain equipment. These leases are all classified as operating leases in accordance with FASB ASC Topic 840. The cost of these operating leases, including any contractual rent increases, rent concessions, and landlord incentives, are recognized ratably over the life of the related lease agreement. Lease expense was $87.9 million, $38.0 million, and $33.8 million in 2017, 2016 and 2015, respectively.
Equipment, leasehold improvements and other fixed assets owned by the Company are recorded at cost less accumulated depreciation. Except fordepreciation and amortization. Fixed assets, other than leasehold improvements, these fixed assets are depreciated using the straight-line method over the estimated useful liveslife of the assets.underlying asset. Leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful liveslife of the improvement or the remaining term of the related lease. The Company had total depreciationDepreciation and amortization expense of $63.9for fixed assets was $93.4 million, $37.2$102.8 million and $33.8$93.9 million in 2017, 20162022, 2021 and 2015,2020, respectively. The Company's total fixed assets, less accumulated depreciationProperty, equipment and amortization, consisted ofleasehold improvements, net are presented in the followingtable below (in thousands):.
| | | | | Useful Life | | December 31, | | | Useful Life | | December 31, |
| Category | | (Years) | | 2017 | | 2016 | Category | | (Years) | | 2022 | | 2021 |
| Computer equipment and software | | 2-7 | | $ | 189,015 |
| | $ | 166,385 |
| Computer equipment and software | | 2 - 7 | | $ | 258,843 | | | $ | 304,386 | |
| Furniture and equipment | | 3-8 | | 67,288 |
| | 43,137 |
| Furniture and equipment | | 3 - 8 | | 89,559 | | | 97,050 | |
| Leasehold improvements | | 2-15 | | 175,716 |
| | 96,603 |
| Leasehold improvements | | 2 - 15 | | 220,509 | | | 253,451 | |
| | | | | $ | 432,019 |
| | $ | 306,125 |
| |
| Total cost | | Total cost | | | | 568,911 | | | 654,887 | |
| Less — accumulated depreciation and amortization | | | | (210,512 | ) | | (184,519 | ) | Less — accumulated depreciation and amortization | | | | (304,330) | | | (381,325) | |
| Property, equipment, and leasehold improvements, net | | | | $ | 221,507 |
| | $ | 121,606 |
| |
| Property, equipment and leasehold improvements, net | | Property, equipment and leasehold improvements, net | | | | $ | 264,581 | | | $ | 273,562 | |
The Company incurs costs to develop internal useinternal-use software used in our operations, and certainits operations. Certain of thesethose costs meetingthat meet the criteria outlined in FASB ASC Topic No. 350,Intangibles - Goodwill and Other are capitalized and amortized over future periods. Net capitalized internal-use software development costs for internal use software was $26.9were $84.0 million and $16.6$65.5 million at December 31, 20172022 and 2016,2021, respectively, which isand are included in the Computer equipment and software categoryin the table above. Amortization ofexpense for capitalized internalinternal-use software development costs, which is classified inincluded with Depreciation in the Consolidated Statements of Operations, totaled $9.9$39.6 million, $8.8$34.6 million and $8.2 million during 2017, 2016 and 2015 respectively.
Finite-lived intangible assets. The Company has finite-lived intangible assets which are amortized against earnings using the straight-line method over their expected useful lives. Changes in intangible assets subject to amortization during the two-year period ended December 31, 2017 were as follows (in thousands):
|
| | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 | | Customer
Relationships | | Software | | Content | | Other | | Total |
| Gross cost, December 31, 2016 | | $ | 63,369 |
| | $ | 16,025 |
| | $ | 3,728 |
| | $ | 33,645 |
| | $ | 116,767 |
|
| Additions due to acquisitions (1) | | 1,253,312 |
| | 180,787 |
| | 141,707 |
| | 24,384 |
| | 1,600,190 |
|
| Intangibles fully amortized | | — |
| | — |
| | (4,227 | ) | | — |
| | (4,227 | ) |
| Reclassified as held-for-sale (2) | | (140,156 | ) | | (69,012 | ) | | (38,593 | ) | | (2,711 | ) | | (250,472 | ) |
| Foreign currency translation impact | | 23,791 |
| | (4,376 | ) | | 1,698 |
| | (389 | ) | | 20,724 |
|
| Gross cost | | 1,200,316 |
| | 123,424 |
| | 104,313 |
| | 54,929 |
| | 1,482,982 |
|
| Accumulated amortization (3) | | (92,983 | ) | | (26,344 | ) | | (47,475 | ) | | (24,158 | ) | | (190,960 | ) |
| Balance, December 31, 2017 | | $ | 1,107,333 |
| | $ | 97,080 |
| | $ | 56,838 |
| | $ | 30,771 |
| | $ | 1,292,022 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| December 31, 2016 | | Customer
Relationships | | Software | | Content | | Other | | Total |
| Gross cost, December 31, 2015 | | $ | 62,860 |
| | $ | 16,219 |
| | $ | 5,450 |
| | $ | 33,474 |
| | $ | 118,003 |
|
| Additions due to acquisitions | | 3,677 |
| | — |
| | 1,948 |
| | 302 |
| | 5,927 |
|
| Intangibles fully amortized | | — |
| | (125 | ) | | (162 | ) | | — |
| | (287 | ) |
| Foreign currency translation impact | | (3,168 | ) | | (69 | ) | | (3,508 | ) | | (131 | ) | | (6,876 | ) |
| Gross cost | | 63,369 |
| | 16,025 |
| | 3,728 |
| | 33,645 |
| | 116,767 |
|
| Accumulated amortization (3) | | (16,744 | ) | | (8,904 | ) | | (2,033 | ) | | (12,285 | ) | | (39,966 | ) |
| Balance, December 31, 2016 | | $ | 46,625 |
| | $ | 7,121 |
| | $ | 1,695 |
| | $ | 21,360 |
| | $ | 76,801 |
|
| |
(1) | The additions were primarily due to the Company's acquisitions of CEB and L2 during April 2017 and March 2017, respectively. See Note 2 — Acquisitions and Divestiture for additional information. |
| |
(2) | Represents amounts reclassified (net) as held-for-sale assets related to the CEB Talent Assessment business. See Note 2 — Acquisitions and Divestiture for additional information. |
| |
(3) | Finite-lived intangible assets are amortized using the straight-line method over the following periods: Customer Relationships—4 to 13 years; Software 3 to 7 years; Content—1.5 to 5 years; and Other —2 to 5 years. |
Amortization expense related to finite-lived intangible assets was $176.3 million, $24.8 million and $13.3$28.9 million in 2017, 20162022, 2021 and 2015,2020, respectively. The estimated future amortization expense by year from finite-lived intangibles is as follows (in thousands):
|
| | | |
| 2018 | $ | 190,442 |
|
| 2019 | 134,530 |
|
| 2020 | 128,133 |
|
| 2021 | 107,715 |
|
| 2022 and thereafter | 731,202 |
|
| | $ | 1,292,022 |
|
Goodwill. Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair valuevalues of the tangible and identifiable intangible net assets acquired. Evaluations of the recoverability of goodwill are performed in accordance with FASB ASC Topic 350, which requires an annual assessment of potential goodwill impairment at the reporting unit level and whenever events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.
TheWhen performing the annual assessment of the recoverability of recorded goodwill, can be based on eitherthe Company initially performs a qualitative analysis evaluating whether any events or quantitative assessmentcircumstances occurred or a combinationexist that provide evidence that it is more likely than not that the fair value of any of the two approaches. Both methods utilize estimates which, in turn, requireCompany’s reporting units is less than the related carrying amount. If the Company does not believe that it is more likely than not that the fair value of any of the Company’s reporting units is less than the related carrying amount, then no quantitative impairment test is performed. However, if the results of the qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its respective carrying amount, then the Company performs a quantitative impairment test. Evaluating the recoverability of goodwill requires judgments and assumptions regarding future trends and events. As a result, both the precision and reliability of the resultingmanagement estimates are subject to uncertainty. If our annual goodwill impairment evaluation determines that the fair value of a reporting unit is less than its related carrying amount, we may recognize an impairment charge. In connection with our
The Company’s most recent annual impairment test of goodwill was a qualitative analysis conducted during the third quarter of 2017, whichended September 30, 2022 that indicated no impairment. Subsequent to completing the 2022 annual impairment test, no events or changes in circumstances were noted that required an interim goodwill impairment test. Note 3 — Goodwill and Intangible Assets provides additional information regarding the Company’s goodwill.
Finite-lived intangible assets. The Company has finite-lived intangible assets that are amortized using the straight-line method over the expected useful life of recorded goodwill, the Company utilizedunderlying asset. Note 3 — Goodwill and Intangible Assets provides additional information regarding the qualitative approach in assessing the fair values of its reporting units relative to their respective carrying values.Company’s finite-lived intangible assets.
The following table presents changes to the carrying amount of goodwill by segment during the two-year period ended December 31, 2017 (in thousands):
|
| | | | | | | | | | | | | | | | | | | |
| | Research | | Consulting | | Events | | Talent Assessment & Other
| | Total |
| Balance, December 31, 2015 (1) | $ | 575,292 |
| | $ | 98,412 |
| | $ | 41,655 |
| | $ | — |
| | $ | 715,359 |
|
| Additions due to acquisitions | 28,465 |
| | — |
| | 5,843 |
| | — |
| | 34,308 |
|
| Foreign currency translation impact | (8,307 | ) | | (1,932 | ) | | (975 | ) | | — |
| | (11,214 | ) |
| Balance, December 31, 2016 | $ | 595,450 |
| | $ | 96,480 |
| | $ | 46,523 |
| | $ | — |
| | $ | 738,453 |
|
| Additions due to acquisitions (2) | 2,042,514 |
| | — |
| | 140,914 |
| | 274,363 |
| | 2,457,791 |
|
Reclassified as held-for-sale (3)
| — |
| | — |
| | — |
| | (212,994 | ) | | (212,994 | ) |
| Foreign currency translation impact | (18,287 | ) | | 1,318 |
| | 483 |
| | 20,530 |
| | 4,044 |
|
| Balance, December 31, 2017 | $ | 2,619,677 |
| | $ | 97,798 |
| | $ | 187,920 |
| | $ | 81,899 |
| | $ | 2,987,294 |
|
| |
(1) | The Company does not have any accumulated goodwill impairment losses. |
| |
(2) | The 2017 goodwill additions are due to the acquisitions of CEB and L2 during April 2017 and March 2017, respectively. See Note 2—Acquisitions and Divestiture for additional information. |
| |
(3) | Represents amounts reclassified as held-for-sale assets related to the CEB Talent Assessment business. See Note 2 — Acquisitions and Divestiture for additional information. |
Impairment of long-lived assets. The Company'sCompany’s long-lived assets primarily consist of intangible assets other than goodwill, right-of-use assets and property, equipment and leasehold improvements. The Company reviews its long-lived asset groups for impairment whenever events or changes in circumstances indicate that the carrying amount of the respectivean asset or an asset group may not be recoverable. Such evaluation may be based on a number of factors, including current and projected operating results and cash flows, and changes in management’s strategic direction as well as external economic and market factors. The Company evaluates the recoverability of these assets and asset groups by determining whether thetheir carrying valuevalues can be recovered through undiscounted future operating cash flows. If events or circumstances indicate that the carrying valuevalues might not be recoverable based on undiscounted future operating cash flows, an
impairment loss wouldmay be recognized. The amount of impairment if any, is measured based on the difference between the projected discounted future operating cash flows, using a discount rate reflecting the Company’s average cost of funds, and the carrying value of the asset. The Company did not record any impairment charges for long-lived asset groups during the three year period ended December 31, 2017.or asset group.
Pension obligations. The Company has defined-benefit pension plans in several of its international locations (see Note 13 — Employee Benefits). Benefits earned under these plans are generally based on years of service and level of employee compensation. The Company accounts for defined benefit plans in accordance with the requirements of FASB ASC Topic No. 715. The Company determines the periodic pension expense and related liabilities for these plans through actuarial assumptions and valuations. The Company recognized approximately $3.5 million of pension expense in each of the years ended 2017, 2016, and 2015. The Company classifies pension expense in SG&A in the Consolidated Statements of Operations.
Debt. The Company presents amounts borrowed in the Consolidated Balance Sheets, at amortized cost, net of deferred financing fees. Interest accrued on amounts borrowed is classified inrecorded as Interest expense in the Consolidated Statements of Operations. The Company amended its credit facility during 2017 and borrowed additional amounts related to its acquisitions. The Company had $3.3 billion of principal amount of debt outstanding at December 31, 2017 compared to $702.5 million at December 31, 2016. Note 56 — Debtprovides additional information regarding the Company's debt.Company’s debt arrangements.
Foreign currency exposure. The functional currency of ourthe Company’s foreign subsidiaries is typically the local currency. All assets and liabilities of foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at average exchange rates forthroughout the year. The resulting translation adjustments are recorded as foreign currency translation adjustments, a component of Accumulated other comprehensive income (loss),loss, net within the Stockholders’ Equity section ofon the Consolidated Balance Sheets.
Currency transaction gains or losses arising from transactions denominated in currencies other than the functional currency of a subsidiary are recognized in results of operations inas part of Other income (expense), net withinin the Consolidated Statements of Operations. The Company had net currency transaction lossesgains (losses) of $(5.5)$25.6 million, $(0.4)$(3.7) million and $(2.6)$12.5 million in 2017, 2016,2022, 2021 and 2015,2020, respectively. The Company enters into foreign currency forward exchange contracts to mitigate the effects of adverse fluctuations in foreign currency exchange rates on thesecertain transactions. TheseThose contracts generally have a short durationdurations and are recorded at fair value with both realized and unrealized gains and losses recorded in Other income (expense), net. The net gain (loss)loss from theseforeign currency forward exchange contracts was $0.8$31.9 million, $(0.3)$1.4 million and $(0.1)$14.1 million in 2017, 2016,2022, 2021 and 2015,2020, respectively. Note 13 — Derivatives and Hedging provides additional information regarding the Company’s foreign currency forward exchange contracts.
Comprehensive income. The Company reports comprehensive income in a separate statement called the Consolidated Statements of Comprehensive Income, which is included herein. The Company's comprehensive income disclosures are included in Note 7 — Stockholders' Equity.
Fair value disclosures. The Company has a limited number of assets and liabilities that are adjusted to fair value at each balance sheet date. The Company’s required fair value disclosures are included inprovided at Note 1214 — Fair Value Disclosures.
Concentrations of credit risk. Assets that may subject the Company to concentration of credit risk consist primarily of short-term, highly liquid investments classified as cash equivalents, fees receivable, contract assets, interest rate swaps and a pension reinsurance asset. The majority of the Company’s cash equivalent investments and its interest rate swap contracts are with investment grade commercial banks. Fees receivable and contract asset balances deemed to be collectible from customers have limited concentration of credit risk due to ourthe Company’s diverse customer base and geographic dispersion. The Company’s pension reinsurance asset (see Note 1315 — Employee Benefits) is maintained with a large international insurance company that was rated investment grade as of December 31, 20172022 and 2016.2021.
Stock repurchase programs. The Company records the cost to repurchase shares of its own common shares tostock as treasury stock. During 2017, 2016 and 2015, the Company used $41.3 million, $59.0 million, and $509.0 million, respectively, in cash for stock repurchases (see Note 7 — Stockholders’ Equity for additional information). Shares repurchased by the Company are added to treasury shares and are not retired. Note 8 — Stockholders’ Equity provides additional information regarding the Company’s common stock repurchase activity.
Gain on event cancellation insurance claims. During the year ended December 31, 2021, the Company received $166.9 million of proceeds related to 2020 event cancellation insurance claims, and recorded a pre-tax gain of $152.3 million. The Company does not record any gain on insurance claims in excess of expenses incurred until the receipt of the insurance proceeds is deemed to be realizable.
Adoption of new accounting standards. The Company did not adopt any significant newadopted the accounting standardsstandard described below during 2017.2022.
Accounting standards issued but not yet adopted. The FASB has issued accounting standards that have not yet become effective and that may impact the Company’s consolidated financial statements or related disclosures in future periods. These standards and their potential impact are discussed below:
Accounting standards effective in 2018
Stock Compensation Award ModificationsBusiness Combinations —In May 2017,October 2021, the FASB issued ASU No. 2017-09, "Compensation—Stock Compensation - Scope of Modification2021-08, Business Combinations, Accounting" (" for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU No. 2017-09"2021-08”). ASU No. 2017-092021-08 provides guidance about which changesfor a business combination on how to recognize and measure contract assets and contract liabilities from revenue contracts with customers and other contracts that apply the terms or conditionsprovisions of a share-based payment awardASC Topic 606, Revenue from Contracts with Customers. Specifically, the proposed amendments would require that an entity to apply modification accounting. ASU No. 2017-09 was(acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606. Generally, this would result in an acquirer recognizing and measuring the acquired contract assets and contract liabilities consistent with how they were recognized and measured in the acquiree’s financial statements (if the acquiree prepared financial statements in accordance with U.S. GAAP). The rule will be effective for Gartnerpublic entities on January 1, 2018. We have concluded that the2023, with early adoption ofpermitted. Gartner elected to adopt ASU No. 2017-092021-08 effective January 1, 2022. ASU No. 2021-08 will not have a material impact acquired contract assets or liabilities from business combinations occurring prior to January 1, 2022, and the impact in future periods will depend on the Company's consolidated financial statements.contract assets and contract liabilities acquired in future business combinations.
Retirement Benefits Cost Presentation Government Assistance — In March 2017,November 2021, the FASB issued ASU No. 2017-07, "Compensation—Retirement Benefits" ("2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance (“ASU No. 2017-07"2021-10”).ASU No. 2017-07 improves the reporting of net benefit cost in the financial statements, and provides additional guidance on the presentation of net benefit cost in the income statement and clarifies the components eligible for capitalization. ASU No. 2017-07 wasNo, 2021-10 requires business entities to annually disclose information about certain government assistance they receive. The rule will be effective for Gartner on January 1, 2018. We have concluded that the adoption of ASU No. 2017-07 will not have a material impact on the Company's consolidated financial statements.
Partial Sales of Non-financial Assets — In February 2017, the FASB issued ASU No. 2017-05, "Clarifying the Scope of Asset Derecognition Guidance and Accountingpublic entities for Partial Sales of Non-financial Assets" ("ASU No. 2017-05"). ASU No. 2017-05 clarifies the scope of the FASB’s recently established guidance on non-financial asset de-recognition as well as the accounting for partial sales of non-financial assets. It conforms the de-recognition guidance on non-financial assets with the model for revenue transactions. ASU No. 2017-05 was effective for Gartner on January 1, 2018. We have concluded that the adoption of ASU No. 2017-05 will not have a material impact on the Company's consolidated financial statements.
Definition of a Business — In January 2017, the FASB issued ASU No. 2017-01, "Clarifying the Definition of a Business" ("ASU No. 2017-01"), which was effective for Gartner on January 1, 2018. ASU No. 2017-01 changes the U.S. GAAP definition of a business which can impact the accounting for asset purchases, acquisitions, goodwill impairment, and other assessments. We have concluded that the adoption of ASU No. 2017-01 will not have a material impact on the Company's consolidated financial statements.
Presentation of Restricted Cash — In November 2016, the FASB issued ASU No. 2016-18, "Restricted Cash" ("ASU No. 2016-18"). ASU No. 2016-18 requires that amounts generally described as restricted cash and restricted cash equivalents be presented with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. If different, a reconciliation of the cash balances reported in the cash flow statement and the balance sheet would need to be provided along with explanatory information. ASU No. 2016-18 was effective for Gartner on January 1, 2018. The adoption of ASU No. 2016-18 will require the Company to disclose restricted cash and, as a result, will change the presentation of its consolidated statements of cash flows.
Income Taxes — In October 2016, the FASB issued ASU No. 2016-16, "Intra-Entity Transfers of Assets Other Than Inventory" ("ASU No. 2016-16"). ASU No. 2016-16 accelerates the recognition of taxes on certain intra-entity transactions and was effective for Gartner on January 1, 2018. Current U.S. GAAP requires deferral of the income tax implications of an intercompany sale of assets until the assets are sold to a third party or recovered through use. Under the new rule, the seller’s tax effects and the buyer’s deferred taxes on post-adoption asset transfers will be immediately recognized upon the sale. On the date of adoption of ASU No. 2016-16 any taxes attributable to pre-2018 intra-entity transfers that were previously deferred will be accelerated and recorded to accumulated earnings as permitted by the transition rules. ASU 2016-16 could have a material impact on our consolidated financial statements in the future depending on the nature, size, and tax consequences of future intra-entity transfers, if any.
Statement of Cash Flows — In August 2016, the FASB issued ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments" ("ASU No. 2016-15"). ASU No. 2016-15 sets forth classification requirements for certain cash flow transactions. ASU No. 2016-15 was effective for Gartner on January 1, 2018. We have concluded that the adoption of ASU No. 2016-15 will not have a material impact on the Company's consolidated financial statements.
Financial Instruments Recognition and Measurement — In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments Overall - Recognition and Measurement of Financial Assets and Liabilities" ("ASU No. 2016-01") to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Among the significant changes required by ASU No. 2016-01 is that equity investments will be measured at fair value with changes in fair value recognized in net income. ASU No. 2016-01 was effective for Gartner on January 1, 2018. We have concluded that the adoption of ASU No. 2016-01 will not have a material impact on the Company's consolidated financial statements.
Revenue Recognition — In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" ("ASU No. 2014-09"). ASU No. 2014-09 and related amendments require changes in revenue recognition policies as well as enhanced disclosures. ASU No. 2014-09 is intended to clarify the principles for recognizing revenue by removing inconsistencies and weaknesses in existing revenue recognition rules; provide a more robust framework for addressing revenue recognition issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets; and provide more useful information to users of financial statements through improved disclosures. ASU No. 2014-09 also requires significantly expanded disclosures around the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. An entity may adopt ASU No. 2014-09 using either a full retrospective approach for each prior reporting period presented or a modified retrospective approach (the cumulative effect method).annual periods beginning after December 15, 2021. The Company adopted ASU No. 2014-09 on January 1, 2018 using2021-10 in 2022 and the cumulative effect method of adoption. The adoption of ASU No. 2014-09 did not have a material impact on the Company’s consolidated financial statements. statement disclosures.
Accounting standard issued but not yet adopted. The adoptionFASB has issued an accounting standard that has not yet become effective as of the standard does require the Company to reclassify certain immaterial amounts inDecember 31, 2022 and may impact the Company’s consolidated balance sheet as well as provide the enhancedConsolidated Financial Statements or related disclosures required by thein future periods. The standard both of which will be provided in the Company's Form 10-Q filing for the quarterly period endingand its potential impact are discussed below.
Reference Rate Reform — In March 31, 2018.
Accounting standards effective in 2019
Targeted Improvements to Accounting for Hedging Activities - In August 2017,2020, the FASB issued ASU No. 2017-12, "Derivatives and Hedging 2020-04, Reference Rate Reform—Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("“ASU No. 2017-12"2020-04”). ASU No. 2017-12 is intended2020-04 provides that an entity can elect not to improveapply certain required modification accounting in U.S. GAAP to contracts where all changes to the financial reportingcritical terms relate to reference rate reform (e.g., the expected discontinuance of LIBOR and the transition to an alternative reference interest rate, etc.). In addition, the rule provides optional expedients and exceptions that enable entities to continue to apply hedge accounting for hedging relationships to better portray economic results of an entity’s risk management activities in its financial statements. In addition to that main objective, the standard makes certain targeted improvements to simplify the applicationwhere one or more of the hedge accounting guidance in current U.S. GAAP.critical terms change due to reference rate reform. The rule became effective for all entities as of March 12, 2020 and will generally no longer be available to apply after December 31, 2022. ASU No. 2017-122022-06, which was issued in December 2022, extended the deadline to December 31, 2024. The Company is effective for Gartner on January 1, 2019. We are currently evaluating the impact of ASU No. 2017-12 on the Company's consolidated financial statements.
