UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended SeptemberJune 30, 20192020
OR
☐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)
Delaware04-3099750
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification Number)
P.O. Box 1021206902-7700
56 Top Gallant Road(Zip Code)
Stamford,
Connecticut
(Address of principal executive offices)
Registrant’s telephone number, including area code: (203) 316-1111
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $.0005 par value per shareITNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☑Accelerated filer☐Non-accelerated filer☐
Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of October 28, 2019, 89,452,966July 31, 2020, 89,232,595 shares of the registrant’s common shares were outstanding.




Table of Contents


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PART II. OTHER INFORMATION
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4641


2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GARTNER, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets
(Unaudited; in thousands, except share data)
 September 30, December 31,
 2019 2018
Assets 
  
Current assets: 
  
Cash and cash equivalents$306,727
 $156,368
Fees receivable, net of allowances of $7,800 and $7,700, respectively1,028,320
 1,255,118
Deferred commissions197,607
 235,016
Prepaid expenses and other current assets173,851
 165,237
Total current assets1,706,505
 1,811,739
Property, equipment and leasehold improvements, net300,612
 267,665
Operating leases - right-of-use assets652,273
 —
Goodwill2,939,707
 2,923,136
Intangible assets, net936,313
 1,042,565
Other assets201,934
 156,369
Total Assets$6,737,344
 $6,201,474
Liabilities and Stockholders’ Equity 
  
Current liabilities: 
  
Accounts payable and accrued liabilities$593,695
 $710,113
Deferred revenues1,803,135
 1,745,244
Current portion of long-term debt130,433
 165,578
Total current liabilities2,527,263
 2,620,935
Long-term debt, net of deferred financing fees2,051,507
 2,116,109
Operating leases - liabilities776,562
 —
Other liabilities462,355
 613,673
Total Liabilities5,817,687
 5,350,717
Stockholders’ Equity 
  
Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or outstanding—
 —
Common stock, $0.0005 par value, 250,000,000 shares authorized; 163,602,067 shares issued for both periods82
 82
Additional paid-in capital1,885,370
 1,823,710
Accumulated other comprehensive loss, net(81,264) (39,867)
Accumulated earnings1,921,021
 1,755,432
Treasury stock, at cost, 74,124,094 and 73,899,977 common shares, respectively(2,805,552) (2,688,600)
Total Stockholders’ Equity919,657
 850,757
Total Liabilities and Stockholders’ Equity$6,737,344
 $6,201,474
 June 30,December 31,
20202019
Assets  
Current assets:  
Cash and cash equivalents$356,633  $280,836  
Fees receivable, net of allowances of $11,000 and $8,000, respectively1,048,519  1,326,012  
Deferred commissions233,402  265,867  
Prepaid expenses and other current assets128,631  146,026  
Total current assets1,767,185  2,018,741  
Property, equipment and leasehold improvements, net343,563  344,579  
Operating lease right-of-use assets668,510  702,916  
Goodwill2,935,609  2,937,726  
Intangible assets, net847,375  925,087  
Other assets248,052  222,245  
Total Assets$6,810,294  $7,151,294  
Liabilities and Stockholders’ Equity  
Current liabilities:  
Accounts payable and accrued liabilities$736,039  $788,796  
Deferred revenues1,765,264  1,928,020  
Current portion of long-term debt38,019  139,718  
Total current liabilities2,539,322  2,856,534  
Long-term debt, net of deferred financing fees1,937,232  2,043,888  
Operating lease liabilities802,119  832,533  
Other liabilities540,402  479,746  
Total Liabilities5,819,075  6,212,701  
Stockholders’ Equity  
Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or outstanding—  —  
Common stock, $0.0005 par value, 250,000,000 shares authorized; 163,602,067 shares issued for both periods82  82  
Additional paid-in capital1,941,509  1,899,273  
Accumulated other comprehensive loss, net(142,175) (77,938) 
Accumulated earnings2,118,896  1,988,722  
Treasury stock, at cost, 74,249,510 and 74,444,288 common shares, respectively(2,927,093) (2,871,546) 
Total Stockholders’ Equity991,219  938,593  
Total Liabilities and Stockholders’ Equity$6,810,294  $7,151,294  

See the accompanying notes to condensed consolidated financial statements.

3

GARTNER, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share data)

Three Months EndedSix Months Ended
 June 30,June 30,
 2020201920202019
Revenues:
Research$875,329  $826,055  $1,784,620  $1,651,429  
Conferences317  141,174  14,187  193,106  
Consulting97,489  103,653  193,219  196,791  
Total revenues973,135  1,070,882  1,992,026  2,041,326  
Costs and expenses:
Cost of services and product development322,551  387,999  663,829  734,644  
Selling, general and administrative494,840  514,976  991,479  1,033,746  
Depreciation22,728  20,099  45,245  39,874  
Amortization of intangibles31,208  32,164  63,387  65,847  
Acquisition and integration charges (credits)2,157  (358) 3,716  2,414  
Total costs and expenses873,484  954,880  1,767,656  1,876,525  
Operating income99,651  116,002  224,370  164,801  
Interest expense, net(30,296) (24,749) (56,644) (49,596) 
Loss from divested operations—  —  —  (2,075) 
Other expense, net(10,399) (247) (11,915) (1,071) 
Income before income taxes58,956  91,006  155,811  112,059  
Provision (benefit) for income taxes3,879  (12,400) 25,637  (12,142) 
Net income$55,077  $103,406  $130,174  $124,201  
Net income per share: 
Basic$0.62  $1.15  $1.46  $1.38  
Diluted$0.61  $1.13  $1.45  $1.36  
Weighted average shares outstanding:
Basic89,323  90,112  89,271  89,997  
Diluted89,780  91,188  89,967  91,146  
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
Revenues:       
Research$840,998
 $774,188
 $2,492,427
 $2,308,426
Conferences66,286
 57,141
 259,392
 214,481
Consulting93,218
 78,752
 290,009
 258,106
Other—
 11,593
 —
 105,562
Total revenues1,000,502
 921,674
 3,041,828
 2,886,575
Costs and expenses:       
Cost of services and product development365,056
 336,112
 1,099,700
 1,060,958
Selling, general and administrative512,159
 447,537
 1,545,905
 1,396,085
Depreciation20,704
 17,335
 60,578
 50,456
Amortization of intangibles31,694
 50,852
 97,541
 152,625
Acquisition and integration charges1,742
 17,114
 4,156
 96,342
Total costs and expenses931,355
 868,950
 2,807,880
 2,756,466
Operating income69,147
 52,724
 233,948
 130,109
Interest expense, net(24,073) (26,984) (73,669) (99,647)
Gain (loss) from divested operations—
 13,040
 (2,075) 38,500
Other income (expense), net8,024
 (827) 6,953
 1,193
Income before income taxes53,098
 37,953
 165,157
 70,155
Provision (benefit) for income taxes11,710
 26,200
 (432) 31,719
Net income$41,388
 $11,753
 $165,589
 $38,436
        
Net income per share:     
  
Basic$0.46
 $0.13
 $1.84
 $0.42
Diluted$0.46
 $0.13
 $1.82
 $0.42
Weighted average shares outstanding:    

  
Basic89,846
 90,854
 89,947
 90,969
Diluted90,887
 92,148
 91,089
 92,244

See the accompanying notes to condensed consolidated financial statements.

4

GARTNER, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income
(Unaudited; in thousands)

Three Months EndedSix Months Ended
 June 30,June 30,
 2020201920202019
Net income$55,077  $103,406  $130,174  $124,201  
Other comprehensive (loss) income, net of tax: 
Foreign currency translation adjustments23,817  12,761  (22,564) 5,525  
Interest rate swaps – net change in deferred gain or loss2,900  (24,715) (41,832) (39,220) 
Pension plans – net change in deferred actuarial loss80  41  159  83  
Other comprehensive loss, net of tax26,797  (11,913) (64,237) (33,612) 
Comprehensive income$81,874  $91,493  $65,937  $90,589  
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
Net income$41,388
 $11,753
 $165,589
 $38,436
Other comprehensive (loss) income, net of tax:       
Foreign currency translation adjustments3,553
 964
 9,078
 (38,504)
Interest rate swaps – net change in deferred gain or loss(11,379) 350
 (50,599) 13,557
Pension plans – net change in deferred actuarial loss41
 53
 124
 164
Other comprehensive (loss) income, net of tax(7,785) 1,367
 (41,397) (24,783)
Comprehensive income$33,603
 $13,120
 $124,192
 $13,653

See the accompanying notes to condensed consolidated financial statements.

5

GARTNER, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited; in thousands)

Three and Six Months Ended June 30, 2020
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Loss, NetAccumulated EarningsTreasury StockTotal
Balance at December 31, 2019$82  $1,899,273  $(77,938) $1,988,722  $(2,871,546) $938,593  
Net income—  —  —  75,097  —  75,097  
Other comprehensive loss—  —  (91,034) —  —  (91,034) 
Issuances under stock plans—  (1,794) —  —  7,448  5,654  
Common share repurchases—  —  —  —  (63,164) (63,164) 
Stock-based compensation expense—  25,129  —  —  —  25,129  
Balance at March 31, 2020$82  $1,922,608  $(168,972) $2,063,819  $(2,927,262) $890,275  
Net income—  —  —  55,077  —  55,077  
Other comprehensive loss—  —  26,797  —  —  26,797  
Issuances under stock plans—  3,223  —  —  867  4,090  
Common share repurchases—  —  —  —  (698) (698) 
Stock-based compensation expense—  15,678  —  —  —  15,678  
Balance at June 30, 2020$82  $1,941,509  $(142,175) $2,118,896  $(2,927,093) $991,219  

Three and Six Months Ended June 30, 2019
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Loss, NetAccumulated EarningsTreasury StockTotal
Balance at December 31, 2018$82  $1,823,710  $(39,867) $1,755,432  $(2,688,600) $850,757  
Net income—  —  —  20,795  —  20,795  
Other comprehensive loss—  —  (21,699) —  —  (21,699) 
Issuances under stock plans—  (2,911) —  —  7,973  5,062  
Common share repurchases—  —  —  —  (29,837) (29,837) 
Stock-based compensation expense—  31,819  —  —  —  31,819  
Balance at March 31, 2019$82  $1,852,618  $(61,566) $1,776,227  $(2,710,464) $856,897  
Net income—  —  —  103,406  —  103,406  
Other comprehensive loss—  —  (11,913) —  —  (11,913) 
Issuances under stock plans—  3,140  —  —  875  4,015  
Common share repurchases—  —  —  —  (1,723) (1,723) 
Stock-based compensation expense—  13,120  —  —  —  13,120  
Balance at June 30, 2019$82  $1,868,878  $(73,479) $1,879,633  $(2,711,312) $963,802  

6

GARTNER, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited; in thousands)

Six Months Ended
 June 30,
 20202019
Operating activities:  
Net income$130,174  $124,201  
Adjustments to reconcile net income to cash provided by operating activities:  
Depreciation and amortization108,632  105,721  
Stock-based compensation expense40,807  44,939  
Deferred taxes(1,813) (49,414) 
Loss from divested operations—  2,075  
Reduction in the carrying amount of operating lease right-of-use assets43,256  42,556  
Amortization and write-off of deferred financing fees5,392  3,238  
Amortization of deferred swap losses from de-designation10,320  —  
Changes in assets and liabilities:  
     Fees receivable, net261,124  140,841  
Deferred commissions31,255  22,974  
Prepaid expenses and other current assets14,202  16,734  
Other assets(932) (49,524) 
Deferred revenues(149,615) 47,923  
Accounts payable and accrued and other liabilities(93,885) (189,186) 
Cash provided by operating activities398,917  263,078  
Investing activities:  
     Additions to property, equipment and leasehold improvements(45,865) (59,479) 
Acquisitions - cash paid (net of cash acquired)—  (2,295) 
Cash used in investing activities(45,865) (61,774) 
Financing activities:  
     Proceeds from employee stock purchase plan9,719  9,077  
     Proceeds from borrowings800,000  5,000  
     Payments of deferred financing fees(10,516) —  
     Proceeds from revolving credit facility327,000  253,000  
     Payments on revolving credit facility(475,000) (316,000) 
     Payments on borrowings(853,094) (46,647) 
     Purchases of treasury stock(73,862) (46,558) 
Cash used in financing activities(275,753) (142,128) 
Net increase in cash and cash equivalents77,299  59,176  
Effects of exchange rates on cash and cash equivalents(1,502) 614  
Cash and cash equivalents and restricted cash, beginning of period280,836  158,663  
Cash and cash equivalents, end of period$356,633  $218,453  
 Nine Months Ended
 September 30,
 2019 2018
Operating activities: 
  
Net income$165,589
 $38,436
Adjustments to reconcile net income to cash provided by operating activities: 
  
Depreciation and amortization158,119
 203,081
Stock-based compensation expense57,893
 56,018
Deferred taxes(50,790) (4,746)
Loss (gain) from divested operations2,075
 (38,500)
Fair value adjustment - equity security(9,120) —
Amortization of lease right-of-use assets63,692
 —
Amortization and write-off of deferred financing fees4,865
 12,205
Changes in assets and liabilities, net of divestitures: 
  
     Fees receivable, net215,132
 172,679
Deferred commissions35,329
 38,216
Prepaid expenses and other current assets(941) (64,395)
Other assets(46,954) 23,444
Deferred revenues70,006
 68,895
Accounts payable, accrued, and other liabilities(182,294) (79,322)
Cash provided by operating activities482,601
 426,011
Investing activities: 
  
     Additions to property, equipment and leasehold improvements(95,701) (64,631)
Acquisitions - cash paid(2,295) (15,855)
Divestitures - cash received (net of cash transferred)—
 520,709
Cash (used in) provided by investing activities(97,996) 440,223
Financing activities: 
  
     Proceeds from employee stock purchase plan13,235
 11,134
     Proceeds from borrowings5,000
 —
     Payments on borrowings(109,612) (1,120,290)
     Purchases of treasury stock(141,436) (104,400)
Cash used in financing activities(232,813) (1,213,556)
Net increase (decrease) in cash and cash equivalents and restricted cash151,792
 (347,322)
Effects of exchange rates on cash and cash equivalents and restricted cash(3,728) (6,444)
Cash and cash equivalents and restricted cash, beginning of period158,663
 567,058
Cash and cash equivalents and restricted cash, end of period$306,727
 $213,292

See the accompanying notes to condensed consolidated financial statements.


7

GARTNER, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
Note 1 — Business and Basis of Presentation

Business. Gartner, Inc. (NYSE: IT) is the world’s leading research and advisory company and a member of the S&P 500. We equip business leaders with indispensable insights, advice and tools to achieve their mission–critical priorities today and build the successful organizations of tomorrow. We believe our unmatched combination of expert-led, practitioner-sourced and data-driven research steers clients toward the right decisions on the issues that matter most. We are a trusted advisor and an objective resource for more than 15,000 organizations14,000 enterprises in more than 100 countries — across all major functions, in every industry and enterprise size.

Segments. Gartner delivers its products and services globally through 3 business segments: Research, Conferences and Consulting. Our revenues by business segmentRevenues and other financial information for our segments are discussed below under the heading "Revenue Recognition." During 2018, the Company divested all of the non-core businesses that comprised its Other segment and moved a small residual product in the Other segment into the Research business and, as a result, no operating activity has been recorded in the Other segment in 2019.Note 5 — Segment Information.

Basis of presentation. The accompanying interim condensed consolidated 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 interim financial information and with the applicable instructions of the U.S. Securities and Exchange Commission (“SEC”) Rule 10-01 of Regulation S-X on Form 10-Q, and should be read in conjunction with the consolidated financial statements and related notes of the Company filed in its Annual Report on Form 10-K for the year ended December 31, 2018.2019.

The fiscal year of Gartner is the twelve-month period from January 1 through December 31. In the opinion of management, all normal recurring accruals and adjustments considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented herein have been included. The results of operations for the three and ninesix months ended SeptemberJune 30, 20192020 may not be indicative of the results of operations for the remainder of 20192020 or beyond. When used in these notes, the terms “Gartner,” the “Company,” “we,” “us,” or “our” refer to Gartner, Inc. and its consolidated subsidiaries.

Principles of consolidation. The accompanying interim condensed consolidated 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 interim condensed consolidated 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 these interim condensed consolidated 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 statements in future periods.

In December 2019, a novel coronavirus disease (“COVID-19”) was reported in Wuhan, China and on March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. Any future asset impairment charges, increase in allowance for doubtful accounts, or restructuring charges could be more likely if the negative effects of the COVID-19 pandemic continue and will be dependent on the severity and duration of this crisis. To date, the Company has not observed any material impairments of its assets or a significant change in the fair value of assets due to the COVID-19 pandemic.

8

Revenue recognition. Revenue is recognized in accordance with the requirements of FASB ASC Topic 606, “Revenue from Contracts with Customers” (“ASC Topic 606”). Revenue is only recognized when all of the required criteria for revenue recognition have been met. The accompanying Condensed Consolidated Statements of Operations present revenue net of any sales or value-added taxes that we collect from customers and remit to government authorities. ASC Topic 270 requires certain disclosures in interim financial statements around the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers,customers. Note 2 — Revenue and Related Matters provides additional information regarding the Company's revenues.

Acquisition and divestiture activities. The Company recognized $2.2 million and $(0.4) million of Acquisition and integration charges during the three months ended June 30, 2020 and 2019, respectively. Acquisition and integration charges reflect additional costs and expenses resulting from our acquisitions and include, among other items, professional fees, severance and stock-based compensation charges. Although the Company did not complete any business acquisitions during the six months ended June 30, 2020 or 2019, it paid $2.3 million of restricted cash in 2019 for deferred consideration from a 2017 acquisition.

During the six months ended June 30, 2019, the Company recorded a pretax Loss from divested operations of $2.1 million, primarily due to adjustments of certain working capital balances related to divestitures that were completed in 2018.

Adoption of new accounting standards. The Company adopted the accounting standards described below during the six months ended June 30, 2020.

Implementation Costs in a Cloud Computing Arrangement — In August 2018, the FASB issued ASU No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU No. 2018-15"). ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Costs that are capitalized under ASU No. 2018-15 will be expensed over the term of the cloud computing arrangement. Gartner adopted ASU No. 2018-15 on January 1, 2020 on a prospective basis. The adoption of ASU No. 2018-15 did not have a material impact on the Company's condensed consolidated financial statements.

Fair Value Measurement Disclosures — In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ("ASU No. 2018-13"). ASU No. 2018-13, which is part of the FASB's broader disclosure framework project, modifies and supplements the current U.S. GAAP disclosure requirements pertaining to fair value measurements, with an emphasis on Level 3 disclosures of the valuation hierarchy. Gartner adopted ASU No. 2018-13 on January 1, 2020. The adoption of ASU No. 2018-13 did not have a material impact on the Company's condensed consolidated financial statements.

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 goodwill impairment test under current U.S. GAAP. Gartner adopted ASU No. 2017-04 on January 1, 2020. The adoption of ASU No. 2017-04 did not have a material impact on the Company's condensed 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. Gartner adopted ASU No. 2016-13 on January 1, 2020 with no cumulative effect adjustment to the Company's opening retained earnings. The Company applied the expected credit loss model to its fees receivable balance on January 1, 2020 using a historical loss rate method. The Company’s trade receivables are providedcollected fairly quickly and its credit losses have historically been low. The adoption of ASU No. 2016-13 did not have a material impact on the Company's condensed consolidated financial statements.

Accounting standards issued but not yet adopted. The FASB has issued accounting standards that have not yet become effective and may impact the Company’s consolidated financial statements or related disclosures in future periods. Those standards and their potential impact are discussed below.


Accounting standard effective immediately upon voluntary election by Gartner

9


Reference Rate Reform — In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform—Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU No. 2020-04"). ASU No. 2020-04 provides that an entity can elect not to apply certain required modification accounting in U.S. GAAP to contracts where all changes to the critical 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 where one or more of the 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. The Company is currently evaluating the potential impact of ASU No. 2020-04 on its consolidated financial statements, including the rule’s potential impact on any debt modifications or other contractual changes in the future that may result from reference rate reform.

