2019
Annual
Report
Dear Shareholders:
Gene Hall
Chief Executive Officer
Craig Safian
Chief Financial Officer
“ Gartner equips business
leaders with indispensable
insights, advice and tools
to achieve their mission-
critical priorities and build
the successful organizations
of tomorrow.”
Our clients are experiencing more
disruptive change than ever before.
There has never been more pressure for companies
to innovate and succeed. Clients are experiencing
disruptive change and they are feeling pressure both
internally and externally to innovate.
Our clients need the right strategy — and strong
execution — to succeed.
This means clients need Gartner now more than
ever before.
We would like to take a moment to reflect on Gartner’s
strengths and performance in 2019, even as we
acknowledge the humanitarian and economic
impact the COVID-19 pandemic is having.
Gartner provides the insight
and advice to navigate these
disruptive times.
Gartner equips business leaders with indispensable
insights, advice and tools to achieve their mission-
critical priorities and build the successful
organizations of tomorrow. Our unmatched
combination of expert-led, practitioner-sourced
and data-driven research empowers clients
across all major enterprise functions — including
Information Technology (IT), HR, Finance, Marketing,
Supply Chain, Sales and Legal — to make the right
decisions on issues that matter most.
Because of our independence and objectivity, we’re
a highly trusted advisor. Our strategic advice and
pragmatic tools — peer benchmarks, best-practice
cases and step-by-step implementation guides —
are free from vendor bias and rooted in the data,
analytics and insights of our objective research.
By consistently applying the Gartner Formula across
our business, we increased our penetration of the
addressable market. We made progress on our core
strategy of establishing leading market positions in
every role across the enterprise while continuing to
drive innovation.
2019 was a strong year.
For the full year 2019, we drove double-digit top-line
growth for each of our business segments and
concluded a period of increased investment. We
generated $4.2 billion of adjusted revenue and
$684 million of adjusted EBITDA,1 representing
year-over-year growth of 11% and 2%, respectively,
excluding the impact of foreign exchange. Adjusted
diluted earnings per share was $3.90 in 2019, and
free cash flow was $462 million.
Gartner Research, our largest and most profitable
segment, represents about 80% of our revenue.
Gartner Research is the core of our unrivaled client
value proposition, providing subscription, cloud-
based, on-demand, indispensable research and
advisory services. We deliver incredible insights
at a price that’s extremely low relative to the value.
There is no other place that our clients can get such
valuable insights on demand and at a very modest
cost. This is why our clients stay with us, renew at
high rates and spend more with us year after year.
The Research segment closed another double-digit
growth year with adjusted revenue of $3.4 billion, an
increase of 11% year over year, excluding the impact
of foreign exchange. We closed 2019 with contract
value of $3.4 billion, an increase of 12% year over
year. We report contract value excluding the impact
of foreign exchange.
We have a vast and under-penetrated
market opportunity.
We estimate our total market opportunity to be almost
$200 billion. Our contract value (the annualized
amount of revenue under contract at a point in time)
is about $3.4 billion. This means we can grow at
double-digit rates for a very long time.
Over the past decade, we’ve developed the Gartner
Formula to drive long-term, sustained double-digit
growth. The Gartner Formula has four elements:
1) Indispensable insights, 2) Exceptional talent,
3) Sales excellence, and 4) Enabling infrastructure.
For each of these elements, we drive globally
consistent execution of best practices and
continuous improvement and innovation.
By consistently applying the Gartner Formula across
our business, we’re able to capture our vast market
opportunity.
We have an attractive business model, with recurring
revenue, high renewal rates and strong contribution
margins. This business model, paired with the Gartner
Formula, enables us to generate long-term, sustained
double-digit growth in contract value, revenue,
earnings and free cash flow.
We sustained a decade of
double-digit revenue growth.
2019 marked a decade of double-digit revenue
growth and an expansion of the practice areas we
serve. In 2010, we were a $1.3 billion-dollar company
that served information technology and supply chain
leaders. Today, we’re a $4.2 billion-dollar company
serving 11 practices with more than 15,000 client
enterprises in more than 100 countries. We provide
great jobs to nearly 17,000 associates around the
world and position our company for the long-term
benefit of our shareholders.
1 Reconciliations of all non-GAAP financial measures used in this letter
to the most directly comparable GAAP measures are available on
investor.gartner.com.
We delivered another year of double-
digit contract value growth, led by
Global Technology Sales (GTS).
Global Technology Sales, or GTS, serves leaders and
their teams within IT and represents about 80% of our
total contract value. In GTS, contract value was strong
in 2019 with 12% growth. We continue to serve a vast
market opportunity across all sectors, sizes and
geographies. We’ve made investments over the
past two years, including sales head count, that
position us well to capture that market opportunity.
Global Business Sales (GBS)
accelerated and the foundation
is in place for future growth.
Global Business Sales, or GBS, represents about 20%
of our total contract value. The GBS sales organization
supports all the enterprise functions beyond IT. This
includes Supply Chain and Marketing, which we’ve
addressed for several years, as well as other major
enterprise roles including HR, Finance, Legal, Sales
and more. Each of these roles has the same need
for our insight and advice as IT.
Over the past three years, we launched enhanced
subscription products for individual enterprise
function leaders, we expanded service capabilities
and we grew the sales force. We applied the Gartner
Formula to build the foundation to drive sustained
double-digit growth and we ended 2019 with record
organic contract value growth of 8%, an increase in
the growth rate of 6.7 percentage points from the
prior year.
Conferences and Consulting both had
double-digit revenue growth years.
Gartner Conferences delivers incredible insights to
our attendees, while building our brand and making
a profit. This segment represents about 11% of our
business. We combine the outstanding value of
our research insights and advice with unparalleled
peer networking and the immersion of live events
to create the most important annual gatherings for
the executives we serve. The Conferences segment
had another great year with revenue of $477 million,
up more than 18%, excluding the impact of foreign
exchange.
Gartner Consulting, which serves as an extension
of Gartner Research for chief information officers
and other senior executives driving technology-
related strategic initiatives, makes up about 9% of
our business. Gartner Consulting provides a deeper
level of involvement through extended, project-based
work. During 2019, we generated revenue of about
$394 million, an increase of 14% year over year,
excluding the impact of foreign exchange. We
closed the year with $116 million of backlog (a
leading indicator of future growth for Consulting).
We continue to focus on prudent
capital allocation.
Our capital deployment strategy has been consistent
over time. After ensuring that we have appropriately
invested in our business to sustain long-term double-
digit growth, we use our free cash flow and available
balance sheet flexibility to return capital to our
shareholders through our share buyback programs
and through strategic, value-generating tuck-in
acquisitions. During 2019, we repurchased $199
million of stock, repaid about $110 million of our
outstanding debt balance and also acquired TOPO,
a provider of insight and advice for sales leaders,
for around $25 million.
“ 2019 was a great year for
Gartner. We had strong
operating results across
all three of our segments:
Research, Conferences
and Consulting.”
Gartner is a growth company.
2019 was a great year for Gartner. We had strong
operating results across all three of our segments:
Research, Conferences and Consulting. We delivered
incredible value to every major function in the
enterprise. We have a vast market opportunity.
We’ve made investments over the past few years
that position us well to capture that market
opportunity. We’re aligning our cost growth with
revenue growth. With the great strategic positioning
of GTS and GBS, together with leveraging the
investments we’ve made, we are well-positioned
for sustained long-term double-digit growth.
Gartner’s attractive business model, with recurring
revenue, high renewal rates and strong contribution
margins, enables us to generate long-term, sustained
double-digit growth in contract value, revenue,
earnings and free cash flow.
Over the medium term, our objective is double-digit
growth in revenue and EBITDA growth as fast or faster
than revenue growth. And because of our low capital
intensity and upfront billing, we expect to grow free
cash flow as fast or faster than EBITDA growth.
We remain excited about our business, our prospects
for growth and our strategy to create value for our
shareholders over the long term.
On behalf of everyone at Gartner, we thank you for
your support.
Gene Hall
Chief Executive Officer
Craig Safian
Chief Financial Officer
The Numbers: Highlights
Segment Revenue 2019
($ in millions)
Total Contract Value1
($ in millions)
$394
Consulting
$477
Conferences
$3,375
Research
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
$3,446
$3,086
$2,770
$1,923
$1,691
’15
’16
’17
’18
’19
1 All contract values have been calculated using the same
foreign currency rates as December 31, 2019.
Comparison of Five-Year Cumulative Total Return*
Among Gartner, Inc., the S&P 500 Index and the Dow Jones U.S. Business Support Services Index
$250
$200
$150
$100
$50
$0
12/14
The graph matches the cumulative
five-year total return of holders
(including reinvestment of dividends)
of Gartner, Inc.’s common stock with
the cumulative total returns of the
S&P 500 Index and the Dow Jones
U.S. Business Support Services Index.
*$100 invested on 12/31/14 in stock or index,
including reinvestment of dividends. Fiscal year
ending December 31.
Copyright© 2020 Standard & Poor’s, a division
of S&P Global. All rights reserved.
Copyright© 2020 S&P Dow Jones Indices LLC,
a division of S&P Global. All rights reserved.
12/15
12/16
12/17
12/18
12/19
Gartner, Inc.