Distinguishing Liabilities from Equity — In July 2017, the FASB issued ASU No. 2017-11, "Earnings Per Share, Distinguishing Liabilities from Equity, and Derivatives and Hedging" ("ASU No. 2017-11"). ASU No. 2017-11 is intended to simplify the accounting for financial instruments with characteristics of liabilities and equity. Among the issues addressed are: (i) determining whether an instrument (or embedded feature) is indexed to an entity’s own stock; (ii) distinguishing liabilities from equity for mandatorily redeemable financial instruments of certain nonpublic entities; and (iii) identifying mandatorily redeemable non-controlling interests. ASU No. 2017-11 is effective for Gartner on January 1, 2019. We are currently evaluating the potential impact of ASU No. 2017-11 on the Company's consolidated financial statements.
Leases — In February 2016, the FASB issued2020-04, as amended by ASU No. 2016-02, "Leases" ("ASU No. 2016-02") which will require significant2022-06, on its Consolidated Financial Statements, including the rule’s potential impact on any debt modifications or other contractual changes in the accounting and disclosure for lease arrangements. Currently under U.S. GAAP, lease arrangementsfuture that meet certain criteria are considered operating leases and aremay result from reference rate reform. However, the Company does not recorded on the balance sheet. All of the Company's existing lease arrangements are accounted for as operating leases and are thus not recorded on the Company's balance sheet. ASU No. 2016-02 will significantly change the accounting for leases since a right-of-use ("ROU") model must be used in which the lessee must record a ROU asset and a lease liability on the balance sheet for leases with terms longer than 12 months. Leases will be classified as either finance or operating arrangements, with classification affecting the pattern of expense recognition in the income statement. ASU No. 2016-02 also requires expanded disclosures about leasing arrangements. ASU No. 2016-02 will be effective for Gartner on January 1, 2019. We are currently evaluating the potential impact of ASU No. 2016-02 on our consolidated financial statements.
Accounting standards effective in 2020
Goodwill Impairment — In January 2017, the FASB issued ASU No. 2017-04, "Intangibles—Goodwill and Other - Simplifying the Test for Goodwill Impairment" ("ASU No. 2017-04"). ASU No. 2017-04 simplifies the determination of the amount of goodwill to be potentially charged off by eliminating Step 2 of the current goodwill impairment test. ASU No. 2017-04 is effective for Gartner on January 1, 2020. We have concluded thatexpect the adoption of ASU 2020-04, as amended by ASU No. 2017-04 will not2022-06, to have a material impact on the Company's consolidated financial statements.Company’s Consolidated Financial Statements.
Financial Instrument Credit Losses —In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments—Credit Losses" ("ASU No. 2016-13"). ASU No. 2016-13 amends the current financial instrument impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU No. 2016-13 is effective for Gartner on January 1, 2020, with early adoption permitted. We are currently evaluating the potential impact of ASU No. 2016-13 on our consolidated financial statements.
The FASB also continues to work on a number of other significant accounting standards which if issued could materially impact the Company's accounting policies and disclosures in future periods. However, since these standards have not yet been issued, the effective dates and potential impact are unknown.
Note 2 — ACQUISITIONS AND DIVESTITUREAcquisitions and Divestiture
Acquisitions
The Company accounts for business acquisitions in accordance with the acquisition method of accounting as prescribed by FASB ASC Topic 805, Business Combinations. The acquisition method of accounting requires the Company to record the net assets and liabilities acquired based on their estimated fair values as of the acquisition date, with any excess of the consideration transferred over the estimated fair value of the net assets acquired, including identifiable intangible assets, to be recorded to goodwill. Under the acquisition method, the operating results of acquired companies are included in the Company's consolidated financial statements beginning on the date of acquisition. The Company completed the following business acquisitions:
For the year endedYear Ended December 31, 2017:2022
CEB
On April 5, 2017,In October 2022, the Company acquired 100% of the outstanding capital stock of CEBUpCity, Inc. (“UpCity”), a privately-held company based in Chicago, Illinois, for an aggregate purchase price of $3.5 billion. The consideration transferred$6.4 million. UpCity’s online marketplace helps small businesses by Gartner included approximately $2.7 billion in cashconnecting them to ratings and $818.7 million in fair valuereviews of Gartner common shares. CEB was a publicly-held company headquartered in Arlington, Virginia with approximately 4,900 employees. CEB's primary business was to serve as a leading provider of subscription-based, best practice research and analysis focusing on human resources, sales, finance, IT, and legal. CEB served executives and professionals at corporate and middle market institutions in over 70 countries.more than 50,000 B2B service providers.
L2
Year Ended December 31, 2021
On March 9, 2017,
In June 2021, the Company acquired 100% of the outstanding capital stock of L2,Pulse Q&A Inc. (“Pulse”), a privately-held firmcompany based in New York City with 150 employees,San Francisco, California, for an aggregate purchase price of $134.2$29.9 million. L2Pulse is a subscription-based researchtechnology-enabled community platform.
During 2021, the Company paid $22.9 million in cash for Pulse after considering the cash acquired with the business, that benchmarks the digital performance of brands.
Total Consideration Transferred
The following table summarizes the aggregate consideration paid for these acquisitions (in thousands):
|
| | | | | | | | | | | |
| Aggregate consideration (1): | CEB | | L2 | | Total |
| Cash paid at close (2), (3) | $ | 2,687,704 |
| | $ | 134,199 |
| | $ | 2,821,903 |
|
| Additional cash paid (2) | 12,465 |
| | — | | 12,465 |
|
| Fair value of Gartner equity (4) | 818,660 |
| | — | | 818,660 |
|
| Total (5) | $ | 3,518,829 |
| | $ | 134,199 |
| | $ | 3,653,028 |
|
| |
(1) | Includes the total consideration transferred for 100% of the outstanding capital stock of the acquired businesses. |
| |
(2) | The cash paid at close represents the gross contractual amount paid. The Company paid the additional $12.5 million in cash in third quarter 2017. Net of cash acquired from these businesses and for cash flow reporting purposes, the Company paid a total of $2.63 billion in cash. |
| |
(3) | The Company borrowed a total of approximately $2.8 billion in conjunction with the CEB acquisition (see Note 7 — Debt for additional information). |
| |
(4) | Consists of the fair value of (i) Gartner common stock issued (see Note 7 — Stockholders' Equity for additional information) and (ii) stock-based compensation replacement awards. |
| |
(5) | The Company may also be required to pay up to an additional $20.8 million in cash for L2 which is contingent on the achievement of certain employment conditions by several key employees. This amount is being recognized as compensation expense over approximately three years. |
Preliminary Allocation of Purchase Price
The following table summarizes the preliminary allocation of theamounts held in escrow and certain other purchase price to the fair value of the assets acquired and liabilities assumed for the acquisitions of L2 and CEB (in thousands):
|
| | | | | | | | | | | |
| | CEB (3) | | L2 (4) | | Total |
| Assets: | | | | | |
| Cash | $ | 194,706 |
| | $ | 4,852 |
| | $ | 199,558 |
|
| Fees receivable | 175,440 |
| | 8,277 |
| | 183,717 |
|
| Prepaid expenses and other current assets | 53,610 |
| | 1,167 |
| | 54,777 |
|
| Property, equipment and leasehold improvements | 51,399 |
| | 663 |
| | 52,062 |
|
Goodwill (1) | 2,349,589 |
| | 108,202 |
| | 2,457,791 |
|
Finite-lived intangible assets (2) | 1,584,300 |
| | 15,890 |
| | 1,600,190 |
|
| Other assets | 66,818 |
| | 13,067 |
| | 79,885 |
|
| Total assets | $ | 4,475,862 |
| | $ | 152,118 |
| | $ | 4,627,980 |
|
| Liabilities: | | | | |
|
| Accounts payable and accrued liabilities | $ | 142,134 |
| | $ | 3,050 |
| | $ | 145,184 |
|
| Deferred revenues (current) | 246,472 |
| | 13,200 |
| | 259,672 |
|
| Other liabilities | 568,427 |
| | 1,669 |
| | 570,096 |
|
| Total liabilities | $ | 957,033 |
| | $ | 17,919 |
| | $ | 974,952 |
|
| Net assets acquired | $ | 3,518,829 |
| | $ | 134,199 |
| | $ | 3,653,028 |
|
| |
(1) | The Company believes the goodwill resulting from the acquisitions is supportable based on anticipated synergies. For CEB, among the factors contributing to the anticipated synergies are a broader market presence, expanded product offerings and market opportunities, and an acceleration of CEB's growth by leveraging Gartner's global infrastructure and best practices in sales productivity and other areas. None of the recorded goodwill is expected to be deductible for tax purposes. The Company recorded certain measurement period adjustments to the CEB preliminary purchase price allocation during 2017, primarily related to tenant improvement incentives and tax liabilities. These adjustments resulted in a net increase to recorded goodwill of approximately $32.0 million. As of December 31, 2017, the allocation of the purchase price for the L2 and CEB acquisitions are preliminary with respect to certain tax matters and contingencies. The Company will resolve these remaining matters and complete the allocation of the purchase price by the end of the accounting measurement period for the respective acquisition. |
| |
(2) | All of the acquired intangible assets are finite-lived. The determination of the fair value of the finite-lived intangible assets required management judgment and the consideration of a number of factors. In determining the fair values, management primarily relied on income valuation methodologies, in particular discounted cash flow models. The use of discounted cash flow models required the use of estimates, significant among them projected cash flows related to the particular asset; the useful lives of the particular assets; the selection of royalty and discount rates used in the models; and certain published industry benchmark data. In establishing the estimated useful lives of the finite-lived intangible assets, the Company relied on both internally-generated data for similar assets as well as certain published industry benchmark data. We believe the values we have assigned to the finite-lived intangible assets are both reasonable and supportable. |
| |
(3) | The Company's financial statements include the operating results of CEB beginning on April 5, 2017, the date of acquisition. CEB's operating results and the related goodwill are being reported as part of the Company's Research, Events, and Talent Assessment & Other segments. Had the Company acquired CEB in prior periods, the impact to the Company's operating results would have been material, and as a result the following pro forma consolidated financial information is presented as if CEB had been acquired by the Company on January 1, 2016 (in thousands, except per share amounts): |
|
| | | | | | | | |
| | | Twelve Months Ended |
| | | December 31, |
| | | 2017 | | 2016 |
| Pro forma total revenue | | $ | 3,726,470 |
| | $ | 3,183,070 |
|
| Pro forma net income (loss) | | 150,167 |
| | (241,423 | ) |
| Pro forma basic and diluted income (loss) per share | | $ | 1.66 |
| | $ | (2.68 | ) |
The pro forma results have been prepared in accordance with U.S. GAAP and include the following pro forma adjustments:
(a) An increase in interest expense and amortization of debt issuance costs related to the financing of the CEB acquisition. Note 5 — Debt provides further information regarding the Company's borrowings related to the CEB acquisition;
(b) A change in revenue as a result of the required fair value adjustment to deferred revenue; and
(c) An adjustment for additional depreciation and amortization expense as a result of the preliminary purchase price allocation for finite-lived intangible assets and property, equipment, and leasehold improvements.
| |
(4) | The Company's financial statements include the operating results of L2 beginning on March 9, 2017, the acquisition date. L2's operating results were not material to the Company's consolidated operating and segment results for 2017. Had the Company acquired L2 in prior periods, the impact to the Company's operating results would not have been material, and as a result pro forma financial information for L2 for prior periods has not been presented. L2's operating results and the related goodwill are being reported as part of the Company's Research segment. |
The Company recognized $158.5 million of acquisition and integration charges in 2017 compared to $42.6 million in 2016. The additional charges during 2017 primarily consisted of higher professional fees, severance, stock-based compensation charges, and accruals for exit costs for certain office space that the Company does not intend to occupy in Arlington, Virginia that was related to the CEB acquisition. The following table presents a summary of the activity related to this space foradjustments. During the year ended December 31, 2017 (in thousands):
|
| | | |
| Liability balance at December 31, 2016 | $ | — |
|
| Charges and adjustments | 13,087 |
|
| Payments | (126 | ) |
| Liability balance at December 31, 2017 | $ | 12,961 |
|
For the year ended December 31, 2016:
On November 9, 2016,2022, the Company acquired 100%paid $4.1 million of deferred consideration held in escrow. In addition to the outstanding capital stock of Machina Research Limited ("Machina"), a privately-held firm based in London with 16 employees. Thepurchase price, the Company paid approximatelymay also be required to pay up to $4.5 million in cash at close. Machina provides clients with subscription-based research that provides strategic insight and market intelligence in areas such as IOT ("Internet of things").
On June 28, 2016, the Company acquired 100% of the outstanding capital stock of Newco 5CL Limited (which operates under the trade name "SCM World"), a privately-held firm based in London with 60 employees, for $34.2 million in cash paid at close. SCM World is a leading cross-industry peer network and learning community providing subscription-based research and conferences for supply chain executives. Net of cash acquired with the business and for cash flow reporting purposes, the Company paid approximately $27.9 million in cash for SCM World. The acquisition of SCM World also included an earn-out provision. The fair value of the earn-out was recorded on the acquisition datecontinuing employment of certain key employees. Such amounts are recognized as partcompensation expense over three years post-acquisition and reported in Acquisition and integration charges in the Consolidated Statements of the cost of the acquisition and was subsequently adjusted with a charge against earnings.Operations.
The Company recorded $32.4$31.0 million of goodwill and $5.9 million of amortizable intangible assets for these two acquisitions and an immaterial amount of other assets on a net basis. The operating results and the related goodwill are reported as part of the Company's Research and Events segments. The Company also recorded an additional $1.9 million of additional goodwill in 2016 related to a prior year acquisition.
For the year ended December 31, 2015:
The Company acquired 100% of the outstanding shares of Nubera eBusiness S.L., and Capterra, Inc., during 2015. Each of these businesses assist clients with selecting business software. The aggregate purchase price was $206.9 in cash. Net of cash acquired with the businesses and for cash flow reporting purposes the Company paid $196.2 million in cash. The Company recorded $79.6 million and $138.1 million of amortizablefinite-lived intangible assets and goodwill, respectively, and $10.8$1.1 million inof liabilities on a net basis for these acquisitions. The operating results and the related goodwill are reported as part of the Company's Research segment.Pulse acquisition.
Planned divestiture of the CEB Talent Assessment businessPending Divestiture
On February 6, 2018,In November 2022, the Company announced that it had reachedentered into a definitive agreement to sell its CEB Talent Assessment business for approximately $400.0 million. The agreement was the resultTalentNeuron business. As of a previously announced process to evaluate strategic alternatives for the business. The purchase price is subject to typical adjustments for, among other things, the working capital of the business. The transaction is expected to close in the first half of 2018 and is subject to customary closing conditions and certain approvals.
The CEB Talent Assessment business was acquired by Gartner as part of the CEB acquisition in 2017 and is a significant portion of the Talent Assessment & Other segment. During the period from the CEB acquisition date to December 31, 2017,2022, the CEB Talent Assessment business contributed approximately $126.1 million of revenue and incurred a pre-tax loss of approximately $19.3 million. Effective with its designation as held-for-sale on October 4, 2017, we discontinued recording depreciation and
amortization on the property, equipment and leasehold improvements and finite-lived intangible assets of this business as required under the accounting rules. The Company also separately classified the related assets and liabilities of this business as held-for-saleTalentNeuron were considered held for sale, resulting in its$49.0 million of assets held for sale and $30.8 million of liabilities held for sale on the Consolidated Balance Sheet. The majority of the held for sale assets were goodwill, intangible assets, net and accounts receivable, with carrying amounts of $16.0 million, $9.5 million and $15.9 million, respectively, while the majority of the held for sale liabilities was deferred revenues, with a carrying amount of $27.1 million. TalentNeuron is included in the Company's Research segment.
On February 2, 2023, the Company completed the sale of TalentNeuron for approximately $164.0 million, prior to final working capital adjustments.
Acquisition and Integration Charges
The Company recognized $9.1 million, $6.1 million and $6.3 million of Acquisition and integration charges during 2022, 2021 and 2020, respectively. Acquisition and integration charges reflect additional costs and expenses resulting from the Company’s acquisitions and divestitures and include, among other items, professional fees, severance and stock-based compensation charges.
During 2021, the Company received $2.3 million cash proceeds from deferred consideration related to a 2018 divestiture.
Note 3 — Goodwill and Intangible Assets
Goodwill. The table below presents changes to the carrying amount of goodwill by segment during the two-year period ended December 31, 2017 Consolidated Balance Sheet.2022 (in thousands).
| | | | | | | | | | | | | | | | | | | | | | | |
| | Research | | Conferences | | Consulting | | Total |
| Balance at December 31, 2020 (1) | $ | 2,664,732 | | | $ | 184,091 | | | $ | 96,724 | | | $ | 2,945,547 | |
| Additions due to an acquisition (2) | 11,486 | | | — | | | — | | | 11,486 | |
| Foreign currency translation impact | (5,284) | | | (70) | | | (362) | | | (5,716) | |
| Balance at December 31, 2021 (1) | 2,670,934 | | | 184,021 | | | 96,362 | | | 2,951,317 | |
| Additions due to an acquisition (2) | 4,617 | | | — | | | — | | | 4,617 | |
| Reclassified as held-for-sale (3) | (16,000) | | | — | | | — | | | (16,000) | |
| Foreign currency translation impact | (8,358) | | | (70) | | | (1,295) | | | (9,723) | |
| Balance at December 31, 2022 (1) | $ | 2,651,193 | | | $ | 183,951 | | | $ | 95,067 | | | $ | 2,930,211 | |
(1)The Company does not have any accumulated goodwill impairment losses.
(2)The additions were due to the acquisition of Pulse in June 2021 and UpCity in October 2022 See Note 2 — Acquisitions and Divestiture for additional information.
(3)Represents amounts reclassified to Assets Held for Sale due to the pending divestiture of the Company’s TalentNeuron business.See Note 2 — Acquisitions and Divestiture for additional information. The amount of goodwill allocated to the pending divestiture was determined using a relative fair value approach.
Finite-lived intangible assets. Changes in finite-lived intangible assets during the two-year period ended December 31, 2022 are presented in the tables below (in thousands).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 | | Customer
Relationships | | Technology-related | | | | Other | | Total |
| Gross cost at December 31, 2021 | | 1,096,358 | | | 61,216 | | | | | 10,436 | | | $ | 1,168,010 | |
| | | | | | | | | | |
| | | | | | | | | | |
| Reclassified as held-for-sale (2) | | — | | | (49,487) | | | | | — | | | (49,487) | |
| Foreign currency translation impact | | (35,817) | | | (529) | | | | | — | | | (36,346) | |
| Gross cost | | 1,060,541 | | | 11,200 | | | | | 10,436 | | | 1,082,177 | |
| Accumulated amortization (3) | | (486,260) | | | (5,600) | | | | | (5,603) | | | (497,463) | |
| Balance at December 31, 2022 | | $ | 574,281 | | | $ | 5,600 | | | | | $ | 4,833 | | | $ | 584,714 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | Customer
Relationships | | Technology-related | | Content | | Other | | Total |
| Gross cost at December 31, 2020 | | $ | 1,154,210 | | | $ | 110,597 | | | $ | 3,965 | | | $ | 10,614 | | | $ | 1,279,386 | |
| Additions due to an acquisition (1) | | 7,980 | | | 11,200 | | | — | | | 320 | | | 19,500 | |
| Intangible assets fully amortized | | (61,422) | | | (60,685) | | | (3,965) | | | (498) | | | (126,570) | |
| Foreign currency translation impact | | (4,410) | | | 104 | | | — | | | — | | | (4,306) | |
| Gross cost | | 1,096,358 | | | 61,216 | | | — | | | 10,436 | | | 1,168,010 | |
| Accumulated amortization (3) | | (413,266) | | | (35,727) | | | — | | | (4,599) | | | (453,592) | |
| Balance at December 31, 2021 | | $ | 683,092 | | | $ | 25,489 | | | $ | — | | | $ | 5,837 | | | $ | 714,418 | |
(1)The additions were due to the acquisition of Pulse in June 2021. See Note 2 — Acquisitions and Divestiture for additional information.
(2)Represents amounts reclassified to Assets Held for Sale due to the pending divestiture of the Company’s TalentNeuron business.See Note 2 — Acquisitions and Divestiture for additional information.
(3)Finite-lived intangible assets are amortized using the straight-line method over the following periods: Customer relationships—6 to 13 years; Technology-related—3 to 7 years; and Other —4 to 11 years.
Amortization expense related to finite-lived intangible assets was $98.5 million, $109.6 million and $125.1 million in 2022, 2021 and 2020, respectively. The estimated future amortization expense by year for finite-lived intangible assets is presented in the table below (in thousands).
| | | | | |
| 2023 | $ | 90,771 | |
| 2024 | 88,858 | |
| 2025 | 80,191 | |
| 2026 | 77,516 | |
| 2027 | 76,908 | |
| 2028 and thereafter | 170,470 | |
| | $ | 584,714 | |
Note 4 — Other Assets
The principal components of the held-for-saleCompany’s other assets and liabilities at December 31, 2017 for this business are summarized in the table below (in thousands):.
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| Benefit plan-related assets | $ | 99,527 | | | $ | 113,553 | |
| Non-current deferred tax assets | 138,318 | | | 140,004 | |
| Other | 59,686 | | | 55,132 | |
| Total other assets | $ | 297,531 | | | $ | 308,689 | |
Note 5 — Accounts Payable and Accrued and Other Liabilities
|
| | | |
| Cash and cash equivalents | $ | 10,000 |
|
| Fees receivable, net | 50,928 |
|
| Goodwill | 212,994 |
|
| Intangible assets, net | 250,472 |
|
Other assets, including property, equipment and leasehold improvements, net
| 18,571 |
|
| Total assets held-for-sale | $ | 542,965 |
|
| | |
| Accounts payable and accrued liabilities | $ | 32,388 |
|
| Deferred revenues | 61,450 |
|
| Deferred tax liabilities | 47,404 |
|
| Other liabilities | 4,603 |
|
| Total liabilities held-for-sale | $ | 145,845 |
|
The sale of the business has been structured as a sale of the shares of the affected subsidiaries with the corresponding deferred taxes being transferred to the buyer upon consummation of the sale. As such, the Company made an accounting policy election to classify the deferred taxes associated with the individual assets and liabilities that are part of the transaction as held-for-sale.
3 — OTHER ASSETS
Other assets consist of the following (in thousands):
|
| | | | | | | |
| | December 31, |
| | 2017 | | 2016 |
| Benefit plan-related assets | $ | 97,525 |
| | $ | 45,958 |
|
| Non-current deferred tax assets | 31,067 |
| | 27,275 |
|
| Other | 65,150 |
| | 14,046 |
|
| Total other assets | $ | 193,742 |
| | $ | 87,279 |
|
4 — ACCOUNTS PAYABLE, ACCRUED, AND OTHER LIABILITIES
Company’s Accounts payable and accrued liabilities consistare summarized in the table below (in thousands).