Accounting standard effective in the fourth quarter of 2020

Defined Benefit Plan Disclosures — In August 2018, the FASB issued ASU No. 2018-14, Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans ("ASU No. 2018-14"). ASU No. 2018-14, which is part of the FASB's broader disclosure framework project, modifies and supplements the current U.S. GAAP annual disclosure requirements for employers that sponsor defined benefit pension plans. ASU No. 2018-14 is effective for Gartner in the fourth quarter of 2020. ASU No. 2018-14 must be adopted on a retroactive basis and applied to each comparative period presented in an entity's financial statements. The adoption of ASU No. 2018-14 is currently not expected to have a material impact on the Company's financial statement disclosures.

Accounting standard effective in 2021

Simplifying the Accounting for Income Taxes — In December 2019, the FASB issued ASU No. 2019-12, Income Taxes—Simplifying the Accounting for Income Taxes ("ASU No. 2019-12"). ASU No. 2019-12 provides new guidance to simplify the accounting for income taxes in certain areas, changes the accounting for select income tax transactions and makes minor ASC improvements. ASU No. 2019-12 is effective for Gartner on January 1, 2021, including interim periods in the year of adoption. Early adoption is permitted. The method of adoption varies depending on the component of the new rule that is being adopted. The Company is currently evaluating the potential impact of ASU No. 2019-12 on our consolidated financial statements.

Note 2 — Revenue and Related Matters

Disaggregated Revenue — OurThe Company's disaggregated revenue by reportable segment is presented in the tables below for the periods indicated (in thousands).

By Primary Geographic Market (1), (2)

Three Months Ended SeptemberJune 30, 20192020
Primary Geographic MarketResearchConferencesConsultingTotal
United States and Canada$573,245  $317  $58,017  $631,579  
Europe, Middle East and Africa196,854  —  30,114  226,968  
Other International105,230  —  9,358  114,588  
Total revenues$875,329  $317  $97,489  $973,135  


 ResearchConferencesConsultingTotal
Primary Geographic Markets    
United States and Canada$538,112
$28,153
$58,615
$624,880
Europe, Middle East and Africa196,121
24,497
26,468
247,086
Other International106,765
13,636
8,135
128,536
Total revenues$840,998
$66,286
$93,218
$1,000,502

Three Months Ended SeptemberJune 30, 20182019
Primary Geographic MarketResearchConferencesConsultingTotal
United States and Canada$528,461  $100,596  $61,499  $690,556  
Europe, Middle East and Africa193,666  25,827  33,948  253,441  
Other International103,928  14,751  8,206  126,885  
Total revenues$826,055  $141,174  $103,653  $1,070,882  



10

 ResearchConferencesConsultingOtherTotal
Primary Geographic Markets     
United States and Canada$502,489
$22,002
$45,903
$8,948
$579,342
Europe, Middle East and Africa180,124
25,422
26,255
2,645
234,446
Other International91,575
9,717
6,594
—
107,886
Total revenues$774,188
$57,141
$78,752
$11,593
$921,674

NineSix Months Ended SeptemberJune 30, 20192020
Primary Geographic MarketResearchConferencesConsultingTotal
United States and Canada$1,163,400  $6,297  $112,181  $1,281,878  
Europe, Middle East and Africa402,794  2,147  60,196  465,137  
Other International218,426  5,743  20,842  245,011  
Total revenues$1,784,620  $14,187  $193,219  $1,992,026  

 ResearchConferencesConsultingTotal
Primary Geographic Markets    
United States and Canada$1,593,806
$157,756
$175,208
$1,926,770
Europe, Middle East and Africa583,742
67,520
90,350
741,612
Other International314,879
34,116
24,451
373,446
Total revenues$2,492,427
$259,392
$290,009
$3,041,828

NineSix Months Ended SeptemberJune 30, 20182019
ResearchConferencesConsultingOtherTotal
Primary Geographic Markets 
Primary Geographic MarketPrimary Geographic MarketResearchConferencesConsultingTotal
United States and Canada$1,485,545
$131,215
$146,816
$59,419
$1,822,995
United States and Canada$1,055,694  $129,603  $116,592  $1,301,889  
Europe, Middle East and Africa551,070
57,163
89,783
38,369
736,385
Europe, Middle East and Africa387,621  43,024  63,882  494,527  
Other International271,811
26,103
21,507
7,774
327,195
Other International208,114  20,479  16,317  244,910  
Total revenues$2,308,426
$214,481
$258,106
$105,562
$2,886,575
Total revenues$1,651,429  $193,106  $196,791  $2,041,326  

(1)Revenue is reported based on where the sale is fulfilled.
(2)During 2018, the Company divested all of the non-core businesses that comprised its Other segment and moved a small residual product in the Other segment into the Research business and, as a result, no operating activity has been recorded in the Other segment in 2019.
(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 our 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
(1)

Three Months Ended SeptemberJune 30, 20192020
Timing of Revenue RecognitionResearchConferencesConsultingTotal
Transferred over time (1)$810,564  $—  $68,630  $879,194  
Transferred at a point in time (2)64,765  317  28,859  93,941  
Total revenues$875,329  $317  $97,489  $973,135  


 ResearchConferencesConsultingTotal
Timing of Revenue Recognition    
Transferred over time (2)$769,718
$—
$77,570
$847,288
Transferred at a point in time (3)71,280
66,286
15,648
153,214
Total revenues$840,998
$66,286
$93,218
$1,000,502

Three Months Ended SeptemberJune 30, 20182019
Timing of Revenue RecognitionResearchConferencesConsultingTotal
Transferred over time (1)$754,267  $—  $79,114  $833,381  
Transferred at a point in time (2)71,788  141,174  24,539  237,501  
Total revenues826,055  $141,174  $103,653  $1,070,882  


Six Months Ended June 30, 2020
Timing of Revenue RecognitionResearchConferencesConsultingTotal
Transferred over time (1)$1,639,776  $—  $150,038  $1,789,814  
Transferred at a point in time (2)144,844  14,187  43,181  202,212  
Total revenues$1,784,620  $14,187  $193,219  $1,992,026  



11

 ResearchConferencesConsultingOtherTotal
Timing of Revenue Recognition     
Transferred over time (2)$709,496
$—
$69,755
$8,800
$788,051
Transferred at a point in time (3)64,692
57,141
8,997
2,793
133,623
Total revenues$774,188
$57,141
$78,752
$11,593
$921,674


NineSix Months Ended SeptemberJune 30, 2019
 ResearchConferencesConsultingTotal
Timing of Revenue Recognition    
Transferred over time (2)$2,276,783
$—
$235,641
$2,512,424
Transferred at a point in time (3)215,644
259,392
54,368
529,404
Total revenues$2,492,427
$259,392
$290,009
$3,041,828

Timing of Revenue RecognitionResearchConferencesConsultingTotal
Transferred over time (1)$1,507,065  $—  $158,071  $1,665,136  
Transferred at a point in time (2)144,364  193,106  38,720  376,190  
Total revenues$1,651,429  $193,106  $196,791  $2,041,326  
Nine Months Ended September 30, 2018
 ResearchConferencesConsultingOtherTotal
Timing of Revenue Recognition     
Transferred over time (2)$2,119,393
$—
$220,838
$86,667
$2,426,898
Transferred at a point in time (3)189,033
214,481
37,268
18,895
459,677
Total revenues$2,308,426
$214,481
$258,106
$105,562
$2,886,575
(1)During 2018, the Company divested all of the non-core businesses that comprised its Other segment and moved a small residual product in the Other segment into the Research business and, as a result, no operating activity has been recorded in the Other segment in 2019.
(2)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. During 2018, Other revenues were recognized using either a time-elapsed output method, performance-based milestone approach or labor hours, depending on the nature of the underlying customer contract.
(3)The revenues in this category were recognized in connection with performance obligations that were satisfied at the point in time the contractual deliverables were provided to the customer.
(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.

Performance Obligations — 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 SeptemberJune 30, 20192020 was approximately $2.9$3.0 billion. The Company expects to recognize $514.2$1,067.9 million, $1,592.9$1,463.8 million and $750.1$517.7 million of this revenue (most of which pertains to Research) during the remainder of 2019,2020, the year ending December 31, 20202021 and thereafter, respectively. The Company applies an availablea practical expedient that is permitted under ASC Topic 606 and, accordingly, it does not disclose such performance obligation information for customer contracts that have original durations of one year or less. Our performance obligations for contracts meeting this ASC Topic 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 and 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 timing of the recognition of revenue and the amount and timing of our billings and cash collections, as well asincluding upfront customer payments, result in the recordingrecognition of both assets and liabilities on our Condensed Consolidated Balance Sheets.consolidated balance sheet. The table below provides information regarding certain of the Company’s balance sheet accounts that pertain to its contracts with customers (in thousands).

September 30, December 31,June 30,December 31,
2019 201820202019
Assets:   Assets:
Fees receivable, gross (1)$1,036,120
 $1,262,818
Fees receivable, gross (1)$1,059,519  $1,334,012  
   
Contract assets recorded in Prepaid expenses and other current assets (2)$24,905
 $26,119
Contract assets recorded in Prepaid expenses and other current assets (2)$22,696  $21,350  
   
Contract liabilities:   Contract liabilities:
Deferred revenues (current liability) (3)$1,803,135
 $1,745,244
Deferred revenues (current liability) (3)$1,765,264  $1,928,020  
Non-current deferred revenues recorded in Other liabilities (3)15,784
 21,194
Non-current deferred revenues recorded in Other liabilities (3)17,664  24,409  
Total contract liabilities$1,818,919
 $1,766,438
Total contract liabilities$1,782,928  $1,952,429  
   

(1)Fees receivable represent an unconditional right of payment from our customers and include both billed and unbilled amounts.
(2)Contract assets represent recognized revenue for which we do 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 our performance obligation(s).
(1)Fees receivable represent an unconditional right of payment from our customers and include both billed and unbilled amounts.
(2)Contract assets represent recognized revenue for which we do 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 our performance obligation(s).

The Company recognized revenue of $675.2$692.6 million and $642.0$708.3 million during the three months ended SeptemberJune 30, 20192020 and 2018,2019, respectively, and $1,312.3$1,087.9 million and $1,164.2$1,062.0 million during the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively, that was attributable to deferred revenues that were recorded at the beginning of each such period. Those amounts primarily consisted of (i) Research revenues and, in the 2018 periods, Other revenues that were recognized ratably as control of the goods or services passed to the customer and (ii) Conferences revenue pertaining to conferences and meetings that occurred during the reporting periods. During each of the
12

three and ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, the Company did not record any material impairments related to its contract assets. The Company does not typically recognize revenue from performance obligations satisfied in prior periods.

Acquisition and divestiture activities. The Company recognized $1.7 million and $17.1 million of Acquisition and integration charges during the three months ended September 30, 2019 and 2018, respectively, and $4.2 million and $96.3 million during the nine months ended September 30, 2019 and 2018, respectively. Acquisition and integration charges reflect additional costs and expenses resulting from our acquisitions and include, among other items, professional fees, severance and stock-based compensation charges. During the nine months ended September 30, 2018, the charges included $51.4 million of exit costs for certain acquisition-related office space in Arlington, Virginia that the Company did not occupy (such activity for the three months ended September 30, 2018 was nominal). The Company recorded no exit costs for facilities during the three and nine months ended September 30, 2019. Although the Company did not complete any business acquisitions during the nine months ended September 30, 2019 or 2018, it paid $2.3 million and $15.9 million of restricted cash in 2019 and 2018, respectively, for deferred consideration from pre-2018 acquisitions.

During the nine months ended September 30, 2018, the Company completed the divestitures of 3 non-core businesses that had been reported as part of its Other segment. These businesses were acquired as part of the CEB Inc. acquisition in 2017. Revenue from those divested operations was $8.6 million and $97.0 million during the three and nine months ended September 30, 2018, respectively, while the gross contribution was $4.9 million and $60.1 million during the three and nine months ended September 30, 2018, respectively. Also during 2018, the Company sold other miscellaneous assets acquired in the CEB Inc. transaction. For the nine months ended September 30, 2018, the Company recorded $520.7 million in total net cash proceeds from these sales and a net pretax gain of $38.5 million. During the nine months ended September 30, 2019, the Company recorded a pretax Loss from divested operations of $2.1 million, primarily due to adjustments of certain working capital balances related to its 2018 divestitures.

Fair value adjustment - equity security. During both the three and nine months ended September 30, 2019, the Company recognized unrealized appreciation of $9.1 million related to a minority equity investment that we sold in October 2019. That benefit was


recorded in Other income (expense), net in the accompanying Condensed Consolidated Statements of Operations. The minority equity investment’s estimated fair value of $14.1 million was included in Prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheet as of September 30, 2019. Our valuation of such investment was based on certain observable inputs, which the Company considers to be Level 2 inputs under the valuation hierarchy that is described in Note 10 - Fair Value Disclosures.

Cash and cash equivalents and restricted cash. For the nine months ended September 30, 2019, the beginning of period cash and cash equivalents and restricted cash balance of $158.7 million in the accompanying Condensed Consolidated Statements of Cash Flows consisted of $156.4 million of cash and cash equivalents and $2.3 million of restricted cash. The restricted cash, which was classified in Prepaid expenses and other current assets in the accompanying Condensed Consolidated Balance Sheets as of December 31, 2018, was paid to a third party in 2019.

Adoption of new accounting standards. The Company adopted the accounting standards described below during the nine months ended September 30, 2019.

Targeted Improvements to Accounting for Hedging Activities — On January 1, 2019, the Company adopted Accounting Standards Update ("ASU") No. 2017-12, "Derivatives and Hedging" ("ASU No. 2017-12"). ASU No. 2017-12 is intended to improve the financial reporting of hedging relationships to better portray the 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 application of the hedge accounting guidance in current U.S. GAAP. The adoption of the standard had no impact on the Company's consolidated financial statements.

Leases — On January 1, 2019, the Company adopted ASU No. 2016-02, "Leases," as amended ("ASU No. 2016-02" or the “new lease standard”). ASU No. 2016-02 significantly changes the accounting for leases because a right-of-use model is now used 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 ASU No. 2016-02, 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, ASU No. 2016-02 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.

The adoption of ASU No. 2016-02 on January 1, 2019 had a material impact on the Company’s consolidated balance sheet, while the accompanying Condensed Consolidated Statements of Operations and the cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows for the periods ended September 30, 2019 were not materially impacted. Prior to January 1, 2019, the Company recognized lease expense in accordance with then-existing U.S. GAAP under FASB ASC Topic 840, Leases (“prior GAAP”). Although there were significant changes to the Company’s leasing policies and procedures effective January 1, 2019 with the adoption of ASU No. 2016-02, the lease expense recognition patterns under ASU No. 2016-02 and prior GAAP during the periods ended September 30, 2019 and 2018, respectively, were substantively the same. As required by ASU No. 2016-02, the Company's disclosures regardingits leasing activities have been significantly expanded to enable users of our consolidated financial statements to assess the amount, timing and uncertainty of cash flows related to leases. These additional disclosures are included below.

The Company adopted ASU No. 2016-02 on January 1, 2019 using a modified retrospective approach. We elected to use an optional transition method available under ASU No. 2016-02 to record the required cumulative effect adjustments to the opening balance sheet in the period of adoption rather than in the earliest comparative period presented. As such, the Company's historical consolidated financial statements have not been restated.
Under prior GAAP, lease arrangements that met certain criteria were considered operating leases and were not recorded on an entity's balance sheet. Prior to January 1, 2019 and through September 30, 2019, all of the Company’s lease arrangements were accounted for as operating leases. The adoption of ASU No. 2016-02 on January 1, 2019 had a material impact on the Company’s consolidated balance sheet due to the recognition of right-of-use assets of $651.9 million and related lease liabilities of $851.3 million. The Company’s adoption of ASU No. 2016-02 resulted in a net increase of $638.7 million in each of Total Assets and Total Liabilities. The adoption of the new lease standard did not affect Stockholders’ Equity.

In connection with our adoption of ASU No. 2016-02, the Company elected to use certain available practical expedients that were permitted under the new lease standard and made other elections that impact its lease accounting. The Company elected to use these practical expedients in connection with the adoption of ASU No. 2016-02 because, among other things, they simplified the adoption of the new lease standard, streamlined our internal processes and minimized the associated costs. The critical practical expedients and accounting policy elections used by the Company for all classes of leases accounted for under ASU No. 2016-02 were as follows:



Existing contracts were not reassessed to determine if they contained leases.
Existing leases were not reassessed to determine if their classification should be changed.
Initial direct costs for existing leases were not reassessed.
Lease components and nonlease components (e.g., common area maintenance charges, etc.) related to a lease arrangement were accounted for as a single lease component for purposes of the recognition and measurement requirements of ASU No. 2016-02.
The incremental borrowing rate used for the purpose of measuring each of our lease liabilities was derived by reference to the related lease’s remaining minimum payments and remaining lease term on the date of adopting the new lease standard. We used incremental borrowing rates because we were unable to determine the implicit interest rates in our leases.

Leasing Activities

The Company’s leasing activities are primarily for facilities under cancelable and non-cancelable lease agreements expiring during 2019 and through 2038. These facilities support our 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 these lease agreements include (i) renewal options to extend the lease term for up to five 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.

Prior to January 1, 2019, the Company recognized lease expense in accordance with prior GAAP. Because both ASU No. 2016-02 and prior GAAP generally recognize operating lease expense on a straight-line basis over the term of the lease arrangement and the Company only has operating lease arrangements, the lease expense recognition patterns under the two accounting methodologies during the three and nine months ended September 30, 2019 and 2018 were substantively the same.

Except for lease arrangements pertaining to facilities, all other operating lease activity is not significant. As such, operating leases for office equipment and other assets (collectively, “other leases”) are: (i) not recognized and measured under the relevant provisions of ASU No. 2016-02; (ii) excluded from the right-of-use assets and related lease liabilities on the accompanying Condensed Consolidated Balance Sheet as of September 30, 2019, as the related amounts are not material; and (iii) excluded from the quantitative disclosures provided below, other than the disclosures under the heading "Lease Disclosures Under Prior GAAP." Other leases are accounted for similar to the guidance for operating leases under prior GAAP, which generally recognizes lease expense on a straight-line basis over the term of the lease arrangement. As a result, the impact of excluding the other leases from the requirements of ASU No. 2016-02 is not significant.

The Company subleases certain office space that it does not intend to occupy. Such sublease arrangements expire during 2019 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 ASU No. 2016-02

Under ASU No. 2016-02, 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 related 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 our facilities leases, we account 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 our lease payments. Variable lease payments that are not dependent on an index or a rate are excluded from the determination of our 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 the lease 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, the present value of the lease payments for the affected lease is adjusted accordingly. Leases with a term of 12 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 our 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, we elected to use an available practical expedient that is permitted under ASU No. 2016-02 to aggregate nonlease components with the related lease components when (i) the timing and pattern of transfer for the nonlease components and the related lease components are the same and (ii) the lease components, if accounted for separately, would be classified as an operating lease. This practical expedient applies to all of our existing sublease arrangements.

When our lease cost for the term of a sublease exceeds our anticipated sublease income for that same period, we treat that circumstance as an indicator that the carrying amount of our right-of-use assetmay not be fully recoverable. In those circumstances, we perform an impairment analysis and, if indicated, we record a charge against earnings to reduce the right-of-use asset to the amount deemed to be recoverable in the future. There were no right-of-use asset impairments during the three and nine months ended September 30, 2019.

On the accompanying Condensed Consolidated Balance Sheet as of September 30, 2019, right-of-use assets are classified and reported in Operating leases - right-of-use assets, and the related lease liabilities are included in Accounts payable and accrued liabilities (current) and Operating leases - liabilities (long-term). On the accompanying Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2019, the amortization of right-of-use assets is presented separately and the change in operating lease liabilities is included under Accounts payable, accrued, and other liabilities in the reconciliation of net income to cash provided by operating activities.