S&P 500 Index
Dow Jones U.S. Business Support Services Index
(In thousands, except income per share, employees and
research client enterprises)
Year ended December 31,
2019
2018
20171
2016
2015
Statement of Operations Data
Total revenues
Net income2,3
$ 4,245,321 $
3,975,454 $
3,311,494 $ 2,444,550 $
2,163,056
233,290
122,456
3,279
193,582
175,635
Diluted income per common share2,3
$
2.56 $
1.33 $
0.04 $
2.31 $
2.06
Weighted average shares outstanding (diluted)
Common shares outstanding at year-end
90,971
89,158
92,122
89,702
89,790
83,820
90,823
82,651
85,056
82,338
Cash Flow Data
Operating cash flows
Balance Sheet Data
$
565,436 $
471,158 $
254,517 $
365,632 $
345,561
20194
2018
20171
2016
2015
As of December 31,
Cash and cash equivalents
$
280,836 $
156,368 $
538,908 $
474,233 $
372,976
Current assets
Total assets
Current liabilities
2,018,741
1,811,739
2,588,608
1,343,196
1,140,997
7,151,294
6,201,474
7,283,173
2,367,335
2,168,517
2,856,534
2,620,935
2,822,585
1,460,249
1,323,492
Total debt principal outstanding
2,207,514
2,312,092
3,323,062
702,500
825,000
Total liabilities
6,212,701
5,350,717
6,299,708
2,306,457
2,300,917
Stockholders’ equity (deficit)
$
938,593 $
850,757 $
983,465 $
60,878 $
(132,400)
Statistical data
Total contract value5
$ 3,446,000 $ 3,086,000 $
2,770,000 $ 1,923,000 $
1,691,000
Research client enterprises
15,400
15,600
12,000+
11,122
10,796
Consulting backlog5
Employees
$
115,700 $
108,400 $
97,100 $
89,200 $
98,300
16,724
15,173
15,131
8,813
7,834
1 Gartner acquired CEB Inc. on April 5, 2017. The results are included beginning on that date.
2 A net tax benefit of $38.1 million from an intercompany sale of certain intellectual property is included in the 2019 results.
3 A tax benefit of $59.6 million related to the U.S. Tax Cuts and Jobs Act of 2017 is included in the 2017 results.
4 Gartner adopted a new lease accounting standard in 2019, which increased certain assets and liabilities.
5 All contract values and backlog amounts have been calculated using the same foreign currency rates as December 31, 2019.
Investor Relations
As a Gartner shareholder,
you’re invited to take
advantage of shareholder
services or to request
more information
about Gartner.
Account Questions
Our transfer agent can help you with a variety of
shareholder-related services, including:
• Account information
• Transfer instructions
• Change of address
• Lost certificates
• Direct share registration
You can call our transfer agent at:
1 800 937 5449 (toll-free; U.S. shareholders only)
+1 718 921 8124 (non-U.S. shareholders)
You can also write our transfer agent and registrar at:
American Stock Transfer & Trust Company, LLC
Shareholder Relations
6201 15th Avenue
Brooklyn, NY 11219
USA
help@astfinancial.com
Shareholders of record who receive more than one
copy of this annual report can contact our transfer
agent and arrange to have their accounts consolidated.
Shareholders who own Gartner stock through a
brokerage firm can contact their broker to request
consolidation of their accounts.
Contact Information
To contact Gartner Investor Relations, call +1 203 316 6537.
We can be contacted during U.S. East Coast business
hours to answer investment-oriented questions
about Gartner.
In addition, you can write us at:
Gartner Investor Relations
56 Top Gallant Road
P.O. Box 10212
Stamford, CT 06904-2212
USA
Or send us an email at investor.relations@gartner.com.
To get financial information online, visit
investor.gartner.com.
Independent Registered Public Accounting Firm
KPMG LLP
345 Park Avenue
New York, NY 10154
USA
April 22, 2020
Dear Stockholder:
On behalf of the Board of Directors and Management of Gartner, Inc., you are invited to attend our 2020 Annual
Meeting of Stockholders to be held on Monday, June 8, 2020, at 10 a.m. local time, at our corporate headquarters
at 56 Top Gallant Road, Stamford, Connecticut. However, in light of the emerging public health concerns of the
COVID-19 (Coronavirus) outbreak, we may hold a Virtual Annual Meeting in lieu of a physical meeting in
Stamford, Connecticut. If we decide to hold a Virtual Annual Meeting, we will announce it in a press release
available at https://investor.gartner.com as soon as practicable prior to the Annual Meeting.
Details of the business to be conducted at the meeting are given in the Notice of Annual Meeting of Stockholders
and Proxy Statement which follow this letter. The 2019 Annual Report to Stockholders is also included with these
materials.
We have mailed to many of our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”)
containing instructions on how to access our 2020 Proxy Statement and our 2019 Annual Report to Stockholders,
and how to vote online on the three management Proposals put before you this year. The Notice also includes
instructions on how to request a paper or email copy of the proxy materials, including the Notice of Annual
Meeting, Proxy Statement and Annual Report, and proxy card or voting instruction card. Stockholders who
the proxy materials or elected to receive the proxy materials
previously either requested paper copies of
electronically did not receive a Notice and will receive the proxy materials in the format requested.
In addition, by following the e-consent instructions in the proxy card, stockholders may go paperless in future
solicitations and request proxy materials electronically by email on an ongoing basis.
Your vote is important. Whether or not you plan to attend the Annual Meeting, we urge you to review the proxy
materials and vote your shares, regardless of the number of shares you hold, as soon as possible. You may vote
by proxy over the internet or by telephone using the instructions provided in the Notice. Alternatively, if you
received paper copies of the proxy materials by mail, you can also vote by following the instructions on the proxy
card or voting instruction card. Instructions regarding the three methods of voting are contained in the Notice,
proxy card or voting instruction card.
the meeting, please contact our
Investor Relations Department at
If you have any questions about
(203) 316-6537.
Sincerely,
Eugene A. Hall
Chief Executive Officer
2020 Proxy Statement |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Date:
Time:
Location:
Monday, June 8, 2020
10:00 a.m. local time
56 Top Gallant Road
Stamford, Connecticut 06902
Matters To Be Voted On:
(1) Election of ten members of our Board of Directors;
(2) Approval, on an advisory basis, of
the compensation of our named
executive officers; and
(3) Ratification of the appointment of KPMG LLP as our independent registered
public accounting firm for the 2020 fiscal year.
Record Date:
April 14, 2020 – You are eligible to vote if you were a stockholder of record on
this date.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to
Be Held on June 8, 2020: We are making this Notice of Annual Meeting, this Proxy Statement and our
2019 Annual Report available on the Internet at www.proxyvote.com and mailing copies of these Proxy
Materials to certain stockholders on or about April 22, 2020. Stockholders of record at the close of
business on April 14, 2020 are entitled to notice of, and to vote at, the Annual Meeting.
In light of the emerging public health concerns of the COVID-19 (Coronavirus) outbreak, we may hold a
Virtual Annual Meeting in lieu of a physical meeting in Stamford, Connecticut. If we decide to hold a Virtual
Annual Meeting, we will announce it in a press release available at https://investor.gartner.com as soon
as practicable prior to the Annual Meeting. In that event, the 2020 Annual Meeting of Stockholders would be
held in a virtual meeting format only, on the above date and time, via live audio webcast. Stockholders or
their legal proxy holders could participate, submit questions, vote, and examine our stockholder list at the
Virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/IT2020 and using your 16-digit
control number, but only if the meeting is held virtually and not in Stamford, Connecticut. If you are planning
to attend our Annual Meeting, please monitor our website prior to the meeting date. As always, we
encourage you to vote your shares prior to the Annual Meeting.
By Order of the Board of Directors,
Jules Kaufman
Secretary
Stamford, Connecticut
April 22, 2020
2020 Proxy Statement |
TABLE OF CONTENTS
GENERAL INFORMATION
COMPENSATION TABLES AND NARRATIVE
The Annual Meeting and Proposals . . . . . . . . . .
1
DISCLOSURES
THE BOARD OF DIRECTORS
General Information About Our Board of
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Director Skills, Experience and Expertise . . . . .
Majority Vote Standard . . . . . . . . . . . . . . . . . . . .
Compensation of Directors . . . . . . . . . . . . . . . . .
Director Compensation Table . . . . . . . . . . . . . . .
Director Stock Ownership and Holding Period
Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CORPORATE GOVERNANCE
Board Principles and Practices . . . . . . . . . . . . .
Director Independence . . . . . . . . . . . . . . . . . . . .
Board Leadership Structure . . . . . . . . . . . . . . . .