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| Accounts payable | $ | 83,225 | | | $ | 49,277 | |
| Payroll and employee benefits payable | 221,242 | | | 233,704 | |
| | | |
| Bonus payable | 254,675 | | | 243,459 | |
| Commissions payable | 168,042 | | | 201,397 | |
| Income tax payable | 76,383 | | | 18,717 | |
| VAT payable | 43,187 | | | 48,834 | |
| Current portion of operating lease liabilities | 99,717 | | | 89,754 | |
| Other accrued liabilities | 168,727 | | | 249,672 | |
| Total accounts payable and accrued liabilities | $ | 1,115,198 | | | $ | 1,134,814 | |
The Company’s Other liabilities are summarized in the table below (in thousands).
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| Non-current deferred revenues | $ | 39,115 | | | $ | 48,176 | |
| Long-term taxes payable | 92,812 | | | 76,806 | |
| Benefit plan-related liabilities | 124,378 | | | 139,097 | |
| Non-current deferred tax liabilities | 139,531 | | | 181,789 | |
| Other | 27,628 | | | 66,019 | |
| Total other liabilities | $ | 423,464 | | | $ | 511,887 | |
Note 6 — Debt
The Company’s total outstanding borrowings are summarized in the table below (in thousands).
| | | | | | | | | | | | | | |
| | December 31, |
| Description | | 2022 | | 2021 |
| 2020 Credit Agreement - Term loan facility (1) | | $ | 282,200 | | | $ | 287,600 | |
| 2020 Credit Agreement - Revolving credit facility (1), (2) | | — | | | — | |
| Senior Notes due 2028 (“2028 Notes”) (3) | | 800,000 | | | 800,000 | |
| Senior Notes due 2029 (“2029 Notes”) (4) | | 600,000 | | | 600,000 | |
| Senior Notes due 2030 (“2030 Notes”) (5) | | 800,000 | | | 800,000 | |
| Other (6) | | 5,000 | | | 5,531 | |
| Principal amount outstanding (7) | | 2,487,200 | | | 2,493,131 | |
| Less: deferred financing fees (8) | | (25,793) | | | (30,367) | |
| Net balance sheet carrying amount | | $ | 2,461,407 | | | $ | 2,462,764 | |
(1)The contractual annualized interest rate as of December 31, 2022 on the 2020 Credit Agreement Term loan facility and the Revolving credit facility was 5.81%, which consisted of a floating Eurodollar base rate of 4.438% plus a margin of 1.375%. However, the Company has interest rate swap contracts that effectively convert the floating Eurodollar base rates on outstanding amounts to a fixed base rate.
(2)The Company had approximately $1.0 billion of available borrowing capacity on the 2020 Credit Agreement revolver (not including the expansion feature) as of December 31, 2022.
(3)Consists of $800.0 million principal amount of 2028 Notes outstanding. The 2028 Notes bear interest at a fixed rate of 4.50% and mature on July 1, 2028.
(4)Consists of $600.0 million principal amount of 2029 Notes outstanding. The 2029 Notes bear interest at a fixed rate of 3.625% and mature on June 15, 2029.
(5)Consists of $800.0 million principal amount of 2030 Notes outstanding. The 2030 Notes bear interest at a fixed rate of 3.75% and mature on October 1, 2030.
(6)Consists of two State of Connecticut economic development loans. One of the following (in thousands):loans originated in 2012, has a 10-year maturity and bears interest at a fixed rate of 3.00%. This loan had an outstanding balance of $0.5 million as of December 31, 2021 and matured as of December 31, 2022. The second loan, originated in 2019, has a 10-year maturity, bears interest at a fixed rate of 1.75% and may be repaid at any time by the Company without penalty.
(7)The weighted average annual effective rate on the Company’s outstanding debt for 2022, including the effects of its interest rate swaps discussed below, was 4.73%. |
| | | | | | | |
| | December 31, |
| | 2017 | | 2016 |
| Accounts payable | $ | 49,000 |
| | $ | 41,009 |
|
| Payroll and employee benefits payable | 120,278 |
| | 87,821 |
|
| Severance and retention bonus payable | 44,685 |
| | 22,425 |
|
| Bonus payable | 162,710 |
| | 105,549 |
|
| Commissions payable | 108,969 |
| | 68,273 |
|
| Taxes payable | 46,758 |
| | 20,378 |
|
| Other accrued liabilities | 134,421 |
| | 95,316 |
|
| Total accounts payable and accrued liabilities | $ | 666,821 |
| | $ | 440,771 |
|
Other liabilities consist(8)Deferred financing fees are being amortized to Interest expense over the term of the following (in thousands):related debt obligation.
2029 Notes
On June 18, 2021, the Company issued $600.0 million aggregate principal amount of 3.625% Senior Notes due 2029. The 2029 Notes were issued pursuant to an indenture, dated as of June 18, 2021 (the “2029 Note Indenture”), among the Company, the guarantors party thereto and U.S. Bank National Association, as trustee.
The 2029 Notes were issued at an issue price of 100.0% and bear interest at a rate of 3.625% per annum. Interest on the 2029 Notes is payable on June 15 and December 15 of each year, beginning on December 15, 2021. The 2029 Notes will mature on June 15, 2029. The Company may redeem some or all of the 2029 Notes at any time on or after June 15, 2024 for cash at the
|
| | | | | | | |
| | December 31, |
| | 2017 | | 2016 |
| Non-current deferred revenue | $ | 16,205 |
| | $ | 11,289 |
|
| Long-term taxes payable | 66,386 |
| | 19,737 |
|
| Benefit plan-related liabilities | 118,868 |
| | 67,747 |
|
| Lease-related matters | 115,840 |
| | 38,042 |
|
Non-current deferred tax liabilities
| 206,338 |
| | 22,520 |
|
| Other | 54,362 |
| | 22,482 |
|
| Total other liabilities | $ | 577,999 |
| | $ | 181,817 |
|
5 — DEBT
On September 28, 2020, the Company issued $800.0 million aggregate principal amount of 3.75% Senior Notes due 2030. The 2030 Notes were issued pursuant to an indenture, dated as of September 28, 2020 (the “2030 Note Indenture”), among the Company, the guarantors party thereto and U.S. Bank National Association, as trustee.
2016 Credit Agreement
The 2030 Notes were issued at an issue price of 100.0% and bear interest at a rate of 3.75% per annum. Interest on the 2030 Notes is payable on April 1 and October 1 of each year, beginning on April 1, 2021. The 2030 Notes will mature on October 1, 2030.
The Company entered intomay redeem some or all of the 2030 Notes at any time on or after October 1, 2025 for cash at the redemption prices set forth in the 2030 Note Indenture, plus accrued and unpaid interest to, but excluding, the redemption date. Prior to October 1, 2025, the Company may redeem up to 40% of the aggregate principal amount of the 2030 Notes in connection with certain equity offerings, or some or all of the 2030 Notes with a term loan“make-whole” premium, in each case subject to the terms set forth in the 2030 Note Indenture.
2028 Notes
On June 22, 2020, the Company issued $800.0 million aggregate principal amount of 4.50% Senior Notes due 2028. The 2028 Notes were issued pursuant to an indenture, dated as of June 22, 2020 (the “2028 Note Indenture”), among the Company, the guarantors party thereto and revolvingU.S. Bank National Association, as trustee.
The 2028 Notes were issued at an issue price of 100.0% and bear interest at a rate of 4.50% per annum. Interest on the 2028 Notes is payable on January 1 and July 1 of each year, beginning on January 1, 2021. The 2028 Notes will mature on July 1, 2028.
The Company may redeem some or all of the 2028 Notes at any time on or after July 1, 2023 for cash at the redemption prices set forth in the 2028 Note Indenture, plus accrued and unpaid interest to, but excluding, the redemption date. Prior to July 1, 2023, the Company may redeem up to 40% of the aggregate principal amount of the 2028 Notes in connection with certain equity offerings, or some or all of the 2028 Notes with a “make-whole” premium, in each case subject to the terms set forth in the 2028 Note Indenture.
2020 Credit Agreement
The Company has a credit facility on June 17, 2016 (the "2016 Credit Agreement"). As discussed below, the 2016 Credit Agreement was amended three times during 2017 in conjunction with the acquisition of CEB. As of December 31, 2017, the 2016 Credit Agreementthat currently provides for a $1.5 billion Term loan A facility, a $500.0$400.0 million Term loan B facility and a $1.2$1.0 billion revolvingRevolving credit facility.facility (the “2020 Credit Agreement”). The 20162020 Credit Agreement contains certain customary restrictive loan covenants, including, among others, financial covenants that apply a maximum consolidated leverage ratio and a minimum consolidated interest expense coverage ratio, and covenants limiting Gartner’s ability to incur indebtedness, grant liens, make acquisitions, merge, dispose of assets, pay dividends, repurchase stock, make investments and enter into certain transactions with affiliates.ratio. The Company was in full compliance with theall financial covenants as of December 31, 2017.2022.
The Company borrowed a total of approximately $2.8 billion for the CEB acquisition. The Company borrowed $1.675 billion under the 2016 Credit Agreement, which consisted of $900.0 million under an increased Term loan A facility, $500.0 million under a new Term loan B facility, and $275.0 million on its existing revolving credit facility. The $1.675 billion drawn under the 2016 Credit Agreement, along with the funds raised through the issuance of $800.0 million Senior Notes and $300.0 million 364-day Bridge Credit Facility discussed below, were used to fund the CEB acquisition and related costs. As discussed below, the funds borrowed under the 364-day Bridge Credit Facility were completely repaid during 2017.
On January 20, 2017, the Company entered into a first amendment to the 2016 Credit Agreement, which was entered into to permit the acquisition of CEB and the incurrence of additional debt to finance, in part, the acquisition and repay certain debt of CEB, and to modify certain covenants. On March 20, 2017, the Company entered into a second amendment to the 2016 Credit Agreement. The second amendment was also entered into in connection with the acquisition of CEB and was executed primarily to extend the maturity date of the Term loan A facility and revolving credit facility through March 20, 2022 and to revise the interest rate and amortization schedule. On April 5, 2017, in conjunction with the closing of the CEB acquisition, the Company entered into a third amendment to the 2016 Credit Agreement with its lenders which increased the aggregate principal amount of the existing Term loan A facility by $900.0 million and added the Term loan B facility in an aggregate principal amount of $500.0 million.
The Term loan A facility will beis being repaid in 16 consecutive quarterly installments that commenced on June 30, 2017,December 31, 2020, plus a final payment to be made on March 20, 2022.September 28, 2025. The additional amount drawnCompany used a portion of the net proceeds from the issuance of the 2029 Notes to repay $100.0 million of the outstanding borrowings under the Termterm loan A facility has the same maturity date and is subject to the same interest, repayment terms, amortization schedules, representations and warranties, affirmative and negative covenants and events of default as the amounts outstanding under such facility prior to entry by the Company into the Incremental Amendment.in June 2021. The revolvingRevolving credit facility may be borrowed, repaid and re-borrowed through March 20, 2022,September 28, 2025, at which time all then-outstanding amounts must be repaid. Amounts borrowed
Interest Rate Swaps
As of December 31, 2022, the Company had one fixed-for-floating interest rate swap contract with a total notional value of $350.0 million that matures in 2025. The Company pays a base fixed rate of 3.04% and in return receives a floating Eurodollar base rate on 30-day notional borrowings. In June 2022, the Company terminated a fixed-for-floating interest rate swap contract with a notional value of $350.0 million, and received proceeds of $0.5 million. The Company had two other fixed-for-floating interest rate swap contracts with a total notional value of $700.0 million that matured during the three months ended March 31, 2022.
Effective June 30, 2020, the Company de-designated all of its interest rate swaps and discontinued hedge accounting. Accordingly, subsequent changes to the fair value of the interest rate swaps are recorded in Other income (expense), net. The amounts previously recorded in Accumulated other comprehensive loss are amortized into Interest expense over the terms of the hedged forecasted interest payments. As of December 31, 2022, $52.3 million is remaining in Accumulated other comprehensive loss, net. The interest rate swaps had unrealized fair values of $10.3 million and negative unrealized fair values (liabilities) of $53.7 million as of December 31, 2022 and December 31, 2021, respectively, of which $39.2 million and $56.3 million were recorded in Accumulated other comprehensive loss, net of tax effect, as of December 31, 2022 and December 31, 2021, respectively. See Note 14 — Fair Value Disclosures for the determination of the fair values of Company’s interest rate swaps.
Note 7 — Leases
The Company’s leasing activities are primarily for facilities under cancelable and non-cancelable lease agreements expiring during 2023 and through 2038. These facilities support the Term loan A facilityCompany’s executive and administrative activities, research and consulting, sales, systems support, operations, and other functions. The Company also has leases for office equipment and other assets, which are not significant. Certain of the Company’s lease agreements include (i) renewal options to extend the lease term for up to ten years and/or (ii) options to terminate the agreement within one year. Additionally, certain of the Company’s lease agreements provide standard recurring escalations of lease payments for, among other things, increases in a lessor’s maintenance costs and taxes. Under some lease agreements, the Company may be entitled to allowances, free rent, lessor-financed tenant improvements and other incentives. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company subleases certain office space that it does not intend to occupy. Such sublease arrangements expire during 2023 and through 2032 and primarily relate to facilities in Arlington, Virginia. Certain of the Company’s sublease agreements: (i) include renewal and termination options; (ii) provide for customary escalations of lease payments in the normal course of business; and (iii) grant the subtenant certain allowances, free rent, Gartner-financed tenant improvements and other incentives.
Lease Accounting under ASC 842
Under ASC 842, a lease is a contract or an agreement, or a part of another arrangement, between two or more parties that, at its inception, creates enforceable rights and obligations that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration.
Right-of-use assets represent a right to use an underlying asset for the lease term and the revolving credit facility bear interest atrelated lease liability represents an obligation to make lease payments pursuant to the contractual terms of the lease agreement. Right-of-use assets and lease liabilities are initially recognized on the lease commencement date based on the present value of the lease payments over the lease term. For all of the Company’s facilities leases, the Company accounts for both lease components and nonlease components (e.g., common area maintenance charges, etc.) as a single lease component when determining the present value of the Company’s lease payments. Variable lease payments that are not dependent on an index or a rate are excluded from the determination of right-of-use assets and lease liabilities and such payments are recognized as expense in the period when the related obligation is incurred.
The Company’s lease agreements do not provide implicit interest rates. Instead, the Company uses an incremental borrowing rate determined on the lease commencement date to calculate the present value of future lease payments. The incremental borrowing rate is calculated for each individual lease and represents the rate of interest that the Company would have to pay to borrow on a collateralized basis (in the currency that the lease is denominated) over a similar term an amount equal to at the Company'slease payments in a similar economic environment. Right-of-use assets also include any initial direct costs incurred by the Company and lease payments made to a lessor on or before the related lease commencement date, less any lease incentives received directly from the lessor.
Certain of the Company’s facility lease agreements include options to extend or terminate the lease. When it is reasonably certain that the Company will exercise a renewal or termination option, either:the present value of the lease payments for the affected lease is adjusted accordingly. Leases with a term of twelve months or less are accounted for in the same manner as long-term lease arrangements, including any related disclosures. Lease expense for operating leases is generally recognized on a straight-line basis over the lease term, unless the related right-of-use asset was previously impaired.
All of the Company’s existing sublease arrangements have been classified as operating leases with sublease income recognized on a straight-line basis over the term of the sublease arrangement. To measure the Company’s periodic sublease income, the
Company elected to use a practical expedient under ASC 842 to aggregate nonlease components with the related lease components when (i) the greatest of: (x)timing and pattern of transfer for the Administrative Agent’s prime rate; (y)nonlease components and the average rate on Federal Reserve Board of New York rate plus 1/2 of 1%; and (z) the eurodollar rate (adjusted for statutory reserves) plus 1%, in each case plus a margin equal to between 0.125% and 1.50% depending on Gartner’s consolidated leverage ratio as of the end of the four consecutive fiscal quarters most recently ended; or
(ii) the eurodollar rate (adjusted for statutory reserves) plus a margin equal to between 1.125% and 2.50%, depending on Gartner’s leverage ratio as of the end of the four consecutive fiscal quarters most recently ended.
The Term loan B facility contains representations and warranties, affirmative and negative covenants and events of default thatrelated lease components are the same and (ii) the lease components, if accounted for separately, would be classified as the Term loan A facility and revolving credit facility, except that a breach of financial maintenance covenants will not result in an event of default under the Term loan B facility unless the lenders under the revolving credit facility and Term loan A facility have accelerated the revolving loans and Term loan A loans and terminated their commitments thereunder. Additionally, the Term loan B facility includes mandatory prepayment requirements related to asset sales (subject to reinvestment), debt incurrence (other than permitted debt) and excess cash flow, subject to certain limitations described therein. The Term loan B facility will mature on April 5, 2024 and amounts outstanding thereunder will bear interest at a rate per annum equal to, at the option of Gartner, (i) adjusted LIBOR plus 2.00% or (ii) an alternate base rate plus 1.00%.
364-day Bridge Credit Facility
On April 5, 2017, in conjunction with the acquisition of CEB, the Company entered into a senior unsecured 364-day Bridge Credit Facility in an aggregate principal amount of $300.0 million, which was immediately drawn down to fund a portion of the purchase price associated with the CEB acquisition. The Company repaid the entire $300.0 million of the 364-day Bridge Credit Facility during 2017.
Senior Notes
On March 30, 2017, in conjunction with the acquisition of CEB, the Company issued $800.0 million aggregate principal amount of 5.125% Senior Notes due 2025 (the “Senior Notes”). The proceeds of the Senior Notes were also used to fund a portion of the purchase price associated with the CEB acquisition.
The Senior Notes were issued at an issue price of 100.00% and bear interest at a fixed rate of 5.125% per annum. Interest on the Senior Notes is payable on April 1 and October 1 of each year. The Senior Notes will mature on April 1, 2025. The Company may redeem some or all of the Senior Notes at any time on or after April 1, 2020 for cash at the redemption prices set forth in the Note Indenture, plus accrued and unpaid interest to, but not including, the redemption date. Prior to April 1, 2020, the Company may redeem up to 40.0% of the aggregate principal amount of the Senior Notes with the proceeds of certain equity offerings at a redemption price of 105.125% plus accrued and unpaid interest to, but not including, the redemption date. In addition, the Company may redeem some or all of the Senior Notes prior to April 1, 2020, at a redemption price of 100% of the principal amount of the Senior Notes plus accrued and unpaid interest to, but not including, the redemption date, plus a “make-whole” premium. If the Company experiences specific kinds of change of control, it will be required to offer to purchase the Senior Notes at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest.
The Senior Notes are the Company’s general unsecured senior obligations, and are effectively subordinatedoperating lease. This practical expedient applies to all of the Company’s existing sublease arrangements.
When the projected lease cost for the term of a sublease exceeds the anticipated sublease income for that same period, the Company treats that circumstance as an indicator that the carrying amount of the related right-of-use asset may not be fully recoverable. In those situations, the Company performs an impairment analysis and, future secured indebtednessif indicated, the Company records a charge against earnings to reduce the right-of-use asset to the extentamount deemed to be recoverable in the future.
On the Consolidated Balance Sheet, right-of-use assets are classified and reported in Operating lease right-of-use assets, and the related lease liabilities are included in Accounts payable and accrued liabilities (current) and Operating lease liabilities (long-term). On the Consolidated Statement of Cash Flows, the valuereduction in the carrying amount of right-of-use assets is presented separately and the collateral securing such indebtedness, structurally subordinated to all existingchange in operating lease liabilities is included under Accounts payable and future indebtednessaccrued and other liabilities in the reconciliation of net income to cash provided by operating activities.
All of the Company’s non-guarantor subsidiaries, equalleasing and subleasing activities are recognized in rightSelling, general and administrative expense in the Consolidated Statements of payment to all ofOperations. The table below presents the Company’s net lease cost and Company’s guarantor subsidiaries’ existing and future senior indebtedness and senior in right of paymentcertain other information related to all of the Company’s future subordinated indebtedness, if any.
Outstanding Borrowings -leasing activities as of and for the years ended December 31, 20172022, 2021 and 2020 (dollars in thousands).
The following table summarizes the Company’s total outstanding borrowings (in thousands):
|
| | | | | | | | |
| | | Balance
December 31, | | Balance
December 31, |
| Description: | | 2017 | | 2016 |
| 2016 Credit Agreement - Term loan A facility (1) | | $ | 1,429,312 |
| | $ | 585,000 |
|
| 2016 Credit Agreement - Term loan B facility (1) | | 496,250 |
| | — |
|
| 2016 Credit Agreement - Revolving credit facility (1), (2) | | 595,000 |
| | 115,000 |
|
| Senior notes (3) | | 800,000 |
| | — |
|
| Other (4) | | 2,500 |
| | 2,500 |
|
| Principal amount outstanding (5), (6) | | 3,323,062 |
| | $ | 702,500 |
|
| Less: deferred financing fees (7) | | (44,217 | ) | | (8,109 | ) |
| Net balance sheet carrying amount | | $ | 3,278,845 |
| | $ | 694,391 |
|
| | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, |
| Description | | 2022 | | 2021 | | 2020 |
| Operating lease cost (1) | | $ | 117,750 | | | $ | 130,383 | | | $ | 140,829 | |
| Variable lease cost (2) | | 15,209 | | | 17,940 | | | 17,463 | |
| Sublease income | | (46,698) | | | (42,801) | | | (38,925) | |
| Total lease cost, net (3) (4) | | $ | 86,261 | | | $ | 105,522 | | | $ | 119,367 | |
| | | | | | |
Cash paid for amounts included in the measurement of operating lease
liabilities | | $ | 137,399 | | | $ | 140,571 | | | $ | 137,790 | |
| Cash receipts from sublease arrangements | | $ | 46,159 | | | $ | 42,374 | | | $ | 38,565 | |
| Right-of-use assets obtained in exchange for new operating lease liabilities | | $ | 20,597 | | | $ | 33,113 | | | $ | 27,258 | |
| | | | | | |
| As of December 31, | | 2022 | | 2021 | | 2020 |
| Weighted average remaining lease term for operating leases (in years) | | 7.9 | | 8.7 | | 9.6 |
| Weighted average discount rate for operating leases | | 6.6 | % | | 6.5 | % | | 6.6 | % |
| |
(1) | The contractual annualized interest rate as of December 31, 2017 on the Term loan A and B facilities was 3.57%, which consisted of a floating Eurodollar base rate of 1.57% plus a margin of 2.00%. The contractual annualized interest rate on the revolving credit facility was 4.07%, which consisted of a floating eurodollar base rate of 1.57% plus a margin of 2.50%. However, the Company has interest rate swap contracts which effectively convert the floating eurodollar base rates on a portion of the amounts outstanding to a fixed base rate. |
| |
(2) | The Company had $558.0 million of available borrowing capacity on the revolver (not including the expansion feature) as of December 31, 2017. |
| |
(3) | Consists of an $800.0 million principal amount of Senior Notes outstanding. The Senior Notes pay a fixed rate of 5.125% and have an eight year maturity. |
| |
(4) | Consists of a $2.5 million State of Connecticut economic development loan with a 3.0% fixed rate of interest. The loan was originated in 2012 and has a 10 year maturity. Principal payments are deferred for the first five years and the loan may be repaid at any point by the Company without penalty. |
| |
(5) | The average annual interest rate on the Company's outstanding debt as of December 31, 2017 was 3.91%, including the effect of its interest rate swaps discussed below. |
| |
(6) | The contractual due dates by year on the debt outstanding as of December 31, 2017 are as follows: $80.0 million in 2018; $107.6 million in 2019; $144.7 million in 2020; $42.6 million in 2021; $1.68 billion in 2022; and approximately $1.27 billion thereafter. In January 2018 the Company repaid $255.0 million of outstandings on the revolver which were not contractually due until 2022. |
| |
(7) | The deferred financing fees are being amortized to Interest expense, net over the term of the respective debt obligation. During 2017 the Company paid $51.2 million in additional deferred financing fees and recorded a charge of approximately $6.1 million for the write-off of deferred financing fees related to the prior financing arrangement. |
(1)Included in operating lease cost was $41.9 million, $42.3 million and $42.2 million of costs for subleasing activities during 2022, 2021, and 2020 respectively.