Lease Disclosures Under ASU No. 2016-02

All of the Company’s leasing and subleasing activity is recognized in Selling, general and administrative expense in the accompanying Condensed Consolidated Statements of Operations. The table below presents the Company’s net lease cost and certain other information related to the Company’s leasing activities as of and for the periods indicated (dollars in thousands).
Description:Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
  Operating lease cost (1)$35,443
 $106,958
  Variable lease cost (2)3,902
 11,517
  Sublease income(10,205) (30,767)
  Total lease cost, net (3)$29,140
 $87,708
    
  Cash paid for amounts included in the measurement of operating lease liabilities$34,294
 $100,172
  Cash receipts from sublease arrangements$9,000
 $25,131
  Right-of-use assets obtained in exchange for new operating lease liabilities$38,571
 $67,756
    
As of September 30, 2019:   
  Weighted average remaining lease term for operating leases (in years)  10.5
  Weighted average discount rate for operating leases  6.9%
(1)Included in operating lease cost was $10.8 million and $32.5 million of costs for subleasing activities during the three and nine months ended September 30, 2019, respectively.
(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 operating lease costs during the three and nine months ended September 30, 2019.



As of September 30, 2019, the (i) maturities of operating lease liabilities under non-cancelable arrangements and (ii) estimated future sublease cash receipts from non-cancelable arrangements were as follows (in thousands):
  Operating Sublease
  Lease Cash
Period ending December 31, Payments Receipts
2019 (remaining three months) $35,125
 $9,344
2020 133,534
 40,534
2021 126,602
 42,918
2022 121,021
 43,587
2023 115,034
 44,469
Thereafter 693,901
 177,741
Total future minimum operating lease payments and estimated sublease cash receipts (1) 1,225,217
 $358,593
Imputed interest (368,485)  
Total per the Condensed Consolidated Balance Sheet $856,732
  
(1)Approximately 84% of the operating lease payments pertain to properties in the United States.

The table below indicates where the discounted operating lease payments from the above table are classified in the accompanying Condensed Consolidated Balance Sheet as of September 30, 2019 (in thousands).
Description:  
Accounts payable and accrued liabilities $80,170
Operating leases - liabilities 776,562
Total operating lease liabilities per the Condensed Consolidated Balance Sheet $856,732


As of September 30, 2019, the Company had additional operating leases for facilities that have not yet commenced. These operating leases, which aggregated $146.6 million of undiscounted lease payments, are scheduled to commence between 2019 and 2021 with lease terms of up to ten years.

Lease Disclosures Under Prior GAAP

Based on the Company's selected method of adoption for ASU No. 2016-02, the prior GAAP disclosures presented below are required in our Condensed Consolidated Financial Statements.

As of December 31, 2018, future minimum annual cash payments under non-cancelable operating lease agreements for facilities, office equipment and other assets, which expire during 2019 and through 2038, were as follows (in thousands):
Year ending December 31,  
2019 $130,991
2020 121,802
2021 118,945
2022 111,117
2023 106,113
Thereafter 689,360
Total minimum lease payments (1) $1,278,328
(1) Excludes approximately $372.0 million of sublease income.

Accounting standards issued but not yet adopted. The FASB has issued accounting standards that have not yet become effective and may impact the Company’s consolidated financial statements or related disclosures in future periods. Those standards and their potential impact are discussed below.



Accounting standards effective in 2020

Implementation Costs in a Cloud Computing Arrangement — In August 2018, the FASB issued ASU No. 2018-15, "Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract" ("ASU No. 2018-15"). ASU No. 2018-15 aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Costs that are capitalized under ASU No. 2018-15 will be expensed over the term of the cloud computing arrangement. ASU No. 2018-15 is effective for Gartner on January 1, 2020, with early adoption permitted. ASU No. 2018-15 may be adopted using either a retroactive or prospective method. The adoption of ASU No. 2018-15 is currently not expected to have a material impact on the Company's consolidated financial statements; however, the new standard will change the classification of certain items on the Company's consolidated balance sheets, statements of operations and statements of cash flows in future periods.

Defined Benefit Plan Disclosures — In August 2018, the FASB issued ASU No. 2018-14, "Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans" ("ASU No. 2018-14"). ASU No. 2018-14, which is part of the FASB's broader disclosure framework project, modifies and supplements the current U.S. GAAP annual disclosure requirements for employers that sponsor defined benefit pension plans. ASU No. 2018-14 is effective for Gartner for the year ending December 31, 2020, with early adoption permitted. ASU No. 2018-14 must be adopted on a retroactive basis and applied to each comparative period presented in an entity's financial statements. The adoption of ASU No. 2018-14 is currently not expected to have a material impact on the Company's financial statement disclosures.

Fair Value Measurement Disclosures — In August 2018, the FASB issued ASU No. 2018-13, "Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU No. 2018-13"). ASU No. 2018-13, which is part of the FASB's broader disclosure framework project, modifies and supplements the current U.S. GAAP disclosure requirements pertaining to fair value measurements, with an emphasis on Level 3 disclosures of the valuation hierarchy. ASU No. 2018-13 is effective for Gartner on January 1, 2020, with early adoption permitted. The adoption of ASU No. 2018-13 is currently not expected to have a material impact on the Company's financial statement disclosures.

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 goodwill impairment test under current U.S. GAAP. ASU No. 2017-04 is effective for Gartner on January 1, 2020. The adoption of ASU No. 2017-04 is currently not expected to have a material impact on the 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. The adoption of ASU No. 2016-13 is currently not expected to have a material impact on the Company's consolidated financial statements.

The FASB continues to work on a number of other accounting standards which, if issued, could materially impact the Company's accounting policies and disclosures in future periods. As these standards have not yet been issued, the effective dates and potential impact are unknown.




Note 23 — 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 during the period. Diluted EPS reflects the potential dilution of securities that could share in earnings. When the impact of common share equivalents is anti-dilutive, they are excluded from the calculation.

The table below sets forth the calculation of basic and diluted income per share for the periods indicated (in thousands, except per share data).
Three Months EndedSix Months Ended
 June 30,June 30,
 2020201920202019
Numerator:    
Net income used for calculating basic and diluted income per common share$55,077  $103,406  $130,174  $124,201  
Denominator:    
Weighted average common shares used in the calculation of basic income per share89,323  90,112  89,27189,997
Common stock equivalents associated with stock-based compensation plans (1)457  1,076  6961,149
Shares used in the calculation of diluted income per share89,780  91,188  89,96791,146
Basic income per share$0.62  $1.15  $1.46  $1.38  
Diluted income per share$0.61  $1.13  $1.45  $1.36  
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
Numerator: 
  
  
  
Net income used for calculating basic and diluted income per common share$41,388
 $11,753
 $165,589
 $38,436
        
Denominator: 
  
  
  
Weighted average common shares used in the calculation of basic income per share89,846
 90,854
 89,947
 90,969
Common stock equivalents associated with stock-based compensation plans (1)1,041
 1,294
 1,142
 1,275
Shares used in the calculation of diluted income per share90,887
 92,148
 91,089
 92,244
        
Basic income per share$0.46
 $0.13
 $1.84
 $0.42
Diluted income per share$0.46
 $0.13
 $1.82
 $0.42

(1)Certain common stock equivalents were not included in the computation of diluted income per share because the effect would have been anti-dilutive. These common share equivalents totaled less than 0.2 million for each of the three and nine months ended September 30, 2018. For the three and nine months ended September 30, 2019, approximately 0.3 million and 0.2 million, respectively, of common stock equivalents were excluded from the calculation of diluted income per share because they were anti-dilutive.

(1)Certain common stock equivalents were not included in the computation of diluted income per share because the effect would have been anti-dilutive. For the three and six months ended June 30, 2020, approximately 1.3 million and 0.8 million common stock equivalents were excluded from the calculation of diluted income per share because they were anti-dilutive.These common share equivalents totaled less than 0.3 million and 0.2 million for the three and six months ended June 30, 2019.

Note 34 — 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. As of SeptemberJune 30, 2019,2020, the Company had 4.44.1 million shares of its common stock, par value $.0005$0.0005 per share, (the “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 for equity awards is based ontables below summarize 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. 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 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.







Stock-Based Compensation Expense

The Company recognized the followingCompany's stock-based compensation expense by award type and expense category line item during the periods indicated (in millions):.
Three Months EndedSix Months Ended
 June 30,June 30,
Award type2020201920202019
Stock appreciation rights$1.9  $0.9  $3.6  $4.8  
Restricted stock units13.6  12.0  36.8  39.7  
Common stock equivalents0.2  0.2  0.4  0.4  
Total (1)$15.7  $13.1  $40.8  $44.9  
  Three Months Ended Nine Months Ended
  September 30, September 30,
Award type 2019 2018 2019 2018
Stock appreciation rights $1.0
 $0.8
 $5.8
 $5.6
Restricted stock units 11.8
 9.8
 51.5
 49.9
Common stock equivalents 0.2
 0.1
 0.6
 0.5
Total (1) $13.0
 $10.7
 $57.9
 $56.0

13

 Three Months Ended Nine Months EndedThree Months EndedSix Months Ended
 September 30, September 30, June 30,June 30,
Expense category line item 2019 2018 2019 2018Expense category line item2020201920202019
Cost of services and product development $6.2
 $4.7
 $23.7
 $22.8
Cost of services and product development$7.1  $6.2  $19.2  $17.5  
Selling, general and administrative 6.7
 5.7
 33.8
 31.4
Selling, general and administrative8.6  6.7  21.6  27.1  
Acquisition and integration charges (2) 0.1
 0.3
 0.4
 1.8
Acquisition and integration charges (2)—  0.2  —  0.3  
Total (1) $13.0
 $10.7
 $57.9
 $56.0
Total (1)$15.7  $13.1  $40.8  $44.9  

(1) Includes a chargecharges of $0.4$5.2 million and a credit of $0.3$0.5 million during the three months ended SeptemberJune 30, 20192020 and 2018,2019, respectively, and charges of $21.8$16.8 million and $19.6$21.4 million during the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively, for awards to retirement-eligible employees. Those awards vest on an accelerated basis.
(2) Includes charges related to an acquisitionacquisitions and the related integration process.efforts.

As of September 30, 2019, the Company had $100.0 million of total unrecognized stock-based compensation cost, which is expected to be expensed over the remaining weighted average service period of approximately 2.5 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") 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. Upon exercise, the Company withholds a portion of the shares of the Common Stock 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 table below summarizes changes in SARs outstanding during the nine months ended September 30, 2019.
 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, 20181.2
 $89.45
 $19.88
 4.33
Granted0.3
 143.23
 32.62
 6.36
Forfeited(0.1) 118.31
 26.52
 n/a
Exercised(0.1) 70.54
 16.64
 n/a
Outstanding at September 30, 2019 (1) (2)1.3
 $100.54
 $22.43
 4.18
Vested and exercisable at September 30, 2019 (2)0.7
 $83.36
 $18.46
 3.11
n/a = not applicable

(1) As of September 30, 2019, 0.6 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 September 30, 2019, the total SARs outstanding had an intrinsic value of $56.9 million. On such date, SARs vested and exercisable had an intrinsic value of $42.1 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:
 Nine Months Ended
 September 30,
 2019 2018
Expected dividend yield (1)—% —%
Expected stock price volatility (2)21% 21%
Risk-free interest rate (3)2.5% 2.5%
Expected life in years (4)4.6
 4.5
(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") 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 1 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 table below summarizes the changes in RSUs outstanding during the nine months ended September 30, 2019.
 
Restricted
Stock Units
("RSUs")
(in millions)
 
Per Share
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 20181.4
 $101.75
Granted (1)0.5
 139.84
Vested and released(0.5) 97.13
Forfeited(0.1) 115.15
Outstanding at September 30, 2019 (2) (3)1.3
 $118.94
(1)The 0.5 million of RSUs granted during the nine months ended September 30, 2019 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 in final settlement of 2018 grants and approximately 0.1 million of RSUs representing the target amount of the grant for the year ending December 31, 2019 that is tied to an increase in Gartner's total contract value for 2019. The number of performance-based RSUs that will ultimately be awarded for 2019 ranges from 0% to 200% of the target amount and will be finalized based on the actual increase in Gartner's total contract value for 2019 as measured on December 31, 2019. If the specified minimum level of achievement is not met, the performance-based RSUs pertaining to 2019 will be forfeited in their entirety and any previously recorded compensation expense will be reversed.
(2)The Company expects that substantially all of the RSUs outstanding will vest in future periods.
(3)As of September 30, 2019, the weighted-average remaining contractual term of the RSUs outstanding was approximately 1.3 years.

Common Stock Equivalents

Common stock equivalents ("CSEs") are convertible into Common Stock. Each CSE entitles the holder to 1 share of Common Stock. Members of our 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 table below summarizes the changes in CSEs outstanding during the nine months ended September 30, 2019.
 
Common
Stock
Equivalents
("CSEs")
 
Per Share
Weighted
Average
Grant Date
Fair Value
Outstanding at December 31, 2018109,780
 $24.96
Granted3,410
 152.58
Converted to shares of Common Stock upon grant(2,199) 146.28
Outstanding at September 30, 2019110,991
 $26.48


Employee Stock Purchase Plan

The Company has an employee stock purchase plan (the “ESP Plan”) wherein 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 September 30, 2019, the Company had 0.6 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 $13.2 million and $11.1 million in cash from employee share purchases under the ESP Plan during the nine months ended September 30, 2019 and 2018, respectively.



Note 45 — Segment Information

OurThe Company's products and services are delivered through 3 segments – Research, Conferences and Consulting, as described below.

•
•Research provides trusted, objective insights and advice on the mission-critical priorities of leaders across all functional areas of an enterprise through reports, briefings, proprietary tools, access to our research experts, peer networking services and membership programs that enable our clients to drive organizational performance.

•Conferences provides business professionals 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 advice.

•Consulting combines the power of Gartner market-leading research with custom analysis and on-the-ground support to help chief information officers and other senior executives driving technology-related strategic initiatives move confidently from insight to action.

 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 and advisors, peer networking services and membership programs that enable our clients to make better decisions. Our traditional strengths in IT, marketing and supply chain research are supplemented by best practice and talent management research insights across a range of business functions, including human resources, sales, legal and finance.

•
Conferences provides business professionals across an organization the opportunity to learn, share and network. From our flagship Chief Information Officer conference Gartner IT Symposium, to industry-leading conferences focused on specific business roles and topics, to member-driven sessions, our offerings enable attendees to experience the best of Gartner insight and advice live.

•
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.

The Company evaluates segment performance and allocates resources based on gross contribution margin. Gross contribution, as presented in the tabletables 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 0 intersegment revenues. The Company does not identify or allocate assets, including capital expenditures, by reportable segment. Accordingly, 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 regarding the allocation of resources.

The tables below present information about the Company’s reportable segments for the periods indicated (in thousands) (1).

Three Months Ended June 30, 2020ResearchConferencesConsultingConsolidated
Revenues$875,329  $317  $97,489  $973,135  
Gross contribution632,624  (11,230) 33,542  654,936  
Corporate and other expenses   (555,285) 
Operating income   $99,651  

14

Three Months Ended September 30, 2019Research Conferences Consulting  Consolidated
Three Months Ended June 30, 2019Three Months Ended June 30, 2019ResearchConferencesConsultingConsolidated
Revenues$840,998
 $66,286
 $93,218
 $1,000,502
Revenues$826,055  $141,174  $103,653  $1,070,882  
Gross contribution582,502
 27,465
 26,538
 636,505
Gross contribution572,297  80,570  34,236  687,103  
Corporate and other expenses 
  
  
 (567,358)Corporate and other expenses   (571,101) 
Operating income 
  
  
 $69,147
Operating income   $116,002  
Three Months Ended September 30, 2018Research Conferences Consulting Other Consolidated
Revenues$774,188
 $57,141
 $78,752
 $11,593
 $921,674
Gross contribution534,911
 25,047
 18,419
 6,927
 585,304
Corporate and other expenses 
  
  
   (532,580)
Operating income 
  
  
   $52,724
Nine Months Ended September 30, 2019Research Conferences Consulting  Consolidated
Revenues$2,492,427
 $259,392
 $290,009
  $3,041,828
Gross contribution1,729,967
 126,910
 89,493
  1,946,370
Corporate and other expenses 
  
  
  (1,712,422)
Operating income 
  
  
  $233,948
Nine Months Ended September 30, 2018Research Conferences Consulting Other Consolidated
Revenues$2,308,426
 $214,481
 $258,106
 $105,562
 $2,886,575
Gross contribution1,599,277
 104,698
 76,236
 65,075
 1,845,286
Corporate and other expenses 
  
  
   (1,715,177)
Operating income 
  
  
   $130,109


Six Months Ended June 30, 2020ResearchConferencesConsultingConsolidated
Revenues$1,784,620  $14,187  $193,219  $1,992,026  
Gross contribution1,286,094  (17,290) 62,925  1,331,729  
Corporate and other expenses   (1,107,359) 
Operating income   $224,370  

(1) During 2018, the Company divested all of the non-core businesses that comprised its Other segment and moved a small residual product in the Other segment into the Research business and, as a result, no operating activity has been recorded in the Other segment in 2019.
Six Months Ended June 30, 2019ResearchConferencesConsultingConsolidated
Revenues$1,651,429  $193,106  $196,791  $2,041,326  
Gross contribution1,147,465  99,446  62,954  1,309,865  
Corporate and other expenses   (1,145,064) 
Operating income   $164,801  

The table below provides a reconciliation of total segment gross contribution to net income for the periods indicated (in thousands).
Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
Total segment gross contribution$654,936  $687,103  $1,331,729  $1,309,865  
Costs and expenses:
Cost of services and product development - unallocated (1)4,352  4,220  3,532  3,183  
Selling, general and administrative494,840  514,976  991,479  1,033,746  
Depreciation and amortization53,936  52,263  108,632  105,721  
Acquisition and integration charges2,157  (358) 3,716  2,414  
Operating income99,651  116,002  224,370  164,801  
Interest expense and other, net(40,695) (24,996) (68,559) (50,667) 
  Loss from divested operations—  —  —  (2,075) 
  Less: Provision for income taxes3,879  (12,400) 25,637  (12,142) 
Net income$55,077  $103,406  $130,174  $124,201  
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
Total segment gross contribution$636,505
 $585,304
 $1,946,370
 $1,845,286
Costs and expenses:       
Cost of services and product development - unallocated (1)1,059
 (258) 4,242
 19,669
Selling, general and administrative512,159
 447,537
 1,545,905
 1,396,085
Depreciation and amortization52,398
 68,187
 158,119
 203,081
Acquisition and integration charges1,742
 17,114
 4,156
 96,342
Operating income69,147
 52,724
 233,948
 130,109
Interest expense and other, net16,049
 27,811
 66,716
 98,454
  Gain (loss) from divested operations—
 13,040
 (2,075) 38,500
  Provision (benefit) for income taxes11,710
 26,200
 (432) 31,719
Net income$41,388
 $11,753
 $165,589
 $38,436

(1)
The unallocated amounts consist of certain bonus and related fringe costs recorded in consolidated Cost of services and product development 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
(1)The unallocated amounts consist of certain bonus and fringe costs recorded in consolidated Cost of services and product development that are not allocated to segment expense. The Company's policy is to allocate bonuses to segments at 100% of a segment employee's target bonus. Amounts above or below 100% are absorbed by corporate.


Note 56 — Goodwill and Intangible Assets

Goodwill

Goodwill represents the excess of the purchase price of acquired businesses over the estimated fair values of the tangible and identifiable intangible net assets acquired. 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. The

When performing our annual assessment of the recoverability of recorded goodwill, can be based on eitherwe initially perform a qualitative analysis evaluating whether any events or circumstances occurred or exist that provide evidence that it is more likely than not that the fair value of
15

any of our reporting units is less than the related carrying amount. If we do not believe that it is more likely than not that the fair value of any of our reporting units is less than the related carrying amount, then no quantitative impairment test is performed. However, if the results of our qualitative assessment orindicate that it is more likely than not that the fair value of a combinationreporting unit is less than its respective carrying amount, then we perform a quantitative impairment test. Evaluating the recoverability of the two approaches. Both methods utilize estimates which, in turn, requiregoodwill requires judgments and assumptions regarding future trends and events. As a result, both the precision and reliability of the resultingour 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

Our most recent annual impairment test of goodwill was a qualitative analysis conducted during the quarter ended September 30, 2019 whichthat indicated 0 impairment of recorded goodwill, the Company utilized the qualitative approach in assessing the fair values of its reporting units relative to their respective carrying values. Subsequent to completing our 2019 annual impairment test,impairment. There were no events or changes in circumstances were notedwhich indicate that required an interimthe carrying value of goodwill impairment test.may not be recoverable during the six months ended June 30, 2020.