Risk Oversight . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board and Committee Meetings and Annual
2
5
5
5
6
7
8
8
9
9
Meeting Attendance . . . . . . . . . . . . . . . . . . . . 10
. . . . . . . . 10
Committees Generally and Charters
Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . 10
Compensation Committee . . . . . . . . . . . . . . . . . 11
Governance/Nominating Committee . . . . . . . . . 12
. . . . . . . . 13
Code of Ethics and Code of Conduct
PROPOSAL ONE: ELECTION OF DIRECTORS
Nominees for Election to the Board of
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
EXECUTIVE OFFICERS
General Information about our Current
Executive Officers . . . . . . . . . . . . . . . . . . . . . 15
COMPENSATION DISCUSSION & ANALYSIS
Executive Summary . . . . . . . . . . . . . . . . . . . . . . 17
Compensation Setting Process for 2019 . . . . . . 21
Other Compensation Policies and
Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Executive Stock Ownership and Holding
Period Guidelines . . . . . . . . . . . . . . . . . . . . 29
Clawback Policy . . . . . . . . . . . . . . . . . . . . . . . 29
Hedging and Pledging Policies . . . . . . . . . . . 29
Accounting and Tax Impact
. . . . . . . . . . . . . . 29
Grant of Equity Awards . . . . . . . . . . . . . . . . . . 30
Compensation Committee Report . . . . . . . . . . . 31
Summary Compensation Table . . . . . . . . . . . . . 32
Other Compensation Table . . . . . . . . . . . . . . . . 33
Grants of Plan-Based Awards Table . . . . . . . . . 34
Certain Employment Agreements with
Executive Officers . . . . . . . . . . . . . . . . . . . . . . 35
Potential Payments upon Termination or
Change in Control
. . . . . . . . . . . . . . . . . . . . . 39
Outstanding Equity Awards at Fiscal Year-End
Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Option Exercises and Stock Vested Table . . . . 42
Non-Qualified Deferred Compensation
Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Pay Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Equity Compensation Plan Information . . . . . . . 44
PROPOSAL TWO: APPROVAL, ON AN
ADVISORY BASIS, OF THE
COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . 45
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 46
TRANSACTIONS WITH RELATED
PERSONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
PROPOSAL THREE: RATIFICATION OF
APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Principal Accountant Fees and Services . . . . . . 49
Audit Committee Report . . . . . . . . . . . . . . . . . . . 50
PROXY AND VOTING INFORMATION
Information Concerning Proxy Materials and
the Voting of Proxies . . . . . . . . . . . . . . . . . . . . 51
Stockholder Communications . . . . . . . . . . . . . . . 55
Available Information . . . . . . . . . . . . . . . . . . . . . . 55
Process for Submission of Stockholder
Proposals for our 2021 Annual Meeting . . . . 55
Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
2020 Proxy Statement |
56 Top Gallant Road
Stamford, Connecticut 06902
PROXY STATEMENT
For the Annual Meeting of Stockholders to be held on June 8, 2020
GENERAL INFORMATION
The Annual Meeting and Proposals
time,
for the purposes set
The 2020 Annual Meeting of Stockholders of Gartner, Inc. will be held on Monday, June 8, 2020, at 10:00 a.m.
local
forth in the accompanying Notice of Annual Meeting of Stockholders and
described in greater detail below. This Proxy Statement and form of proxy, together with our 2019 Annual Report
to Stockholders, are being furnished in connection with the solicitation by the Board of Directors of proxies to be
used at the meeting and any adjournment of the meeting, and are first being made available to our stockholders
on or around April 22, 2020. We will refer to your company in this Proxy Statement as “we”, “us”, the “Company”
or “Gartner.” The three proposals to be considered and acted upon at the Annual Meeting, which are described in
more detail in this Proxy Statement, are:
•
•
•
Election of ten (10) nominees to our Board of Directors;
Approval, on an advisory basis, of the compensation of our named executive officers; and
Ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the
2020 fiscal year.
Management does not intend to present any other items of business and is not aware of any matters other than
those set forth in this Proxy Statement for action at the 2020 Annual Meeting of Stockholders. However, if any
other matters properly come before the Annual Meeting, the persons designated by the Company as proxies may
vote the shares of common stock (“Common Stock”) they represent in their discretion.
Public Health Concerns of the COVID-19 Outbreak
In light of the emerging public health concerns of the COVID-19 (Coronavirus) outbreak, we may hold a Virtual
Annual Meeting in lieu of a physical meeting in Stamford, Connecticut. If we decide to hold a Virtual Annual
Meeting, we will announce it in a press release available at https://investor.gartner.com as soon as practicable
prior to the Annual Meeting. In that event, the 2020 Annual Meeting of Stockholders would be held in a virtual
meeting format only, on the above date and time, via live audio webcast. Stockholders or their legal proxy holders
could participate, submit questions, vote, and examine our stockholder list at the Virtual Annual Meeting by
visiting www.virtualshareholdermeeting.com/IT2020 and using your 16-digit control number, but only if the
meeting is held virtually and not in Stamford, Connecticut. If you are planning to attend our Annual Meeting,
please monitor our website prior to the meeting date. As always, we encourage you to vote your shares prior to
the Annual Meeting.
2020 Proxy Statement | 1
THE BOARD OF DIRECTORS
General Information about our Board of Directors
Our Board of Directors of Gartner, Inc. (the “Board”) currently has ten directors who serve for annual terms. Our
CEO, Eugene A. Hall, has an employment agreement with the Company that obligates the Company to include
him on the slate of nominees to be elected to our Board during the term of the agreement. See Executive
Compensation – Certain Employment Agreements with Executive Officers – Mr. Hall below. There are no other
arrangements between any director or nominee and any other person pursuant to which the director or nominee
was selected. None of our directors or executive officers is related to another director or executive officer by
blood, marriage or adoption.
Each member of our Board has been nominated for re-election at the 2020 Annual Meeting. See Proposal One –
Election of Directors on page 14. Set forth below are the name, age, principal occupation for the last five years,
public company board experience, selected additional biographical information and period of service as a director
of
the Company of each director, as well as a summary of each director’s experience, qualifications and
background which, among other factors, support their respective qualifications to continue to serve on our Board.
Peter E. Bisson, 62,
director since 2016
including chair of
Mr. Bisson retired from McKinsey & Company, a global management consulting
business, in 2016 where he last served as Director and Global Leader of the High
Tech Practice. Mr. Bisson held a number of other leadership positions at McKinsey &
its knowledge committee, which guides the firm’s
Company,
knowledge investment and communication strategies, member of
the firm’s
shareholders committee, and leader of the firm’s strategy and telecommunications
practices. In more than 30 years at McKinsey & Company, Mr. Bisson advised a
variety of multinational public companies in the technology-based products and
services industry. Mr. Bisson is also a director of Automatic Data Processing, Inc.
Mr. Bisson’s experience includes advising clients on corporate strategy and M&A,
design and execution of performance improvement programs and marketing and
technology development, which qualifies him to serve as a director.
Richard J. Bressler,
62, director since
2006
Mr. Bressler is President, Chief Operating Officer and Chief Financial Officer of
iHeartMedia, Inc., a mass media company. iHeartMedia, Inc. filed for bankruptcy
protection under Chapter 11 of the U.S. Bankruptcy Code in March 2018 and emerged
from bankruptcy in May 2019.
From July 2013 to April 2019, Mr. Bressler also served as the Chief Financial Officer
of Clear Channel Outdoor Holdings, Inc., an outdoor advertising company. Prior to
joining iHeartMedia, he served as Managing Director of Thomas H. Lee Partners, L.P.,
a Boston-based private equity firm, from 2006 to July 2013. He joined Thomas H. Lee
Partners from his role as Senior Executive Vice President and Chief Financial Officer
of Viacom Inc., where he managed all strategic, financial, business development and
technology functions. Mr. Bressler has also served in various capacities with Time
Warner Inc., including Chairman and Chief Executive Officer of Time Warner Digital
Media and Executive Vice President and Chief Financial Officer of Time Warner Inc.
Prior to joining Time Inc., he was a partner with the accounting firm of Ernst & Young.
Mr. Bressler is currently a director of iHeartMedia, Inc., and a former director of The
Nielsen Company B.V. and Warner Music Group Corp.
Mr. Bressler qualifies as an audit committee financial expert, and his extensive
financial and operational roles at
large U.S. public companies bring a wealth of
management, financial, accounting and professional expertise to our Board and Audit
Committee.
2020 Proxy Statement | 2
Raul E. Cesan, 72,
director since 2012
Karen E. Dykstra, 61,
director since 2007
Anne Sutherland
Fuchs, 73, director
since 1999
William O. Grabe, 81,
director since 1993
The Board of Directors
Mr. Cesan is the Founder and Managing Partner of Commercial Worldwide LLC, an
investment firm. Prior thereto, he spent 25 years at Schering – Plough Corporation,
serving in various capacities of substantial responsibility: the President and Chief
Operating Officer (from 1998 to 2001); Executive Vice President of Schering-Plough
Corporation and President of Schering-Plough Pharmaceuticals (from 1994 to 1998);
President of Schering Laboratories, U.S. Pharmaceutical Operations (from 1992 to
1994); and President of Schering – Plough International (from 1988 to 1992).
Mr. Cesan was until April 2018 also a director of The New York Times Company.
Mr. Cesan’s extensive operational and international experiences provide valuable
guidance to our Board and Compensation Committee.
Ms. Dykstra served as Chief Financial and Administrative Officer from November 2013
to July 2015, and as Chief Financial Officer from September 2012 to November 2013,
of AOL, Inc., an online service provider. From January 2007 until December 2010,
Ms. Dykstra was a Partner of Plainfield Asset Management LLC (“Plainfield”), and she
served as Chief Operating Officer and Chief Financial Officer of Plainfield Direct LLC,
Plainfield’s business development company, from May 2006 to 2010, and as a director
from 2007 to 2010. Prior thereto, she spent over 25 years with Automatic Data
Processing, Inc., serving most recently as Chief Financial Officer from January 2003
to May 2006, and prior thereto as Vice President – Finance, Corporate Controller and
in other capacities. Ms. Dykstra is a director of VMware, Inc. and Boston Properties,
Inc., and a former director of Crane Co. and AOL, Inc.