Interest Rate Swaps(2)These amounts are primarily variable lease and nonlease costs that were not fixed at the lease commencement date or are dependent on something other than an index or a rate.
(3)The Company did not capitalize any initial direct costs for operating leases during 2022, 2021, or 2020.
(4)Amount excludes impairment charges of $54.0 million and $49.5 million, for the years ended December 31, 2022 and 2021, respectively, as discussed below.
As of December 31, 2017,2022, the Company had fixed-for-floating interest rate swap contracts. The swaps have a total notional value(i) maturities of $1.4 billion and mature in 2022. The Company designates the swaps as accounting hedges of the forecasted interest payments on $1.4 billion of the Company’s variable rate borrowings. The Company pays base fixed rates on these swaps ranging from 1.54% to 2.13% and in return receives a floating eurodollar base rate on $1.4 billion of 30-day notional borrowings.
The Company accounts for the interest rate swaps as cash flow hedges in accordance with FASB ASC Topic 815. Since the swaps hedge forecasted interest payments, changes in the fair value of the swaps are recorded in accumulated other comprehensive income (loss), a component of equity, as long as the swaps continue to be highly effective hedges of the designated interest rate risk. Any ineffective portion of change in the fair value of the hedges is recorded in earnings. All of the swaps were highly effective hedges of the forecasted interest payments as of December 31, 2017. The interest rate swaps had a positive fair value of $3.4 million at December 31, 2017 and a negative fair value of $2.3 million as of December 31, 2016. These amounts were deferred and classified in accumulated other comprehensive income (loss), net of tax effect.
6 — COMMITMENTS AND CONTINGENCIES
Contractual Lease Commitments. The Company leases various facilities, computer and office equipment, furniture, and other assetsoperating lease liabilities under non-cancelable operating lease agreements expiring between 2018arrangements and 2032. The(ii) estimated future minimum annualsublease cash payments under these operating lease agreements as of December 31, 2017 wasreceipts from non-cancelable arrangements were as follows (in thousands):
| | | | | | | | | | | | | | |
| | Operating | | Sublease |
| | Lease | | Cash |
| Period ending December 31, | | Payments | | Receipts |
| 2023 | | $ | 142,251 | | | $ | 52,286 | |
| 2024 | | 130,395 | | | 42,906 | |
| 2025 | | 114,233 | | | 43,226 | |
| 2026 | | 111,257 | | | 44,008 | |
| 2027 | | 107,228 | | | 44,889 | |
| Thereafter | | 299,612 | | | 25,022 | |
| Total future minimum operating lease payments and estimated sublease cash receipts (1) | | 904,976 | | | $ | 252,337 | |
| Imputed interest | | (207,992) | | | |
| Total operating lease liabilities per the Consolidated Balance Sheet | | $ | 696,984 | | | |
|
| | | |
| Year ended December 31, | |
|
| 2018 | $ | 129,570 |
|
| 2019 | 121,543 |
|
| 2020 | 113,612 |
|
| 2021 | 106,371 |
|
| 2022 | 97,225 |
|
| Thereafter | 727,405 |
|
| Total minimum lease payments (1) | $ | 1,295,726 |
|
(1) Excludes approximately $284.0 millionApproximately 80% of sublease income.
Legal Matters. The Company is involved in legal proceedings and litigation arisingthe operating lease payments pertain to properties in the ordinary course of business. We believe thatUnited States.
The table below indicates where the potential liability, if any, in excess of amounts already accrueddiscounted operating lease payments from all proceedings, claims and litigation will not have a material effect on our financial position, cash flows, or results of operations when resolved in a future period.
Indemnifications. The Company has various agreements that may obligate us to indemnify the other party with respect to certain matters. Generally, these indemnification clausesabove table are included in contracts arisingclassified in the normal courseConsolidated Balance Sheet (in thousands).
| | | | | | | | | | | | | | |
| | December 31, |
| Description | | 2022 | | 2021 |
| Accounts payable and accrued liabilities | | $ | 99,717 | | | $ | 89,754 | |
| Operating lease liabilities | | 597,267 | | | 697,766 | |
| Total operating lease liabilities per the Consolidated Balance Sheet | | $ | 696,984 | | | $ | 787,520 | |
During the years ended December 31, 2022 and 2021, as a result and in consideration of business under which we customarily agree to hold the other party harmless against losses arising from a breach of representations related to such matters as title to assets sold and licensed or certain intellectual property rights. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditionalchanging nature of the Company’s obligationsuse of office space for its workforce and the unique factstransitioning to a virtual-first hybrid, remote-work environment, the Company evaluated its existing real estate lease portfolio. This evaluation included the decision to abandon certain leased office spaces and the cease-use of each particular agreement. Historically, payments made by uscertain other leased office spaces that the Company intends to sublease. In connection with this evaluation, the Company reviewed certain of its right-of-use assets and related other long-lived assets for impairment under these agreements have not been material. ASC 360.
As a result of the evaluation, the Company recognized an impairment loss of $54.0 million and $49.5 million during the years ended December 31, 2017,2022 and December 31, 2021, respectively, which is included as a component of Selling, general and administrative expenses in the Company did not have any material payment obligations under any such indemnification agreements.accompanying Consolidated Statements of Operations. The impairment loss for the year ended December 31, 2022 includes $40.7 million related to right-of-use assets, and $13.3 million related to other long-lived assets, primarily leasehold improvements. The impairment loss for the fourth quarter of the year ended December 31, 2021 includes $50.9 million related to right-of-use assets, $17.9 million related to other long-lived assets, primarily leasehold improvements and a $19.3 million reduction in lease liabilities.
The fair values for the asset groups relating to the impaired long-lived assets were estimated primarily using discounted cash flow models (income approach) with Level 3 inputs. The significant assumptions used in estimating fair value include the expected downtime prior to the commencement of future subleases, projected sublease income over the remaining lease periods and discount rates that reflect the level of risk associated with receiving future cash flows.
7Note 8 — STOCKHOLDERS’ EQUITYStockholders’ Equity
Common stock. Holders of Gartner’s Common Stock,common stock, par value $.0005$0.0005 per share, (“Common Stock”) are entitled to one vote per share on all matters to be voted by stockholders. The Company does not currently pay cash dividends on its Common Stock.common stock. Also, our 2016the 2020 Credit Agreement contains a negative covenant whichthat may limit ourthe Company’s ability to pay dividends. The following table below summarizes transactions relating to our Common Stockthe Company’s common stock for the three years ended December 31, 2017: 2022.
|
| | | | | |
| | Issued Shares | | Treasury Stock Shares |
| Balance at December 31, 2014 | 156,234,415 |
| | 68,713,890 |
|
| Issuances under stock plans | — |
| | (1,003,746 | ) |
| Purchases for treasury (1) | — |
| | 6,186,101 |
|
| Balance at December 31, 2015 | 156,234,415 |
| | 73,896,245 |
|
| Issuances under stock plans | — |
| | (923,696 | ) |
| Purchases for treasury (1) | — |
| | 610,623 |
|
| Balance at December 31, 2016 | 156,234,415 |
| | 73,583,172 |
|
| Issued in connection with the acquisition of CEB | 7,367,652 |
| | — |
|
| Issuances under stock plans | — |
| | (1,186,150 | ) |
| Purchases for treasury (1) | — |
| | 382,183 |
|
| Balance at December 31, 2017 | 163,602,067 |
| | 72,779,205 |
|
| | | | | | | | | | | |
| | Issued
Shares | | Treasury
Stock
Shares |
| Balance at December 31, 2019 | 163,602,067 | | | 74,444,288 | |
| Issuances under stock plans | — | | | (820,065) | |
| Purchases for treasury (1), (2) | — | | | 1,135,762 | |
| Balance at December 31, 2020 | 163,602,067 | | | 74,759,985 | |
| Issuances under stock plans | — | | | (807,320) | |
| Purchases for treasury (1) | — | | | 7,252,839 | |
| Balance at December 31, 2021 | 163,602,067 | | | 81,205,504 | |
| Issuances under stock plans | — | | | (599,081) | |
| Purchases for treasury (1) | — | | | 3,822,090 | |
| Balance at December 31, 2022 | 163,602,067 | | | 84,428,513 | |
| |
(1) | The Company used a total of $41.3 million, $59.0 million, and $509.0 million in cash for share repurchases in 2017, 2016, and 2015, respectively. |
(1)The Company used a total of $1.0 billion, $1.7 billion and $0.2 billion in cash for share repurchases during 2022, 2021 and 2020, respectively.
Share Issuance Related to the Acquisition(2)The number of CEB. On April 5, 2017, the Company issued 7.4 million of its common shares at a fair value of $109.65 per common share as part of the consideration for the CEB acquisition. Note 2 — Acquisitions and Divestiture provides additional information regarding the CEB acquisition. The fair value of the Company's common stock was determined based on an average of the high and low prices of the common stock as reported by the New York Stock Exchange on April 5, 2017, the date of the acquisition.repurchased in 2020 includes shares repurchased in December 2020 that settled in January 2021.
Share repurchase authorization. The Company hasIn 2015, the Company’s Board of Directors (the “Board”) authorized a share repurchase program to repurchase up to $1.2 billion board approved authorizationof the Company’s common stock. The Board authorized incremental share repurchases of up to repurchasean additional $1.6 billion, and $1.0 billion of the Company'sCompany’s common stock of which $1.1 billionduring 2021 and 2022, respectively. $606 million remained available as of December 31, 2017.2022. The Company may repurchase its common stock from time to timetime-to-time in amounts, and at prices and in the manner that 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 (which may include repurchase plans designed to comply with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended), accelerated share repurchases, private transactions or other transactions and will be funded fromby cash on hand and borrowings underborrowings. Repurchases may also be made from time-to-time in connection with the settlement of the Company’s credit arrangement.stock-based compensation awards. See Note 19 — Subsequent Event for information regarding an increase in the Company’s share repurchase authorization.
Accumulated Other Comprehensive Income (Loss), Net. net (“AOCI/L”)
The following tables disclosebelow provide information about the changes in Accumulated Other Comprehensive Income (Loss) ("AOCL/I"), a component of equity,AOCI/L by component and the related amounts reclassified out of AOCL/IAOCI/L to income during the years indicated (net of tax, in thousands) (1):.
2017Year Ended December 31, 2022
| | | | | | | | | | | | | | | | | | | | | | | |
| | Interest Rate Swaps | | Defined Benefit Pension Plans | | Foreign Currency Translation Adjustments | | Total |
| Balance - December 31, 2021 | $ | (56,323) | | | $ | (6,672) | | | $ | (18,436) | | | $ | (81,431) | |
| Other comprehensive income (loss) activity during the year: | | | | | | | |
| Change in AOCI/L before reclassifications to income | — | | | 2,244 | | | (39,679) | | | (37,435) | |
| Reclassifications from AOCI/L to income (2), (3) | 17,075 | | | 181 | | | — | | | 17,256 | |
| Other comprehensive income (loss), net for the year | 17,075 | | | 2,425 | | | (39,679) | | | (20,179) | |
| Balance - December 31, 2022 | $ | (39,248) | | | $ | (4,247) | | | $ | (58,115) | | | $ | (101,610) | |
Year Ended December 31, 2021
|
| | | | | | | | | | | | | | | |
| | Interest Rate Swaps | | Defined Benefit Pension Plans | | Foreign Currency Translation Adjustments | | Total |
| Balance - December 31, 2016 | $ | (1,409 | ) | | $ | (5,797 | ) | | $ | (42,477 | ) | | $ | (49,683 | ) |
| Changes during the period: | | | | | | | |
| Change in AOCL/I before reclassifications to income | (1,492 | ) | | — |
| | 47,363 |
| | 45,871 |
|
| Reclassifications from AOCL/I to income during the period (2), (3) | 5,384 |
| | (64 | ) | | — |
| | 5,320 |
|
| Other comprehensive income (loss) for the period | 3,892 |
| | (64 | ) | | 47,363 |
| | 51,191 |
|
| Balance - December 31, 2017 | $ | 2,483 |
| | $ | (5,861 | ) | | $ | 4,886 |
| | $ | 1,508 |
|
2016
|
| | | | | | | | | | | | | | | |
| | Interest Rate Swaps | | Defined Benefit Pension Plans | | Foreign Currency Translation Adjustments | | Total |
| Balance - December 31, 2015 | $ | (3,079 | ) | | $ | (4,832 | ) | | $ | (36,491 | ) | | $ | (44,402 | ) |
| Changes during the period: | | | | | | | |
| Change in AOCL/I before reclassifications to income | (2,902 | ) | | (1,113 | ) | | (5,986 | ) | | (10,001 | ) |
| Reclassifications from AOCL/I to income during the period (2), (3) | 4,572 |
| | 148 |
| | — |
| | 4,720 |
|
| Other comprehensive income (loss) for the period | 1,670 |
| | (965 | ) | | (5,986 | ) | | (5,281 | ) |
| Balance - December 31, 2016 | $ | (1,409 | ) | | $ | (5,797 | ) | | $ | (42,477 | ) | | $ | (49,683 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Interest Rate Swaps | | Defined Benefit Pension Plans | | Foreign Currency Translation Adjustments | | Total |
| Balance - December 31, 2020 | $ | (78,104) | | | $ | (9,309) | | | $ | (11,815) | | | $ | (99,228) | |
| Other comprehensive income (loss) activity during the year: | | | | | | | |
| Change in AOCI/L before reclassifications to income | — | | | 2,232 | | | (6,621) | | | (4,389) | |
| Reclassifications from AOCI/L to income (2), (3) | 21,781 | | | 405 | | | — | | | 22,186 | |
| Other comprehensive income (loss), net for the year | 21,781 | | | 2,637 | | | (6,621) | | | 17,797 | |
| Balance - December 31, 2021 | $ | (56,323) | | | $ | (6,672) | | | $ | (18,436) | | | $ | (81,431) | |
(1)Amounts in parentheses represent debits (deferred losses).
(2) The$22.6 million and $29.1 million of the reclassifications related to interest rate swaps (cash flow hedges) were recorded in Interest expense net of tax effect.for the year ended December 31, 2022 and 2021, respectively. See Note 11 –6 — Debt and Note 13 — Derivatives and Hedging for information regarding the cash flow hedges.
(3)The reclassifications related to defined benefit pension plans were primarily recorded in Selling, general and administrative expense, net of tax effect. See Note 13 –15 — Employee Benefits for information regarding the Company’s defined benefit pension plans.
The estimated net amount of the existing losses on the Company’s interest rate swaps that are reported in Accumulated other comprehensive loss, net at December 31, 2022 that is expected to be reclassified into earnings within the next 12 months is $20.1 million.
8Note 9 — STOCK-BASED COMPENSATIONRevenue and Related Matters
Our Business and Revenues
Gartner delivers its products and services globally through three business segments: Research, Conferences and Consulting. Revenues from those business segments are discussed below.
Research
Research equips executives and their teams from every function and across all industries with actionable, objective insight, guidance and tools. Our experienced experts deliver all this value informed by a combination of practitioner-sourced and data-driven research to help our clients address their mission critical priorities.
Research revenues are mainly derived from subscription contracts for research products, representing approximately 91% of the segment’s revenue. The related revenues are deferred and recognized ratably over the applicable contract term (i.e., as services are provided over the contract period). Fees derived from assisting organizations in selecting the right business software for their needs are recognized at a point in time (i.e., when the lead is provided to the vendor).
The Company enters into subscription contracts for research products that generally are for twelve-month periods or longer. Approximately 80% to 85% of the Company’s annual and multi-year Research subscription contracts provide for billing of the first full service period upon signing. In subsequent years, multi-year subscription contracts are normally billed prior to the contract’s anniversary date. Other Research subscription contracts are usually invoiced in advance, commencing with the contract signing, on (i) a quarterly, monthly or other recurring basis or (ii) in accordance with a customized invoicing schedule. Research contracts are generally non-cancelable and non-refundable, except for government contracts that may have cancellation or fiscal funding clauses, which have not historically resulted in material cancellations. It is the Company’s policy to record the amount of a subscription contract that is billable as a fee receivable at the time the contract is signed with a corresponding amount as deferred revenue because the contract represents a legally enforceable claim.
Conferences
Conferences provides executives and teams across an organization the opportunity to learn, share and network. From our Gartner Symposium/Xpo series, to industry-leading conferences focused on specific business roles and topics, to peer-driven sessions, our offerings enable attendees to experience the best of Gartner insight and guidance.
The Company earns revenues from both the attendees and exhibitors at Gartner conferences and meetings. Attendees are generally invoiced for the full attendance fee upon their completion of an online registration form or their signing of a contract, while exhibitors typically make several individual payments commencing with the signing of a contract. Almost all of the invoiced amounts are collected in advance of the related activity, resulting in the recording of deferred revenue. Both the attendee and exhibitor revenues are recognized as the related performance obligations are satisfied (i.e., when the related activity is held).
The Company defers certain costs directly related to specific conferences and meetings and expenses those costs in the period during which the related activity occurs. The Company’s policy is to defer only those costs that are incremental and directly attributable to a specific activity, primarily prepaid site and production services costs. Other costs of organizing and producing conference activities, primarily Company personnel and non-conference specific expenses, are expensed in the period incurred.
Consulting
Consulting serves senior executives leading technology-driven strategic initiatives leveraging the power of Gartner’s actionable, objective insight. Through custom analysis and on-the-ground support we enable optimized technology investments and stronger performance on our clients’ mission critical priorities.
Consulting revenues, primarily derived from custom consulting and measurement services, are principally generated from fixed fee or time and materials engagements. Revenues from fixed fee engagements are recognized as the Company works to satisfy its performance obligations, while revenues from time and materials engagements are recognized as work is delivered and/or services are provided. In both of these circumstances, performance obligations are satisfied and control of the services are passed to customers over time (i.e., during the duration of the contract or consulting engagement). On a contract-by-contract basis, the Company typically uses actual labor hours incurred compared to total expected labor hours to measure the Company’s performance in respect of fixed fee engagements. If labor and other costs on an individual contract are expected to exceed the total contract value or the contract’s funded ceiling amount, the Company reflects an adjustment to the contract’s overall profitability in the period determined. Revenues related to contract optimization engagements are contingent in nature and are only recognized at the point in time when all of the conditions related to their payment have been satisfied.
Consulting customers are invoiced based on the specific terms and conditions in their underlying contracts. They are typically invoiced after the Company has satisfied some or all of the related performance obligations and the related revenue has been recognized. The Company records fees receivable for amounts that are billed or billable. Contract assets are also recorded representing amounts for which the Company has recognized revenue but lacks the unconditional right to payment as of the balance sheet date due to the required continued performance under the relevant contract, progress billing milestones or other billing-related restrictions.
Disaggregated Revenue
Disaggregated revenue by reportable segment is presented in the tables below for the years indicated (in thousands).
By Primary Geographic Market(1)
Year Ended December 31, 2022
| | | | | | | | | | | | | | |
| Primary Geographic Market | Research | Conferences | Consulting | Total |
| | | | |
| United States and Canada | $ | 3,056,096 | | $ | 263,165 | | $ | 300,121 | | $ | 3,619,382 | |
| Europe, Middle East and Africa | 1,017,860 | | 88,979 | | 127,820 | | 1,234,659 | |
| Other International | 530,835 | | 37,129 | | 53,841 | | 621,805 | |
| Total revenues | $ | 4,604,791 | | $ | 389,273 | | $ | 481,782 | | $ | 5,475,846 | |
Year Ended December 31, 2021
| | | | | | | | | | | | | | |
| Primary Geographic Market | Research | Conferences | Consulting | Total |
| | | | |
| United States and Canada | $ | 2,655,534 | | $ | 146,707 | | $ | 246,661 | | $ | 3,048,902 | |
| Europe, Middle East and Africa | 958,339 | | 47,883 | | 124,757 | | 1,130,979 | |
| Other International | 487,519 | | 19,859 | | 46,703 | | 554,081 | |
| Total revenues | $ | 4,101,392 | | $ | 214,449 | | $ | 418,121 | | $ | 4,733,962 | |
Year Ended December 31, 2020
| | | | | | | | | | | | | | |
| Primary Geographic Market | Research | Conferences | Consulting | Total |
| | | | |
| United States and Canada | $ | 2,339,482 | | $ | 75,024 | | $ | 223,318 | | $ | 2,637,824 | |
| Europe, Middle East and Africa | 826,752 | | 28,108 | | 111,413 | | 966,273 | |
| Other International | 436,658 | | 17,008 | | 41,640 | | 495,306 | |
| Total revenues | $ | 3,602,892 | | $ | 120,140 | | $ | 376,371 | | $ | 4,099,403 | |
(1)Revenue is reported based on where the sale is fulfilled.
The Company’s revenue is generated primarily through direct sales to clients by domestic and international sales forces and a network of independent international sales agents. Most of the Company’s products and services are provided on an integrated worldwide basis and, because of this integrated delivery approach, it is not practical to precisely separate Company’s revenue by geographic location. Accordingly, revenue information presented in the above tables is based on internal allocations, which involve certain management estimates and judgments.
By Timing of Revenue Recognition
Year Ended December 31, 2022
| | | | | | | | | | | | | | |
| Timing of Revenue Recognition | Research | Conferences | Consulting | Total |
| | | | |
| Transferred over time (1) | $ | 4,182,747 | | $ | — | | $ | 378,062 | | $ | 4,560,809 | |
| Transferred at a point in time (2) | 422,044 | | 389,273 | | 103,720 | | 915,037 | |
| Total revenues | $ | 4,604,791 | | $ | 389,273 | | $ | 481,782 | | $ | 5,475,846 | |
Year Ended December 31, 2021
| | | | | | | | | | | | | | |
| Timing of Revenue Recognition | Research | Conferences | Consulting | Total |
| | | | |
| Transferred over time (1) | $ | 3,740,694 | | $ | — | | $ | 334,945 | | $ | 4,075,639 | |
| Transferred at a point in time (2) | 360,698 | | 214,449 | | 83,176 | | 658,323 | |
| Total revenues | $ | 4,101,392 | | $ | 214,449 | | $ | 418,121 | | $ | 4,733,962 | |
Year Ended December 31, 2020
| | | | | | | | | | | | | | |
| Timing of Revenue Recognition | Research | Conferences | Consulting | Total |
| | | | |
| Transferred over time (1) | $ | 3,313,111 | | $ | — | | $ | 296,546 | | $ | 3,609,657 | |
| Transferred at a point in time (2) | 289,781 | | 120,140 | | 79,825 | | 489,746 | |
| Total revenues | $ | 3,602,892 | | $ | 120,140 | | $ | 376,371 | | $ | 4,099,403 | |
(1)Research revenues were recognized in connection with performance obligations that were satisfied over time using a time-elapsed output method to measure progress. Consulting revenues were recognized over time using labor hours as an input measurement basis.