The table below presents changes to the carrying amount of goodwill by segment during the ninesix months ended SeptemberJune 30, 20192020 (in thousands).

 Research Conferences Consulting  Total
Balance at December 31, 2018 (1)$2,638,418
 $187,654
 $97,064
  $2,923,136
Foreign currency translation impact16,745
 24
 (198)  16,571
Balance at September 30, 2019$2,655,163
 $187,678
 $96,866
  $2,939,707
 ResearchConferencesConsultingTotal
Balance at December 31, 2019 (1)$2,651,060  $189,641  $97,025  $2,937,726  
Foreign currency translation impact(1,586) (3) (528) (2,117) 
Balance at June 30, 2020$2,649,474  $189,638  $96,497  $2,935,609  

(1)The Company does not have any accumulated goodwill impairment losses.

(1)The Company does 0t have any accumulated goodwill impairment losses.


Finite-Lived Intangible Assets

The tables below present reconciliations of the carrying amounts of the Company's finite-lived intangible assets as of the dates indicated (in thousands).
September 30, 2019 Customer
Relationships		 Software Content Other Total
Gross cost at December 31, 2018 $1,131,656
 $110,701
 $98,842
 $51,662
 $1,392,861
Intangible assets fully amortized —
 —
 (85,900) (18,680) (104,580)
Foreign currency translation impact (9,810) (303) (2) (106) (10,221)
Gross cost 1,121,846
 110,398
 12,940
 32,876
 1,278,060
Accumulated amortization (1) (255,139) (55,609) (9,973) (21,026) (341,747)
Balance at September 30, 2019 $866,707
 $54,789
 $2,967
 $11,850
 $936,313
December 31, 2018 Customer
Relationships		 Software Content Other Total
Gross cost $1,131,656
 $110,701
 $98,842
 $51,662
 $1,392,861
Accumulated amortization (1) (184,918) (38,901) (92,717) (33,760) (350,296)
Balance at December 31, 2018 $946,738
 $71,800
 $6,125
 $17,902
 $1,042,565

June 30, 2020Customer
Relationships		SoftwareContentOtherTotal
Gross cost at December 31, 2019$1,145,109  $111,033  $14,140  $30,838  $1,301,120  
Intangible assets fully amortized$—  (787) (10,000) (772) (11,559) 
Foreign currency translation impact(17,773) (574) (175) (72) (18,594) 
Gross cost1,127,336  109,672  3,965  29,994  1,270,967  
Accumulated amortization (1)(327,640) (71,574) (2,758) (21,620) (423,592) 
Balance at June 30, 2020$799,696  $38,098  $1,207  $8,374  $847,375  

December 31, 2019Customer
Relationships		SoftwareContentOtherTotal
Gross cost$1,145,109  $111,033  $14,140  $30,838  $1,301,120  
Accumulated amortization (1)(283,369) (61,564) (11,225) (19,875) (376,033) 
Balance at December 31, 2019$861,740  $49,469  $2,915  $10,963  $925,087  


(1) Finite-lived intangible assets are amortized using the straight-line method over the following periods: Customer relationships—43 to 13 years; Software—32 to 7 years; Content—1.52 to 53 years; and Other—2 to 11 years.

Amortization expense related to finite-lived intangible assets was $31.7$31.2 million and $50.9$32.2 million during the three months ended SeptemberJune 30, 20192020 and 2018,2019, respectively, and $97.5$63.4 million and $152.6$65.8 million during the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. The estimated future amortization expense by year for finite-lived intangible assets is as followspresented in the table below (in thousands):.
2019 (remaining three months)$31,812
2020122,864
2021102,493
202292,989
202392,989
Thereafter493,166
 $936,313
16

2020 (remaining six months)$61,108  
2021103,593  
202293,796  
202393,781  
202488,493  
Thereafter406,604  
$847,375  


Note 67 — Debt

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”). The 2028 Notes were issued pursuant to an indenture, dated as of June 22, 2020 (the “Indenture”), among the Company, the guarantors party thereto and U.S. Bank National Association, as trustee (the “Trustee”). The 2028 Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers (as defined in the Securities Act of 1933, as amended (the “Securities Act”)) pursuant to Rule 144A under the Securities Act and outside the United States only to non-U.S. persons in accordance with Regulation S under the Securities Act.

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 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 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 with the proceeds of certain equity offerings at a redemption price of 104.5% plus accrued and unpaid interest to, but excluding, the redemption date. In addition, the Company may redeem some or all of the 2028 Notes prior to July 1, 2023, at a redemption price of 100.0% of the principal amount of the 2028 Notes plus accrued and unpaid interest to, but excluding, the redemption date, plus a “make-whole” premium. If the Company experiences specific kinds of change of control and a ratings decline, it will be required to offer to repurchase the 2028 Notes at a price equal to 101.0% of the principal amount thereof plus accrued and unpaid interest to, but excluding, the repurchase date.

The 2028 Notes are the Company’s general unsecured senior obligations, and are effectively subordinated to all of the Company’s existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness, structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s non-guarantor subsidiaries, equal in right of payment to all of the Company’s and Company’s guarantor subsidiaries’ existing and future senior indebtedness and senior in right of payment to all of the Company’s future subordinated indebtedness, if any. The 2028 Notes are jointly and severally guaranteed on a senior unsecured basis by certain of the Company’s domestic subsidiaries that have outstanding indebtedness or guarantee other specified indebtedness.

The Indenture contains covenants that limit, among other things, the Company’s ability and the ability of some of the Company’s subsidiaries to:

•create liens; and
•merge or consolidate with other entities.

These covenants are subject to a number of exceptions and qualifications. The Indenture also provides for events of default, which, if any of them occurs, would permit or require the principal, premium, if any, and interest on all the then outstanding 2028 Notes issued under the Indenture to be due and payable.


2016 Credit Agreement

The Company has a credit facility that currently provides for a $1.5 billion Term loan A facility and a $1.2 billion revolving credit facility (the "2016 Credit Agreement"). The 2016 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 covenants as of SeptemberJune 30, 2019.2020.

17

The Term loan A facility is being repaid in 16 consecutive quarterly installments that commenced on June 30, 2017, plus a final payment to be made on March 20, 2022. On June 30, 2020, the Company used proceeds from the Notes offering to prepay $787.9 million outstanding under the Term loan A facility. The revolving credit facility may be borrowed, repaid and re-borrowed through March 20, 2022, at which time all then-outstanding amounts must be repaid. Amounts borrowed under

On May 6, 2020, the Term loan A facility2016 Credit Agreement was amended with the consent of the required lenders to, among other things, modify certain financial maintenance covenants to provide additional flexibility to Gartner through December 31, 2021. The amendment increases the maximum consolidated leverage ratio to 5.00 to 1.00 and the revolving credit facility bear interest at a rate equalmaximum consolidated secured leverage ratio to at3.75 to 1.00 (each as determined in accordance with the Company's option, either:

(i) the greatest of: (x) the Administrative Agent’s prime rate; (y) the rate calculated by the New York Federal Reserve Bank for federal funds transactions plus 1/2 of 1%; and (z) the eurodollar rate (adjusted for statutory reserves) plus 1%2016 Credit Agreement), in each case plus


afor fiscal quarters ending on June 30, 2020 through and including December 31, 2021. The amendment only increases the applicable margin equalfor all outstanding Revolving Loans and Tranche A Term Loans (each as defined in the 2016 Credit Agreement) to between 0.125% and 1.50%, depending on Gartner’sthe extent the consolidated leverage ratio as of(as determined in accordance with the end of the four consecutive fiscal quarters most recently ended; orCredit Agreement) exceeds 4.50 to 1.00.

(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.
Senior2025 Notes

The Company has $800.0 million aggregate principal amount of 5.125% Senior Notes due 2025 (the “Senior“2025 Notes”). The Senior2025 Notes were issued at an issue price of 100.0% 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 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% 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 certain kinds of changes 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.

Outstanding Borrowings

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

 September 30, December 31,June 30,December 31,
Description: 2019 2018Description:20202019
2016 Credit Agreement - Term loan A facility (1) $1,280,813
 $1,355,062
2016 Credit Agreement - Term loan A facility (1)$400,125  $1,252,969  
2016 Credit Agreement - Revolving credit facility (1), (2) 120,000
 155,000
2016 Credit Agreement - Revolving credit facility (1), (2)—  148,000  
Senior Notes (3) 800,000
 800,000
2025 Notes (3)2025 Notes (3)800,000  800,000  
2028 Notes (4)2028 Notes (4)800,000  —  
Other (4)(5) 6,667
 2,030
$6,297  $6,545  
Principal amount outstanding (5)(6) 2,207,480
 2,312,092
2,006,422  2,207,514  
Less: deferred financing fees (6)(7) (25,540) (30,405)$(31,171) $(23,908) 
Net balance sheet carrying amount $2,181,940
 $2,281,687
Net balance sheet carrying amount$1,975,251  $2,183,606  

(1)The contractual annualized interest rate as of September 30, 2019 on the Term loan A facility and the revolving credit facility was 3.54%, which consisted of a floating eurodollar base rate of 2.04% plus a margin of 1.50%. However, the Company has interest rate swap contracts that effectively convert the floating eurodollar base rates on amounts outstanding to a fixed base rate.
(2)The Company had approximately $1.1 billion of available borrowing capacity on the revolver (not including the expansion feature) as of September 30, 2019.
(3)Consists of $800.0 million principal amount of Senior Notes outstanding. The Senior Notes pay a fixed rate of 5.125% and mature on April 1, 2025.
(4)Consists of 2 State of Connecticut economic development loans. One of the loans originated in 2012, has a 10-year maturity and the outstanding balance of $1.7 million as of September 30, 2019 bears interest at a fixed rate of 3.00%. In connection with an expansion project at its Stamford, Connecticut headquarters, the Company borrowed $5.0 million during the nine months ended September 30, 2019 under a financial assistance program offered by the State of Connecticut. This second loan has a 10-year maturity and bears interest at a fixed rate of 1.75%. Principal and interest payments are deferred for the first seven years. The loan has a provision whereby some or all of the $5.0 million principal may be forgiven if the Company meets certain employment targets in the State of Connecticut during the first five years of the loan. Both of these loans may be repaid at any time by the Company without penalty.
(5)The weighted average annual effective rates on the Company's total debt outstanding for the three and nine months ended September 30, 2019, including the effects of its interest rate swaps discussed below, was 4.00% and 4.01%, respectively.
(6)Deferred financing fees are being amortized to Interest expense, net over the term of the related debt obligation.

(1)The contractual annualized interest rate as of June 30, 2020 on the Term loan A facility and the revolving credit facility was 1.68%, which consisted of a floating Eurodollar base rate of 0.18% plus a margin of 1.50%. 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 $1.2 billion of available borrowing capacity on the revolver (not including the expansion feature) as of June 30, 2020.

(3)Consists of $800.0 million principal amount of 2025 Notes outstanding. The Senior Notes bear interest at a fixed rate of 5.125% and mature on April 1, 2025.

(4)Consists of $800.0 million principal amount of 2028 Notes outstanding. The Senior Notes bear interest at a fixed rate of 4.50% and mature on July 1, 2028.

(5)Consists of 2 State of Connecticut economic development loans. One of the loans originated in 2012, has a 10-year maturity and the outstanding balance of $1.3 million as of June 30, 2020 bears interest at a fixed rate of 3.00%. The second loan, originated in 2019, has a 10-year maturity and bears interest at a fixed rate of 1.75%. Both of these loans may be repaid at any time by the Company without penalty.
(6)The weighted average annual effective rate on the Company's outstanding debt for the three and six months ended June 30, 2020, including the effects of its interest rate swaps discussed below, was 4.28% and 4.35%, respectively.
(7)Deferred financing fees are being amortized to Interest expense, net over the term of the related debt obligation.
18


Interest Rate Swaps

TheAs of June 30, 2020, the Company hashad 4 fixed-for-floating interest rate swap contracts with a total notional value of $1.4 billion that mature through 2025. ThePrior to June 30, 2020, the Company designatesdesignated the swaps as accounting hedges of the forecasted interest payments on $1.4 billion of the Company’sits variable-rate borrowings. The Company pays base fixed rates on these swaps ranging from 2.13% to 3.04% and in return receives a floating eurodollarEurodollar base rate on 30-day notional borrowings. The

Prior to the prepayment of $787.9 million under the Term Loan A facility and repayment of all amounts outstanding under the Revolving credit facility on June 30, 2020, the Company accountsaccounted for theits interest rate swap contracts as cash flow hedges in accordance with FASB ASC Topic 815. SinceBecause the swaps hedgehedged forecasted interest payments, changes in the fair values of the swaps arewere recorded in accumulated other comprehensive income (loss), a component of stockholders' equity, as long as the swaps continuecontinued to be highly effective hedges of the designated interest rate risk. AllAny ineffective portion of a change in the fair value of a hedge was recorded in earnings. Upon the prepayment of $787.9 million under the Company's swaps were considered highly effective hedgesTerm Loan A credit facility and repayment of all amounts outstanding under the Revolving credit facility, the Company determined that it was probable that forecasted interest payments on $200.0 million of variable rate debt would not occur. Additionally, as the variable rate debt under the Term A loan credit facility was replaced by $800.0 million of fixed rate debt under the 2028 Notes, the Company de-designated all of its interest rate swaps. As a result, the Company accelerated the release of $10.3 million from Accumulated other comprehensive loss, net related to the forecasted interest payments asthat were no longer probable. The loss was recorded in Other expense, net on the Condensed Consolidated Statement of SeptemberOperations for the three and six months ended June 30, 2019.2020. The remaining $118.4 million is classified within Accumulated other comprehensive loss and will be amortized into Interest expense, net over the terms of the hedged forecasted interest payments. Subsequent changes to fair value of the interest rate swaps will be recorded in Other expense, net. The interest rate swaps had a negative unrealized fair value (liability)values (liabilities) of $80.2$128.7 million and $64.8 million as of SeptemberJune 30, 2020 and December 31, 2019, respectively, of which was deferred$89.0 million and $47.2 million were recorded in Accumulated other comprehensive loss, net of tax effect.effect, as of June 30, 2020 and December 31, 2019, respectively. See Note 11 — Fair Value Disclosures for the determination of the fair values of Company's interest rate swaps.


Note 78 — Equity

Share Repurchase Authorization

The Company has a $1.2 billion board authorization to repurchase the Company'sits common stock, of which $0.8$0.7 billion remained available as of SeptemberJune 30, 2019.2020. The Company may repurchase its common stock from time-to-time in amounts, 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 by cash on hand and borrowings. The Company’s share repurchase activity for the periods indicated is presented in the table below.below for the periods indicated.
Three Months EndedSix Months Ended
 June 30,June 30,
 2020201920202019
Number of shares repurchased (1)5,999  11,087  423,706223,511
Cash paid for repurchased shares (in thousands) (2)$698  $1,719  $73,862  $46,558  
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
Number of shares repurchased (1)705,800
 51,298
 929,311
 815,001
Cash paid for repurchased shares (in thousands) (2)$94,878
 $8,129
 $141,436
 $104,400

(1) The average purchase price for repurchased shares was $134.42$116.29 and $140.09$155.37 for the three months ended SeptemberJune 30, 20192020 and 2018,2019, respectively, and $136.05$150.72 and $128.10$141.20 for the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. The repurchased shares during the three and ninesix months ended SeptemberJune 30, 2019 and 20182020 included purchases for both stock-based compensation awards and open market purchases. All of the shares repurchased during the six months ended June 30, 2019 related to the settlement of the Company's stock-based compensation awards.
(2) The cash paid for repurchased shares during the ninesix months ended SeptemberJune 30, 20192020 included open market purchases with trade dates in December 20182019 that settled in January 2019.

Stockholders' Equity

The tables below provide a reconciliation of changes in the Company's Stockholders' Equity for the periods indicated (in thousands).

2020.
Three Months Ended September 30, 2019


19

 Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Loss, NetAccumulated EarningsTreasury StockTotal
Balance at June 30, 2019$82
$1,868,878
$(73,479)$1,879,633
$(2,711,312)$963,802
Net income—
—
—
41,388
—
41,388
Other comprehensive loss—
—
(7,785)—
—
(7,785)
Issuances under stock plans—
3,538
—
—
633
4,171
Common share repurchases—
—
—
—
(94,873)(94,873)
Stock-based compensation expense—
12,954
—
—
—
12,954
Balance at September 30, 2019$82
$1,885,370
$(81,264)$1,921,021
$(2,805,552)$919,657



Three Months Ended September 30, 2018
 Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Loss, NetAccumulated EarningsTreasury StockTotal
Balance at June 30, 2018$82
$1,798,075
$(24,051)$1,659,658
$(2,512,332)$921,432
Net income—
—
—
11,753
—
11,753
Other comprehensive income—
—
1,367
—
—
1,367
Issuances under stock plans—
1,752
—
—
1,711
3,463
Common share repurchases—
—
—
—
(7,186)(7,186)
Stock-based compensation expense—
10,718
—
—
—
10,718
Balance at September 30, 2018$82
$1,810,545
$(22,684)$1,671,412
$(2,517,807)$941,548

Nine Months Ended September 30, 2019
 Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Loss, NetAccumulated EarningsTreasury StockTotal
Balance at December 31, 2018$82
$1,823,710
$(39,867)$1,755,432
$(2,688,600)$850,757
Net income—
—
—
165,589
—
165,589
Other comprehensive loss—
—
(41,397)—
—
(41,397)
Issuances under stock plans—
3,767
—
—
9,481
13,248
Common share repurchases—
—
—
—
(126,433)(126,433)
Stock-based compensation expense—
57,893
—
—
—
57,893
Balance at September 30, 2019$82
$1,885,370
$(81,264)$1,921,021
$(2,805,552)$919,657

Nine Months Ended September 30, 2018
 Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss), NetAccumulated EarningsTreasury StockTotal
Balance at December 31, 2017$82
$1,761,383
$1,508
$1,647,284
$(2,426,792)$983,465
Adoption of ASU No. 2018-02 (1)—
—
591
(591)—
—
Adoption of ASU No. 2016-16 (2)—
—
—
(13,717)—
(13,717)
Net income—
—
—
38,436
—
38,436
Other comprehensive loss—
—
(24,783)—
—
(24,783)
Issuances under stock plans—
(6,856)—
—
13,385
6,529
Common share repurchases—
—
—
—
(104,400)(104,400)
Stock-based compensation expense—
56,018
—
—
—
56,018
Balance at September 30, 2018$82
$1,810,545
$(22,684)$1,671,412
$(2,517,807)$941,548
(1)
On April 1, 2018, the Company early adopted ASU No. 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" ("ASU No. 2018-02"), which resulted in a reclassification of $0.6 million of stranded tax amounts related to the U.S. Tax Cuts and Jobs Act of 2017 from Accumulated other comprehensive income (loss), net to Accumulated earnings.
(2)
On January 1, 2018, the Company adopted 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. As a result of the transition rules under ASU No. 2016-16, certain of the Company's balance sheet income tax accounts pertaining to pre-2018 intra-entity transfers, which aggregated $13.7 million, were reversed against accumulated earnings on January 1, 2018.






Accumulated Other Comprehensive Income (Loss), net ("AOCI/L")

The tables below provide information about the changes in AOCI/L by component and the related amounts reclassified out of AOCI/L to income during the periods indicated (net of tax, in thousands) (1).