Ms. Dykstra qualifies as an audit committee financial expert, and her extensive
management,
financial, accounting and oversight experience provide important
expertise to our Board and Audit Committee.
Ms. Fuchs served as Group President, Growth Brands Division, Digital Ventures, a
division of J.C. Penney Company, Inc., from November 2010 until April 2012. She also
served as Chair of the Commission on Women’s Issues for New York City during the
Bloomberg Administration, a position she held from 2002 through 2013. Previously,
Ms. Fuchs served as a consultant to companies on branding and digital initiatives, and
as a senior executive with operational responsibility at LVMH Moët Hennessy Louis
Vuitton, Phillips de Pury & Luxembourg and several publishing companies, including
Hearst Corporation, Conde Nast, Hachette and CBS. Ms. Fuchs is also a director of
Pitney Bowes Inc.
Ms. Fuchs’ executive management, content and branding skills plus operations
expertise, her knowledge of government operations and government partnerships with
the private sector, and her keen interest and knowledge of diversity, governance and
executive compensation matters provide important perspective to our Board and its
Governance and Compensation Committees.
Mr. Grabe is an Advisory Director of General Atlantic LLC, a global private equity firm.
Prior to joining General Atlantic in 1992, Mr. Grabe was a Vice President and
Corporate Officer of IBM Corporation. Mr. Grabe is presently a director of QTS Realty
Trust, Inc. and Lenovo Group Limited. He is a former director of Infotech Enterprises
Limited, Compuware Corporation, Patni Computer Systems Ltd. (now known as iGate
Computer Systems Limited) and Covisint Corporation. Mr. Grabe is also a trustee of
the Nature Conservatory in Florida and the NYU Entrepreneurial Institute, as well as a
member of the Board of Grand Canyon Trust and the UCLA Anderson School of
Management Board of Visitors.
Mr. Grabe’s extensive senior executive experience, his knowledge of business
operations and his vast knowledge of the global information technology industry have
made him a valued member of the Board and Governance Committee.
2020 Proxy Statement | 3
The Board of Directors
Eugene A. Hall, 63,
director since 2004
Stephen G. Pagliuca,
65, director since
1990 (except for six
months in 2009 when
he entered the U.S.
Senate race for
Massachusetts)
Eileen M. Serra, 65,
director since 2017
Mr. Hall is the Chief Executive Officer of Gartner. Prior to joining Gartner as Chief
Executive Officer in 2004, Mr. Hall was a senior executive at Automatic Data
Processing, Inc., a Fortune 500 global technology and services company, serving
most recently as President, Employers Services Major Accounts Division, a provider
of human resources and payroll services. Prior to joining ADP in 1998, Mr. Hall spent
16 years at McKinsey & Company, most recently as Director.
As Gartner’s CEO, Mr. Hall
is responsible for developing and executing on the
Company’s operating plan and business strategies in consultation with the Board of
Directors and for driving Gartner’s business and financial performance and is the sole
management representative on the Board.
Mr. Pagliuca is a Managing Director of Bain Capital Private Equity, LP, a global private
equity firm, and Co-Chairman of Bain Capital, L.P. He is also a Managing Partner and
the Boston Celtics basketball franchise. Mr. Pagliuca joined Bain &
an owner of
Company in 1982, and founded the Information Partners private equity fund for Bain
Capital in 1989. Prior to joining Bain, Mr. Pagliuca worked as a senior accountant and
international tax specialist for Peat Marwick Mitchell & Company in the Netherlands.
Mr. Pagliuca is a former director of Burger King Holdings, Inc., HCA, Inc. (Hospital
Corporation of America), Quintiles Transnational Corporation, Warner Chilcott PLC
and the Weather Company. He currently serves on the Board of Directors of Axis
Bank, Ltd., Kioxia Holdings Corporation and Virgin Voyages.
the
Mr. Pagliuca has deep subject matter knowledge of Gartner’s history,
development of its business model and the global information technology industry, as
well as financial and accounting matters.
Ms. Serra retired from JPMorgan Chase & Co., an international financial services
company, in February 2018, where she last served as a Senior Advisor focusing on
strategic growth initiatives across Chase Consumer and Community Banking
businesses. From 2012 to 2016, she served as the CEO of Chase Card Services.
Prior to joining Chase Card Services in 2006, Ms. Serra was a Managing Director at
Merrill Lynch. She was a Senior Vice President at American Express and a partner at
McKinsey & Company earlier in her career. She is currently a director of Capital One
Financial Corporation.
Ms. Serra has extensive operational and management experience, having held senior
positions at some of
the world’s largest companies, which allows her to provide
valuable guidance to our Board.
James C. Smith, 79,
director since 2002
and Chairman of the
Board since 2004
Mr. Smith was Chairman of the Board of First Health Group Corp., a national health
its sale in 2004. He also served as First Health’s Chief
benefits company until
Executive Officer from January 1984 through January 2002 and President
from
January 1984 to January 2001.
Mr. Smith’s long-time expertise and experience as the founder, senior-most executive
and chairman of the board of a successful large public company provides a unique
perspective and insight into management and operational issues faced by the Board,
Audit Committee and our CEO. This experience, coupled with Mr. Smith’s personal
leadership qualities, qualify him to continue to serve as Chairman of the Board.
2020 Proxy Statement | 4
The Board of Directors
Director Skills, Experience and Expertise
The matrix below summarizes what our Board believes are desirable types of experience, qualifications, attributes
and skills possessed by one or more of Gartner’s directors, because of
their particular relevance to the
Company’s business and structure. The following matrix does not encompass all the experience, qualifications,
attributes or skills of our directors.
Bisson Bressler Cesan Dykstra Fuchs
Grabe
Hall
Pagliuca Serra
Smith
Total
Industry Experience
Technology
Public Company Boards
International
Leadership
Corporate Governance
Accounting
Capital Markets
Executive Compensation
Diversity
Strategic Planning/ Business
Development/ M&A
Operations
Sales & Marketing
X
X
X
X
X
X
X
X
Majority Vote Standard
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
5
5
8
9
10
4
5
3
8
4
10
10
5
X
X
X
X
X
X
X
X
The Company has adopted a majority vote standard for the election of directors which provides that a nominee
must receive more FOR votes than AGAINST votes for election as a director. Should a nominee fail to achieve
this threshold, the nominee must immediately tender his or her resignation to the Chairman. The Board, in its
discretion, can determine whether or not to accept the resignation.
Compensation of Directors
The Compensation Committee, in consultation with the Governance Committee, reviews all forms of independent
director compensation and approves changes, when appropriate. The Compensation and Governance
Committees are supported in this review by Exequity, LLP. The review examines director compensation in relation
to two comparator groups: Peer Group and General Industry Reference Group. The Peer Group includes the
same companies used to benchmark executive pay. The General
Industry Reference Group includes 100
companies with median revenues similar to that of Gartner. Regular review of the director compensation program
ensures that the director compensation is reasonable and reflects a mainstream approach to the structure of the
compensation components and the method of delivery. Director compensation is primarily reviewed in relation to
the Peer Group. Gartner did not adjust director compensation in 2019 after adjusting it in 2018 to close an
identified shortfall from the Peer Group median, increasing the director annual equity grant from $200,000 to
$240,000. An increase in equity compensation was the only change made to director compensation in following
with Gartner’s philosophy to provide more value in equity compensation than cash. Director compensation in 2019
was determined to approximate the median of the Peer Group. The section that follows describes the current
director compensation program and components.
2020 Proxy Statement | 5
The Board of Directors
Directors who are also employees receive no fees for their services as directors. Non-management directors are
reimbursed for their meeting attendance expenses and receive the following compensation for their service as
director:
Annual Director
Retainer Fee:
Annual Committee
Chair Fee:
Annual Committee
Member Fee:
Annual Equity Grant:
$60,000 per director and an additional $100,000 for our non-executive Chairman of
the Board, payable in arrears in four equal quarterly instalments, on the first
business day of each quarter. These amounts are paid in common stock
equivalents (“CSEs”) granted under the Company’s 2014 Long-Term Incentive Plan
(the “2014 Plan”), except that a director may elect to receive up to 50% of this fee in
cash. The CSEs convert into Common Stock on the date the director’s continuous
status as a director terminates, unless the director elects accelerated release as
provided in the 2014 Plan. The number of CSEs awarded is determined by dividing
the aggregate director fees owed for a quarter (other than any amount payable in
cash) by the closing price of the Common Stock on the first business day following
the close of that quarter.
$10,000 for the chair of our Governance Committee and $15,000 for the chairs of
our Audit and Compensation Committees. Amounts are payable in the same
manner as the Annual Director Retainer Fee.
$7,500 for our Governance Committee members, $10,000 for our Compensation
Committee members and $15,000 for our Audit Committee members. Committee
chairs receive both a committee chair fee and a committee member fee. Amounts
are payable in the same manner as the Annual Director Retainer Fee.
$240,000 in value of restricted stock units (“RSUs”), awarded annually on the date
of the Annual Meeting. The number of RSUs awarded is determined by dividing
$240,000 by the closing price of the Common Stock on the award date. The RSUs
vest one year after grant subject to continued service as director through that date;
release may be deferred beyond the vesting date at the director’s election.