(2)The revenues in this category were recognized in connection with performance obligations that were satisfied at the point in time that the contractual deliverables were provided to the customer.
Determining a measure of progress for performance obligations that are satisfied over time and when control transfers for performance obligations that are satisfied at a point in time requires management to make judgments that affect the timing of revenue recognition. A key factor in this determination is when the customer can direct the use of, and can obtain substantially all of the benefits from, the deliverable.
For performance obligations recognized in accordance with a time-elapsed output method, the Company’s efforts are expended consistently throughout the contractual period and the Company transfers control evenly by providing stand-ready services. For performance obligations satisfied under Consulting fixed fee or time and materials engagements, the Company believes that
labor hours are the best measure of depicting the Company’s progress because labor output corresponds directly to the value of the Company’s performance to date as control is transferred.
For customer contracts that are greater than one year in duration, the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2022 was approximately $5.2 billion. The Company expects to recognize $3.0 billion, $1.7 billion and $0.5 billion of this revenue (most of which pertains to Research) during the year ending December 31, 2023, the year ending December 31, 2024 and thereafter, respectively. The Company applies a practical expedient allowed in ASC 606 and, accordingly, it does not disclose such performance obligation information for customer contracts that have original durations of one year or less. The Company’s performance obligations for contracts meeting this ASC 606 disclosure exclusion primarily include: (i) stand-ready services under Research subscription contracts; (ii) holding conferences and meetings where attendees and exhibitors can participate; and (iii) providing customized Consulting solutions for clients under fixed fee or time and materials engagements. The remaining duration of these performance obligations is generally less than one year, which aligns with the period that the parties have enforceable rights and obligations under the affected contracts.
Customer Contract Assets and Liabilities
The payment terms and conditions in the Company’s customer contracts vary. In some cases, customers prepay and, in other cases, after the Company conducts a credit evaluation, payment may be due in arrears. Because the timing of the Company’s service delivery typically differs from the timing of customer payments, the Company recognizes either a contract asset (the Company performs either fully or partially under the contract but a contingency remains) or a contract liability (upfront customer payments precede the Company’s performance, resulting in deferred revenue). Amounts recorded as contract assets are reclassified to fees receivable when all of the outstanding conditions have been resolved and the Company’s right to payment becomes unconditional. Contracts with payments due in arrears are also recognized as fees receivable. As contractual performance obligations are satisfied, the Company correspondingly relieves its contract liabilities and records the associated revenue.
The table below provides information regarding certain of the Company’s balance sheet accounts that pertain to its contracts with customers (in thousands).
| | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 |
| Assets: | | | |
| Fees receivable, gross (1) | $ | 1,565,786 | | | $ | 1,371,680 | |
| Contract assets recorded in Prepaid expenses and other current assets (2) | $ | 21,183 | | | $ | 20,054 | |
| Contract liabilities: | | | |
| Deferred revenues (current liability) (3) | $ | 2,443,762 | | | $ | 2,238,035 | |
| Non-current deferred revenues recorded in Other liabilities (3) | 39,115 | | | 48,176 | |
| Total contract liabilities | $ | 2,482,877 | | | $ | 2,286,211 | |
(1)Fees receivable represent an unconditional right of payment from the Company’s customers and include both billed and unbilled amounts.
(2)Contract assets represent recognized revenue for which the Company does not have an unconditional right to payment as of the balance sheet date because the project may be subject to a progress billing milestone or some other billing restriction.
(3)Deferred revenues represent amounts (i) for which the Company has received an upfront customer payment or (ii) that pertain to recognized fees receivable. Both situations occur before the completion of the Company’s performance obligation(s).
The Company recognized revenue of $1.9 billion, $1.6 billion and $1.5 billion during 2022, 2021 and 2020 respectively, which was attributable to deferred revenues that were recorded at the beginning of each such year. Those amounts primarily consisted of (i) Research revenues and (ii) Conferences revenues pertaining to conferences and meetings that occurred during the reporting periods. During 2022, 2021 and 2020, the Company did not record any material impairments related to its contract assets.
Costs of Obtaining and Fulfilling a Customer Contract
When the Company concludes that a liability should be recognized for the costs of obtaining a customer contract and determines how such liability should be measured, certain commissions are capitalized as a recoverable direct incremental cost of obtaining the underlying contract. No other amounts are capitalized as a cost of obtaining or fulfilling a customer contract because no expenditures have been identified that meet the requisite capitalization criteria. For Research and Consulting, the Company amortizes deferred commissions on a systematic basis that aligns with the transfer to customers of the services to which the commissions relate. For Conferences, deferred commissions are expensed during the period when the related conference or meeting occurs.
During 2022, 2021 and 2020, deferred commission amortization expense was $562.1 million, $472.5 million and $440.5 million, respectively, and was included in Selling, general and administrative expense in the Consolidated Statements of Operations. The Company classifies Deferred commissions as a current asset on the Consolidated Balance Sheets at both December 31, 2022 and 2021 because those costs were, or will be, amortized over the twelve months following the respective balance sheet dates.
Note 10 — Stock-Based Compensation
The Company grants stock-based compensation awards as an incentive for employees and directors to contribute to the Company’s long-term success. The Company currently awards stock-settled stock appreciation rights, service-based and performance-based restricted stock units, and common stock equivalents. AtAs of December 31, 2017,2022, the Company had 5.74.0 million shares of its common stock, par value $.0005$0.0005 per share, (the "Common Stock"“Common Stock”) available for stock-based compensation awards under its 2014 Long-Term Incentive Plan.
The Company accounts for stock-based compensation awards in accordance with FASB ASC Topics 505 and 718 and SEC Staff Accounting Bulletins No. 107 and No. 110. Stock-based compensation expense is based on the fair value of the award on the date of grant. The Company recognizes stock-based compensation expense over the period that the related service is performed, which is generally the same as the vesting period of the underlying award.Plan (the “Plan”). Currently, the Company issues treasury shares upon the exercise, release or settlement of stock-based compensation awards.
Determining the appropriate fair value model and calculating the fair value of stock-based compensation awards requires the use of certain complex and subjective assumptions, including the expected life of a stock-based compensation award and Common Stock price volatility. In addition, determining the appropriate periodic stock-based compensation expense requires management to estimate the likelihood of the achievement of certain performance targets. The assumptions used in calculating the fair values of stock-based compensation awards and the related periodic expense represent management’s best estimates, which involve inherent uncertainties and the application of judgment. As a result, if circumstances 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-based compensation expense could be materially different from what has been recorded in the current period.year.
Stock-Based Compensation Expense
The Company recognizedtables below summarize the followingCompany’s stock-based compensation expense by award type and expense category line item during the years ended December 31 (in millions):.
| | | | | | | | | | | | | | | | | | | | |
| Award type | | 2022 | | 2021 | | 2020 |
| Stock appreciation rights | | $ | 8.8 | | | $ | 8.2 | | | $ | 7.8 | |
| Restricted stock units (1) | | 81.0 | | | 89.6 | | | 54.1 | |
| Common stock equivalents | | 0.8 | | | 0.8 | | | 0.7 | |
| Total (2) | | $ | 90.6 | | | $ | 98.6 | | | $ | 62.6 | |
|
| | | | | | | | | | | | |
| Award type | | 2017 | | 2016 | | 2015 |
| Stock appreciation rights | | $ | 5.6 |
| | $ | 5.6 |
| | $ | 5.7 |
|
| Restricted stock units | | 72.6 |
| | 40.4 |
| | 39.8 |
|
| Common stock equivalents | | 0.7 |
| | 0.7 |
| | 0.6 |
|
| Total (1) | | $ | 78.9 |
| | $ | 46.7 |
| | $ | 46.1 |
|
|
| | | | | | | | | | | | |
| Expense category line item | | 2017 | | 2016 | | 2015 |
| Cost of services and product development | | $ | 25.8 |
| | $ | 21.9 |
| | $ | 20.6 |
|
| Selling, general and administrative | | 35.5 |
| | 24.8 |
| | 25.5 |
|
| Acquisition and integration charges (2) | | 17.6 |
| | — |
| | — |
|
| Total (1) | | $ | 78.9 |
| | $ | 46.7 |
| | $ | 46.1 |
|
| | | | | | | | | | | | | | | | | | | | |
| Expense category line item | | 2022 | | 2021 | | 2020 |
| Cost of services and product development | | $ | 32.7 | | | $ | 35.0 | | | $ | 29.7 | |
| Selling, general and administrative | | 57.9 | | | 63.6 | | | 32.9 | |
| Total (1) (2) | | $ | 90.6 | | | $ | 98.6 | | | $ | 62.6 | |
| |
(1) | Includes charges of $22.9 million, $19.4 million and $20.1 million during 2017, 2016 and 2015, respectively, for awards to retirement-eligible employees. Those awards vest on an accelerated basis. |
| |
(2) | These charges are primarily the result of the acceleration of the vesting of certain restricted stock units related to the CEB acquisition. |
(1)On February 5, 2020, prior to the COVID-19 related shutdown in the U.S., the Compensation Committee (“Committee”) of the Board of Directors of the Company established performance measures for the performance-based restricted stock units (the “PSUs”) awarded to the Company’s executive officers in 2020 under the Plan. Based on preliminary corporate performance results for the 2020 performance measures, the 2020 PSUs would have been earned at 50% of target. However, on February 3, 2021, the Committee determined to use its discretion under the Plan to approve a payout at 95% of target. In deciding to exercise this discretion to adjust the performance-based RSU payout, the Committee considered the Company’s strong overall performance in 2020 despite the significant negative impact of the COVID-19 pandemic. As a
result of the modification, the Company recognized $6.5 million of incremental compensation cost during the year ended December 31, 2021.
(2)Includes charges of $32.2 million, $41.2 million and $17.9 million during 2022, 2021 and 2020, respectively, for awards to retirement-eligible employees. Those awards vest on an accelerated basis.
As of December 31, 2017,2022, the Company had $79.9$118.4 million of total unrecognized stock-based compensation cost, which is expected to be expensed over the remaining weighted average service period of approximately 2.4 years.
Stock-Based Compensation Awards
The disclosures presented below provide information regarding the Company’s stock-based compensation awards, all of which have been classified as equity awards in accordance with FASB ASC Topic 505.
Stock Appreciation Rights
Stock-settled stock appreciation rights ("SARs"(“SARs”) permit the holder to participate in the appreciation of the value of the Common Stock. After the applicable vesting criteria have been satisfied, SARs are settled in shares of Common Stock upon exercise by the employee. SARs vest ratably over a four-year service period and expire seven years from the date of grant. The fair value of a SARs award is recognized as compensation expense on a straight-line basis over four years. SARs have only been awarded to the Company’s executive officers.
When SARs are exercised, the number of shares of Common Stock issued is calculated as follows: (1) the total proceeds from the exercise of the SARs award (calculated as the closing price of the Common Stock as reported on the New York Stock Exchange on the date of exercise less the exercise price of the SARs award, multiplied by the number of SARs exercised) is divided by (2) the closing price of the Common Stock on the date of exercise. TheUpon exercise, the Company withholds a portion of the shares of the Common Stock issued upon exercise to satisfy statutory tax withholding requirements. SARs recipients do not have any stockholder rights until the shares of Common Stock are issued in respect of the award, which is subject to the prior satisfaction of the vesting and other criteria relating to such grants.
The following table below summarizes changes in SARs outstanding during the year ended December 31, 2017: 2022.
|
| | | | | | | | | | | | |
| | Stock Appreciation Rights ("SARs") (in millions) | | Per Share Weighted Average Exercise Price | | Per Share Weighted Average Grant Date Fair Value | | Weighted Average Remaining Contractual Term (Years) |
| Outstanding at December 31, 2016 | 1.3 |
| | $ | 66.22 |
| | $ | 15.77 |
| | 4.40 years |
| Granted | 0.3 |
| | 99.07 |
| | 22.02 |
| | 6.10 years |
| Forfeited | (0.1 | ) | | 85.28 |
| | 10.49 |
| | n/a |
| Exercised | (0.3 | ) | | 52.72 |
| | 14.85 |
| | n/a |
| Outstanding at December 31, 2017 (1) (2) | 1.2 |
| | $ | 76.73 |
| | $ | 17.35 |
| | 4.28 years |
| Vested and exercisable at December 31, 2017 (2) | 0.5 |
| | $ | 65.67 |
| | $ | 15.69 |
| | 3.22 years |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Units of SARs
(in millions) | | Per Share
Weighted
Average
Exercise Price | | Per Share
Weighted
Average
Grant Date
Fair Value | | Weighted Average
Remaining
Contractual
Term (Years) |
| Outstanding at December 31, 2021 | 0.8 | | | $ | 145.36 | | | $ | 34.72 | | | 4.45 |
| Granted | 0.1 | | | 302.90 | | | 92.56 | | | 6.11 |
| | | | | | | |
| Exercised | (0.1) | | | 124.20 | | | 28.26 | | | n/a |
| Outstanding at December 31, 2022 (1) (2) | 0.8 | | | $ | 168.16 | | | $ | 42.99 | | | 3.89 |
| Vested and exercisable at December 31, 2022 (2) | 0.4 | | | $ | 135.43 | | | $ | 31.36 | | | 2.97 |
n/a = not applicable
| |
(1) | As of December 31, 2017, 0.7 million of the total SARs outstanding were unvested. The Company expects that substantially all of those unvested awards will vest in future periods. |
| |
(2) | As of December 31, 2017, the total SARs outstanding had an intrinsic value of $55.0 million. On such date, SARs vested and exercisable had an intrinsic value of $30.2 million. |
(1)As of December 31, 2022, 0.4 million of the total SARs outstanding were unvested. The Company expects that substantially all of those unvested awards will vest in future periods.
(2)As of December 31, 2022, the total SARs outstanding had an intrinsic value of $140.5 million. On such date, SARs vested and exercisable had an intrinsic value of $86.4 million.
The fair value of a SARs award is determined on the date of grant using the Black-Scholes-Merton valuation model with the following weighted average assumptions for the years ended December 31:
|
| | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Expected dividend yield (1) | — | % | | — | % | | — | % |
| Expected stock price volatility (2) | 22 | % | | 22 | % | | 24 | % |
| Risk-free interest rate (3) | 1.8 | % | | 1.1 | % | | 1.5 | % |
| Expected life in years (4) | 4.53 |
| | 4.39 |
| | 4.41 |
|
| | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| Expected dividend yield (1) | — | % | | — | % | | — | % |
| Expected stock price volatility (2) | 33 | % | | 31 | % | | 23 | % |
| Risk-free interest rate (3) | 1.8 | % | | 0.4 | % | | 1.5 | % |
| Expected life in years (4) | 4.59 | | 4.74 | | 4.68 |
| |
(1) | The expected dividend yield assumption was based on both the Company's historical and anticipated dividend payouts. Historically, the Company has not paid cash dividends on its Common Stock. |
| |
(2) | The determination of expected stock price volatility was based on both historical Common Stock prices and implied volatility from publicly traded options in the Common Stock. |
| |
(3) | The risk-free interest rate was based on the yield of a U.S. Treasury security with a maturity similar to the expected life of the award. |
| |
(4) | The expected life represents the Company’s estimate of the weighted average period of time the SARs are expected to be outstanding (that is, the period between the service inception date and the expected exercise date). |
(1)The expected dividend yield assumption was based on both the Company’s historical and anticipated dividend payouts. Historically, the Company has not paid cash dividends on its Common Stock.
(2)The determination of expected stock price volatility was based on both historical Common Stock prices and implied volatility from publicly traded options in the Common Stock.
(3)The risk-free interest rate was based on the yield of a U.S. Treasury security with a maturity similar to the expected life of the award.
(4)The expected life represents the Company’s estimate of the weighted average period of time the SARs are expected to be outstanding (that is, the period between the service inception date and the expected exercise date).
Restricted Stock Units
Restricted stock units ("RSUs"(“RSUs”) give the awardee the right to receive shares of Common Stock when the vesting conditions are met and certain restrictions lapse. Each RSU that vests entitles the awardee to one share of Common Stock. RSU awardees do not have any of the rights of a Gartner stockholder, including voting rights and the right to receive dividends and distributions, until the shares are released. The fair value of an RSU award is determined on the date of grant based on the closing price of the Common Stock as reported on the New York Stock Exchange on that date. Service-based RSUs vest ratably over four years and are expensed on a straight-line basis over the vesting period. Performance-based RSUs are subject to the satisfaction of both performance and service conditions, vest ratably over four years and are expensed on an accelerated basis over the vesting period.
The following table below summarizes the changes in RSUs outstanding during the year ended December 31, 2017: 2022.
|
| | | | | | |
| | Restricted Stock Units ("RSUs") (in millions) | | Per Share Weighted Average Grant Date Fair Value |
| Outstanding at December 31, 2016 | 1.3 |
| | $ | 73.19 |
|
| Granted (1) (2) | 1.1 |
| | 105.55 |
|
| Vested and released | (0.8 | ) | | 79.60 |
|
| Forfeited | (0.1 | ) | | 91.03 |
|
| Outstanding at December 31, 2017 (3) (4) | 1.5 |
| | $ | 91.47 |
|
| | | | | | | | | | | |
| | Units of RSUs
(in millions) | | Per Share
Weighted
Average
Grant Date
Fair Value |
| Outstanding at December 31, 2021 | 1.1 | | | $ | 160.04 | |
| Granted (1) | 0.5 | | | 301.38 | |
| Vested and released | (0.5) | | | 152.13 | |
| Forfeited | (0.1) | | | 195.86 | |
| Outstanding at December 31, 2022 (2) (3) | 1.0 | | | $ | 211.25 | |
| |
(1) | The 1.1(1)The 0.5 million of RSUs granted during 2022 consisted of 0.2 million of performance-based RSUs awarded to executives and 0.3 million of service-based RSUs awarded to non-executive employees and non-management board members. The performance-based awards include RSUs granted during 2017 consisted of 0.2 million of performance-based RSUs awarded to executives and 0.9 million of service-based RSUs awarded to executives, non-executive employees and non-management board members. The 0.2 million of performance-based RSUs represents the target amount of the grant for the year, which is tied to the increase |
in heritagefinal adjustments of 2021 grants and approximately 0.1 million of RSUs representing the target amount of the grant for 2022 that is tied to an increase in Gartner’s total contract value for 2017. Total contract value for this determination represents the value attributable to all of heritage Gartner’s subscription-related revenue contracts.such year. The final number of performance-based RSUs awardedfor 2022 that holders could rangereceive ranges from 0% to 200% of the target amount. The actual increase in heritage Gartner’s contract value for 2017 as measured on December 31, 2017 yielded approximately 186% of the target amount. The incremental awardsamount based on the actual achievementextent to which the corresponding performance goals have been achieved and subject to certain other conditions. Any adjustments in the number of performance-based RSUs under the 20172022 grant will be issuedmade in 2018.
| |
(2) | Includes 0.6 million of RSUs awarded to employees that joined Gartner as a result of the CEB acquisition. |
| |
(3) | The Company expects that substantially all of the RSUs outstanding will vest in future periods. |
| |
(4) | As of December 31, 2017, the weighted average remaining contractual term of the RSUs outstanding was approximately 1.2 years. |
2023.
(2)The Company expects that substantially all of the RSUs outstanding will vest in future periods.
(3)As of December 31, 2022, the weighted average remaining contractual term of the RSUs outstanding was approximately 1.1 years.
Common Stock Equivalents
Common stock equivalents ("CSEs"(“CSEs”) are convertible into Common Stock. Each CSE entitles the holder to one share of Common Stock. Members of ourthe Company’s Board of Directors receive their directors’ fees in CSEs unless they opt to receive up to 50% of those fees in cash. Generally, CSEs have no defined term and are converted into shares of Common Stock when service as a director terminates unless the director has elected an accelerated release. The fair value of a CSE award is determined on the date of grant based on the closing price of the Common Stock as reported on the New York Stock Exchange on that date. CSEs vest immediately and, as a result, they are recorded as expense on the date of grant.
The following table below summarizes the changes in CSEs outstanding during the year ended December 31, 2017: 2022.
| | | | | | | Units of CSEs | | Per Share
Weighted Average
Grant Date
Fair Value |
| | Common Stock Equivalents ("CSEs") | | Per Share Weighted Average Grant Date Fair Value | |
| Outstanding at December 31, 2016 | 107,338 |
| | $ | 20.74 |
| |
| Outstanding at December 31, 2021 | | Outstanding at December 31, 2021 | 114,318 | | | $ | 31.15 | |
| Granted | 5,852 |
| | 120.28 |
| Granted | 2,641 | | | 287.83 | |
| Converted to shares of Common Stock upon grant | (3,177 | ) | | 119.10 |
| Converted to shares of Common Stock upon grant | (1,680) | | | 283.58 | |
| Outstanding at December 31, 2017 | 110,013 |
| | $ | 23.19 |
| |
| Outstanding at December 31, 2022 | | Outstanding at December 31, 2022 | 115,279 | | | $ | 33.35 | |
Employee Stock Purchase Plan
The Company has an employee stock purchase plan (the “ESP Plan”) under whichwherein eligible employees are permitted to purchase shares of Common Stock through payroll deductions, which may not exceed 10% of an employee’s compensation, or $23,750 in any calendar year, at a price equal to 95% of the closing price of the Common Stock as reported on the New York Stock Exchange at the end of each offering period. As of December 31, 2017,2022, the Company had 0.83.3 million shares available for purchase under the ESP Plan. The ESP Plan is considered non-compensatory under FASB ASC Topic 718 and, as a result, the Company does not record stock-based compensation expense for employee share purchases. The Company received $11.7$22.2 million, $9.3$18.2 million and $7.5$18.1 million in cash from employee share purchases under the ESP Plan during 2017, 20162022, 2021 and 2015,2020, respectively.
9Note 11 — COMPUTATION OF EARNINGS PER SHARE
Computation of Earnings Per Share
Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of shares of Common Stock outstanding forduring the period. Diluted EPS reflects the potential dilution of securities that could share in earnings. When the impactPotential shares of common share equivalents is anti-dilutive, theystock are excluded from the calculation.
The following table sets forth the reconciliationcomputation of the basic and diluted earnings per share computationswhen their effect would be anti-dilutive.
The table below sets forth the calculation of basic and diluted income per share for the years ended December 31 (in thousands, except per share amounts):data).