Three Months Ended SeptemberJune 30, 20192020
 Interest Rate
Swaps		Defined
Benefit
Pension Plans		Foreign
Currency
Translation
Adjustments		Total
Balance – March 31, 2020$(91,896) $(8,505) $(68,571) $(168,972) 
Other comprehensive income (loss) activity during the period:  
  Change in AOCI/L before reclassifications to income(9,935) —  23,817  13,882  
  Reclassifications from AOCI/L to income (2), (3)12,835  80  —  12,915  
Other comprehensive income (loss) for the period2,900  80  23,817  26,797  
Balance – June 30, 2020$(88,996) $(8,425) $(44,754) $(142,175) 
 
Interest Rate
Swaps
 
Defined
Benefit
Pension Plans
 
Foreign
Currency
Translation
Adjustments
 Total
Balance – June 30, 2019$(46,990) $(5,655) $(20,834) $(73,479)
Other comprehensive income (loss) activity during the period: 
      
  Change in AOCI/L before reclassifications to income(10,285) —
 3,553
 (6,731)
  Reclassifications from AOCI/L to income (2), (3)(1,094) 41
 —
 (1,054)
Other comprehensive income (loss) for the period(11,379) 41
 3,553
 (7,785)
Balance – September 30, 2019$(58,369) $(5,614) $(17,281) $(81,264)

Three Months Ended SeptemberJune 30, 20182019
 Interest Rate
Swaps		Defined
Benefit
Pension Plans		Foreign
Currency
Translation
Adjustments		Total
Balance – March 31, 2019$(22,275) $(5,696) $(33,595) $(61,566) 
Other comprehensive income (loss) activity during the period:
  Change in AOCI/L before reclassifications to income(23,085) —  12,761  (10,324) 
  Reclassifications from AOCI/L to income (2), (3)(1,630) 41  —  (1,589) 
Other comprehensive income (loss) for the period(24,715) 41  12,761  (11,913) 
Balance – June 30, 2019$(46,990) $(5,655) $(20,834) $(73,479) 
 Interest Rate
Swaps		 Defined
Benefit
Pension Plans		 Foreign
Currency
Translation
Adjustments		 Total
Balance – June 30, 2018$16,281
 $(5,750) $(34,582) $(24,051)
Other comprehensive income (loss) activity during the period:       
  Change in AOCI/L before reclassifications to income969
 —
 814
 1,783
  Reclassifications from AOCI/L to income (2), (3), (4)(619) 53
 150
 (416)
Other comprehensive income (loss) for the period350
 53
 964
 1,367
Balance – September 30, 2018$16,631
 $(5,697) $(33,618) $(22,684)


NineSix Months Ended SeptemberJune 30, 2020
 Interest Rate
Swaps		Defined
Benefit
Pension Plans		Foreign
Currency
Translation
Adjustments		Total
Balance – December 31, 2019$(47,164) $(8,584) $(22,190) $(77,938) 
Other comprehensive income (loss) activity during the period:
  Change in AOCI/L before reclassifications to income(56,989) —  (22,564) (79,553) 
  Reclassifications from AOCI/L to income (2), (3)15,157  159  —  15,316  
Other comprehensive income (loss) for the period(41,832) 159  (22,564) (64,237) 
Balance – June 30, 2020$(88,996) $(8,425) $(44,754) $(142,175) 

Six Months Ended June 30, 2019
 Interest Rate
Swaps		Defined
Benefit
Pension Plans		Foreign
Currency
Translation
Adjustments		Total
Balance – December 31, 2018$(7,770) $(5,738) $(26,359) (39,867) 
Other comprehensive income (loss) activity during the period:
  Change in AOCI/L before reclassifications to income(35,938) —  5,525  (30,413) 
  Reclassifications from AOCI/L to income (2), (3)(3,282) 83  —  (3,199) 
Other comprehensive income (loss) for the period(39,220) 83  5,525  (33,612) 
Balance – June 30, 2019$(46,990) $(5,655) $(20,834) (73,479) 
 
Interest Rate
Swaps
 
Defined
Benefit
Pension Plans
 
Foreign
Currency
Translation
Adjustments
 Total
Balance – December 31, 2018$(7,770) $(5,738) $(26,359) $(39,867)
Other comprehensive income (loss) activity during the period:       
  Change in AOCI/L before reclassifications to income(46,224) —
 9,078
 (37,146)
  Reclassifications from AOCI/L to income (2), (3)(4,375) 124
 —
 (4,251)
Other comprehensive income (loss) for the period(50,599) 124
 9,078
 (41,397)
Balance – September 30, 2019$(58,369) $(5,614) $(17,281) $(81,264)

Nine Months Ended September 30, 2018
 Interest Rate
Swaps		 Defined
Benefit
Pension Plans		 Foreign
Currency
Translation
Adjustments		 Total
Balance – December 31, 2017$2,483
 $(5,861) $4,886
 1,508
Adoption of ASU No. 2018-02 (5)591
 —
 —
 591
Other comprehensive income (loss) activity during the period:       
  Change in AOCI/L before reclassifications to income13,748
 —
 21,656
 35,404
  Reclassifications from AOCI/L to income (2), (3), (4)(191) 164
 (60,160) (60,187)
Other comprehensive income (loss) for the period13,557
 164
 (38,504) (24,783)
Balance – September 30, 2018$16,631
 $(5,697) $(33,618) (22,684)

(1)Amounts in parentheses represent debits (deferred losses).
20

(1)Amounts in parentheses represent debits (deferred losses).
(2)The reclassifications related to interest rate swaps (cash flow hedges) were recorded in Interest expense, net of tax effect. See Note 6 – Debt and Note 9 – 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 11 – Employee Benefits for information regarding the Company’s defined benefit pension plans.
(4)The reclassifications related to foreign currency translation adjustments in 2018 were recorded in Gain (loss) from divested operations. See Note 1 – Business and Basis of Presentation for information regarding our divestitures in 2018.
(5)
On April 1, 2018, the Company early adopted ASU No. 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" ("ASU No. 2018-02"), which resulted in a reclassification of $0.6 million of stranded tax amounts related to the U.S. Tax Cuts and Jobs Act of 2017 from AOCI/L to Accumulated earnings.

(2)$10.3 million and $7.3 million of the reclassifications related to interest rate swaps (cash flow hedges) were recorded in Other expense, net and Interest expense, net, respectively, for the three months ended June 30, 2020. $10.3 million and $10.5 million of the reclassifications related to interest rate swaps (cash flow hedges) were recorded in Other expense, net and Interest expense, net, respectively for the six months ended June 30, 2020. The reclassifications related to interest rate swaps (cash flow hedges) were recorded as interest expense, net for the three and six months ended June 30, 2019. See Note 7 — Debt and Note 10 — Derivatives and Hedging for information regarding the cash flow hedges.
(3)The reclassifications related to defined benefit pension plans were recorded in Other expense, net. See Note 12 – 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 at June 30, 2020 that is expected to be reclassified into earnings within the next 12 months is $28.7 million.

Note 89 — Income Taxes

The provision for income taxes for the three months ended SeptemberJune 30, 20192020 and 20182019 was an expense of $11.7$3.9 million and $26.2a benefit of $12.4 million, respectively. The provision for income taxes for the ninesix months ended SeptemberJune 30, 20192020 was an expense of $25.6 million compared to a benefit of $0.4 million compared to an expense of $31.7$12.1 million for the ninesix months ended SeptemberJune 30, 2018.2019.

The effective income tax rate was an expense of 22.1%6.6% and 69.0%a benefit of 13.6% for the three months ended SeptemberJune 30, 2020 and 2019, and 2018, respectively. The quarter-over-quarter decrease in the effective income tax rate was primarily attributable to the taxable third quarter 2018 divestiture of the Company’s CEB Challenger training business, which resulted in a greater tax than book gain.

The effective income tax rate was an expense of 16.5% for the six months ended June 30, 2020 compared to a benefit of 0.3%10.8% for the ninesix months ended SeptemberJune 30, 2019 compared to an expense of 45.2% for the nine months ended September 30, 2018. The effective income tax rate for the 2019 nine-month period included a significant benefit. Both periods include material benefits from an intercompany salesales of certain intellectual property, as discussed below.well as movements in unrecognized tax benefits. The favorablechanges in effective tax rates are largely attributable to the differences in the relative impacts of these items period over period.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law in the United States. The CARES Act provides a substantial stimulus and assistance package intended to address the impact of the COVID-19 pandemic. It includes provisions for the deferral of certain taxes and the acceleration of income tax deductions for certain expenses. The Company continues to monitor and record any effects that transaction compared to the unfavorable impactmay result from the CEB Challenger training business divestiture during the 2018 nine-month period drove the year-over-year change in the effective income tax rates for the nine-month periods.CARES Act as well as ongoing government guidance related to COVID-19 that may be issued.

In April 2019, weThe Company completed an intercompany salesales of certain intellectual property.property in both 2020 and 2019. As a result, the Company recorded a net tax benefitbenefits of approximately $28.3 million during the three and six months ended June 30, 2020 and $38.1 million during the ninethree and six months ended SeptemberJune 30, 2019, which represents2019. These benefits represent the benefitsvalue of future tax deductions for amortization of the assets in the acquiring jurisdiction. Our

In July 2020, the Company completed an intercompany contribution of a significant amount of intellectual property. The Company will not be claiming future tax planning related to ourdeductions for amortization of the assets in the acquiring jurisdiction. The Company's intellectual property is ongoingfootprint continues to evolve and may result in tax rate volatility in the future.

The Company had gross unrecognized tax benefits of $87.3$114.3 million at SeptemberJune 30, 20192020 and $90.3$102.8 million at December 31, 2018.2019. It is reasonably possible that gross unrecognized tax benefits will decrease by approximately $2.8$9.9 million within the next 12twelve months due to the anticipated closure of audits and the expiration of certain statutes of limitation.

In connection with the Company’s adoption of ASU No. 2016-02 on January 1, 2019, operating leases were recorded on the accompanying Condensed Consolidated Balance Sheet as of September 30, 2019, including the recognition of operating lease liabilities and corresponding right-of-use assets. The corresponding deferred tax assets and deferred tax liabilities were also recorded. The net deferred tax impact was zero. Note 1 — Business and Basis of Presentation provides additional information regarding our leases and the adoption of ASU No. 2016-02.

Note 910 — Derivatives 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-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 815, which requires all derivatives, including derivatives designated as accounting hedges, to be recorded on the balance sheet at fair value. The tables below provide information regarding the Company’s outstanding derivative contracts as of the dates indicated (in thousands, except for number of contracts).

21

September 30, 2019        
June 30, 2020June 30, 2020
Derivative Contract Type 
Number of
Contracts
 
Notional
Amounts
 
Fair Value
Asset
(Liability), Net (3)
 
Balance
Sheet
Line Item
 
Unrealized
Loss Recorded
in AOCI/L
Derivative Contract TypeNumber of
Contracts		Notional
Amounts		Fair Value
Asset
(Liability), Net (3)		Balance
Sheet
Line Item		Unrealized
Loss Recorded
in AOCI/L, net of tax
Interest rate swaps (1) 4
 $1,400,000
 $(80,233) Other liabilities $(58,369)Interest rate swaps (1)4  $1,400,000  $(94,175) Other liabilities$(88,996) 
(34,538) Accrued liabilities
Foreign currency forwards (2) 40
 203,351
 (220) Accrued liabilities —
Foreign currency forwards (2)39  182,734  (61) Accrued liabilities—  
Total 44
 $1,603,351
 $(80,453)   $(58,369)Total43  $1,582,734  $(128,774)  $(88,996) 



December 31, 2019
Derivative Contract TypeNumber of ContractsNotional
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  $(64,831) Other liabilities$(47,164) 
Foreign currency forwards (2)176  604,858�� 59  Other current assets—  
Total180  $2,004,858  $(64,772)  $(47,164) 

December 31, 2018          
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) 7
 $2,100,000
 $(10,681) Other liabilities $(7,770)
Foreign currency forwards (2) 135
 927,375
 (1,942) Accrued liabilities —
Total 142
 $3,027,375
 $(12,623)   $(7,770)
(1)Prior to June 30, 2020, the interest rate swaps were designated and accounted for as cash flow hedges of the forecasted interest payments on borrowings. As a result, changes in the fair values of the swaps were deferred and recorded in AOCI/L, net of tax effect. Upon the prepayment of $787.9 million under the Company's Term Loan A credit facility and all amounts outstanding under the Revolving credit facility, the Company determined that it was probable that forecasted interest payments on $200.0 million of variable rate debt would not occur. Additionally, as the variable rate debt under the Term A loan credit facility was replaced by $800.0 million of fixed rate debt under the 2028 Notes, the Company de-designated all of its interest rate swaps. Note 7 — Debt provides additional information regarding the Company's interest rate swap contracts.
(1)The interest rate 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 values of the swaps are deferred and recorded in AOCI/L, net of tax effect. Note 6 — Debt provides additional information.
(2)
(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 June 30, 2020 matured before July 31, 2020.
(3)See Note 11 — Fair Value Disclosures for the determination of the fair values of these instruments.

September 30, 2019 matured before October 31, 2019.
(3)See Note 10 — Fair Value Disclosures for the determination of the fair values of these instruments.

At SeptemberJune 30, 2019,2020, 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 table below provides information regarding amounts recognized in the accompanying Condensed Consolidated Statements of Operations for derivative contracts for the periods indicated (in thousands).
Three Months EndedSix Months Ended
 June 30,June 30,
Amount recorded in:2020201920202019
Interest (income) expense, net (1)$7,322  $(2,240) $10,514  $(4,511) 
Other expense, net (2)9,715  2,535  22,314  697  
Total expense (income), net$17,037  $295  $32,828  $(3,814) 
  Three Months Ended Nine Months Ended
  September 30, September 30,
Amount recorded in: 2019 2018 2019 2018
Interest (income) expense, net (1) $(1,504) $(851) $(6,015) $(262)
Other expense, net (2) 4,367
 1,140
 5,064
 2,815
Total expense (income), net $2,863
 $289
 $(951) $2,553

(1)Consists of interest (income) expense from interest rate swap contracts.
(1)Consists of interest (income) expense from interest rate swap contracts.
(2)Consists of net realized and unrealized gains and losses on foreign currency forward contracts.

(2)Consists of net realized and unrealized gains and losses on foreign currency forward contracts and $10.3 million expense on interest rate swap contracts due to forecasted interest payments no longer being probable as a result of the prepayment of $787.9 million under the Term A loan facility and all amounts outstanding under the Revolving credit facility on June 30, 2020.
22


Note 1011 — Fair Value Disclosures
 
The Company’s financial instruments include cash equivalents, fees receivable from customers, accounts payable and accruals,accrued 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 values due to their short-term nature. The Company’s financial instruments also include its outstanding variable-rate borrowings under the 2016 Credit Agreement. The Company believes that the carrying amounts of its variable-rate borrowings reasonably approximate their fair values because the rates of interest on those borrowings reflect 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 on the transparency of inputs used in the valuation of assets and liabilities. Classification within the valuation hierarchy is based on 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. 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 in its required annual impairment review of recorded goodwill. Information regarding the periodic assessment of the Company’s goodwill is included in Note 56 — Goodwill and Intangible Assets. The Company does not typically transfer assets or liabilities between different levels of the valuation hierarchy.

The table below presents the fair valuevalues of certain financial assets and liabilities (in thousands).
Description:September 30,
2019		 December 31,
2018
DescriptionDescriptionJune 30,
2020		December 31,
2019
Assets: 
  
Assets:  
Values based on Level 1 inputs:   Values based on Level 1 inputs:
Deferred compensation plan assets (1)$8,985
 $8,956
Deferred compensation plan assets (1)$8,547  $2,277  
Total Level 1 inputs8,985
 8,956
Total Level 1 inputs8,547  2,277  
Values based on Level 2 inputs:   Values based on Level 2 inputs:
Deferred compensation plan assets (1)61,491
 57,690
Deferred compensation plan assets (1)65,637  73,419  
Foreign currency forward contracts (2)65
 1,318
Foreign currency forward contracts (2)71  1,558  
Total Level 2 inputs61,556
 59,008
Total Level 2 inputs65,708  74,977  
Total Assets$70,541
 $67,964
Total Assets$74,255  $77,254  
Liabilities: 
  
Liabilities:  
Values based on Level 2 inputs:   Values based on Level 2 inputs:
Deferred compensation plan liabilities (1)$74,308
 $68,570
Deferred compensation plan liabilities (1)$78,883  $79,556  
Foreign currency forward contracts (2)285
 3,260
Foreign currency forward contracts (2)132  1,499  
Interest rate swap contracts (3)80,233
 10,681
Interest rate swap contracts (3)128,713  64,831  
Senior Notes due 2025 (4)838,584
 776,160
2025 Notes (4)2025 Notes (4)820,920  835,384  
2028 Notes (5)2028 Notes (5)809,576  —  
Total Level 2 inputs993,410
 858,671
Total Level 2 inputs1,838,224  981,270  
Total Liabilities$993,410
 $858,671
Total Liabilities$1,838,224  $981,270  

(1)The Company has a deferred compensation plan for the benefit of certain highly compensated officers, managers and other key employees. The assets consist of investments in money market funds, mutual funds and company-owned life insurance contracts, which are valued based on Level 1 or Level 2 inputs. 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 9 — Derivatives 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 through the use of an electronic quotation service.
(4)As discussed in Note 6 — Debt, the Company has $800.0 million of principal amount fixed-rate Senior Notes due in 2025. 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.

(1)The Company has a deferred compensation plan for the benefit of certain highly compensated officers, managers and other key employees. The assets consist of investments in money market funds, mutual funds and company-owned life insurance contracts, which are valued based on Level 1 or Level 2 inputs. 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 10 — Derivatives 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.
23

(3)The Company has interest rate swap contracts that hedge the risk of variability from interest payments on its borrowings (see Note 7 — 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.
(4)As discussed in Note 7 — Debt, the Company has $800.0 million of principal amount with 5.125% fixed-rate 2025 Notes due in 2025. The estimated fair values of the notes was derived from quoted market prices provided by an independent dealer, which the Company considers to be a Level 2 input. The carrying amounts of the Senior Notes were $786.2 million and $785.0 million as of June 30, 2020 and December 31, 2019, respectively.
(5)As discussed in Note 7 — Debt, on June 22, 2020 the Company issued $800.0 million aggregate principal amount of 4.50% fixed-rate 2028 Notes due in 2028. The estimated fair values of the notes was derived from quoted market prices provided by an independent dealer, which the Company considers to be a Level 2 input. The carrying amounts of the 2028 Notes were $790.0 million as of June 30, 2020.

Note 1112 — Employee Benefits

The Company has defined benefit pension plans at 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’s defined benefit pension plans are accounted for in accordance with FASB ASC Topics 715 and 960. Net periodic pension expense was $1.0 million and $0.9 million for both the three months ended SeptemberJune 30, 2020 and 2019, and 2018, and $2.6respectively. Net periodic pension expense was $2.1 million and $2.5$1.7 million for the ninesix months ended SeptemberJune 30, 2020 and 2019, and 2018, respectively.










Note 1213 — Contingencies

Legal Matters. The Company is involved in legal proceedings and litigation arising in the ordinary course of business. We record a provision for pending litigation in our consolidated financial statements when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. We believe 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 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 clauses are included in contracts arising in the normal course of business under which we customarily agree to hold the other party harmless against losses arising from a breach of representations related to matters 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 conditional nature of the Company’s obligations and the unique facts of each particular agreement. Historically, payments made by us under these agreements have not been material. As of SeptemberJune 30, 2019,2020, the Company did not have any material payment obligations under any such indemnification agreements.


Note 1314 — Subsequent Event

Leases
On October 1, 2019,
The Company’s leasing activities are primarily for facilities under cancelable and non-cancelable lease agreements expiring during 2020 and through 2038. These facilities support our executive and administrative activities, sales, systems support, operations, and other functions. The Company also has leases for office equipment and other assets, which are not significant. Certain of these lease agreements include (i) renewal options to extend the lease term for up to five 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 acquired 100%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 2021 and through 2032 and primarily relate to facilities in Arlington, Virginia. Certain of the outstanding membership interestsCompany’s sublease agreements: (i) include renewal and termination options; (ii) provide for customary escalations of TOPO Research LLC ("TOPO"), a privately-held company basedlease payments in Redwood City, California, for an aggregate purchase pricethe normal course of $33 million (subject tobusiness; and (iii) grant the subtenant certain working capitalallowances, free rent, Gartner-financed tenant improvements and other customary post-closing adjustments)incentives.