Director Compensation Table
This table sets forth compensation earned or paid in cash, and the grant date fair value of equity awards made, to
our non-management directors on account of services rendered as a director in 2019. Mr. Hall receives no
additional compensation for service as director.
Name
Peter E. Bisson
Richard J. Bressler
Raul E. Cesan
Karen E. Dykstra
Anne Sutherland Fuchs
William O. Grabe
Stephen G. Pagliuca
Eileen M. Serra
James C. Smith
Fees
Earned Or Paid
($)(1)
67,504
89,900
69,966
74,927
92,592
77,471
60,000
69,966
174,898
Stock
Awards
($)(2)
240,129
240,129
240,129
240,129
240,129
240,129
240,129
240,129
240,129
Total
($)
307,633
330,029
310,095
315,056
332,721
317,600
300,129
310,095
415,027
2020 Proxy Statement | 6
The Board of Directors
(1) Includes amounts earned in 2019 and paid in cash and/or CSEs on account of the Annual Director
Retainer Fee, Annual Committee Chair Fee and/or Annual Committee Member Fee, described above.
Does not include reimbursement for meeting attendance expenses.
(2) Represents the grant date value of an annual equity award computed in accordance with Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, consisting
of 1,574 RSUs that vest on May 30, 2020, one year from the date of the 2019 Annual Meeting (unless
deferred release was elected), subject to continued service through that date. The number of RSUs
awarded was calculated by dividing $240,000 by the price of our Common Stock on May 30, 2019
($152.56) (rounded up to the nearest whole number).
Director Stock Ownership and Holding Period Guidelines
The Board believes directors should have a financial
interest in the Company. Accordingly, each director is
required to hold shares of Gartner common stock with a value of not less than five (5) times the Annual Director
Retainer Fee ($60,000). Directors are required to achieve the guideline within three years of joining the Board. In
the event a director has not satisfied the guideline within such three-year period, he/she will be required to hold
50% of net after-tax shares received from the Company either in the form of equity awards or released CSEs until
the guideline is achieved. We permit directors to apply deferred and unvested equity awards towards satisfying
these requirements. As of December 31, 2019, all of our directors were in compliance with these guidelines.
2020 Proxy Statement | 7
CORPORATE GOVERNANCE
Gartner is committed to maintaining strong corporate governance practices.
Corporate Governance Highlights:
➣ Independent Chairman of the Board
➣ Majority voting for directors
➣ Annual election of directors
➣ Annual Board and Committee performance evaluation
➣ Executive sessions after each Board and Committee meeting
➣ 9 out of 10 directors are independent
➣ 3 out of 10 directors are women
➣ Fully independent Board committees
➣ Annual director affirmation of compliance with Code of Conduct
➣ Annual director evaluation of CEO
Board Principles and Practices
Our Board Principles and Practices (the “Board Guidelines”) are reviewed annually and revised in light of legal,
regulatory or other developments, as well as emerging best practices, by our Governance Committee and Board.
The Board Guidelines, which are posted on https://investor.gartner.com, describe the Board’s responsibilities,
its role in strategic development and other matters, discussed below.
Director Independence
Our Board Guidelines require that our Board be comprised of a majority of directors who meet the criteria for
independence from management set forth by the New York Stock Exchange (the “NYSE”) in its corporate
governance listing standards.
Our committee charters likewise require that our standing Audit, Compensation and Governance/Nominating
Committees be comprised only of independent directors. Additionally, the Audit Committee members must be
independent under Section 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The
Compensation Committee members must be independent under Rule 16b-3 promulgated under the Exchange
Act as well as applicable NYSE corporate governance listing standards, and they must qualify as outside directors
under regulations promulgated under Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986,
as amended (the “Code”).
Utilizing all of these criteria, as well as all relevant facts and circumstances, the Board annually assesses the
independence from management of all non-management directors and committee members by reviewing the
commercial, financial, familial, employment and other relationships between each director and the Company, its
auditors and other companies that do business with Gartner. Because of our worldwide reach, it is not unusual for
Gartner to engage in ordinary course of business transactions involving the sale of research or consulting
services with entities affiliated with one of our directors, or their immediate family members. The Board
considered these transactions in determining director independence and determined that such transactions did
not impair any director’s independence.
After analysis and recommendation by the Governance Committee, the Board determined that:
•
all non-management directors who served during the 2019 fiscal year (Peter Bisson, Richard
Bressler, Raul Cesan, Karen Dykstra, Anne Sutherland Fuchs, William Grabe, Stephen Pagliuca,
Eileen Serra and James Smith) are independent under the NYSE listing standards;
2020 Proxy Statement | 8
Corporate Governance
•
•
our Audit Committee members (Ms. Dykstra and Messrs. Bressler and Smith) are independent
under the criteria set forth in Section 10A-3 of the Exchange Act; and
our Compensation Committee members (Mr. Cesan and Mses. Fuchs and Serra) are independent
under the criteria set forth in Exchange Act Rule 16b-3 as well as under applicable NYSE corporate
governance listing standards, and qualify as “outside directors” under Code Section 162(m)
regulations.
Board Leadership Structure
The leadership of our Board rests with our independent Chairman of the Board, Mr. James C. Smith. Gartner
believes that the separation of functions between the CEO and Chairman of the Board provides independent
leadership of the Board in the exercise of its management oversight responsibilities, increases the accountability
of the CEO and creates transparency into the relationship among executive management, the Board of Directors
and stockholders. Additionally, in view of Mr. Smith’s extensive experience as a chief executive officer of a major
corporation, he is able to provide an independent point of view to our CEO on important management and
operational issues.
Risk Oversight
The Board of Directors, together with management, oversees risk (including cybersecurity risk) at Gartner. The
Company’s strategic objectives and activities are presented by executive management to the Board and approved
annually and more frequently as necessary. The Board regularly receives updates on cybersecurity matters from
the Company’s Chief Information Officer and discusses identified issues at its meetings.
The Risk (Internal Audit) function reports directly to the Audit Committee and provides quarterly reports to the
committee. The committee reviews the results of the internal audit annual risk assessment and the proposed
internal audit plan. Subsequent quarterly meetings include an update on ongoing internal audit activities, including
results of audits and any changes to the audit plan. Risk also meets with the Audit Committee in executive
session on a quarterly basis.
The General Counsel, who serves as Chief Compliance Officer, also reports directly to the Audit Committee on a
quarterly basis concerning the effectiveness and status of the Company’s legal and ethical compliance program
and initiatives, hotline activities and litigation matters.
The Company maintains internal controls and procedures over financial reporting, as well as enterprise wide
internal controls, which are updated and tested annually by management and our independent registered public
accounting firm. Any internal control deficiencies and the status of remediation efforts as well as any findings of
the Disclosure Controls Committee are reported to the Audit Committee on a quarterly basis.
Risk Assessment of Compensation Policies and Practices
Management conducts an annual risk assessment of
the Company’s compensation policies and practices,
including all executive, non-executive and business unit compensation policies and practices, as well as the
variable compensation policies applicable to our global sales force. The results of this assessment are reported to
the Compensation Committee. For 2019, management concluded, and the Compensation Committee agreed, that
no Company compensation policies and practices created risks that were reasonably likely to have a material
adverse effect on the Company.
Management Succession Planning
Succession planning is one of the Board’s most critical functions—to develop leaders who will successfully build
the Company’s business. The Board and its Committees regularly review and discuss management development
2020 Proxy Statement | 9
Corporate Governance
and succession plans for the Chief Executive Officer and his direct reports. This review includes an assessment
of senior executives and their potential as successor to the Chief Executive Officer.
Board and Committee Meetings and Annual Meeting Attendance
Our Board held four meetings in 2019. During 2019, all of our directors attended at least 75% of the Board and
committee meetings held during the periods in which such director served as a director and/or committee
member. At each regular quarterly Board and committee meeting, time is set aside for the non-management
directors to meet
in executive session without management present. James C. Smith, our non-executive
Chairman of the Board, presides over the executive sessions at the Board meetings, and each committee
chairperson presides over the executive sessions at their respective committee meetings. Directors are not
required, but are invited, to attend the Annual Meeting of Stockholders. In 2019, Mr. Hall and other executive
officers of the Company attended the 2019 Annual Meeting of Stockholders.
Committees Generally and Charters
As noted above, our Board has three standing committees: Audit, Compensation and Governance/Nominating,
and all committee members have been determined by our Board to be independent under applicable standards.
Our Board has approved a written charter for each standing committee, which is reviewed annually and revised
as appropriate. The table below provides information for each Board committee in 2019:
Name
Audit
Compensation
Governance/Nominating
Peter E. Bisson
Richard J. Bressler
Raul E. Cesan
Karen E. Dykstra
Anne Sutherland Fuchs
William O. Grabe
Stephen G. Pagliuca
Eileen M. Serra
James C. Smith
Meetings Held in 2019:
Audit Committee
X (Chair)
X
X
5
X
X (Chair)
X
5
X
X
X (Chair)
4
Our Audit Committee serves as an independent body to assist in Board oversight of:
✓ the integrity of the Company’s financial statements;
✓ the Company’s compliance with legal and regulatory requirements;
✓ the independent registered public accounting firm’s retention, qualifications
and independence; and
✓ the Company’s Risk, Compliance and Internal Audit functions.