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Numerator: | | | | | |
| Net income used for calculating basic and diluted earnings per common share | $ | 3,279 |
| | $ | 193,582 |
| | $ | 175,635 |
|
Denominator: (1) | |
| | |
| | |
|
| Weighted average number of common shares used in the calculation of basic earnings per share | 88,466 |
| | 82,571 |
| | 83,852 |
|
| Common share equivalents associated with stock-based compensation plans | 1,324 |
| | 1,249 |
| | 1,204 |
|
| Shares used in the calculation of diluted earnings per share | 89,790 |
| | 83,820 |
| | 85,056 |
|
Earnings per share: (2) | |
| | |
| | |
|
| Basic | $ | 0.04 |
| | $ | 2.34 |
| | $ | 2.09 |
|
| Diluted | $ | 0.04 |
| | $ | 2.31 |
| | $ | 2.06 |
|
| | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| Numerator: | | | | | |
| Net income used for calculating basic and diluted income per share | $ | 807,799 | | | $ | 793,560 | | | $ | 266,745 | |
| Denominator: | | | | | |
| Weighted average common shares used in the calculation of basic income per share | 80,178 | | | 85,026 | | | 89,315 | |
| Dilutive effect of outstanding awards associated with stock-based compensation plans | 889 | | | 1,151 | | | 702 | |
| Shares used in the calculation of diluted income per share | 81,067 | | | 86,177 | | | 90,017 | |
Income per share (1): | | | | | |
| Basic | $ | 10.08 | | | $ | 9.33 | | | $ | 2.99 | |
| Diluted | $ | 9.96 | | | $ | 9.21 | | | $ | 2.96 | |
| |
(1) | The Company repurchased 0.4 million, 0.6 million and 6.2 million shares of its Common Stock in 2017, 2016 and 2015, respectively. |
| |
(2) | Both basic and diluted earnings per share for 2017 include a one-time benefit of approximately $0.66 per share related to the Tax Cuts and Jobs Act of 2017. Note 10 — Income Taxes provides information related to the Tax Cuts and Jobs Act of 2017. |
(1)Both basic and diluted income per share for 2021 and 2020 included a tax benefit of approximately $0.63 and $0.31 per share, respectively, related to intercompany sales of certain intellectual property (see Note 12 — Income Taxes).
The following table below presents the number of common share equivalentsoutstanding awards associated with stock-based compensation plans that were not included in the computationcomputations of diluted EPSincome per share in the above table above because the effect would have been anti-dilutive. During periodsyears with net income, these common share equivalentsthe outstanding awards were anti-dilutive because their exercise price wasprices were greater than the average market value of aprice per share of Common Stock during the period.such year.
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| Anti-dilutive outstanding awards associated with stock-based compensation plans (in millions) (1) | 0.1 | | | — | | | 0.5 | |
| Average market price per share of Common Stock during the year | $ | 289.73 | | | $ | 252.07 | | | $ | 130.95 | |
(1)The number of anti-dilutive common stock equivalents for 2021 was de minimis.
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Anti-dilutive common share equivalents as of December 31 (in millions): | 0.3 |
| | 0.2 |
| | 0.3 |
|
| Average market price per share of Common Stock during the year | $ | 116.09 |
| | $ | 92.58 |
| | $ | 86.02 |
|
Note 12 — Income Taxes
10 — INCOME TAXES
The followingBelow is a summary of the components of the Company's (loss)Company’s income before income taxes for the years ended December 31 (in thousands): .
| | | | 2017 | | 2016 | | 2015 | | 2022 | | 2021 | | 2020 |
| U.S. | $ | (135,757 | ) | | $ | 182,178 |
| | $ | 165,848 |
| U.S. | $ | 560,193 | | | $ | 485,472 | | | $ | 111,880 | |
| Non-U.S. | 7,940 |
| | 106,253 |
| | 106,363 |
| Non-U.S. | 467,002 | | | 484,398 | | | 214,253 | |
| (Loss) income before income taxes | $ | (127,817 | ) | | $ | 288,431 |
| | $ | 272,211 |
| |
| Income before income taxes | | Income before income taxes | $ | 1,027,195 | | | $ | 969,870 | | | $ | 326,133 | |
The components of the expense (benefit) for income taxes on the above income consists ofare summarized in the following componentstable below (in thousands):.
| | | | 2017 | | 2016 | | 2015 | | 2022 | | 2021 | | 2020 |
| Current tax expense: | |
| | |
| | |
| Current tax expense: | | | | | |
| U.S. federal | $ | 48,339 |
| | $ | 58,616 |
| | $ | 48,801 |
| U.S. federal | $ | 122,191 | | | $ | 117,024 | | | $ | 14,480 | |
| State and local | 434 |
| | 11,292 |
| | 10,300 |
| State and local | 48,482 | | | 36,266 | | | 16,360 | |
| Foreign | 38,602 |
| | 27,536 |
| | 23,225 |
| Foreign | 91,596 | | | 64,835 | | | 62,993 | |
| Total current | 87,375 |
| | 97,444 |
| | 82,326 |
| Total current | 262,269 | | | 218,125 | | | 93,833 | |
| Deferred tax (benefit) expense: | |
| | |
| | |
| Deferred tax (benefit) expense: | | | | | |
| U.S. federal | (176,046 | ) | | (61 | ) | | (884 | ) | U.S. federal | (21,337) | | | (4,640) | | | (7,206) | |
| State and local | (14,363 | ) | | (349 | ) | | (702 | ) | State and local | (10,108) | | | 3,156 | | | (13,121) | |
| Foreign | (25,898 | ) | | (1,626 | ) | | 1,550 |
| Foreign | (4,232) | | | (33,389) | | | (22,673) | |
| Total deferred | (216,307 | ) | | (2,036 | ) | | (36 | ) | Total deferred | (35,677) | | | (34,873) | | | (43,000) | |
| Total current and deferred | (128,932 | ) | | 95,408 |
| | 82,290 |
| Total current and deferred | 226,592 | | | 183,252 | | | 50,833 | |
| Benefit (expense) relating to interest rate swaps used to increase (decrease) equity | (2,477 | ) | | (1,113 | ) | | 893 |
| |
| (Expense) benefit relating to interest rate swaps used to increase equity | | (Expense) benefit relating to interest rate swaps used to increase equity | (5,569) | | | (7,281) | | | 8,257 | |
| Benefit from stock transactions with employees used to increase equity | 46 |
| | 52 |
| | 13,960 |
| Benefit from stock transactions with employees used to increase equity | 66 | | | 78 | | | 56 | |
| Benefit (expense) relating to defined-benefit pension adjustments used to increase (decrease) equity | 267 |
| | 502 |
| | (567 | ) | |
| Total tax (benefit) expense | $ | (131,096 | ) | | $ | 94,849 |
| | $ | 96,576 |
| |
| Benefit relating to defined-benefit pension adjustments used to increase equity | | Benefit relating to defined-benefit pension adjustments used to increase equity | (1,693) | | | 261 | | | 242 | |
| Total tax expense | | Total tax expense | $ | 219,396 | | | $ | 176,310 | | | $ | 59,388 | |
Long-termThe components of long-term deferred tax assets and liabilities(liabilities) are comprised ofsummarized in the followingtable below (in thousands):.
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| Accrued liabilities | $ | 72,610 | | | $ | 90,384 | |
| Operating leases | 63,289 | | | 60,226 | |
| Intangible assets | 35,803 | | | — | |
| Loss and credit carryforwards | 37,978 | | | 31,662 | |
| Assets relating to equity compensation | 19,299 | | | 15,863 | |
| Other assets | 16,638 | | | 12,195 | |
| Gross deferred tax assets | 245,617 | | | 210,330 | |
| Valuation allowance | (152,808) | | | (23,331) | |
| Net deferred tax assets | 92,809 | | | 186,999 | |
| Property, equipment and leasehold improvements | (1,856) | | | (14,576) | |
| Intangible assets | — | | | (123,523) | |
| Prepaid expenses | (69,230) | | | (70,149) | |
| Other liabilities | (22,936) | | | (20,536) | |
| Gross deferred tax liabilities | (94,022) | | | (228,784) | |
| Net deferred tax liabilities | $ | (1,213) | | | $ | (41,785) | |
|
| | | | | | | |
| | December 31, |
| | 2017 | | 2016 |
| Accrued liabilities | $ | 80,557 |
| | $ | 62,439 |
|
| Loss and credit carryforwards | 59,502 |
| | 7,766 |
|
| Assets relating to equity compensation | 24,874 |
| | 25,569 |
|
| Other assets | 30,236 |
| | 6,652 |
|
| Gross deferred tax assets | 195,169 |
| | 102,426 |
|
| Property, equipment, and leasehold improvements | (962 | ) | | (11,796 | ) |
| Intangible assets | (372,542 | ) | | (43,548 | ) |
| Prepaid expenses | (35,126 | ) | | (32,971 | ) |
| Other liabilities | (6,584 | ) | | (7,925 | ) |
| Gross deferred tax liabilities | (415,214 | ) | | (96,240 | ) |
| Valuation allowance | (3,192 | ) | | (1,431 | ) |
| Net deferred tax (liabilities) assets | $ | (223,237 | ) | | $ | 4,755 |
|
Net deferred tax assets and net deferred tax liabilities were $30.5$138.3 million and $253.7$139.5 million as of December 31, 2017,2022, respectively, and $27.3$140.0 million and $22.5$181.8 million as of December 31, 2016,2021, respectively. These amounts are primarily reported in Other assets and Other liabilities in the Consolidated Balance Sheets. Management has concluded it is more likely than not that the reversal of deferred tax liabilities and results of future operations will generate sufficient taxable income to realize the deferred tax assets, net of the valuation allowance at December 31, 2017.2022.
In 2022, the Company recorded a deferred tax asset of approximately $122.9 million for tax basis in intangible assets along with an offsetting valuation allowance of the same amount consistent with changes in the Company’s expectations for recovering amortizable tax basis in certain intellectual property during the period.
The valuation allowances of $3.2$152.8 million and $23.3 million as of December 31, 20172022 and $1.4 million as of 2016,2021, respectively, primarily relaterelated to net operating losses whichtax basis in certain intangible assets and loss and credit carryovers that are not likely to be realized.
As of December 31, 2017,2022, the Company had state and local tax net operating loss carryforwards of $91.5$17.6 million, of which $0.9$7.4 million expireexpires within one to five years and $19.9 million expire within six to fifteen years and $70.7$10.2 million expireexpires within sixteen to twenty years. The Company also had state tax credits of $2.0$8.0 million, a majority of which will expire in five to six years. As of December 31, 2017,2022, the Company had non-U.S. net operating loss carryforwards of $16.0$2.1 million, of which $0.5$0.1 million expireexpires over the next 20 years and $15.5$2.0 million can be carried forward indefinitely. In addition, the Company also had foreign tax credit carryforwards of $59.0$19.7 million, all of which will expire at the end of 2027.between 2028 and 2032. These amounts have been reduced for associated unrecognized tax benefits, consistent with FASB ASU No. 2013-11.2013-11, “Income Taxes—Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.”
As of December 31, 2017,The items comprising the Company recorded deferred tax assets for federal and state unrealized capital losses of $62.9 million resulting from held-for-sale accounting for the CEB Talent Assessment business.
The differences between the U.S. federal statutory income tax rate and the Company’s effective tax rate on income before income taxes for the years ended December 31 follow: are summarized in the table below.
| | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| Statutory tax rate | 21.0 | % | | 21.0 | % | | 21.0 | % |
| State income taxes, net of federal benefit | 2.4 | | | 2.8 | | | 1.7 | |
| Effect of non-U.S. operations | (2.0) | | | (3.4) | | | (1.8) | |
| Intercompany sale of intellectual property | — | | | (5.6) | | | (8.7) | |
| Net activity in recognized tax benefits | (1.1) | | | 1.3 | | | 6.4 | |
| Law changes | — | | | 1.3 | | | 1.8 | |
| Stock-based compensation expense | (2.0) | | | (2.0) | | | (2.8) | |
| | | | | |
| | | | | |
| | | | | |
| Limitation on executive compensation | 1.4 | | | 1.7 | | | 1.3 | |
| Global intangible low-taxed income, net of foreign tax credits | 1.9 | | | 1.7 | | | 1.4 | |
| Foreign-derived intangible income | (0.4) | | | (0.3) | | | (0.8) | |
| | | | | |
| | | | | |
| Other items, net | 0.2 | | | (0.3) | | | (1.3) | |
| Effective tax rate | 21.4 | % | | 18.2 | % | | 18.2 | % |
|
| | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Statutory tax rate | 35.0 | % | | 35.0 | % | | 35.0 | % |
| State income taxes, net of federal benefit | 3.6 |
| | 2.4 |
| | 3.5 |
|
| Effect of non-U.S. operations | 5.9 |
| | (6.1 | ) | | (6.9 | ) |
| Record (release) reserve for tax contingencies | (2.8 | ) | | 3.2 |
| | 1.7 |
|
| Law changes | 41.8 |
| | — |
| | (0.2 | ) |
| Excess tax benefits from stock based compensation | 11.0 |
| | (3.8 | ) | | — |
|
| Nondeductible acquisition costs | (7.9 | ) | | 2.6 |
| | 0.8 |
|
| Nondeductible meals and entertainment costs | (3.5 | ) | | 1.1 |
| | 1.1 |
|
| Capital loss | 13.1 |
| | — |
| | — |
|
| Record (release) valuation allowance | 3.0 |
| | (0.2 | ) | | 0.5 |
|
| Other items, net | 3.4 |
| | (1.3 | ) | | — |
|
| Effective tax rate | 102.6 | % | | 32.9 | % | | 35.5 | % |
The Tax CutsCompany completed intercompany sales of certain intellectual property in 2021 and Jobs Act (“2020. As a result, the Act”) was enacted on December 22, 2017. Among other things,Company recorded net tax benefits of approximately $54.1 million and $28.3 million during 2021 and 2020, respectively. These benefits represent the Act reducesvalue of future tax deductions for amortization of the U.S. federal corporationassets in the acquiring jurisdiction, net of any tax recognized in the selling jurisdiction. The Company’s intellectual property footprint continues to evolve and may result in tax rate from 35% to 21%, requires companies to pay a one-time transition tax on accumulated deferred foreign income (“ADFI”) of foreign subsidiaries that were previously tax deferred and creates a new tax on global intangible low-taxed income (“GILTI”) attributable to foreign subsidiaries. volatility in the future.
As of December 31, 2017, we have not completed our accounting for the tax effects of enactment of the Act because all of the necessary information is not currently available, prepared or analyzed. As such, the amount we have recorded are provisional estimates2022 and as permitted by SEC per Staff Accounting Bulletin No. 118, we will continue to assess the enactment of the Act and may record additional provisional amount or adjustments to provisional amounts during fiscal year 2018. We expect to complete the accounting for these impacts of tax reform by the fourth quarter of 2018 as we complete our analysis and receive additional guidance from the Internal Revenue Service pertaining to the Act.
We remeasured U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21% and recorded a provisional amount which reduced our income tax expense by $123.2 million. However, we are still finalizing purchase accounting for the acquisition of CEB, analyzing certain aspects of the Act and refining our deferred tax calculations, which could affect the measurement of these balances or give rise to new deferred tax amounts.
The tax on ADFI is based on our total post-1986 earnings and profits ("E&P") of our foreign subsidiaries that were previously deferred from US income taxes. We recorded a $63.6 million provisional amount for this one-time transition tax liability, resulting in an increase in income tax expense of $63.6 million. We have not yet completed our calculation of the tax on ADFI given pending
regulatory guidance and the need to obtain, prepare and analyze various information relevant to calculation including, but not limited to, our post-1986 E&P, foreign taxes and amounts held in cash or other specified assets on various measurement dates.
As disclosed in Note 1 - Business and Significant Accounting Policies,2021, the Company adopted FASB ASU No. 2016-09 in 2016. The effect of the adoption reduced the provision for income taxes by $12.9 million and $10.0 million for the years ended December 31, 2017 and 2016, respectively.
In July 2015, the United States Tax Court (the “Court”) issued an opinion relating to the treatment of stock-based compensation expense in an inter-company cost-sharing arrangement. In its opinion, the Court held that affiliated companies may exclude stock-based compensation expense from their cost-sharing arrangement. The Internal Revenue Service is appealing the decision. Because of uncertainty related to the final resolution of this litigation and the recognition of potential benefits to the Company, the Company has not recorded any financial statement benefit associated with this decision. The Company will monitor developments related to this case and the potential impact of those developments on the Company’s consolidated financial statements
As of December 31, 2017 and December 31, 2016, the Company had gross unrecognized tax benefits of $60.3$137.2 million and $37.1$150.0 million, respectively. The increasedecrease is primarily attributabledue to pre-acquisitionreleases for expiration of statutes. The gross unrecognized tax benefits of CEB for positions taken with respect to intercompany transactions and state income tax positions. The unrecognized tax benefits as ofat December 31, 20172022 related primarily to transfer pricing on intercompany transactions, the exclusion of stock-based compensation expense from the Company’s cost sharing agreement, utilization of certain tax attributes, state income tax positions,and the ability to realize certain refund claims, and intercompany transactions.claims. It is reasonably possible that gross unrecognized tax benefits will be decreaseddecrease by $6.3approximately $11.7 million within the next 12twelve months due to the anticipated closure of audits and the expiration of certain statutes of limitation.
Included in the balance of gross unrecognized tax benefits at December 31, 20172022 are potential benefits of $57.1$125.8 million that, if recognized, would reduce theour effective tax rate on income from continuing operations. Also included in the balance of gross
unrecognized tax benefits as ofat December 31, 20172022 are potential benefits of $3.2$11.4 million that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes.
The followingtable below is a reconciliation of the beginning and ending amountamounts of gross unrecognized tax benefits, excluding interest and penalties, for the years ended December 31 (in thousands):.
| | | | | | | | | | | |
| | 2022 | | 2021 |
| Beginning balance | $ | 150,024 | | | $ | 127,080 | |
| Additions based on tax positions related to the current year | 10,989 | | | 29,636 | |
| | | |
| Additions for tax positions of prior years | 12,153 | | | 2,756 | |
| Reductions for tax positions of prior years | (485) | | | (4,592) | |
| Reductions for expiration of statutes | (30,817) | | | (3,240) | |
| Settlements | (2,177) | | | (147) | |
| Change in foreign currency exchange rates | (2,460) | | | (1,469) | |
| Ending balance | $ | 137,227 | | | $ | 150,024 | |
|
| | | | | | | |
| | 2017 | | 2016 |
| Beginning balance | $ | 37,099 |
| | $ | 25,911 |
|
| Additions based on tax positions related to the current year | 10,883 |
| | 7,086 |
|
| Additions for tax positions of prior years | 24,299 |
| | 6,443 |
|
| Reductions for tax positions of prior years | (10,613 | ) | | (496 | ) |
| Reductions for expiration of statutes | (1,368 | ) | | (1,006 | ) |
| Settlements | (1,769 | ) | | (544 | ) |
| Change in foreign currency exchange rates | 1,738 |
| | (295 | ) |
| Ending balance | $ | 60,269 |
| | $ | 37,099 |
|
The Company accrues interest and penalties related to gross unrecognized tax benefits in its income tax provision. As of December 31, 20172022 and 2016,2021, the Company had $6.4$16.3 million and $4.3$14.3 million, respectively, of accrued interest and penalties related to gross unrecognized tax benefits. These amounts are in addition to the gross unrecognized tax benefits disclosed above. The total amount of interest and penalties recognized in the income tax provision for both the years ended December 31, 2017during 2022 and December 31, 20162021 was $0.9 million.$2.4 million and $4.2 million, respectively.
The number of years with open statutes of limitation varies depending on the tax jurisdiction. The Company’s statutes are open with respect to the U.S. federal jurisdiction for 20142019 and forward, India for 2005 and forward, and IndiaIreland for 20032018 and forward. For other major taxing jurisdictions, including the U.S. states, the United Kingdom, Canada, Japan, Cyprus, and France, and Ireland, the Company'sCompany’s statutes vary and are open as far back as 2012.
The Organization for Economic Co-operation and Development (the “OECD”) has issued various proposals that would change long-standing global tax principles. These proposals include a two-pillar approach to global taxation (BEPS 2.0/ Pillar Two), focusing on global profit allocation and a global minimum tax rate. On December 12, 2022, the European Union member states agreed to implement the OECD’s global corporate minimum tax rate of 15%, to be effective as of January 2024. Other countries are also actively considering changes to their tax laws to adopt certain parts of the OECD’s proposals. In December 2022, South Korea enacted new global minimum tax rules to align with Pillar Two. The enactment of Pillar Two legislation could have a material adverse effect on the Company's effective tax rate, financial position, results of operations, and cash flows. The Company will continue to monitor and reflect the impact of such legislative changes in future financial statements as appropriate.
Under U.S. GAAP, rules, no provision for income taxes that may result from the remittance of earnings held overseas is required if the Company has the ability and intent to indefinitely reinvest such funds overseas. While our current plans do not demonstrate a need to repatriate accumulated undistributed foreign earnings to fund our U.S. operations or otherwise satisfy the liquidity needs of our U.S. operations, the Company has not asserted its intention to indefinitely reinvest certain accumulated undistributed foreign earnings of CEB. As a result of tax planning, approximately $12.0 million of deferred tax liability previously recorded in purchase
accounting for the estimated tax that could result from the remittance of these earnings was reversed in the current quarter and related goodwill reduced. The Company continues to assert its intention to reinvest all other accumulated undistributed foreign earnings in ourits non-U.S. operations, except in instances in whichwhere the repatriation of those earnings would result in minimal additional tax. Consequently, the Company has not recognized income tax expense that would result from the remittance of thesethose earnings. The accumulated undistributed earnings of non-U.S. subsidiaries were approximately $194.0$120.3 million as of December 31, 2017. As a result of the ACT, the income tax that would be payable if such earnings were not indefinitely invested is estimated at this time to be minimal.2022.
11Note 13 — DERIVATIVES AND HEDGINGDerivatives and Hedging
The Company enters into a limited number of derivative contracts to mitigate the cash flow risk associated with changes in interest rates on variable ratevariable-rate debt and changes in foreign exchange rates on forecasted foreign currency transactions. The Company accounts for its outstanding derivative contracts in accordance with FASB ASC Topic No. 815, which requires all derivatives, including derivatives designated as accounting hedges, to be recorded on the balance sheet at fair value. The following tables below provide information regarding the Company’s outstanding derivativesderivative contracts as of the dates indicated (in thousands, except for number of outstanding contracts):.