All of the Company’s leasing and subleasing activity is recognized in Selling, general and administrative expense in the accompanying Condensed Consolidated Statements of Operations. The table below presents the Company’s net lease cost and certain other information related to the Company’s leasing activities as of and for the periods indicated (dollars in thousands).
24

Description:Three Months Ended June 30, 2020Six Months Ended June 30, 2020
 Operating lease cost (1)$35,173  $73,134  
 Variable lease cost (2)3,973  8,376  
 Sublease income(10,719) (21,810) 
 Total lease cost, net (3)28,427  $59,700  
 Cash paid for amounts included in the measurement of operating lease liabilities$34,026  $68,962  
 Cash receipts from sublease arrangements$9,503  $18,920  
 Right-of-use assets obtained in exchange for new operating lease liabilities$3,616  $18,535  

(1)TOPO is a subscription-based researchIncluded in operating lease cost was $10.6 million of costs for subleasing activities during the three months ended June 30, 2020.
(2)These amounts are primarily variable lease and advisory businessnonlease costs that helps sales leaderswere not fixed at the world’s fastest-growing companies achieve their growth objectives. Tlease commencement date or are dependent on something other than an index or a rate.
(3)heThe Company did not capitalize any operating results of TOPOlease costs during the three months ended June 30, 2020.

The table below indicates where the discounted operating lease payments from the above table are includedclassified in the Company's consolidated financial statements beginning on the dateaccompanying Condensed Consolidated Balance Sheet as of acquisition.June 30, 2020 (in thousands).


Description:
Accounts payable and accrued liabilities$80,168 
Operating leases - liabilities802,119 
Total operating lease liabilities per the Condensed Consolidated Balance Sheet$882,287 



ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this Management’s Discussion and Analysis (“MD&A”) is to facilitate an understanding of significant factors influencing the quarterly 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 condensed consolidated financial statements and related notes included in this reportQuarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 20182019 (the "2018"2019 Form 10-K"). Historical results and percentage relationships are not necessarily indicative of operating results for future periods. References to “Gartner,” the "Company,” “we,” “our” and “us” in this MD&A are to Gartner, Inc. and its consolidated subsidiaries.

2018 Business Divestitures

During 2018, the Company divested all of the non-core businesses that comprised its Other segment and moved a small residual product in the Other segment into the Research business and, as a result, no operating activity has been recorded in the Other segment in 2019. The Other segment had $11.6 million and $105.6 million of revenue during the three and nine months ended September 30, 2018, respectively, while gross contribution was $6.9 million and $65.1 million, respectively.

FORWARD-LOOKING STATEMENTS

In addition to historical information,information, this Quarterly Report on Form 10-Q 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 inin 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: uncertainty of the magnitude, duration, geographic reach and impact on the global economy of the COVID-19 pandemic; the current, and uncertain future, impact of the COVID-19 pandemic and governments’ responses to it on our business, growth, reputation, projections, prospects, financial condition, operations, cash flows, and liquidity; the adequacy or effectiveness or steps we take to respond to the crisis, including cost reduction or other mitigation programs; our ability to recover potential claims under our event cancellation insurance; the timing of our Gartner Symposium/ITxpoXpo series that normally occurs during the fourth quarter, as well as our other conferences and meetings; the amount of new business generated, including from acquisitions; the mix of domestic and international business; domestic and international economic conditions; the U.K.’s planned exit from the European Union and its impact on our results; the impact of changes in tax policy and heightened scrutiny from various taxing authorities globally; the impact of restructuring and other changes on our business and operations; cybersecurity incidents; changes in market demand for our products and services; changes in foreign currency rates; changes in macroeconomic and market conditions and market volatility (including developments and volatility arising from the COVID-19 pandemic), including interest rates and the effect on the credit markets and access to capital; risks associated with the creditworthiness, budget cuts, and shutdown of governments and agencies; the timing of the development, introduction and marketing of new products and services; competition in the industry; the payment of performance compensation; uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark; and other factors.risks and uncertainties detailed in this Form 10-Q and our most recent Form 10-K and other filings that we make with the SEC. 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 Part I, Item 1A. of the 20182019 Form 10-K and "Risk Factors" in Part II, Item 1A of our Form 10-Q for the quarterly period ended March 31, 2020, 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.statements, and are currently, or in the future could be, amplified by the COVID-19 pandemic. Factors that might cause such a difference include, but are not limited to, those listed above or described under “Item 1A. Risk FactorsFactors” in the 2019 Form 10-K and "Risk Factors" in Part II, Item 1A of our 2018 Form 10-K.10-Q for the quarterly period ended March 31, 2020. 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 Quarterly Report on Form 10-Q 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.

26



BUSINESS OVERVIEW

Gartner, Inc. (NYSE: IT) isis the world’s leading research and advisory company and a member of the S&P 500. We equip business leaders with indispensable insights, advice and tools to achieve their mission–critical priorities today and build the successful organizations of tomorrow. We believe our unmatched combination of expert-led, practitioner-sourced and data-driven research steers clients toward the right decisions on the issues that matter most. We are a trusted advisor and an objective resource for more than 15,000 organizations14,000 enterprises in more than 100 countries — across all major functions, in every industry and enterprise size.

Gartner delivers itsOur products andand services globallyare delivered through three segments – Research, Conferences and Consulting, as described below.

•Research provides trusted, objective insights and advice on the mission-critical priorities of leaders across all functional areas of an enterprise through reports, briefings, proprietary tools, access to our research experts, peer networking services and membership programs that enable our clients to drive organizational performance.

•Conferences provides business segments:professionals 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 advice.

•
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 and advisors, peer networking services and membership programs that enable our clients to make better decisions. Our traditional strengths in IT, marketing and supply chain research are supplemented by best practice and talent management research insights across a range of business functions, including human resources, sales, legal and finance.

•
Conferences provides business professionals across an organization the opportunity to learn, share and network. From our flagship CIO conference Gartner IT Symposium, to industry-leading conferences focused on specific business roles and topics, to member-driven sessions, our offerings enable attendees to experience the best of Gartner insight and advice live.

•
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.

•Consulting combines the power of Gartner market-leading research with custom analysis and on-the-ground support to help chief information officers and other senior executives driving technology-related strategic initiatives move confidently from insight to action.

COVID-19 Impact

The coronavirus disease (“COVID-19”) pandemichas affected nearly every region in the world and has created significant uncertainties and disruption in the global economy. Gartner is closely monitoring the pandemic-related developments, and our highest priority is the health and safety of our associates, clients, vendors, partners, and other stakeholders. We are working closely with our clients to provide best in class COVID-19 related research to assist them in achieving their mission critical priorities.

As a result of the COVID-19 pandemic, we temporarily closed Gartner offices (including our corporate headquarters) in the United States, United Kingdom, Europe, parts of Asia and several other impacted locations and implemented significant travel restrictions. Though many of our employees continue to work remotely, these changes impact the normal operation of our business. We cannot predict when or how we will begin to lift the actions put in place as part of our business continuity plans, including work from home protocols and travel restrictions. As of the date of this filing, we do not believe our work from home protocol has affected our internal controls over financial reporting.

We have seen negative impacts to all of our segments with Conferences being the most impacted. On March 25, 2020, we announced the cancellation of all conferences through August. On July 2, 2020, we announced we cancelled all destination conferences for the remainder of the year. The Company continues its operational planning for virtual conferences from September to December, which are expected to result in significantly less revenue and contribution margin but aid in client retention and engagement. The safety of our associates and clients remain our top priority so future destination conferences will be held only if we determine the relevant impacts of COVID-19 have sufficiently receded in the jurisdictions where our conferences are to be held.

As of June 30, 2020, we had approximately $13 million recorded in Prepaid expenses and other current assets on the balance sheet related to cancelled conferences. We expect to recover the majority of these and potential termination costs for future conferences through either force majeure clauses in our vendor contracts, other arrangements with vendors or event cancellation insurance claims. For cancelled conferences, our event cancellation insurance enables us to receive an amount up to the lost contribution margin per conference plus incurred expenses. Our event cancellation insurance provides up to $170 million in coverage for 2020 with the right to reinstate that amount one time if those limits are utilized. The insurer has contested our right to reinstate limits and to include in reinstated limits conferences cancelled due to COVID-19. We are in litigation with the insurer on these issues.The timing of receiving the insurance claims is uncertain so we will not record any insurance claims in excess of expenses incurred until the receipt of the insurance proceeds.

Our Research segment has continued to experience a slowdown as contract value (CV) growth was 7.0% in the second quarter of 2020 compared to 10.6%, in the first quarter of 2020. CV growth slowed late in the first quarter as the global virus response led to lower new business growth and lower retention rates. However, because our revenue and CV have been historically
27

stable and predictable as a result of our subscription-based business model, we are only expecting a modest decrease in Research revenue for the remainder of the year. Slower CV growth this year however will lead to slower research revenue growth in 2021. Nonetheless, we believe that our emphasis on producing COVID-19 and cost optimization related research will continue to drive client engagement and satisfaction with our Research products.

Our Consulting segment was only mildly impacted by the COVID-19 pandemic as many engagements are being performed by associates working remotely. Labor based consulting weakened late in the first quarter due to the pandemic. This weakness continued in the second quarter due to weaker demand which will likely continue for the remainder of 2020. Overall, we expect Consulting revenues to be lower throughout the remainder of the year, due to a slowdown in labor-based demand.

In connection with the cancellation of the majority of 2020 conferences and the weaker demand in our Consulting segment noted above, in the second quarter of 2020, we implemented workforce reductions. We incurred an aggregate of approximately $18 million in costs relating to these workforce reductions in the second quarter of 2020 and expect the majority of these charges to be paid out in the third and fourth quarters of 2020.

In response to the pandemic’s impacts to our business, we have implemented other actions to include significant limitations on hiring and third-party spending, reductions to discretionary spending and elimination of non-essential travel and re-prioritization of capital expenditures. To the extent the business disruption continues for an extended period, we may need to implement additional cost management actions.


BUSINESS MEASUREMENTS

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

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BUSINESS SEGMENTBUSINESS MEASUREMENTSMEASUREMENT
Research
Total contract value represents the 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 contract value primarily includes Research deliverables for which revenue is recognized on a ratable basis, as well as other deliverables (primarily Conferences 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 total contract value consists of Global Technology Salescontract value,, which includes sales to users and providers of technology, and Global Business Salescontract 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.
Conferences
Conferences
Number of destination conferences represents the total number of hosted destination conferences completed during the period. Single day, local meetings are excluded.
Number of destination conferences attendees represents the total number of people who attend destination conferences. Single day, local meetings are excluded.
Consulting
Consulting backlog represents future revenue to be derived from in-process consulting and measurement 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.


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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, delivering innovative and highly differentiated product offerings, building a strong sales capability, providing world class client service with a focus on client engagement and retention, and continuously improving our operational effectiveness.

We had total revenues of $1.0 billion during the thirdsecond quarter of 2019, an increase2020, a decrease of 9% compared to the thirdsecond quarter of 2018. Quarter-over-quarter2019. During the second quarter of 2020 revenues for Research increased by 6% year-over-year, while Conferences and Consulting increased 9%, 16%revenues declined by 100% and 18%, respectively, during the third quarter of 2019.6%. For a more complete discussion of our results by segment, see Segment Results below.

For the thirdsecond quarter of 2019,2020, we had net income of $41.4$55.1 million and diluted income per share of $0.46.$0.61. Cash provided by operating activities was $482.6$398.9 million and $426.0$263.1 million during the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. As of SeptemberJune 30, 2019,2020, we had $306.7$356.6 million of cash and cash equivalents and approximately $1.1$1.2 billion of available borrowing capacity on our revolving credit facility. For a more complete discussion of our cash flows and financial position, see the Liquidity and Capital Resources section below.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation ofFor information regarding our consolidated financial statements requires the application of appropriatecritical accounting policies and the use of estimates. Our significant accounting policies are described in Note 1 — Business and Significantestimates, please refer to Part II, Item 7, “Critical Accounting Policies and Estimates” contained in our Annual Report on Form 10-K for the Notesfiscal year ended December 31, 2019. There have been no material changes to Consolidated Financial Statements of Gartner, Inc. in the2018 Form 10-K. Management considers the policies discussed below to be critical to an understanding of our financial statements because their application requires complex and subjective management judgments and estimates. Specific risks for these critical accounting policies are also described below.previously disclosed in that report.

RECENTLY ISSUED ACCOUNTING STANDARDS

The preparation of our consolidated financial statements requires us to make estimatesFASB has issued accounting standards that have not yet become effective 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 wethat 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, they may ultimately differ materially from actual results. Ongoing changes in our estimates could be material and would be reflected inimpact the Company’s consolidated financial statements or its disclosures in future periods.

Our critical accounting policies are described below.

Accounting for leases — On January 1, 2019, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update No. 2016-02, "Leases," as amended ("ASU No. 2016-02" or the “new lease standard”), which substantively modifies the accounting anddisclosure requirements for lease arrangements. Prior to the issuance of ASU No. 2016-02, generally accepted accounting principles in the United States of America under FASB Accounting Standards Codification ("ASC") Topic 840, Leases, provided that lease arrangements meeting certain criteria werenot recorded on an entity's balance sheet. ASU No. 2016-02 significantly changes the accounting for leases because a right-of-use model is now used wherebya lessee must record a right-of-use asset and a related lease liability on its balance sheet for most of its leases. Under ASU No. 2016-02, leases are classified as either operating orfinance arrangements, with such classification affecting the pattern of expense recognition in an entity's income statement. ASU No. 2016-02 also requiressignificantly expanded disclosures to meet the objective of enabling users of financial statements to assess the amount, timing and uncertainty of cash flows related toleases.

The Company adopted ASU No. 2016-02 using a modified retrospective approach. We elected to use an optional transition method available under ASU No. 2016-02 to record the required cumulative effect adjustments to the opening balance sheet in the period of adoption rather than in the earliest comparative period presented. As such, the Company's historical consolidated financial statements have not been restated. Certain permitted practical expedients were used by the Company upon adoption of the new lease standard, including: (i) combining lease and nonlease components as a single lease component for purposes of the recognition and measurement requirements under ASU No. 2016-02; (ii) not reassessing a lease arrangement to determine if its classification should be changed under ASU No. 2016-02; and (iii) not reassessing initial direct costs for leases that were in existence on the date of adoption.

The adoption of ASU No. 2016-02 on January 1, 2019 had a material impact on our consolidated balance sheet because the right-of-use model significantly increased both our assets and liabilities from our lease arrangements (all of which were operating leases that were not previously recorded on the Company’s consolidated balance sheets). The adoption of the new lease standard resulted in the recognition of operating lease liabilities aggregating $851.3 million based on the present value of the Company’s remaining


minimum lease payments, while the corresponding right-of-use assets totaled $651.9 million. Additionally, the Company’s adoption of ASU No. 2016-02 resulted in a net increase of $638.7 million in each of the Company’s Total Assets and Total Liabilities; however, there was no effect on the Company’s Total Stockholders’ Equity. The Company’s Condensed Consolidated Statements of Operations and its cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows for the periods ended September 30, 2019 were not materially impacted by the adoption of the new lease standard. Note 1 — Business and Basis of Presentation in the Notes to Condensed Consolidated Financial Statements provides additional information regarding our leases and the adoption of ASU No. 2016-02.those accounting standards.

Revenue recognition
 — Revenue is recognized in accordance with the requirements of FASB ASC Topic 606, “Revenue from Contracts with Customers.” Revenue is only recognized when all of the required criteria for revenue recognition have been met. Our 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 and time and material engagements. Revenues from fixed fee contracts are recognized as we work to satisfy our performance obligations. Revenues from time and materials engagements are recognized as work is delivered and/or services are provided. Revenues related to contract optimization contracts are contingent in nature and are only recognized upon satisfaction of all conditions related to their payment.

The majority of 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 our 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 1 — Business and Basis of Presentation in the Notes to Condensed Consolidated Financial Statements provides additional information regarding our revenues.

Uncollectible fees receivable — The Company maintains an allowance for losses of uncollectible receivables that is classified in our consolidated balance sheets as an offset to the gross amount of fees receivable. Increases and decreases to the allowance are recognized in earnings.

The determination of the amount of the allowance 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 allowance is periodically re-evaluated and adjusted as more information about the ultimate collectability of fees receivable becomes available. Circumstances that could cause the allowance 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 table below presents our gross fees receivable and the related allowance for losses as of the dates indicated (in thousands).
 September 30,
2019		 December 31,
2018
Gross fees receivable$1,036,120
 $1,262,818
Allowance for losses(7,800) (7,700)
Fees receivable, net$1,028,320
 $1,255,118

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 and content, 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 for 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 an acquired intangible asset is its 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 selected discount rates 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 also 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 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 current operating results that do not align with our annual plan or historical performance; changes in our strategic plan or the 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 values of all of the Company's reporting units during the quarter ended September 30, 2019. Our assessment 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. Subsequent to completing our 2019 annual impairment test, no events or changes in circumstances were noted that required an interim goodwill impairment test. Note 5 — Goodwill and Intangible Assets in the Notes to Condensed Consolidated Financial Statements provides 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. 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. When 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.

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. Note 3 — Stock-Based Compensation in the Notes to Condensed Consolidated Financial Statements provides additional 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 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 accruals for severance costs, contract terminations, asset impairments and other costs as a result of ongoing actions we undertake to streamline our organization, reposition certain businesses and reduce ongoing costs. Estimates of costs to be incurred to complete these actions, such as future payments under contractual arrangements, the fair value of assets, and severance and related benefits, are based on assumptions at the time the actions are initiated. These accruals may need to be adjusted to the extent that actual costs differ from such estimates. In addition, these actions may be revised due to changes in business conditions that we did not foresee at the time such plans were approved. We also record accruals during the year for our various employee cash incentive programs. Amounts accrued at the end 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 until the end of our fiscal year.

RESULTS OF OPERATIONS
Consolidated Results
The table below presents an analysis of selected line items and period-over-period changes in our interim Condensed Consolidated Statements of Operations for the periods indicated (in thousands).