Gartner has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A)
of
the Exchange Act. Our Board has determined that both Ms. Dykstra and Mr. Bressler qualify as audit
committee financial experts, as defined by the rules of the Securities and Exchange Commission (the “SEC”), and
that all members have the requisite accounting or related financial management expertise and are financially
literate as required by the NYSE corporate governance listing standards.
2020 Proxy Statement | 10
Corporate Governance
Additionally, the Audit Committee is directly responsible for the appointment, compensation and oversight of our
independent registered public accounting firm, KPMG; approves the engagement letter describing the scope of
the annual audit; approves fees for audit and non-audit services; provides an open avenue of communication
among the independent registered public accounting firm, the Risk and Internal Audit functions, management and
the Board; resolves disagreements,
if any, between management and the independent registered public
accounting firm regarding financial reporting for the purpose of issuing an audit report in connection with our
financial statements and our internal control over financial reporting; and prepares the Audit Committee Report
required by the SEC and included in this Proxy Statement on page 50 below.
The independent registered public accounting firm reports directly to the Audit Committee. By meeting with the
independent registered public accounting firm, the internal auditor, and operating and financial management
personnel, the Audit Committee oversees matters relating to accounting standards, policies and practices, any
changes thereto and the effects of any changes on our financial statements, financial reporting practices and the
quality and adequacy of internal controls. Additionally, our internal audit and compliance functions report directly
to the Audit Committee. After each Audit Committee meeting, the Committee meets separately with the CFO, the
independent registered public accounting firm, the Chief Compliance Officer and the internal auditor without
management present.
The Audit Committee has established procedures for (i) the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting controls or auditing matters, and (ii) the
confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing
matters. A toll-free phone number and web-submission form, in local
language, managed by a third party is
available for confidential and anonymous submission of concerns relating to accounting, auditing and illegal or
unethical matters, as well as alleged violations of Gartner’s Code of Conduct or any other policies. All
submissions on the hotline are reported to the General Counsel (or designee, who determines the mode of
investigation), the internal auditor and the Audit Committee at each regular meeting. The Audit Committee has the
power and funding to retain independent counsel and other advisors as it deems necessary to carry out its duties.
Compensation Committee
Our Compensation Committee has responsibility for:
✓
✓
✓
✓
✓
✓
✓
administering and approving all elements of compensation for the Chief
Executive Officer and other executive officers;
approving, by direct action or through delegation, all equity awards, grants,
and related actions under the provisions of our equity plan, and administering
the plan;
participating in the evaluation of CEO and other executive officer performance
(with the input and oversight of the Governance Committee and the Chairman
of the Board);
approving the peer group used for executive compensation benchmarking
purposes;
evaluating the independence of all compensation committee advisers;
providing oversight in connection with company-wide compensation programs;
and
approving the form and amount of director compensation in consultation with
the Governance/Nominating Committee.
2020 Proxy Statement | 11
Corporate Governance
The Compensation Committee reviewed and approved the Compensation Discussion and Analysis contained in
this Proxy Statement, recommended its inclusion herein (and in our 2019 Annual Report on Form 10-K) and
issued the related report to stockholders as required by the SEC (see Compensation Committee Report on
page 31 below).
Exequity LLP (“Exequity”) was retained by the Compensation Committee to provide information, analyses and
advice to the Committee during various stages of 2019 executive compensation planning. Exequity reports
directly to the Compensation Committee chair. In the course of conducting its activities, Exequity attended
meetings of
the Compensation Committee and briefed the Committee on executive compensation trends
generally.
The Compensation Committee has assessed the independence of Exequity and has concluded that Exequity is
independent and that its retention presents no conflicts of interest either to the Committee or the Company.
Final decisions with respect to determining the amount or form of executive compensation under the Company’s
executive compensation programs are made by the Compensation Committee alone and may reflect factors and
considerations other
to the
Compensation Discussion & Analysis beginning on page 17 for a more detailed discussion of the Compensation
Committee’s activities with respect to executive compensation.
than the information and advice provided by its consultants. Please refer
Compensation Committee Interlocks and Insider Participation. During 2019, no member of the Compensation
Committee served as an officer or employee of the Company, was formerly an officer of the Company or had any
relationship with the Company required to be disclosed under Transactions with Related Persons below.
Additionally, during 2019, no executive officer of the Company: (i) served as a member of the compensation
committee (or full board in the absence of such a committee) or as a director of another entity, one of whose
executive officers served on our Compensation Committee; or (ii) served as a member of the compensation
committee (or full board in the absence of such a committee) of another entity, one of whose executive officers
served on our Board.
Governance/Nominating Committee
Our Governance/Nominating Committee (the “Governance Committee”) has responsibility for:
✓ the size, composition and organization of our Board;
✓ the independence of directors and committee members under applicable standards;
✓ our corporate governance policies, including our Board Principles and Practices;
✓ the criteria for directors and the selection of nominees for election to the Board;
✓ committee assignments;
✓ assisting the Compensation Committee in determining the form and amount of
director compensation;
✓ the performance evaluation of our CEO and management succession planning; and
✓ the annual Board and Committee performance evaluations.
While the Governance Committee has not specified minimum qualifications for candidates it recommends, it will
consider the qualifications, skills, expertise, qualities, diversity, age, gender, availability and experience of all
candidates that are presented for consideration. At the present time, three of our ten directors are women. The
Board utilizes a concept of diversity that extends beyond race, gender and national origin to encompass the
viewpoints, professional experience and other individual qualities and attributes of candidates that will enable the
2020 Proxy Statement | 12
Corporate Governance
Board to select candidates who are best able to carry out the Board’s responsibilities and complement the mix of
talent and experience represented on the Board. In connection with its annual evaluation, the Board considers the
appropriateness of the qualifications of existing directors given then current needs.
Candidates for Board nomination may be brought to the attention of the Governance Committee by current Board
members, management, stockholders or other persons. All potential new candidates are fully evaluated by the
Governance Committee using the criteria described above, and then considered by the entire Board for
nomination.
Director Candidates submitted by Stockholders: Stockholders wishing to recommend director candidates for
the Governance/
consideration by the Governance Committee may do so by writing to the Chairman of
Nominating Committee, c/o Corporate Secretary, Gartner, Inc., 56 Top Gallant Road, P.O. Box 10212, Stamford,
CT 06904-2212, and indicating the recommended candidate’s name, biographical data, professional experience
and any other qualifications. In addition, stockholders wishing to propose candidates for election must follow our
advance notice provisions. See Process for Submission of Stockholder Proposals for our 2021 Annual Meeting on
page 55.
Code of Ethics and Code of Conduct
Gartner has adopted a CEO & CFO Code of Ethics which applies to our CEO, CFO, controller and other financial
managers, and a Global Code of Conduct, which applies to all Gartner officers, directors and employees,
wherever located. Annually, each officer, director and employee affirms compliance with the Global Code of
Conduct. See Proxy and Voting Information—Available Information below.
2020 Proxy Statement | 13
PROPOSAL ONE:
ELECTION OF DIRECTORS
Nominees for Election to the Board of Directors
Our Board, acting through the Governance Committee, is responsible for presenting for stockholder consideration
each year a group of nominees that, taken together, has the experience, qualifications, attributes and skills
appropriate and necessary to carry out the duties and responsibilities of, and to function effectively as, the board
of directors of Gartner. The Governance Committee regularly reviews the composition of the Board in light of the
needs of the Company, its assessment of board and committee performance, and the input of stockholders and
other key stakeholders. The Governance Committee looks for certain common characteristics in all nominees,
including integrity, strong professional experience and reputation, a record of achievement, constructive and
collegial personal attributes and the ability and commitment to devote sufficient time and effort to board service. In
addition, the Governance Committee seeks to include on the Board a complementary mix of individuals with
diverse backgrounds and skills that will enable the Board as a whole to effectively manage the array of issues it
will confront in furtherance of its duties. These individual qualities can include matters such as experience in the
technology industry; experience managing and operating large public companies;
international operating
experience; financial, accounting, executive compensation and capital markets expertise; and leadership skills
and experience.
All of
the nominees listed below are incumbent directors who have been nominated by the Governance
Committee and Board for re-election and have agreed to serve another term. For additional information about the
nominees and their qualifications, please see General Information about our Board of Directors on page 2 above.
If any nominee is unable or declines unexpectedly to stand for election as a director at the Annual Meeting,
proxies may be voted for a nominee designated by the present Board to fill the vacancy. Each person elected as
a director will continue to be a director until the 2021 Annual Meeting of Stockholders or a successor has been
elected.
Peter E. Bisson
Richard J. Bressler
Raul E. Cesan
Karen E. Dykstra
Anne Sutherland Fuchs
William O. Grabe
Eugene A. Hall
Stephen G. Pagliuca
Eileen M. Serra
James C. Smith
RECOMMENDATION OF OUR BOARD
Our Board unanimously recommends that you vote FOR the election of each of the
ten nominees to our Board of Directors.