December 31, 20172022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Contract Type | | Number of
Contracts | |
Notional
Amounts | | Fair Value
Asset
(Liability), Net (3) | | Balance Sheet
Line Item | |
Unrealized
Loss Recorded in AOCI/L |
| Interest rate swap (1) | | 1 | | | $ | 350,000 | | | $ | 3,952 | | | Other assets | | $ | (39,248) | |
| | | | | | 6,346 | | | Other current assets | | |
| Foreign currency forwards (2) | | 138 | | | 687,763 | | | 625 | | | Other current assets | | — | |
| Total | | 139 | | | $ | 1,037,763 | | | $ | 10,923 | | | | | $ | (39,248) | |
|
| | | | | | | | | | | | | | | | | |
| Derivative Contract Type | | Number of Outstanding Contracts | |
Notional Amounts | | Fair Value Asset (Liability) (3) | | Balance Sheet Line Item | |
Unrealized Gain Recorded in OCI |
| Interest rate swaps (1) | | 5 |
| | $ | 1,400,000 |
| | $ | 3,412 |
| | Other assets | | $ | 2,483 |
|
| Foreign currency forwards (2) | | 137 |
| | 686,764 |
| | 448 |
| | Other current assets | | — |
|
| Total | | 142 |
| | $ | 2,086,764 |
| | $ | 3,860 |
| | | | $ | 2,483 |
|
|
| | | | | | | | | | | | | | | | | |
| Derivative Contract Type | | Number of Outstanding Contracts | |
Notional Amounts | | Fair Value Asset (Liability) (3) | | Balance Sheet Line Item | |
Unrealized Loss Recored in OCI
|
| Interest rate swaps (1) | | 3 |
| | $ | 700,000 |
| | $ | (2,349 | ) | | Other liabilities | | $ | (1,409 | ) |
| Foreign currency forwards (2) | | 84 |
| | 86,946 |
| | (320 | ) | | Accrued liabilities | | — |
|
| Total | | 87 |
| | $ | 786,946 |
| | $ | (2,669 | ) | | | | $ | (1,409 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Contract Type | | Number of
Contracts | |
Notional
Amounts | | Fair Value
Asset
(Liability), Net (3) | | Balance Sheet
Line Item | |
Unrealized
Loss Recorded in AOCI/L |
| Interest rate swaps (1) | | 4 | | | $ | 1,400,000 | | | $ | (31,942) | | | Other liabilities | | $ | (56,323) | |
| | | | | | (21,795) | | | Accrued liabilities | | |
| Foreign currency forwards (2) | | 138 | | | 533,506 | | | (91) | | | Accrued liabilities | | — | |
| Total | | 142 | | | $ | 1,933,506 | | | $ | (53,828) | | | | | $ | (56,323) | |
| |
(1) | The swaps have been designated and are accounted for as cash flow hedges of the forecasted interest payments on borrowings. As a result, changes in the fair value of the swaps are deferred and are recorded in AOCL/I, net of tax effect (see Note 5 — Debt for additional information). |
| |
(2) | The Company has foreign exchange transaction risk since it typically enters into transactions in the normal course of business that are denominated in foreign currencies that differ from the local functional currency. The Company enters into short-term foreign currency forward exchange contracts to mitigate the cash flow risk associated with changes in foreign currency rates on forecasted foreign currency transactions. These contracts are accounted for at fair value with realized and unrealized gains and losses recognized in Other income, net since the Company does not designate these contracts as hedges for accounting purposes. All of the outstanding contracts at December 31, 2017 matured by the end of January 2018. |
| |
(3) | See Note 12 — Fair Value Disclosures for the determination of the fair value of these instruments. |
(1)As a result of the payment under the then outstanding 2016 Credit Agreement term loan and revolving credit facility, the Company de-designated all of its interest rate swaps effective June 30, 2020. Accordingly, hedge accounting is not applicable, and subsequent changes to fair value of the interest rate swaps are recorded in Other income (expense), net. The amounts previously recorded in Accumulated other comprehensive loss are amortized into Interest expense over the terms of the hedged forecasted interest payments. Note 6 — Debt provides additional information regarding the Company’s interest rate swap contracts.
(2)The Company has foreign exchange transaction risk because it typically enters into transactions in the normal course of business that are denominated in foreign currencies that differ from the local functional currency. The Company enters into short-term foreign currency forward exchange contracts to mitigate the cash flow risk associated with changes in foreign currency rates on forecasted foreign currency transactions. These contracts are accounted for at fair value with realized and unrealized gains and losses recognized in Other income (expense), net because the Company does not designate these contracts as hedges for accounting purposes. All of the outstanding foreign currency forward exchange contracts at December 31, 2022 matured before January 31, 2023.
(3)See Note 14 — Fair Value Disclosures for the determination of the fair values of these instruments.
At December 31, 2017,2022, all of the Company’s derivative counterparties were investment grade financial institutions. The Company did not have any collateral arrangements with its derivative counterparties and none of the derivative contracts contained credit-risk related contingent features. The following table below provides information regarding amounts recognized in the Consolidated Statements of Operations for derivative contracts for the years ended December 31 (in millions): thousands).
| | | | | | | | | | | | | | | | | | | | |
| Amount Recorded In | | 2022 | | 2021 | | 2020 |
| Interest expense, net (1) | | $ | 22,643 | | | $ | 29,061 | | | $ | 24,880 | |
| Other (income) expense, net (2) | | (20,397) | | | (18,844) | | | 22,300 | |
| Total expense, net | | $ | 2,246 | | | $ | 10,217 | | | $ | 47,180 | |
|
| | | | | | | | | | | | |
| Amount recorded in: | | 2017 | | 2016 | | 2015 |
| Interest expense (1) | | $ | 7.9 |
| | $ | 7.6 |
| | $ | 8.5 |
|
| Other (gain) loss, net (2) | | (0.8 | ) | | 0.3 |
| | 0.1 |
|
| Total expense | | $ | 7.1 |
| | $ | 7.9 |
| | $ | 8.6 |
|
| |
(1) | Consists of interest expense from interest rate swap contracts. |
| |
(2) | Consists of net realized and unrealized gains and losses on foreign currency forward contracts. |
(1)Consists of interest expense from interest rate swap contracts. 12(2)Consists of net realized and unrealized gains and losses on foreign currency forward contracts, gains and losses on de-designated interest rate swaps. For the year ended December 31, 2020, Other (income) expense, net included $10.3 million expense on interest rate swap contracts due to forecasted interest payments no longer being probable as a result of the payment under the then outstanding 2016 Credit Agreement term loan and revolving credit facility on June 30, 2020.
.
Note 14 — FAIR VALUE DISCLOSURESFair Value Disclosures
The Company’s financial instruments include cash equivalents, fees receivable from customers, accounts payable and accrualsaccrued liabilities, all of which are normally short-term in nature. The Company believes that the carrying amounts of these financial instruments reasonably approximate their fair valuevalues due to their short-term nature. The Company’s financial instruments also include its outstanding variable-rate borrowings under the 20162020 Credit Agreement. The Company believes that the carrying amountamounts of its variable-rate borrowings reasonably approximatesapproximate their fair valuevalues because the raterates of interest on those borrowings reflectsreflect current market rates of interest for similar instruments with comparable maturities.
The Company enters into a limited number of derivatives transactions but does not enter into repurchase agreements, securities lending transactions or master netting arrangements. Receivables or payables that result from derivatives transactions are recorded gross in the Company’s Consolidated Balance Sheets.
FASB ASC Topic 820 provides a framework for the measurement of fair value and a valuation hierarchy based uponon the transparency of inputs used in the valuation of assets and liabilities. Classification within the valuation hierarchy is based uponon the lowest level of input that is significant to the resulting fair value measurement. The valuation hierarchy contains three levels. Level 1 measurements consist of quoted prices in active markets for identical assets or liabilities. Level 2 measurements include significant other observable inputs such as quoted prices for similar assets or liabilities in active markets; identical assets or liabilities in inactive markets; observable inputs such as interest rates and yield curves; and other market-corroborated inputs. Level 3 measurements include significant unobservable inputs such as internally-created valuation models. TheGenerally, the Company does not currently utilize Level 3 valuation inputs to remeasure any of its assets or liabilities. However, Level 3 inputs may be used by the Company when certain long-lived assets, including identifiable intangible assets, goodwill, and right-of-use assets are measured at fair value on a nonrecurring basis when there are indicators of impairment. Additionally, Level 3 inputs may be used by the Company in its required annual impairment review of recorded goodwill. Information regarding the periodic assessment of the Company’s goodwill is included in Note 1 — Business and Significant Accounting Policies. The Company does not typically transfer assets or liabilities between different levels of the fair valuevaluation hierarchy.
The following table below presents the fair value of certain financial assets and liabilities that are recorded at fair value and measured on a recurring basis in the Company’s Consolidated Balance Sheets (in thousands):
|
| | | | | | | | |
| | | Fair Value | | Fair Value |
| Description: | | December 31,
2017 | | December 31,
2016 |
| Assets: | | |
| | |
|
| Values based on Level 1 inputs: | | | | |
| Deferred compensation plan assets (1) | | $ | 29,108 |
| | $ | 10,252 |
|
| Total Level 1 inputs | | 29,108 |
| | 10,252 |
|
| Values based on Level 2 inputs: | | | | |
| Deferred compensation plan assets (1) | | 59,017 |
| | 27,847 |
|
| Foreign currency forward contracts (2) | | 2,053 |
| | 165 |
|
Interest rate swap contracts (3)
| | 3,412 |
| | — |
|
| Total Level 2 inputs | | 64,482 |
| | 28,012 |
|
| Total Assets | | $ | 93,590 |
| | $ | 38,264 |
|
| Liabilities: | | |
| | |
|
| Values based on Level 2 inputs: | | | | |
| Deferred compensation plan liabilities (1) | | $ | 89,900 |
| | $ | 43,075 |
|
| Foreign currency forward contracts (2) | | 1,605 |
| | 485 |
|
| Interest rate swap contracts (3) | | — |
| | 2,349 |
|
| Senior Notes due 2025 (4) | | 837,560 |
| | — |
|
| Total Level 2 inputs | | $ | 929,065 |
| | $ | 45,909 |
|
| Total Liabilities | | $ | 929,065 |
| | $ | 45,909 |
|
. | | | | | | | | | | | | | | |
| | | | |
| | December 31, |
| Description | | 2022 | | 2021 |
| Assets: | | | | |
| Values based on Level 1 inputs: | | | | |
| Deferred compensation plan assets (1) | | $ | 6,065 | | | $ | 7,428 | |
| Total Level 1 inputs | | 6,065 | | | 7,428 | |
| Values based on Level 2 inputs: | | | | |
| Deferred compensation plan assets (1) | | 84,318 | | | 96,627 | |
| Foreign currency forward contracts (2) | | 3,236 | | | 1,122 | |
| Interest rate swap contract (3) | | 10,298 | | | — | |
| Total Level 2 inputs | | 97,852 | | | 97,749 | |
| Total Assets | | $ | 103,917 | | | $ | 105,177 | |
| Liabilities: | | | | |
| Values based on Level 2 inputs: | | | | |
| Deferred compensation plan liabilities (1) | | $ | 96,641 | | | $ | 110,861 | |
| Foreign currency forward contracts (2) | | 2,611 | | | 1,213 | |
| Interest rate swap contracts (3) | | — | | | 53,737 | |
| Total Level 2 inputs | | 99,252 | | | 165,811 | |
| Total Liabilities | | $ | 99,252 | | | $ | 165,811 | |
| |
(1) | The Company has a deferred compensation plan for the benefit of certain highly compensated officers, managers and other key employees (see Note 13 — Employee Benefits). The assets consist of investments in money market and mutual funds, and company-owned life insurance contracts. The money market funds consist of cash equivalents while the mutual fund investments consist of publicly-traded and quoted equity shares. The Company considers the fair value of these assets to be based on Level 1 inputs, and these assets had a fair value of $29.1 million and $10.3 million as of December 31, 2017 and 2016, respectively. The carrying amount of the life insurance contracts equals their cash surrender value. Cash surrender value represents the estimated amount that the Company would receive upon termination of the contract, which approximates fair value. The Company considers the life insurance contracts to be valued based on a Level 2 input, and these assets had a fair value of $59.0 million and $27.8 million at December 31, 2017 and 2016, respectively. The related deferred compensation plan liabilities are recorded at fair value, or the estimated amount needed to settle the liability, which the Company considers to be a Level 2 input. |
| |
(2) | (1)The Company has a deferred compensation plan for the benefit of certain highly compensated officers, managers and other key employees (see Note 15 — Employee Benefits). The assets consist of investments in money market funds, mutual funds and company-owned life insurance contracts. The money market funds consist of cash equivalents while the mutual fund investments consist of publicly-traded and quoted equity shares. The Company considers the fair values of these assets to be based on Level 1 inputs, and such assets had fair values of $6.1 million and $7.4 million as of December 31, 2022 and 2021, respectively. The carrying amounts of the life insurance contracts equal their cash surrender values. Cash
surrender value represents the estimated amount that the Company would receive upon termination of a contract, which approximates fair value. The Company considers life insurance contracts to be valued based on Level 2 inputs, and such assets had fair values of $84.3 million and $96.6 million at December 31, 2022 and 2021, respectively. The related deferred compensation plan liabilities are recorded at fair value, or the estimated amount needed to settle the liability, which the Company considers to be a Level 2 input. (2)The Company enters into foreign currency forward exchange contracts to hedge the effects of adverse fluctuations in foreign currency exchange rates (see Note 11 — Derivatives and Hedging). Valuation of the foreign currency forward contracts is based on observable foreign currency exchange rates in active markets, which the Company considers a Level 2 input. |
| |
(3) | The Company has interest rate swap contracts which hedge the risk of variability from interest payments on its borrowings (see Note 5 — Debt). The fair value of the swaps is based on mark-to-market valuations prepared by a third-party broker. The valuations are based on observable interest rates from recently executed market transactions and other observable market data, which the Company considers Level 2 inputs. The Company independently corroborates the reasonableness of the valuations prepared by the third-party broker through the use of an electronic quotation service. |
| |
(4) | As discussed in Note 5 — Debt, the Company issued $800.0 million of principal amount fixed-rate Senior Notes due 2025 on March 30, 2017. The estimated fair value of the notes was derived from quoted market prices provided by an independent dealer which the Company considers to be a Level 2 input. |
13 — EMPLOYEE BENEFITSDerivatives and Hedging). Valuation of these contracts is based on observable foreign currency exchange rates in active markets, which the Company considers to be a Level 2 input.
(3)The Company has interest rate swap contracts that hedge the risk of variability from interest payments on its borrowings (see Note 6 — Debt). The fair values of interest rate swaps are based on mark-to-market valuations prepared by a third-party broker. Those valuations are based on observable interest rates from recently executed market transactions and other observable market data, which the Company considers to be Level 2 inputs. The Company independently corroborates the reasonableness of the valuations prepared by the third-party broker by using an electronic quotation service.
The table below presents the carrying amounts (net of deferred financing costs) and fair values of financial instruments that are not recorded at fair value in the Company’s Consolidated Balance Sheets (in thousands). The estimated fair value of the financial instruments was derived from quoted market prices provided by an independent dealer, which the Company considers to be a Level 2 input.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Carrying Amount | | Fair Value |
| | December 31, | | December 31, |
| Description | | 2022 | | 2021 | | 2022 | | 2021 |
| 2028 Notes | | $ | 792,934 | | | $ | 791,833 | | | $ | 740,864 | | | $ | 836,632 | |
| 2029 Notes | | 593,951 | | | 593,139 | | | 523,842 | | | 608,346 | |
| 2030 Notes | | 792,324 | | | 791,491 | | | 688,856 | | | 816,208 | |
| Total | | $ | 2,179,209 | | | $ | 2,176,463 | | | $ | 1,953,562 | | | $ | 2,261,186 | |
| | | | | | | | |
Assets Measured at Fair Value on a Nonrecurring Basis
The Company’s certain long-lived assets, including identifiable intangible assets, goodwill, and right-of-use assets assets are measured at fair value on a nonrecurring basis when there are indicators of impairment. During the years ended December 31, 2022 and December 31, 2021, the Company recorded impairment charges of $54.0 million and $49.5 million, respectively, on right-of-use assets and other long-lived assets primarily related to certain office leases that the Company determined will no longer be used, net of a reduction in the related lease liabilities. The impairment was derived by comparing the fair value of the impacted assets to the carrying value of those assets as of the impairment measurement date, as required under ASC Topic 360 using Level 3 inputs. See Note 7 — Leases for additional discussion related to these impairment charges. There were no impairment charges recognized during the year ended December 31, 2020.
Additionally, see Note 2 — Acquisitions and Divestiture for fair value measurements of certain assets and liabilities acquired in business combinations that are recorded at fair value on a nonrecurring basis.
Note 15 — Employee Benefits
Defined contribution plan.plans. The Company has savings and investment plans (the “401k“401(k) Plans”) covering substantially all U.S. employees. Company contributions are based uponon the level of employee contributions, up to a maximum of 4% of an employee’s eligible salary, subject to an annual maximum. For 2017,2022, the maximum Company match was $7,200. Amounts expensed in connection with the 401k401(k) Plans totaled $29.8$50.4 million, $22.9$44.1 million and $20.0$43.9 million in 2017, 20162022, 2021 and 2015,2020, respectively.
Deferred compensation plan.plans. The Company has supplemental deferred compensation plans for the benefit of certain highly compensated officers, managers and other key employees. The plans'plans’ investment assets are recorded at fair value in Other assets on the Consolidated Balance Sheets at fair value.Sheets. The value of thesethose assets was $88.1$90.4 million and $38.1$104.1 million at December 31, 20172022 and 2016,2021, respectively (see Note 1214 — Fair Value Disclosures for fair value information). The correspondingrelated deferred compensation liability,plan liabilities, which was $89.9were $96.6 million and $43.1$110.9 million at December 31, 20172022 and 2016,2021, respectively, isare carried at fair value and isare adjusted with a corresponding charge or credit to compensation expense to reflect the fair value of the amount owed to the employees and is classifiedemployees. Deferred compensation plan liabilities are recorded in Other liabilities on the Consolidated
Balance Sheets. Compensation expense recognized for all of the Company’s deferred compensation plans was $0.4 million, $0.1$1.3 million and $0.5$1.9 million in 2017, 20162022, 2021 and 2015,2020, respectively.
Defined benefit pension plans. The Company has defined benefit pension plans inat several of its international locations. Benefits earned and paid under thesethose plans are generally based on years of service and level of employee compensation. The Company'sCompany’s vested benefit obligation is the actuarial present value of the vested benefits to which an employee is entitled based on the employee’s expected date of separation or retirement. The Company’s defined benefit pension plans are accounted for in accordance with FASB ASC Topics No. 715 and 960. The following aretable below presents the components of the Company’s defined benefit pension plan expense for the years ended December 31 (in thousands): . The components of pension expense, other than service cost, are recorded in Other income (expense), net in the Consolidated Statements of Operations.
| | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| Service cost | $ | 4,173 | | | $ | 4,511 | | | $ | 4,421 | |
| Interest cost | 709 | | | 605 | | | 718 | |
| Expected return on plan assets | (459) | | | (350) | | | (493) | |
| Recognition of actuarial loss | 264 | | | 576 | | | 474 | |
| Recognition of loss due to settlements | — | | | 286 | | | — | |
| Other | 501 | | | — | | | — | |
| Total defined benefit pension plan expense | $ | 5,188 | | | $ | 5,628 | | | $ | 5,120 | |
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Service cost | $ | 2,820 |
| | $ | 2,780 |
| | $ | 2,620 |
|
| Interest cost | 765 |
| | 850 |
| | 790 |
|
| Expected return on plan assets | (360 | ) | | (375 | ) | | (345 | ) |
| Recognition of actuarial loss | 350 |
| | 200 |
| | 300 |
|
| Recognition of termination benefits | — |
| | — |
| | 85 |
|
| Total defined benefit pension plan expense (1) | $ | 3,575 |
| | $ | 3,455 |
| | $ | 3,450 |
|
| |
(1) | Pension expense is classified in SG&A in the Consolidated Statements of Operations. |
The following aretable below presents the key assumptions used in the computation of pension expense for the years ended December 31: |
| | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Weighted average discount rate (1) | 1.78 | % | | 1.78 | % | | 2.19 | % |
| Average compensation increase | 2.66 | % | | 2.67 | % | | 2.66 | % |
31. | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| Weighted average discount rate (1) | 1.24 | % | | 0.94 | % | | 1.28 | % |
| Expected return on plan assets | 1.58 | % | | 1.19 | % | | 2.04 | % |
| Average compensation increase | 2.57 | % | | 2.58 | % | | 2.58 | % |
| Cash balance interest credit rate | 1.20 | % | | 0.80 | % | | 1.20 | % |
| |
(1) | Discount rates are typically determined by utilizing the yields on long-term corporate or government bonds in the relevant country with a duration consistent with the expected term of the underlying pension obligations. |
(1)Discount rates are typically determined by using the yields on long-term corporate or government bonds in the relevant country with a duration consistent with the expected term of the underlying pension obligations.
The following table below provides information related toregarding changes in the projected benefit obligation of the Company’s defined benefit pension plans for the years ended December 31 (in thousands): .
| | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| Projected benefit obligation at beginning of year | $ | 57,973 | | | $ | 62,297 | | | $ | 52,503 | |
| Service cost | 4,173 | | | 4,511 | | | 4,421 | |
| Interest cost | 709 | | | 605 | | | 718 | |
| Actuarial (gain) loss due to assumption changes and plan experience (1) | (7,318) | | | (2,230) | | | 1,516 | |
| | | | | |
| Benefits payments (2) | (1,225) | | | (1,198) | | | (1,438) | |
| Plan amendments | — | | | 269 | | | — | |
| Settlements | — | | | (1,606) | | | — | |
| Other | 5,685 | | | — | | | — | |
| Foreign currency impact | (4,686) | | | (4,675) | | | 4,577 | |
| Projected benefit obligation at end of year (3) | $ | 55,311 | | | $ | 57,973 | | | $ | 62,297 | |
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Projected benefit obligation at beginning of year | $ | 38,400 |
| | $ | 35,870 |
| | $ | 38,115 |
|
| Service cost | 2,820 |
| | 2,780 |
| | 2,620 |
|
| Interest cost | 765 |
| | 850 |
| | 790 |
|
| Actuarial loss (gain) due to assumption changes and plan experience | 690 |
| | 1,480 |
| | (1,190 | ) |
| Additions and contractual termination benefits | (860 | ) | | — |
| | 85 |
|
| Benefits paid (1) | (920 | ) | | (1,640 | ) | | (775 | ) |
| Foreign currency impact | 4,555 |
| | (940 | ) | | (3,775 | ) |
| Projected benefit obligation at end of year (2) | $ | 45,450 |
| | $ | 38,400 |
| | $ | 35,870 |
|
The table below presents the key assumptions used in determining the projected benefit obligations at December 31.
| | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| Weighted average discount rate (4) | 3.67 | % | | 1.24 | % | | 0.94 | % |
| Average compensation increase | 3.37 | % | | 2.57 | % | | 2.58 | % |
| Cash balance interest credit rate | 3.60 | % | | 1.20 | % | | 0.80 | % |
| |
(1) | The Company projects the following benefit payments will be made in future years to plan participants: $1.3 million in 2018; $2.2 million in 2019; $1.5 million in 2020, $1.5 million in 2021, $1.6 million in 2022; and $10.5 million in total in the five years thereafter. |
| |
(2) | Measured as of December 31. |
(1)The actuarial (gain) losses were primarily due to changes in the weighted average discount rate assumption.
(2)The Company projects benefit payments will be made in future years directly to plan participants as follows: $2.4 million in 2023; $2.6 million in 2024; $3.0 million in 2025; $3.3 million in 2026; $3.9 million in 2027; and $25.5 million in total in the five years thereafter.
(3)Measured as of December 31.
(4)Discount rates are typically determined by using the yields on long-term corporate or government bonds in the relevant country with a duration consistent with the expected term of the underlying pension obligations.