Three Months Ended June 30, 2020Three Months Ended June 30, 2019 Increase (Decrease)Increase
(Decrease)
%
Total revenues$973,135  $1,070,882  $(97,747) (9)%
Costs and expenses:    
Cost of services and product development322,551  387,999  (65,448) (17) 
Selling, general and administrative494,840  514,976  (20,136) (4) 
Depreciation22,728  20,099  2,629  13  
Amortization of intangibles31,208  32,164  (956) (3) 
Acquisition and integration charges2,157  (358) 2,515  nm
Operating income99,651  116,002  (16,351) (14) 
Interest expense, net(30,296) (24,749) 5,547  22  
Other expense, net(10,399) (247) 10,152  nm
Less: Provision (benefit) for income taxes3,879  (12,400) 16,279  nm
Net income$55,077  $103,406  $(48,329) (47)%
nm = not meaningful

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Three Months Ended September 30, 2019 Three Months Ended September 30, 2018 Effect on Net Income - Increase (Decrease) 
Increase
(Decrease)
%
Six Months Ended June 30, 2020Six Months Ended June 30, 2019Increase (Decrease)Increase
(Decrease)
%
Total revenues$1,000,502
 $921,674
 $78,828
 9 %Total revenues$1,992,026  $2,041,326  $(49,300) (2)%
Costs and expenses: 
  
  
  
Costs and expenses:    
Cost of services and product development365,056
 336,112
 (28,944) (9)Cost of services and product development663,829  734,644  (70,815) (10) 
Selling, general and administrative512,159
 447,537
 (64,622) (14)Selling, general and administrative991,479  1,033,746  (42,267) (4) 
Depreciation20,704
 17,335
 (3,369) (19)Depreciation45,245  39,874  5,371  13  
Amortization of intangibles31,694
 50,852
 19,158
 38
Amortization of intangibles63,387  65,847  (2,460) (4) 
Acquisition and integration charges1,742
 17,114
 15,372
 90
Acquisition and integration charges3,716  2,414  1,302  54  
Operating income69,147
 52,724
 16,423
 31
Operating income224,370  164,801  59,569  36  
Interest expense, net(24,073) (26,984) 2,911
 11
Interest expense, net(56,644) (49,596) 7,048  14  
Gain from divested operations—
 13,040
 (13,040) >(100)
Other income (expense), net8,024
 (827) 8,851
 >100
Provision for income taxes11,710
 26,200
 14,490
 55
(Loss) gain from divested operations(Loss) gain from divested operations—  (2,075) (2,075) nm
Other expense, netOther expense, net(11,915) (1,071) 10,844  nm
Less: Provision (benefit) for income taxesLess: Provision (benefit) for income taxes25,637  (12,142) (37,779) nm
Net income$41,388
 $11,753
 $29,635
 >100
Net income$130,174  $124,201  $5,973  5  



 Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018 Effect on Net Income - Increase (Decrease) 
Increase
(Decrease)
%
Total revenues$3,041,828
 $2,886,575
 $155,253
 5 %
Costs and expenses: 
  
  
  
Cost of services and product development1,099,700
 1,060,958
 (38,742) (4)
Selling, general and administrative1,545,905
 1,396,085
 (149,820) (11)
Depreciation60,578
 50,456
 (10,122) (20)
Amortization of intangibles97,541
 152,625
 55,084
 36
Acquisition and integration charges4,156
 96,342
 92,186
 96
Operating income233,948
 130,109
 103,839
 80
Interest expense, net(73,669) (99,647) 25,978
 26
(Loss) gain from divested operations(2,075) 38,500
 (40,575) >(100)
Other income, net6,953
 1,193
 5,760
 >100
(Benefit) provision for income taxes(432) 31,719
 32,151
 >100
Net income$165,589
 $38,436
 $127,153
 >100

Total revenues for the three months ended SeptemberJune 30, 20192020 were $1.0 billion, an increasea decrease of $78.8$97.7 million, or 9% compared to the same period in 2018 on a reported basis and 10% excluding the foreign currency impact. Total revenues for the nine months ended September 30, 2019 were $3.0 billion, an increase of $155.3 million, or 5% compared to the same period in 2018 on a reported basis and 8% excluding the foreign currency impact. The three and nineTotal revenues for the six months ended SeptemberJune 30, 2018 included $11.62020 were $2.0 billion, a decrease of $49.3 million, and $105.6 million, respectively, of revenue attributableor 2% compared to the Company's Other segment. During 2018,same period in 2019 on a reported basis and 1% excluding the Company divested all of the non-core businesses comprising that segment and moved a small residual product in the Other segment into the Research business and, as a result, there are no revenues recorded in the Other segment in 2019.foreign currency impact. Refer to the section of this MD&A below entitled “Segment Results”“Segment Results” for a discussion of revenues and results by segment.

Cost of services and product development was $365.1$322.6 million during the three months ended SeptemberJune 30, 2019, an increase2020, a decrease of $28.9$65.4 million compared to the same period in 2018,2019, or 9%17% on a reported basis and 10%16% excluding the foreign currency impact. The increasedecrease in Cost of services and product development was primarily due to higher payrolldecreased costs related to cancellations or postponements of conferences during the second quarter of fiscal year 2020 in response to the COVID-19 pandemic, lower travel and related benefitsentertainment costs resulting from increased headcount, partially offset by a reduction in expense from certain businesses that were divested during 2018.the quarter as well as the implementation of various cost cutting initiatives. Cost of services and product development as a percent of revenues was 33% and 36% during each of the three months ended SeptemberJune 30, 2020 and 2019, and 2018. For the nine months ended September 30, 2019,respectively. Cost of services and product development was $1.1 billion, an increase$663.8 million during the six months ended June 30, 2020, a decrease of $38.7$70.8 million compared to the same period in 2018,2019, or 4%10% on a reported basis and 6%9% excluding the foreign currency impact. The increase in Cost of services and product developmentdecrease was primarily due to the same factors that caused the 2019year-over-year quarterly increase.decrease, partially offset by higher payroll and benefits costs. Cost of services and product development as a percent of revenues was 36%33% and 37%36% during the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively.

Selling, general and administrative (“SG&A”) expense was $512.2$494.8 million during the three months ended SeptemberJune 30, 2019, an increase2020, a decrease of $64.6$20.1 million compared to the same period in 2018,2019, or 14%4% on a reported basis and 16%2% excluding the foreign currency impact. The increasedecrease in SG&A expense was primarily due to (i) higher commissions from increased sales bookingsreduced internal meetings and (ii) more payrolltravel and related benefitsentertainment costs which were driven mostly by increased headcount. These items were partially offset by a reduction in SG&A expense resulting from certain businesses that were divested during 2018. The overall headcount growth included increases inthe COVID-19 pandemic for the three months ended June 30, 2020. There was a decrease to quota-bearing sales associates atin Global Technology Sales and Global Business Sales to 3,3553,089 and 910,834, respectively, at SeptemberJune 30, 2019.2020. On a combined basis, the total number of quota-bearing sales associates increaseddecreased by 15%5% when compared to SeptemberJune 30, 2018.2019. SG&A expense as a percent of revenues was 51% and 49%48% during the three months ended SeptemberJune 30, 2020 and 2019, and 2018, respectively. For the nine months ended September 30, 2019, SG&A expense was $1.5 billion, an increase$991.5 million during the six months ended June 30, 2020, a decrease of $149.8$42.3 million compared to the same period in 2018,2019, or 11%4% on a reported basis and 13%3% excluding the foreign currency impact. The increasedecrease in SG&A expense was primarily due to the same factors that caused the 2019year-over-year quarterly increase.decrease, partially offset by payroll related expenses. SG&A expense as a percent of revenues was 51%50% and 48%51% during the ninesix months ended SeptemberJune 30, 2020 and 2019, and 2018, respectively.



Depreciation increased by 19% and 20%13% during the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively, compared to the same periods in 2018. These increases were2019. This increase for the three and six months ended June 30, 2020 was due to additional investments, including new leasehold improvements, (as additional office space went into service), and capitalized software.

31

Amortization of intangibles decreased by 38%3% and 36%4% during the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively, compared to the same periods in 20182019 due to certain businesses that were divested during 2018, including the related intangible assets, as well as certain intangible assets that became fully amortized in 2018 and 2019.

Acquisition and integration charges were $15.4increased by $2.5 million and $92.2$1.3 million lower during the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively, thancompared to the same periods in 2018. These decreases were the result of the Company having completed two acquisitions in 2017 and none in 2018 or the nine months ended September 30, 2019.

Operating income was $69.1$99.7 million and $52.7$116.0 million during the three months ended SeptemberJune 30, 2020 and 2019, respectively. The decrease in operating income was due to lower revenue, primarily in our Conferences segment, partially offset by reduced Costs of services and 2018,product development and SG&A expense.Operating income was $224.4 million and $164.8 million during the six months ended June 30, 2020 and 2019, respectively. The increase in operating income reflects several factors, including (i) reduced amortization of intangibles and acquisition and integration charges and (ii) higher segment contributions,revenue primarily in our Researchresearch segment and Consulting segments(ii) reduced Cost of services and to a lesser extent, Conferences, which were partially offset by higherproduct development and SG&A expense. Operating income was $233.9 million and $130.1 million during the nine months ended September 30, 2019 and 2018, respectively. The increase in operating income was primarily due to the same factors that caused the 2019 quarterly increase, as well as a higher segment contribution from Conferences.

Interest expense, net declinedincreased by $2.9$5.5 million and $26.0$7.0 million during the three and ninesix months ended SeptemberJune 30, 2019,2020, respectively, compared to the same periods in 2018. These decreases were2019. The increase was primarily due to lower average outstanding borrowings during the 2019 periods and lowerhigher weighted average annual effective rates related to the replacement of expired interest rate swaps with interest rate swaps with higher effective interest rates in late 2019. Additionally, we wrote-off $1.8 million of deferred financing costs related to the prepayment of $787.9 million on the Company's total debt outstanding.

Gains from divested operations of $13.0 million and $38.5 millionTerm Loan A credit facility during the three and nine months ended SeptemberJune 30, 2018, respectively, were due to sales of certain business units and other miscellaneous assets. 2020.

Loss from divested operations of $2.1 million during the ninesix months ended SeptemberJune 30, 2019 was primarily due to adjustments of certain working capital balances related toresulting from the Company's 2018 business unit divestitures.

Other income (expense),expense, net for the periods presented herein included the net impact of foreign currency gains and losses from our hedging activities, as well as sales of certain state tax credits and the recognition of other tax incentives. Additionally, during bothactivities. Other expense, net for the three and ninesix months ended SeptemberJune 30, 2019,2020 also includes the Company recognized unrealized appreciationrelease of $9.1$10.3 million from Accumulated other comprehensive loss, net related to a minority equity investmentforecasted interest payments that we sold in October 2019.were no longer probable on our interest rate swap contracts, due to the prepayment of $787.9 million of our Term loan A credit facility and repayment of all amounts outstanding under our revolving credit facility.

The provision for income taxes for the three months ended SeptemberJune 30, 20192020 and 20182019 was an expense of $11.7$3.9 million and $26.2a benefit of $12.4 million, respectively. The provision for income taxes for the ninesix months ended SeptemberJune 30, 20192020 was an expense of $25.6 million compared to a benefit of $0.4 million compared to an expense of $31.7$12.1 million for the ninesix months ended SeptemberJune 30, 2018. 2019.

The effective income tax rate was an expense of 22.1%6.6% and 69.0%a benefit of 13.6% for the three months ended SeptemberJune 30, 2020 and 2019, and 2018, respectively. The quarter-over-quarter decrease in the effective income tax rate was primarily attributable to the taxable third quarter 2018 divestiture of the Company’s CEB Challenger training business, which resulted in a greater tax than book gain. The effective income tax rate was an expense of 16.5% for the six months ended June 30, 2020 compared to a benefit of 0.3%10.8% for the ninesix months ended SeptemberJune 30, 2019 compared to an expense of 45.2% for the nine months ended September 30, 2018. The effective income tax rate for the 2019 nine-month period included a significant benefit. Both periods include material benefits from an intercompany salesales of certain intellectual property, which is discussedas well as movements in Note 8 — Income Taxesunrecognized tax benefits. The changes in effective tax rates are largely attributable to the differences in the Notes to Condensed Consolidated Financial Statements herein. The favorable impactrelative impacts of that transaction compared to the unfavorable impact from the CEB Challenger training business divestiturethese items period over period.

We completed intercompany sales of certain intellectual property in both 2020 and 2019. As a result, we recorded tax benefits of approximately $28.3 million during the 2018 nine-month period drovethree and six months ended June 30, 2020 and $38.1 million during the year-over-year changethree and six months ended June 30, 2019. These benefits represent the value of future tax deductions for amortization of the assets in the effective incomeacquiring jurisdiction.

In July 2020, we completed an intercompany contribution of a significant amount of intellectual property. We will not be claiming future tax ratesdeductions for amortization of the nine-month periods.assets in the acquiring jurisdiction. Our intellectual property footprint continues to evolve and may result in tax rate volatility in the future.

Net income for the three months ended SeptemberJune 30, 2020 and 2019 and 2018 was $41.4$55.1 million and $11.8$103.4 million, respectively, while net income for the ninesix months ended SeptemberJune 30, 2020 and 2019 and 2018 was $165.6$130.2 million and $38.4$124.2 million, respectively. Additionally, ourOur diluted net income per share during the three and ninesix months ended SeptemberJune 30, 2019 2020 (decreased)/increased by $0.33$(0.52) and $1.40,$0.09, respectively, compared to the same periods in 2018. These year-over-year changes reflect: (i) increases2019. The decrease during the three months ended June 30, 2020 was primarily the result of the decrease in revenues noted above, increased Interest expense and Other expense, net and increased income tax expense, partially offset by reduced operating expenses. The increase for the six months ended June 30, 2020 was the result of an increase in our 20192020 operating income; (ii) lower interest expense;income, partially offset by Interest expense and (iii) lower effectiveOther expense, net and increased income tax rates in 2019 compared to 2018. Partially offsetting these items was a loss from divested operations during the 2019 nine-month period compared to a gain in each of the 2018 periods.expense.


32

SEGMENT RESULTS

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

2018 Business Divestitures

During 2018, the Company divested all of the non-core businesses that comprised its Other segment and moved a small residual product in the Other segment into the Research business and, as a result, no operating activity has been recorded in the Other segment in 2019. The Other segment had $11.6 million and $105.6 million of revenue during the three and nine months ended September 30, 2018, respectively, while gross contribution was $6.9 million and $65.1 million, respectively.

Reportable Segments

The Company’s reportable segments are as follows:

•
•Researchprovides trusted, objective insights and advice on the mission-critical priorities of leaders across all functional areas of an enterprise through reports, briefings, proprietary tools, access to our research experts, peer networking services and membership programs that enable our clients to drive organizational performance.

•Conferencesprovides business professionals 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 advice.

•Consultingcombines the power of Gartner market-leading research with custom analysis and on-the-ground support to help chief information officers and other senior executives driving technology-related strategic initiatives move confidently from insight to action.

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 and advisors, peer networking services and membership programs that enable our clients to make better decisions. Our traditional strengths in IT, marketing and supply chain research are supplemented by best practice and talent management research insights across a range of business functions, including human resources, sales, legal and finance.

•
Conferences provides business professionals across an organization the opportunity to learn, share and network. From our flagship CIO conference Gartner IT Symposium, to industry-leading conferences focused on specific business roles and topics, to member-driven sessions, our offerings enable attendees to experience the best of Gartner insight and advice live.

•
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.

The sections below present the results of the Company's three reportable business segments.

Research
 As Of And For The Three Months Ended June 30, 2020As Of And For The Three Months Ended June 30, 2019Increase
(Decrease)		Percentage
Increase
(Decrease)		As Of And For The Six Months Ended June 30, 2020As Of And For The Six Months Ended June 30, 2019Increase
(Decrease)		Percentage
Increase
(Decrease)
Financial Measurements:    
Revenues (1)$875,329  $826,055  $49,274  6 %$1,784,620  $1,651,429  $133,191  8 %
Gross contribution (1)$632,624  $572,297  $60,327  11 %$1,286,094  $1,147,465  $138,629  12 %
Gross contribution margin72 %69 %3 points—  72 %69 %3 points—  
Business Measurements:
    
Global Technology Sales (2):
Contract value (1), (3)$2,767,000  $2,582,000  $185,000  7 %
Client retention80 %82 %(2) points—  
Wallet retention100 %105 %(5) points—  
Global Business Sales (2):
Contract value (1), (3)$643,000  $603,000  $40,000  7 %
Client retention83 %81 %2 points—  
Wallet retention100 %95 %5 points—  
 As Of And For The Three Months Ended September 30, 2019 As Of And For The Three Months Ended September 30, 2018 
Increase
(Decrease)
 
Percentage
Increase
(Decrease)
 As Of And For The Nine Months Ended September 30, 2019 As Of And For The Nine Months Ended September 30, 2018 
Increase
(Decrease)
 
Percentage
Increase
(Decrease)
Financial Measurements: 
  
  
  
        
Revenues (1)$840,998
 $774,188
 $66,810
 9% $2,492,427
 $2,308,426
 $184,001
 8%
Gross contribution (1)$582,502
 $534,911
 $47,591
 9% $1,729,967
 $1,599,277
 $130,690
 8%
Gross contribution margin69% 69% —
 —
 69% 69% —
 —
                
Business Measurements:
 
  
  
  
        
Global Technology Sales (2):               
Contract value (1), (3)$2,646,000
 $2,338,000
 $308,000
 13%        
Client retention82% 83% (1) point
 —
        
Wallet retention105% 105% —
 —
        
Global Business Sales (2):               
Contract value (1), (3)$620,000
 $602,000
 $18,000
 3%        
Client retention81% 83% (2) points
 —
        
Wallet retention97% 97% —
 —
        

(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.

(1)Dollars in thousands.

(3)Contract values are on a foreign exchange neutral basis. Contract values as of September 30, 2018 have been calculated using the same foreign currency rates as 2019.

(2)Global Technology Sales includes sales to users and providers of technology. Global Business Sales includes sales to all other functional leaders.
(3)Contract values are on a foreign exchange neutral basis. Contract values as of June 30, 2019 have been calculated using the same foreign currency rates as 2020.

33

Research revenues increasedincreased by $66.8$49.3 million during the three months ended SeptemberJune 30, 20192020 compared to the same period in 2018,2019, or 9%6% on a reported basis and 10%8% excluding the foreign currency impact. The segment gross contribution margin was flat at72% and 69% induring the third quarter ofsix months ended June 30, 2020 and 2019, compared to the third quarter of 2018.respectively. For the ninesix months ended SeptemberJune 30, 2019,2020, Research revenues increased by $184.0$133.2 million compared to the same period in 2018,2019, or 8% on a reported basis and 10% excluding the foreign currency impact. The gross contribution margin was flat at 69% during the nine months ended September 30, 2019 compared to the same period in 2018. The increase in revenues for both 2019 periodsduring 2020 was primarily due to the same factors driving the trend in our Research contract value, which isare discussed below. The improvement in margin of 3 points for both the three and six months ended compared to prior year was primarily due to headcount growing at a slower pace than the corresponding revenue and a decline in travel and entertainment expenses due to COVID-19 travel restrictions.

Total contract value increased to $3.3$3.4 billion at SeptemberJune 30, 2019,2020, or 11%7% compared to SeptemberJune 30, 20182019 on a foreign exchange neutral basis. Total contract value at September 30, 2019 increased by double-digits across more than half of the Company’s client sizes and half of its industry segments when compared to September 30, 2018. Global Technology Sales ("GTS") contract value increased by 13%7% at SeptemberJune 30, 20192020 when compared to SeptemberJune 30, 2018.2019. The increase in GTS contract value was primarily due to additional sales headcountnew business from new and productivity improvements.existing clients. Global Business Sales ("GBS") contract value increased by 3%7% year-over-year, primarily driven by the combined effect ofincreased spending by existing clients and improved retention and new business, with a substantial portion of the new business coming from newly launched products.retention.

GTS client retention was 82%80% and 83%82% as of SeptemberJune 30, 20192020 and 2018,2019, respectively, while wallet retention was 100% and 105% at both dates., respectively. GBS client retention was 81%83% and 83%81% as of SeptemberJune 30, 20192020 and 2018,2019, respectively, while wallet retention was 97% at both dates.100% and 95%, respectively. The increase in GBS wallet retention was largely due to increased spending by existing clients. The number of GTS client enterprises increaseddeclined by 2% at September 30, 20193% when compared to September 30, 2018,prior year, while GBS client enterprises declined by 9%.7% at June 30, 2020 when compared to June 30, 2019.

Conferences
 As Of And For The Three Months Ended June 30, 2020As Of And For The Three Months Ended June 30, 2019Increase
(Decrease)		Percentage
Increase
(Decrease)		As Of And For The Six Months Ended June 30, 2020As Of And For The Six Months Ended June 30, 2019Increase
(Decrease)		Percentage
Increase
(Decrease)
Financial Measurements:    
Revenues (1)$317  $141,174  $(140,857) (100)%$14,187  $193,106  $(178,919) (93)%
Gross contribution (1)$(11,230) $80,570  $(91,800) (114)%$(17,290) $99,446  $(116,736) (117)%
Gross contribution marginnm57 %nmnm(122)%51 %nmnm
Business Measurements:    
Number of destination conferences (2)—27  (27) (100)%539(34) (87)%
Number of destination conferences attendees (2)—26,416  (26,416) (100)%3,364  37,946  (34,582) (91)%
 As Of And For The Three Months Ended September 30, 2019 As Of And For The Three Months Ended September 30, 2018 
Increase
(Decrease)
 
Percentage
Increase
(Decrease)
 As Of And For The Nine Months Ended September 30, 2019 As Of And For The Nine Months Ended September 30, 2018 
Increase
(Decrease)
 
Percentage
Increase
(Decrease)
Financial Measurements: 
  
  
  
        
Revenues (1)$66,286
 $57,141
 $9,145
 16% $259,392
 $214,481
 $44,911
 21%
Gross contribution (1)$27,465
 $25,047
 $2,418
 10% $126,910
 $104,698
 $22,212
 21%
Gross contribution margin41% 44% (3) points
 —
 49% 49% —
 —
                
Business Measurements: 
  
  
  
        
Number of destination conferences (2)18
 17
 1
 6% 57
 55
 2
 4%
Number of destination conferences attendees (2)14,739
 13,322
 1,417
 11% 52,685
 45,861
 6,824
 15%
nm = not meaningful
(1)Dollars in thousands.
(2)Single day, local meetings are excluded.