2020 Proxy Statement | 14
EXECUTIVE OFFICERS
General Information about our Current Executive Officers:
Eugene A. Hall
63
Kenneth Allard
49
Joe Beck
59
Ken Davis
51
Alwyn Dawkins
54
Mike Diliberto,
54
Michael Harris
50
Scott Hensel
47
Chief Executive Officer and director since 2004. Prior to joining Gartner as Chief
Executive Officer, he was a senior executive at Automatic Data Processing, Inc., a Fortune
500 global technology and services company, serving most recently as President, Employers
Services Major Accounts Division, a provider of human resources and payroll services. Prior
to joining ADP in 1998, Mr. Hall spent 16 years at McKinsey & Company, most recently as
Director.
Executive Vice President, New Market Programs since April 2019. Mr. Allard joined
Gartner as Group Vice President, Consulting in 2017 following the acquisition of L2, Inc.,
where he was CEO. Previously, he was a Managing Director at Huge Inc., a full service
digital agency, and held senior leadership positions at research and consulting companies
including Edgewater Technology Inc., Jupiter Media Metrix Inc. and Gartner, where he
started his career.
Executive Vice President, Global Technology Sales since November 2017. In his more
than 20 years at Gartner, he has served as Senior Vice President, Americas End User Sales
and Managing Vice President. Mr. Beck joined Gartner in 1997 when we acquired Datapro
Information Services. He held sales positions at McGraw-Hill earlier in his career.
Executive Vice President, Products & Services has been leading the Products & Services
function since 2008. Previously at Gartner, he has served as Senior Vice President, End
User Programs, High Tech & Telecom Programs, and Strategy, Marketing and Business
Development. Prior to joining Gartner in 2005, Mr. Davis spent ten years at McKinsey &
Company, where he was a partner assisting clients in the IT industry.
Executive Vice President, Conferences has been leading the Conferences function since
2008. Previously at Gartner, he has served as Group Vice President, Asia/Pacific Sales,
based in Sydney, Australia, and prior thereto, as Group Vice President, Gartner Events,
where he held global responsibility for exhibit and sponsorship sales across the portfolio of
Gartner events. Prior to joining Gartner in 2002, Mr. Dawkins spent ten years at Richmond
Events, culminating in his role as Executive Vice President responsible for its North
American business.
Executive Vice President & Chief Information Officer has been our Chief Information
Officer since 2016. Previously, he served as CIO at Priceline, a leader in online travel and
related services. Before joining Priceline, he held several senior technology positions at the
online division of News Corp, where he was instrumental in establishing an online presence
for News Corp brands such as Fox News, Fox Sports, TV Guide and Sky Sports, including
launching the first major league baseball website. Previously, he held several
leadership
positions at Prodigy Services Company, one of the pioneering consumer-focused online
services.
Executive Vice President, Research & Advisory since August 2018. Mr. Harris has more
than 20 years of experience at Gartner and has held a number of management positions in
Research & Advisory. Most recently, he led the Company’s global team of IT industry experts
and researchers as Senior Vice President, IT Leaders & Tech Professionals Research. Prior
to joining Gartner, Mr. Harris held various roles in Centel, Sprint and AT&T.
Executive Vice President, Consulting since October 2017. Prior to joining Gartner, he
served as President, Terex Services, Parts and Customer Solutions, at Terex Corporation, a
global manufacturer of lifting and material processing products and services. Previously, he
spent 14 years at McKinsey & Company where he was a partner assisting clients in the IT
and Advanced Industries sectors.
2020 Proxy Statement | 15
Executive Officers
Jules Kaufman
62
Executive Vice President, General Counsel & Secretary since August 2017. Prior to
joining Gartner, he was the Chief Legal Officer and Secretary at Coty Inc., a beauty products
manufacturer, from 2008 through 2016. Previously, he spent 18 years at Colgate-Palmolive,
last serving as General Counsel Europe/South Pacific.
Robin Kranich
49
Executive Vice President, Human Resources has been leading Human Resources since
2008. During her more than 25 years at Gartner, she has served as Senior Vice President,
End User Programs; Senior Vice President, Research Operations and Business
Development; Senior Vice President and General Manager of Gartner EXP; Vice President
and Chief of Staff to Gartner’s president; and various sales and sales management roles.
Prior to joining Gartner, Ms. Kranich was part of the Technology Advancement Group at
Marriott International.
David McVeigh
52
Executive Vice President, Global Business Sales since April 2019. Previously,
Mr. McVeigh served as Executive Vice President, New Market Programs and led the New
Markets function since August 2015. Prior to joining Gartner, he was a managing director at
Hellman & Friedman LLC, a private equity firm and an operating partner at Blackstone
Group, and a partner at McKinsey & Company.
Craig W. Safian
51
Executive Vice President & Chief Financial Officer has been our Chief Financial Officer
since June 2014. In his more than 17 years at Gartner, he has served as Group Vice
President, Global Finance and Strategy & Business Development
from 2007 until his
appointment as CFO, and previously as Group Vice President, Strategy and Managing Vice
President, Financial Planning and Analysis. Prior to joining Gartner, he held finance positions
at Headstrong (now part of Genpact) and Bristol-Myers Squibb, and was an accountant for
Friedman, LLP where he achieved CPA licensure.
2020 Proxy Statement | 16
COMPENSATION DISCUSSION & ANALYSIS
This Compensation Discussion & Analysis, or “CD&A”, describes and explains the Company’s compensation
philosophy and executive compensation program, as well as compensation awarded to and earned by, the
following persons who were Named Executive Officers (“NEOs”) in 2019:
Eugene A. Hall
Craig W. Safian
Alwyn Dawkins
Robin Kranich
David McVeigh
Chief Executive Officer
Executive Vice President & Chief Financial Officer
Executive Vice President, Conferences
Executive Vice President, Human Resources
Executive Vice President, Global Business Sales
The CD&A is organized into three sections:
•
The Executive Summary, which highlights the strong year we had in 2019, the importance of our
Contract Value (herein “CV”) metric, our pay-for-performance approach, and our compensation
practices, all of which we believe are relevant to stockholders as they consider their votes on
Proposal Two (advisory vote on executive compensation, or “Say-on-Pay”)
•
The Compensation Setting Process for 2019
• Other Compensation Policies and Information
The CD&A is followed by the Compensation Tables and Narrative Disclosures, which report and describe the
compensation and benefit amounts paid to our NEOs in 2019.
EXECUTIVE SUMMARY
2019 – Another Year of Strong Performance
In 2019, we continued to deliver strong top-line performances across our business. Total revenues showed strong
growth, when comparing 2019 to 2018, fueled by double-digit growth (on an FX neutral basis) in each of our
continuing business segments – Research, Conferences and Consulting.
Research, our largest and most profitable segment, was up 10% year-over-year in revenues on an FX neutral
basis. Contract Value of Global Technology Sales, or GTS, which sells products and services to users and
providers of technology and represents more than 80% of our total Research contract value, grew 12% on an FX
neutral basis. Contract Value of Global Business Sales, or GBS, which sells products and services to all other
functional leaders and represents approximately 20% of our total Research contract value, accelerated growth
through the year to finish up 8% organically on an FX neutral basis, compared to a growth rate of 1.1% in the
investments we have made in GBS products, services and sales are
same quarter of 2018. The substantial
paying off.
Our Conferences business had a strong year as well, delivering revenue growth of 18% on an FX neutral basis
and destination conference attendee growth of 10%. Our Consulting segment also achieved double-digit growth in
2019 with revenues up 14% on an FX neutral basis.
We’ve made investments over the past two years across the company that position us well to capture our market
opportunity. In some cases, we invested ahead of the growth which resulted in a modest increase of costs. Going
forward, we’re shifting to realizing returns from those investments so we are well-positioned for sustained long-
term growth.
2020 Proxy Statement | 17
Compensation Discussion & Analysis
With the great strategic position of GTS and GBS, together with leveraging the investments we have made, we
expect continued strong growth in the future.
Our results continued to fuel double digit-stock price growth of 20.5% in 2019 and average annual growth of
15.1% and 12.8% on a compounded basis, over the trailing three and five year periods, respectively.
Comparison of Gartner Cumulative Five Year Total Shareholder Return
Versus Market Indices
Gartner
Proxy Peers
Tech Sector
S&P500
$300
$200
$100
FYE 2014
FYE 2015
FYE 2016
FYE 2017
FYE 2018
FYE 2019
“Proxy Peers” represents the proxy peer group disclosed on page 23. “Tech Sector” represents the S&P
Technology Select Sector Industry Index (XLK). All comparisons are on a total return basis, including dividends.
Contract Value–A Unique Key Performance Metric for Gartner
Total Contract Value (“CV”) represents the value attributable to all of our subscription-related
contracts. It is calculated as the annualized value of contracts in effect at a specific point in time,
without regard to the duration of the contract. CV primarily includes research deliverables for which
revenue is recognized on a ratable basis and other deliverables (primarily conferences tickets) included
with subscription-based research products for which revenue is recognized when the deliverable is
utilized.
Unique to Gartner, CV is our single most important performance metric. It focuses all of our executives on driving
both short-term and long-term success for our business and stockholders.
Contract Value = Both Short-Term and Long-Term Measures of Success
Short-Term ✓ Measures the value of all subscription research contracts in effect at a specific point
in time.
Long-Term ✓ Measures revenue that is highly likely to recur over a multi-year period.
Comparing CV year-over-year measures the short-term growth of our business and, more important, also signals
the long-term health of our Research subscription business. We believe that CV is our best, most informed and
leading indicator of long-term Research revenue growth.