The following table providestables below provide information regarding the funded status of the Company’s defined benefit pension plans and the related amounts recorded in the Company’s Consolidated Balance Sheets as of December 31 (in thousands): .
|
| | | | | | | | | | | |
| Funded status of the plans: | 2017 | | 2016 | | 2015 |
| Projected benefit obligation | $ | 45,450 |
| | $ | 38,400 |
| | $ | 35,870 |
|
| Pension plan assets at fair value (1) | (18,475 | ) | | (14,465 | ) | | (13,190 | ) |
| Funded status – shortfall (2) | $ | 26,975 |
| | $ | 23,935 |
| | $ | 22,680 |
|
|
| | | | | | | | | | | |
| Amounts recorded in the Consolidated Balance Sheets for the plans: | | | | | |
| Other liabilities — accrued pension obligation (2) | $ | 26,975 |
| | $ | 23,935 |
| | $ | 22,680 |
|
| Stockholders’ equity — deferred actuarial loss (3) | $ | (5,861 | ) | | $ | (5,797 | ) | | $ | (4,832 | ) |
| | | | | | | | | | | | | | | | | |
| Funded status of the plans | 2022 | | 2021 | | 2020 |
| Projected benefit obligation | $ | 55,311 | | | $ | 57,973 | | | $ | 62,297 | |
| Pension plan assets at fair value (1) | (27,798) | | | (29,737) | | | (28,636) | |
| Funded status – shortfall (2) | $ | 27,513 | | | $ | 28,236 | | | $ | 33,661 | |
| | | | | |
| Accumulated benefit obligation | $ | 50,335 | | | $ | 54,701 | | | $ | 58,963 | |
| | | | | |
| Amounts recorded in the Consolidated Balance Sheets for the plans | | | | | |
| Other liabilities – accrued pension obligation (2) | $ | 27,513 | | | $ | 28,236 | | | $ | 33,661 | |
| Stockholders’ equity – deferred actuarial loss (3) | $ | (4,247) | | | $ | (6,672) | | | $ | (9,309) | |
| |
(1) | The pension plan assets are held by third-party trustees and are invested in a diversified portfolio of equities, high quality government and corporate bonds, and other investments. The assets are primarily valued based on Level 1 and Level 2 inputs under the fair value hierarchy in FASB ASC Topic No. 820, with the majority of the invested assets considered to be of low-to-medium investment risk. The Company projects a future long-term rate of return on these plan assets of 2.22%, which it believes is reasonable based on the composition of the assets and both current and projected market conditions. For the year ended December 31, 2017, the Company contributed $2.4 million to these plans, and benefits paid to participants were $1.8 million.
|
| |
(2) | The Funded status - shortfall represents the amount of the projected benefit obligation that the Company has not funded with a third-party trustee. This amount is a liability of the Company and is recorded in Other liabilities on the Company’s Consolidated Balance Sheets. |
| |
(3) | The deferred actuarial loss as of December 31, 2017 is recorded in AOCL/I and will be reclassified out of AOCL/I and recognized as pension expense over approximately 13 years, subject to certain limitations set forth in FASB ASC Topic No. 715. The impact of this amortization on pension expense in 2018 is projected to result in approximately $0.3 million of additional expense. The amortization of deferred actuarial losses from AOCL/I to pension expense in each of the three years ended December 31, 2017 was immaterial. |
(1)The pension plan assets are held by third-party trustees and are invested in a diversified portfolio of equities, high-quality government and corporate bonds, and other investments. The assets are primarily valued based on Level 1 and Level 2 inputs under the fair value hierarchy in FASB ASC Topic 820, with the majority of the invested assets considered to be of low-to-medium investment risk. The Company projects a future long-term rate of return on these plan assets of 3.90%, which it believes is reasonable based on the composition of the assets and both current and projected market conditions. Additional information regarding pension plan asset activity is provided below.
(2)Funded status – shortfall represents the amount of the projected benefit obligation that the Company has not funded with a third-party trustee. These liabilities of the Company are recorded in Other liabilities on the Consolidated Balance Sheets. The level of future contributions by the Company will vary and is dependent on a number of factors including investment returns, interest rate fluctuations, plan demographics, funding regulations and the results of the final actuarial valuation.
(3)The deferred actuarial loss as of December 31, 2022 is recorded in AOCI/L and will be reclassified out of AOCI/L and recognized as pension expense over approximately 12 years, subject to certain limitations set forth in FASB ASC Topic 715.
The table below provides a rollforward of the Company’s defined benefit pension plans assets for the years ended December 31 (in thousands).
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | 2020 |
| Pension plan assets at the beginning of the year | $ | 29,737 | | | $ | 28,636 | | | $ | 23,444 | |
| Company contributions | 4,450 | | | 4,865 | | | 3,924 | |
| Benefit payments | (1,225) | | | (1,198) | | | (1,438) | |
| Actual return on plan assets | (3,072) | | | 1,066 | | | 684 | |
| | | | | |
| Settlements | — | | | (1,606) | | | — | |
| Foreign currency impact | (2,092) | | | (2,026) | | | 2,022 | |
| Pension plan assets at the end of the year | $ | 27,798 | | | $ | 29,737 | | | $ | 28,636 | |
The Company also maintainshas a reinsurance asset arrangement with a large international insurance company whose purposethat is intended to provide funding forfund benefit payments for one of theits plans. The reinsurance asset is not a pension plan asset but is an asset of the Company. At December 31, 20172022 and 2016,2021, the reinsurance asset was recorded at its cash surrender value of $9.1 million and $7.8$9.5 million, respectively, and is classifiedrecorded in Other assets on the Company's Consolidated Balance Sheets. The Company believes thethat cash surrender value approximates fair value and is equivalent to a Level 2 input under the FASB’s fair value frameworkhierarchy in FASB ASC Topic No. 820.
14
Note 16 — SEGMENT INFORMATIONSegment Information
As a result of the CEB acquisition on April 5, 2017, the Company began reporting its results across four business segments reflecting its enlarged scale and breadth of advisory services aligned to the mission-critical priorities of virtually all functional business leaders across every industry and size of enterprise worldwide.
OurThe Company’s products and services are delivered through fourthree segments – Research, Conferences and Consulting, Events and Talent Assessment & Other, as follows:described below.
•Research provides trusted, objective insights equips executives and advice on the mission-critical priorities of leaderstheir teams from every function and across all functional areasindustries with actionable, objective insight, guidance and tools. Our experienced experts deliver all this value informed by a combination of the enterprise throughpractitioner-sourced and data-driven research and other reports, briefings, proprietary tools, access to our analysts, peer networking services and membership programs that enablehelp our clients to make better decisions. Gartner's traditional strengths in IT, marketingaddress their mission critical priorities.
•Conferences provides executives and supply chain research were enhanced in 2017 with Gartner's acquisition of CEB, Inc., which added CEB's best practice and talent management research insightsteams across a range of business functions, to include human resources, sales, legal and finance.
Consulting provides customized solutions to unique client needs through on-site, day-to-day support, as well as proprietary tools for measuring and improving IT performance with a focus on cost, performance, efficiency and quality.
Events provides business professionals across thean organization the opportunity to learn, share and network. From our flagship CIO event Gartner Symposium/ITxpo,Xpo series, to industry-leading conferences focused on specific business roles and topics, to member-drivenpeer-driven sessions, our eventsofferings enable attendees to experience the best of Gartner insight and advice live.
guidance.
•Consulting serves senior executives leading technology-driven strategic initiatives leveraging the power of Gartner’s actionable, objective insight. Through custom analysis and on-the-ground support we enable optimized technology investments and stronger performance on our clients’ mission critical priorities.
Talent Assessment & Other helps organizations assess, engage, manage and improve talent. This is accomplished through knowledge and skills assessments, training programs, workshops, and survey and questionnaire services.
The Company evaluates segment performance and allocates resources based on gross contribution margin. Gross contribution, as presented in the table below, is defined as operating income or loss excluding certain Cost of services and product development expenses, Selling, general and administrative expenses, Depreciation, Amortization of intangibles, and Acquisition and integration charges. Certain bonus and fringe benefit costs included in consolidated Cost of services and product development are not allocated to segment expense. The accounting policies used by the reportable segments are the same as those used by the Company. There are no intersegment revenues. The Company does not identify or allocate tangible assets, including capital expenditures, by reportable segment. Accordingly, tangible assets are not reported by segment because the information is not available by segment and is not reviewed in the evaluation of segment performance or in making decisions inregarding the allocation of resources.
The Company earns revenue from clients in many countries. Other than the United States, there is no individual country in whichwhere revenues from external clients represent 10% or more of the Company’s consolidated revenues. Additionally, no single client accounted for 10% or more of total revenuethe Company’s consolidated revenues and the loss of a single client, in management’s opinion, would not have a material adverse effect on revenues.
The following tables below present operating information about the Company’s reportable segments for the periods indicatedyears ended December 31 (in thousands):.
| | | | | | | | | | | | | | | | | | | | | | | |
| | Research | | Conferences | | Consulting | | Consolidated |
| 2022 | | | | | | | |
| Revenues | $ | 4,604,791 | | | $ | 389,273 | | | $ | 481,782 | | | $ | 5,475,846 | |
| Gross contribution | 3,414,574 | | | 210,726 | | | 189,834 | | | 3,815,134 | |
| Corporate and other expenses | | | | | | | (2,715,028) | |
| Operating income | | | | | | | $ | 1,100,106 | |
| | | | | | | |
| 2021 | | | | | | | |
| Revenues | $ | 4,101,392 | | | $ | 214,449 | | | $ | 418,121 | | | $ | 4,733,962 | |
| Gross contribution | 3,036,925 | | | 133,748 | | | 158,843 | | | 3,329,516 | |
| Corporate and other expenses | | | | | | | (2,413,765) | |
| Operating income | | | | | | | $ | 915,751 | |
| | | | | | | |
| 2020 | | | | | | | |
| Revenues | $ | 3,602,892 | | | $ | 120,140 | | | $ | 376,371 | | | $ | 4,099,403 | |
| Gross contribution | 2,597,852 | | | 57,302 | | | 115,744 | | | 2,770,898 | |
| Corporate and other expenses | | | | | | | (2,280,748) | |
| Operating income | | | | | | | $ | 490,150 | |
|
| | | | | | | | | | | | | | | | | | |
| | Research | | Consulting | | Events | | Talent Assessment & Other | | Consolidated |
2017 (1) | |
| | |
| | |
| | | | |
|
| Revenues | $ | 2,471,280 |
| | $ | 327,661 |
| | $ | 337,903 |
| | 174,650 |
| | $ | 3,311,494 |
|
| Gross contribution | 1,653,014 |
| | 93,643 |
| | 163,480 |
| | 90,249 |
| | 2,000,386 |
|
| Corporate and other expenses | |
| | |
| | |
| | | | (2,006,715 | ) |
| Operating (loss) | |
| | |
| | |
| | | | $ | (6,329 | ) |
| | | | | | | | | | |
| | Research | | Consulting | | Events | | Talent Assessment & Other | | Consolidated |
2016 (1) | |
| | |
| | |
| | | | |
|
| Revenues | $ | 1,857,001 |
| | $ | 318,934 |
| | $ | 268,605 |
| | — |
| | $ | 2,444,540 |
|
| Gross contribution | 1,285,611 |
| | 89,734 |
| | 136,655 |
| | — |
| | 1,512,000 |
|
| Corporate and other expenses | |
| | |
| | |
| | | | (1,206,859 | ) |
| Operating income | |
| | |
| | |
| | | | $ | 305,141 |
|
| | | | | | | | | | |
| | Research | | Consulting | | Events | | Talent Assessment & Other | | Consolidated |
2015 (1) | |
| | |
| | |
| | | | |
|
| Revenues | $ | 1,614,904 |
| | $ | 296,317 |
| | $ | 251,835 |
| | — |
| | $ | 2,163,056 |
|
| Gross contribution | 1,117,534 |
| | 86,486 |
| | 130,527 |
| | — |
| | 1,334,547 |
|
| Corporate and other expenses | |
| | |
| | |
| | | | (1,046,550 | ) |
| Operating income | |
| | |
| | |
| | | | $ | 287,997 |
|
(1) In 2017 the Company began reporting the results of its Strategic Advisory Services ("SAS") business in Research whereas previously the SAS business was reported with Consulting. Although the impact of the reclassification was not significant, the operating results of the SAS business for 2016 and 2015 were reclassified from Consulting to Research to be comparable with the current year presentation.
The following table below provides a reconciliation of total segment gross contribution to net income for the years ended December 31 (in thousands):.
|
| | | | | | | | | | | | |
| | | 2017 | | 2016 | | 2015 |
| Total segment gross contribution | | $ | 2,000,386 |
| | $ | 1,512,000 |
| | $ | 1,334,547 |
|
| Costs and expenses: | | | | | | |
| Cost of services and product development - unallocated (1) | | 9,090 |
| | 13,108 |
| | 10,567 |
|
| Selling, general and administrative | | 1,599,004 |
| | 1,089,184 |
| | 962,677 |
|
| Depreciation and amortization | | 240,171 |
| | 61,969 |
| | 47,131 |
|
| Acquisition and integration charges | | 158,450 |
| | 42,598 |
| | 26,175 |
|
| Operating (loss) income | | (6,329 | ) | | 305,141 |
| | 287,997 |
|
| Interest expense and other, net | | 121,488 |
| | 16,710 |
| | 15,786 |
|
| (Benefit) provision for income taxes | | (131,096 | ) | | 94,849 |
| | 96,576 |
|
| Net income | | $ | 3,279 |
| | $ | 193,582 |
| | $ | 175,635 |
|
| | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| Total segment gross contribution | | $ | 3,815,134 | | | $ | 3,329,516 | | | $ | 2,770,898 | |
| Costs and expenses: | | | | | | |
| Cost of services and product development - unallocated (1) | | 33,059 | | | 39,647 | | | 16,519 | |
| Selling, general and administrative | | 2,480,944 | | | 2,155,658 | | | 2,038,963 | |
| Depreciation and amortization | | 191,946 | | | 212,405 | | | 218,984 | |
| Acquisition and integration charges | | 9,079 | | | 6,055 | | | 6,282 | |
| Operating income | | 1,100,106 | | | 915,751 | | | 490,150 | |
| Interest expense and other, net | | (72,911) | | | (98,191) | | | (119,203) | |
| Gain on event cancellation insurance claims | | — | | | 152,310 | | | — | |
| | | | | | |
| Loss on extinguishment of debt | | — | | | — | | | (44,814) | |
| Less: Provision for income taxes | | 219,396 | | | 176,310 | | | 59,388 | |
| Net income | | $ | 807,799 | | | $ | 793,560 | | | $ | 266,745 | |
| |
(1) |
(1)The unallocated amounts consist of certain bonus and related fringe costs recorded in consolidated Cost of services and product development expense that are not allocated to segment expense. The Company's policy is to only allocate bonus and related fringe charges to segments for up to 100% of the segment employee's target bonus. Amounts above 100% are absorbed by corporate. |
The Company’s revenuespolicy is to allocate bonuses to segments at 100% of a segment employee’s target bonus. Amounts above or below 100% are generated primarily through direct sales to clientsabsorbed by domesticcorporate.
Disaggregated revenue information by reportable segment for the three years ended December 31, 2022 is presented in Note 9 — Revenue and international sales forces and a network of independent international sales agents. Most of the Company’s products and services are provided on an integrated worldwide basis and, because of this integrated delivery, it is not practical to precisely separate our revenues by geographic location. Accordingly, the separation set forth in the table below is based upon internal allocations, which involve certain management estimates and judgments. Revenues in the table are reported based on where the sale is fulfilled; “Other International” revenues are those attributable to all areas located outside of the United States and Canada, as well as Europe, Middle East and Africa.
SummarizedRelated Matters. Long-lived asset information by geographic location as of and for the years ended December 31 followsis summarized in the table below (in thousands): .
|
| | | | | | | | | | | |
| | 2017 | | 2016 | | 2015 |
| Revenues: | |
| | |
| | |
|
| United States and Canada | $ | 2,037,111 |
| | $ | 1,519,748 |
| | $ | 1,347,676 |
|
| Europe, Middle East and Africa | 850,352 |
| | 616,721 |
| | 557,165 |
|
| Other International | 424,031 |
| | 308,071 |
| | 258,215 |
|
| Total revenues | $ | 3,311,494 |
| | $ | 2,444,540 |
| | $ | 2,163,056 |
|
| | | | | | |
| Long-lived assets: (1) | |
| | |
| | |
|
| United States and Canada | $ | 288,735 |
| | $ | 143,921 |
| | $ | 163,933 |
|
| Europe, Middle East and Africa | 84,840 |
| | 42,326 |
| | 31,130 |
|
| Other International | 41,674 |
| | 24,630 |
| | 16,050 |
|
| Total long-lived assets | $ | 415,249 |
| | $ | 210,877 |
| | $ | 211,113 |
|
| | | | | | | | | | | |
| | 2022 | | 2021 |
| Long-lived assets (1): | | | |
| United States and Canada | $ | 622,993 | | | $ | 706,854 | |
| Europe, Middle East and Africa | 252,573 | | | 298,083 | |
| Other International | 123,138 | | | 125,572 | |
| Total long-lived assets | $ | 998,704 | | | $ | 1,130,509 | |
| |
(1) | Excludes goodwill, intangible, and held-for-sale assets. |
(1)Excludes goodwill and intangible assets for all dates.
15Note 17 — VALUATION AND QUALIFYING ACCOUNTSContingencies
Legal Matters. The Company is involved in legal proceedings and litigation arising in the ordinary course of business. The Company records a provision for pending litigation in its consolidated financial statements when it is determined that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. The Company believes that the potential liability, if any, in excess of amounts already accrued from all proceedings, claims and litigation will not have a material effect on its financial position, cash flows or results of operations when resolved in a future period.
Indemnifications. The Company has various agreements that may obligate it to indemnify the other party with respect to certain matters. Generally, these indemnification clauses are included in contracts arising in the normal course of business under which the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations related to matters such as title to assets sold and licensed or certain intellectual property rights. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of the Company’s obligations and the unique facts of each particular agreement. Historically, payments made by the Company under these agreements have not been material. As of December 31, 2022, the Company did not have any material payment obligations under any such indemnification agreements.
Note 18 — Valuation and Qualifying Accounts
The Company maintains an allowance for losses which is composed of a bad debt allowance and a revenue reserve. Provisions are charged against earnings either as an increase to expense or a reduction in revenues.
debt. The following table below summarizes the activity in the Company’s allowance for losses for the years ended December 31 (in thousands): .
| | | | | | | | | | | | | | | | | | | | | | | |
| | Balance at
Beginning
of Year | | Additions
Charged to
Expense | | Deductions
from the
Reserve | | Balance at
End
of Year |
| 2022 | $ | 6,500 | | | $ | 7,800 | | | $ | (5,300) | | | $ | 9,000 | |
| 2021 | $ | 10,000 | | | $ | 2,800 | | | $ | (6,300) | | | $ | 6,500 | |
| 2020 | $ | 8,000 | | | $ | 16,000 | | | $ | (14,000) | | | $ | 10,000 | |
| | | | | | | |
Note 19 — Subsequent Event
|
| | | | | | | | | | | | | | | | | | | |
| | Balance at Beginning of Year | | Additions Charged to Expense | | Additions Charged Against Revenues | | Deductions from Reserve | | Balance at End of Year |
| 2017: | | | | | | | | | |
| Allowance for doubtful accounts and returns and allowances | $ | 7,400 |
| | $ | 16,600 |
| | $ | 5,500 |
| | $ | (16,800 | ) | | $ | 12,700 |
|
| 2016: | |
| | |
| | |
| | |
| | |
|
| Allowance for doubtful accounts and returns and allowances | $ | 6,900 |
| | $ | 4,750 |
| | $ | 4,850 |
| | $ | (9,100 | ) | | $ | 7,400 |
|
| 2015: | |
| | |
| | |
| | |
| | |
|
| Allowance for doubtful accounts and returns and allowances | $ | 6,700 |
| | $ | 3,480 |
| | $ | 5,420 |
| | $ | (8,700 | ) | | $ | 6,900 |
|
16 — SUBSEQUENT EVENTS
On February 6, 2018, the Company announced that it had reached a definitive agreement to sell its CEB Talent Assessment business to Exponent Private Equity, a UK-based private equity firm, for $400.0 million. The CEB Talent Assessment business is a significant portion of2, 2023, the Company's Talent Assessment & Other segment. The agreement comes atBoard of Directors authorized incremental share repurchases of up to an additional $400.0 million of Gartner's common stock. This authorization is in addition to the previously authorized repurchases of up to $3.8 billion, which as of the end of a previously announced process to evaluate strategic alternatives for CEB Talent Assessment, formerly SHL, which was acquired by Gartner as part of the CEB acquisition in 2017. The transaction is expected to close in the first half of 2018 and is subject to customary closing conditions. Note 2 — Acquisitions and Divestiture provides additional information.January 2023 had approximately $606.0 million remaining.
ITEM 16. FORM 10-K SUMMARYSUMMARY.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in Stamford, Connecticut, on February 22, 2018.
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| | Gartner, Inc. |
| | | |
| Date: | February 22, 201816, 2023 | By: | /s/ Eugene A. Hall |
| | Eugene A. Hall |
| | Chief Executive Officer |
POWER OF ATTORNEY
Each person whose signature appears below appoints Eugene A. Hall and Craig W. Safian and each of them, acting individually, as his or her attorney-in-fact, each with full power of substitution, for him or her in all capacities, to sign all amendments to this Report on Form 10-K, and to file the same, with appropriate exhibits and other related documents, with the Securities and Exchange Commission. Each of the undersigned ratifies and confirms his or her signatures as they may be signed by his or her attorney-in-fact to any amendments to this Report.report. Pursuant to the requirements of the Securities Exchange Act of 1934, this Reportreport has been signed by the following persons on behalf of the Registrantregistrant and in the capacities and on the dates indicated: | | | | | | | | | | | | | | |
| Name | | Title | | Date |
| | | | |
| /s/ Eugene A. Hall | | Director and Chief Executive Officer | | February 16, 2023 |
| Eugene A. Hall | | (Principal Executive Officer) | | |
| | | | |
| /s/ Craig W. Safian | | Executive Vice President and Chief Financial Officer | | February 16, 2023 |
| Craig W. Safian | | (Principal Financial and Accounting Officer) | | |
| | | | |
| /s/ Peter E. Bisson | | Director | | February 16, 2023 |
| Peter E. Bisson | | | | |
| | | | |
| /s/ Richard J. Bressler | | Director | | February 16, 2023 |
| Richard J. Bressler | | | | |
| | | | |
| /s/ Raul E. Cesan | | Director | | February 16, 2023 |
| Raul E. Cesan | | | | |
| | | | |
| /s/ Karen E. Dykstra | | Director | | February 16, 2023 |
| Karen E. Dykstra | | | | |
| | | | |
| /s/ Diana S. Ferguson | | Director | | February 16, 2023 |
| Diana S. Ferguson | | | | |
| | | | |
Name | | Title | | Date |
| | | | |
/s/ Eugene A. Hall | | Director and Chief Executive Officer | | February 22, 2018 |
Eugene A. Hall | | (Principal Executive Officer) | | |
| | | | |
/s/ Craig W. Safian | | Executive Vice President and Chief Financial Officer | | February 22, 2018 |
Craig W. Safian | | (Principal Financial and Accounting Officer) | | |
| | | | |
/s/ Michael J. Bingle | | Director | | February 22, 2018 |
Michael J. Bingle | | | | |
| | | | |
/s/ Peter E. Bisson | | Director | | February 22, 2018 |
Peter E. Bisson | | | | |
| | | | |
/s/ Richard J. Bressler | | Director | | February 22, 2018 |
Richard J. Bressler | | | | |
| | | | |
/s/ Raul E. Cesan | | Director | | February 22, 2018 |
Raul E. Cesan | | | | |
| | | | |
/s/ Karen E. Dykstra | | Director | | February 22, 2018 |
Karen E. Dykstra | | | | |
| | | | |
| /s/ Anne Sutherland Fuchs | | Director | | February 22, 201816, 2023 |
| Anne Sutherland Fuchs | | | | |
| | | | |
| /s/ William O. Grabe | | Director | | February 22, 201816, 2023 |
| William O. Grabe | | | | |
| | | | |
| /s/ Stephen G. Pagliuca | | Director | | February 22, 201816, 2023 |
| Stephen G. Pagliuca | | | | |
| | | | |
| /s/ Eileen M. Serra | | Director | | February 22, 201816, 2023 |
| Eileen M. Serra | | | | |
| | | | |
| /s/ James C. Smith | | Director | | February 22, 201816, 2023 |
| James C. Smith | | | | |