(1)Dollars in thousands.
Conferences revenues increased by $9.1 million during the three months ended September 30, 2019 compared to the same period in 2018, or 16% on a reported basis and 19% excluding the foreign currency impact. Revenues from both attendees and exhibitors at our destination conferences, as well as revenues from our single(2)Single day, local meetings increased by double-digits during the third quarter of 2019 compared to the same period in 2018. are excluded.

We held 18no destination conferences during the three months ended SeptemberJune 30, 2019 with a 11% increase2020 and due to the outbreak of COVID-19, we cancelled all destination conferences scheduled for the remainder of 2020 and are now planning to hold 15 virtual conferences in the numbersecond half of attendees and a 19% increase in exhibitors when2020. As such,Conferences revenues decreased by $140.9 million during the three months ended June 30, 2020 compared to the same period in 2018, while2019, or 100% on a reported basis and excluding the average revenue per attendee was flat and the average revenue per exhibitor increasedforeign currency impact. Conference revenues decreased by 1%. The gross contribution margin declined by three points$178.9 million during the third quarter of 2019six months ended June 30, 2020 compared to the same period in 2018 primarily due2019, or 93% on a reported basis and excluding the foreign currency impact. Gross contribution declined to a loss of $11.2 million compared to income of $80.6 million in the timingsame period last year.


34

Consulting
 As Of And For The Three Months Ended June 30, 2020As Of And For The Three Months Ended June 30, 2019Increase
(Decrease)		Percentage
Increase
(Decrease)		As Of And For The Six Months Ended June 30, 2020As Of And For The Six Months Ended June 30, 2019Increase
(Decrease)		Percentage
Increase
(Decrease)
Financial Measurements:    
Revenues (1)$97,489  $103,653  $(6,164) (6)%$193,219  $196,791  $(3,572) (2)%
Gross contribution (1)$33,542  $34,236  $(694) (2)%$62,925  $62,954  $(29) — %
Gross contribution margin34 %33 %1 point—  33 %32 %1 point—  
Business Measurements:    
Backlog (1), (2)99,000  110,500  (11,500) (10)%
Billable headcount796773  23  3 %
Consultant utilization59 %63 %(4) points—  61 %66 %(1) point—  
Average annualized revenue per billable headcount (1)$353  $379  $(26) (7)%$360  $390  $(30) (8)%

(1)Dollars in thousands.
(2)Backlog is on a foreign exchange neutral basis. Backlog as of certain destination conferences.June 30, 2019 has been calculated using the same foreign currency rates as 2020.

ForConsulting revenues decreased 6% during the ninethree months ended SeptemberJune 30, 2019, Conferences revenues increased by $44.9 million2020 compared to the same period in 2018, or 21%2019 on a reported basis and 24% excluding the foreign currency impact. Revenues from both attendees and exhibitors at our destination conferences, as well as revenues from our single day local meetings, increased by double-digits during the nine months ended September 30, 2019. We held 57 destination conferences during the 2019 nine-month period with a 15% increase


in the number of attendees and a 17% increase in exhibitors when compared to the same period in 2018, while the average revenue per attendee and exhibitor increased by 5% and 4%, respectively. The gross contribution margin was flat at 49% during the nine months ended September 30, 2019 compared to the same period in 2018.

Consulting
 As Of And For The Three Months Ended September 30, 2019 As Of And For The Three Months Ended September 30, 2018 Increase
(Decrease)		 Percentage
Increase
(Decrease)		 As Of And For The Nine Months Ended September 30, 2019 As Of And For The Nine Months Ended September 30, 2018 
Increase
(Decrease)
 
Percentage
Increase
(Decrease)
Financial Measurements: 
  
  
  
        
Revenues (1)$93,218
 $78,752
 $14,466
 18 % $290,009
 $258,106
 $31,903
 12 %
Gross contribution (1)$26,538
 $18,419
 $8,119
 44 % $89,493
 $76,236
 $13,257
 17 %
Gross contribution margin28% 23% 5 points
 —
 31% 30% 1 point
 —
                
Business Measurements: 
  
  
  
        
Backlog (1), (2)$109,200
 $105,800
 $3,400
 3 %        
Billable headcount809
 727
 82
 11 %        
Consultant utilization57% 59% (2) points
 —
 63% 64% (1) point
 —
Average annualized revenue per billable headcount (1)$351
 $354
 $(3) (1)% $376
 $379
 $(3) (1)%
(1)Dollars in thousands.
(2)Backlog is on a foreign exchange neutral basis. Backlog as of September 30, 2018 has been calculated using the same foreign currency rates as 2019.

Consulting revenues increased 18% during the three months ended September 30, 2019 compared to the same period in 2018 on a reported basis and 20% excluding the foreign currency impact, with a revenue improvementsdecrease in labor-based core consulting andof 13%, partially offset by an increase in contract optimization of 11% and 74%18%, respectively, on a reported basis. Contract optimization revenue may vary significantly and, as such, revenues for the thirdsecond quarter of 20192020 may not be indicative of results for the remainder of 20192020 or beyond. The segment gross contribution margin was 28%34% and 23% 33% for the three months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. The higherincrease in gross contribution margin during the thirdsecond quarter of 20192020 was primarily due to the increase instrong contract optimization revenue, which has a higher contribution margin than our labor-based core consulting, billing rate increases, improvements in our labor-based consulting marginsperformance and benefits derived from certain cost-reduction initiatives, partially offsetincluding a decline in travel and entertainment expenses due to COVID-19 travel restrictions. Consultant utilization decreased by increased personnel costs and commissions.

For4 points during the ninethree months ended SeptemberJune 30, 2019, Consulting revenues increased 12%2020 compared to the same period in 20182019 due to a reduction in backlog, as well as, an increase in billable headcount.

For the six months ended June 30, 2020, Consulting revenues decreased 2% compared to the same period in 2019 on a reported basis and 15%1% excluding the foreign currency impact, while the segment gross contribution margin improvedincreased by one point to 31%.1 point. The increasedecrease in revenues was due to the same factors that caused the increasedecrease during the thirdsecond quarter of 2019.2020.

Backlog increaseddecreased by $3.4$11.5 million, or 3%10%, from SeptemberJune 30, 20182019 to SeptemberJune 30, 2019.2020. The $109.2$99.0 million of backlog at SeptemberJune 30, 20192020 represented approximately four months of backlog, which is in line with the Company's operational target.


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LIQUIDITY AND CAPITAL RESOURCES

We finance our operations through cash generated from our operating activities and borrowings. Note 67 — Debt in the Notes to Condensed Consolidated Financial Statements herein provides additional information regarding the Company's outstanding debt obligations. At SeptemberJune 30, 2019,2020, we had $306.7$356.6 million of cash and cash equivalents and approximately $1.1$1.2 billion of available borrowing capacity on the revolving credit facility under our 2016 Credit Agreement. We believe that the Company has adequate liquidity to meet its currently anticipated needs. As a cautionary measure, we have elected to suspend our share repurchase activity.

We have historically generated significant cash flows from our operating activities. Our operating cash flow has been continuously maintained by the leverage characteristics of our subscription-based business model in our Research segment, which is our largest business segment and historically has constituted a significant portion of our total 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 continuouslyhistorically strong operating cash flow. Cash flow generation has also benefited historically from our ongoing 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 sales.

Our cash and cash equivalents are held in numerous locations throughout the world with 75%85% held overseas at SeptemberJune 30, 2019. The Company intends2020. We intend to reinvest substantially all of itsour accumulated undistributed foreign earnings, except in instances where repatriation would result in minimal additional tax. As a result of the U.S. Tax Cuts and Jobs Act of 2017, we believe that the income tax impact if such earnings were repatriated would be minimal.

The table below summarizes the changes in the Company’s cash balances for the periods indicated (in thousands).
 Nine Months Ended September 30, 2019 Nine Months Ended September 30, 2018 
Increase
(Decrease)
Cash provided by operating activities$482,601
 $426,011
 $56,590
Cash (used in) provided by investing activities(97,996) 440,223
 (538,219)
Cash used in financing activities(232,813) (1,213,556) 980,743
Net increase (decrease) in cash and cash equivalents and restricted cash151,792
 (347,322) 499,114
Effects of exchange rates(3,728) (6,444) 2,716
Beginning cash and cash equivalents and restricted cash158,663
 567,058
 (408,395)
Ending cash and cash equivalents and restricted cash$306,727
 $213,292
 $93,435
 Six Months Ended June 30, 2020Six Months Ended June 30, 2019Increase
(Decrease)
Cash provided by operating activities$398,917  $263,078  $135,839  
Cash used in investing activities(45,865) (61,774) 15,909  
Cash used in financing activities(275,753) (142,128) (133,625) 
Net increase in cash and cash equivalents77,299  59,176  18,123  
Effects of exchange rates(1,502) 614  (2,116) 
Beginning cash and cash equivalents280,836  158,663  122,173  
Ending cash and cash equivalents$356,633  $218,453  $138,180  

Operating

Cash provided by operating activities was $482.6$398.9 million and $426.0$263.1 million during the ninesix months ended SeptemberJune 30, 20192020 and 2018,2019, respectively. The year-over-year increase was primarily due to higher netpre-tax income in the 20192020 period and lower cashan increase in accounts payable and accrued and other liabilities due to increased accrued payroll, fringe benefits and customer deposits and reduced income tax payments, offset by higher bonus payments made in 2019 for interest on our borrowings, acquisition-related costs and income taxes.2020 related to 2019.

Investing

Cash used in investing activities was $98.0$45.9 million and $61.8 million during the ninesix months ended SeptemberJune 30, 2020 and 2019, compared to cash provided by investing activities of $440.2 million in the 2018 period.respectively. The cash used in the 2019 periodboth periods was primarily for capital expenditures. In the 2018 period, $520.7 million of net cash was realized from business unit divestitures and other miscellaneous asset sales, partially offset by payments of $64.6 million for capital expenditures and $15.9 million for deferred consideration from a pre-2018 acquisition.

Financing

Cash used in financing activities was $232.8$275.8 million forand $142.1 million during the ninesix months ended SeptemberJune 30, 2020 and 2019, compared torespectively. During the 2020 period, we repaid a net $175.0 million on our revolving credit facility, and used $73.9 million of cash used of $1.2 billion during the same period in 2018.for share repurchases. During the 2019 period, the Company borrowed an additional $5.0 million, under a financial program offered by the State of Connecticut and repaid $109.6paid $46.6 million of other borrowings. We also used $141.4 million in cash during the nine months ended September 30, 2019 for share repurchases. During the 2018 period, the Company paid $1.1 billion in debt principal repayments and $104.4paid $46.6 million for share repurchases.



36


OBLIGATIONS AND COMMITMENTS

Debt

As of SeptemberJune 30, 2019,2020, the Company had $2.2$2.0 billion of principal amount of debt outstanding.outstanding, of which $25.3 million is to be repaid in fiscal 2020. Note 67 — Debt in the Notes to Condensed Consolidated Financial Statements hereinprovides additional information regarding the Company's outstanding debt obligations. From time to time, the Company may seek to retire or repurchase its outstanding debt through various methods including open market repurchases, negotiated block transactions, or otherwise, all or some of which may be effected through Rule 10b5-1 plans. Such transactions, if any, depend on prevailing market conditions, our liquidity and capital requirements, contractual restrictions, and other factors, and may involve material amounts.

We have a credit facility that currently provides a $1.5 billion Term loan A facility and a $1.2 billion revolving credit facility. The 2016 Credit Agreement contains certain customary restrictive loan covenants, including, among others, financial maintenance covenants that apply a maximum consolidated leverage ratio, a maximum consolidated secured leverage ratio and a minimum consolidated interest expense ratio.

On May 6, 2020, the 2016 Credit Agreement was amended with the consent of the required lenders to, among other things, modify certain financial maintenance covenants to provide additional flexibility to Gartner through December 31, 2021. The amendment increases the maximum consolidated leverage ratio to 5.00 to 1.00 and maximum consolidated secured leverage ratio to 3.75 to 1.00 (each as determined in accordance with the 2016 Credit Agreement), in each case for fiscal quarters ending on June 30, 2020 through and including December 31, 2021. The amendment only increased the applicable margin for all outstanding Revolving Loans and Tranche A Term Loans (each as defined in the 2016 Credit Agreement) to the extent the consolidated leverage ratio (as determined in accordance with the 2016 Credit Agreement) exceeds 4.50 to 1.00.

We were in full compliance with the covenants noted above as of June 30, 2020 and on the date this Quarterly Report on Form 10-Q is filed. Note 7 — Debt in the Notes to Condensed Consolidated Financial Statements provides additional information regarding the Company's outstanding debt obligations.

Off-Balance Sheet ArrangementsOur financial covenants as of June 30, 2020 are summarized in the table below:

As of
Covenants* :Maximum/Minimum*June 30, 2020
Consolidated Leverage Ratio<5.002.76
Consolidated Secured Leverage Ratio<3.750.58
Consolidated Interest Expense Ratio≥3.257.25
*- metrics as defined in the 2016 Credit Agreement


On June 22, 2020, the Company issued $800.0 million aggregate principal amount of 4.50% Senior Notes due 2028 (the “2028 Notes”). The 2028 Notes were issued pursuant to an indenture, dated as of June 22, 2020 (the “Indenture”), among the Company, the guarantors party thereto and U.S. Bank National Association, as trustee (the “Trustee”). The 2028 Notes were offered and sold only to persons reasonably believed to be qualified institutional buyers (as defined in the Securities Act of 1933, as amended (the “Securities Act”)) pursuant to Rule 144A under the Securities Act and outside the United States only to non-U.S. persons in accordance with Regulation S under the Securities Act.

The 2028 Notes were issued at an issue price of 100.00% 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 Notes will mature on July 1, 2028.

We used proceeds from the 2028 Notes to prepay $787.9 million of the Tranche A Term Loans.



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OFF BALANCE SHEET ARRANGEMENTS

Through SeptemberJune 30, 2019, we have2020, the Company has not entered into any material off-balance sheet arrangements or transactions with unconsolidated entities or other persons.

RECENTLY ISSUED ACCOUNTING STANDARDS

The FASB has issued accounting standards that have not yet become effective and that may impact the Company’s consolidated financial statements and related disclosures in future periods. Note 1 — Business and Basis of Presentation in the Notes to Condensed Consolidated Financial Statements herein provides information regarding those accounting standards.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK

As of SeptemberJune 30, 2019,2020, the Company had $2.2$2.0 billion in total debt principal outstanding. Note 67 — Debt in the Notes to Condensed Consolidated Financial Statements herein provides additional information regarding the Company's outstanding debt obligations.

Approximately $1.4$0.4 billion of the Company's total debt outstanding as of SeptemberJune 30, 20192020 was based on a floating base rate of interest, which potentially exposes the Company to increases in interest rates. However, we reduce our overall exposure to interest rate increases through our interest rate swap contracts, which effectively convert the base floating base interest raterates on the borrowings to fixed rates. Thus, we are only exposed to base interest rate risk on floating rate borrowings in excess of any amounts that are not hedged. At September 30, 2019, the Company was effectively fully hedged against the base interest rate risk on its floating rate borrowings.

FOREIGN CURRENCY RISK

A significant portion ofof our revenues are 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 statements is the U.S. dollar. As the values of the foreign currencies in which we operate fluctuate over time relative to the U.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 because 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. A measure of the potential impact of foreign currency translation can be determined through a sensitivity analysis of our cash and cash equivalents. At SeptemberJune 30, 2019,2020, we had $306.7$356.6 million of cash and cash equivalents, 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 SeptemberJune 30, 20192020 could have increased or decreased by approximately $23.0$30.0 million. The translation of our foreign currency revenues and expenses historically has not had a material impact on our consolidated earnings because 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.S. dollar.

Transaction risk arises when we enter into a transaction that is 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 SeptemberJune 30, 20192020 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 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.

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ITEM 4. CONTROLS AND PROCEDURES

We have established disclosure controls and procedures that are designed to ensure that the information we are required to disclose in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported in a timely manner. Specifically, these controls and procedures ensure that the information is accumulated and communicated to our executive management team, including our chief executive officer and our chief financial officer, to allow timely decisions regarding required disclosure.

Management conducted an evaluation, as of SeptemberJune 30, 2019,2020, of the effectiveness of the design and operation of our disclosure controls and procedures, 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 the 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 under the Exchange Act.

There have been no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in legal and administrative proceedings and litigation arising in the ordinary course of business. We believe 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 our financial position, cash flows or results of operations when resolved in a future period.

ITEM 1A. RISK FACTORS

RiskThere were no material changes to the risk factors associated withdisclosed in Part I, Item 1A of our business are included under “Risk Factors” in Item 1A. of the Company's 2018Annual Report on Form 10-K for the year ended December 31, 2019 and are incorporated herein by reference.Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020.

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

There were no unregistered sales of equity securities during the period covered by this report.

Issuer Purchases of Equity Securities

The Company hashas a $1.2 billion board authorization to repurchase the Company'sits common stock. The Company may repurchase its common stock from time-to-time in amounts, 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 by cash on hand and borrowings. Repurchases may also be made from time-to-time in connection with the settlement of the Company's stock-based compensation awards. The table below summarizes the repurchases of our outstanding common stock during the threesix months ended SeptemberJune 30, 20192020 pursuant to our $1.2 billion share repurchase authorization and the settlement of stock-based compensation awards.


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 billions)
July 1, 2019 to July 31, 2019 68,262
 $141.61
 68,000
 $0.9
August 1, 2019 to August 31, 2019 446,113
 132.26
 443,027
 0.8
September 1, 2019 to September 30, 2019 191,425
 136.88
 189,968
 $0.8
Total for the quarter (1) 705,800
 $134.42
 700,995
  
PeriodTotal
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)
April 1, 2020 to April 30, 2020766  $102.51  —  $681,062  
May 1, 2020 to May 31, 20204,875  118.08  —  681,062  
June 1, 2020 to June 30, 2020358  121.41  —  $681,062  
Total for the quarter (1)5,999  $116.29  —  

(1)The repurchased shares during the three months ended September 30, 2019 included purchases for both the settlement of stock-based compensation awards and open market purchases.
(1)The repurchased shares during the six months ended June 30, 2020 included purchases for both the settlement of stock-based compensation awards and open market purchases.

ITEM 6. EXHIBITS
EXHIBIT
NUMBER		DESCRIPTION OF DOCUMENT
EXHIBIT
NUMBER4.1 (1)
DESCRIPTION OF DOCUMENT
31.1*
Certification of chief executive officer under Rule 13a — 14(a)/15d — 14(a).
31.2*
Certification of chief financial officer under Rule 13a — 14(a)/15d — 14(a).
32*
Certification under 18 U.S.C. 1350.
101.INS101.INS*Inline 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.SCH101.SCH*Inline XBRL Taxonomy Extension Schema Document.
101.CAL101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104104*Cover Page Interactive Data File, formatted in Inline XBRL (included as Exhibit 101).

*  Filed with this report.

(1) Incorporated by reference from the Company’s Current Report on Form 8-K filed on June 23, 2020.

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Items 3 4 and 54 of Part II are not applicable and have been omitted.

SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Gartner, Inc.
Date:October 31, 2019August 4, 2020/s/ Craig W. Safian
Craig W. Safian
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)


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