2020 Proxy Statement | 18
Compensation Discussion & Analysis
Our Research business comprises 79% of our overall revenue and is also our highest contribution margin
business (70% for 2019). Further, many of our Research contracts are multi-year agreements, and our Research
enterprise client retention and retained contract value (or wallet retention) are consistently high. As a result, CV is
predictive of revenue highly likely to recur over a 3 – 5 year period, and a high CV growth rate translates to
high, long-term revenue and profit growth. In addition, many of our clients pay us upfront when they purchase our
research subscription services, which drives strong cash flow. For all these reasons, the Board believes that CV
growth, which translates to Research revenue growth, is the most important driver of the Company’s profit growth.
Accordingly, growing CV drives both short-term and long-term corporate performance and stockholder value. As
such, all Gartner executives and associates are focused at all times on growing CV. This, coupled with the fact
that our investors are also focused on this metric, ensures that we are aligned on the long-term success of the
Company.
However, for 2020, we have decided to make a change to our short-term incentive plan to focus on
profitable growth by eliminating CV as a metric in favor of revenue. The change reflects our current
business strategy of growth, while ensuring that CV remains a focus in our long-term plan. This also
ensures a balance of metrics in our incentive plans, without an overweighting on any one measure. We
believe this balanced approach is right for the business to achieve our long-term objectives of growth
and profitability.
Key Attributes of our Executive Compensation Program – Pay for Performance
Our executive compensation plan design has successfully motivated senior management to drive
outstanding corporate performance since it was first implemented in 2006.
It is heavily weighted
towards incentive compensation.
Key features of our compensation program are as follows:
✓ 100% of executive incentive awards,
including annual bonus and equity awards, are
performance-based.
✓ 70% of executive equity awards, and 100% of executive bonus awards are subject to forfeiture
the Company fails to achieve performance objectives established by the
in the event
Compensation Committee.
✓ 92% of the CEO’s target total compensation (82% in the case of other NEOs) is in the form of
incentive compensation (bonus and equity awards).
✓ 84% of our CEO’s target total compensation (67% in the case of other NEOs) is in the form of
equity awards, with a focus on long-term performance.
✓ We use a longer than typical vesting period of 4 years on earned equity awards, with awards
subject to increases or decreases in value based upon stock price movement.
2020 Proxy Statement | 19
Compensation Discussion & Analysis
Our Compensation Best Practices
Our compensation practices motivate our executives to achieve our operating plans and execute our
corporate strategy without taking undue risks. These practices, which are consistent with “best
practices” trends, include the following:
✓ We have an independent compensation consultant that reports directly to the Compensation
Committee.
✓ We annually assess the Company’s compensation policies to ensure that the features of our
program do not encourage undue risk.
✓ All executive officers are “at will” employees and only our CEO has an employment
agreement.
✓ “Double-trigger” change in control vesting of all equity awards with limited exceptions for
certain awards granted prior to 2019.
✓ We have a clawback policy applicable to all executive incentive compensation (cash bonus
and equity awards).
✓ We have robust stock ownership guidelines for our directors and executive officers.
✓ We have holding period requirements that require 50% of net after tax shares from all released
equity awards to be held by a director or executive officer until stock ownership guidelines are
satisfied.
✓ We prohibit hedging and pledging transactions in company securities.
✓ We do not provide excise tax gross up payments.
✓ We encourage retention by providing for equity awards that vest 25% per year over 4 years.
✓ We cap payouts on incentive compensation awards to two times target.
✓ We explicitly prohibit in our equity plan:
O Vesting period of less than 12 months on equity awards;
O Repricing of stock options and surrendering outstanding options for new options with a
lower exercise price without stockholder approval;
O Cash buyouts of underwater options or stock appreciation rights without stockholder
approval;
O “Liberal share recycling;”
O Granting options or stock appreciation rights with an exercise price less than the fair
market value of the Company’s Common Stock on the date of grant.
✓ We do not grant equity awards to our directors or executive officers during closed trading
windows.
Effect of Stockholder Advisory Vote on Executive Compensation, or Say on Pay
2019 Say on Pay Approval = 97% of votes cast
The Board has resolved to present Say on Pay proposals to stockholders on an annual basis, respecting the
sentiment of our stockholders as expressed in 2017. The Company and the Compensation Committee will
consider the results on this year’s advisory Say on Pay proposal
in future executive compensation planning
activities. Over
the past several years, stockholders have consistently strongly supported our executive
compensation program. We also engage our stockholders periodically to solicit their feedback on executive
compensation and corporate governance matters. As such, no changes were made to the core structure of our
compensation program as a result of the 2019 Say on Pay vote.
2020 Proxy Statement | 20
Compensation Discussion & Analysis
COMPENSATION SETTING PROCESS FOR 2019
This discussion explains the objectives of the Company’s compensation policies; what the compensation program
is designed to reward; each element of compensation and why the Company chooses to pay each element; how
the Company determines the amount (and, where applicable, the formula) for each element of pay; and how each
compensation element and the Company’s decisions regarding that element fit
into the Company’s overall
compensation objectives and affect decisions regarding other elements.
The Objectives of the Company’s Compensation Policies
The objectives of our compensation policies are threefold:
➣ To attract, motivate and retain highly talented, creative and entrepreneurial individuals by
paying market-based compensation.
➣ To motivate our executives to maximize the performance of our Company through
pay-for-performance compensation components based on the achievement of corporate
performance targets that are aggressive, but attainable, given economic conditions.
➣ To ensure that, as a public company, our compensation structure and levels are reasonable
from a stockholder perspective.
What the Compensation Program Is Designed to Reward
Our guiding philosophy is that the more executive compensation is linked to corporate performance, the stronger
the inducement is for management to strive to improve Gartner’s performance. In addition, we believe that the
design of the total compensation package must be competitive with the marketplace from which we hire our
executive talent in order to achieve our objectives and attract and retain individuals who are critical to our long-
term success. Our compensation program for executive officers is designed to compensate individuals for
achieving and exceeding corporate performance objectives. We believe this type of compensation encourages
outstanding team performance (not simply individual performance), which builds stockholder value.
Both short-term and long-term incentive compensation is earned by executives only upon the achievement of
certain measurable performance objectives that are deemed by the Compensation Committee and management
to be critical to the Company’s short-term and long-term success. The amount of compensation ultimately earned
will increase or decrease depending upon Company performance and the underlying price of our Common Stock
(in the case of long-term equity-based incentive compensation).
2020 Proxy Statement | 21
Compensation Discussion & Analysis
Principal Compensation Elements and Objectives
To achieve the objectives noted above, we have designed executive compensation to consist of three principal
elements:
Base Salary
Short-Term Incentive
Compensation (cash bonuses)
Long-Term Incentive
Compensation (equity awards)
➣ Pay competitive salaries to attract and retain the executive
talent necessary to develop and implement our corporate
strategy and business plan
responsibilities of
the position, experience of
➣ Reflect
the
executive and marketplace in which we compete for talent
➣ Motivate executives to generate outstanding performance and
achieve or exceed annual operating plan
➣ Align compensation with results
➣ Ensure rewards are commensurate with long-term performance
and promote retention
➣ Align executive rewards with long-term stock price appreciation
➣ Facilitate the accumulation of Gartner shares by executives,
thereby enhancing ownership and ensuring greater alignment
with stockholders
How the Company Determines Executive Compensation
In General
The Company set aggressive performance goals in planning 2019 executive compensation. In order for our
executives to earn target compensation,
the Company needed to exceed double digit growth in two key
performance metrics, as discussed below.
The Compensation Committee established performance objectives for short-term (bonus) and long-term (equity)
incentive awards at levels that it believed would motivate performance and be adequately challenging. The target
performance objectives were intended to compel the level of performance necessary to enable the Company to
achieve its operating plan for 2019.
In order to achieve target compensation, executives must achieve performance objectives that
were set at growth rates that significantly exceeded market norms. In other words, if we were
to achieve market norm financial performance, our delivered compensation would be well
below target compensation and well below payouts achieved at peer companies. If we achieved
our plan targets, which were higher than market, executives would earn average pay. If we
exceeded our plan targets, we would have out-performed the majority of peer companies and,
at that point, executives would earn pay that exceeded market compensation.
For example, in establishing Gartner’s 2019 target CV growth rate, we compared our CV growth
rate target against the revenue growth rate of the broader market (i.e., S&P 500) as well as our
peer group. On a trailing 3 and 5 year basis, the broader market grew by a rate that was 5%
under our target growth rate. In fact, our target growth rate was higher than the 75th percentile
of the broader market. Additionally, our target growth rate exceeded the median of our proxy
peer group over the same time periods. The combination validated that we had a high
performing proxy peer group and that we set strong targets.
2020 Proxy Statement | 22
Compensation Discussion & Analysis
The Compensation Committee believes that using a one-year performance period for our long-term incentive
awards helps accelerate growth and sustain performance. If we have a strong year, the goals for the following
year are established on top of the high bar that was already set. If we had a three-year performance period and
the Company overachieved in the first year, the bar would be set lower in years 2 and 3 and may demotivate our
executives. A three-year performance period may also be less aggressive if business cycle risks are factored into
long-term goals, while a one-year performance period allows us to more readily factor in changes in market
conditions.
The short-term and long-term incentive objectives provide executives with opportunity to increase their total
compensation package based upon the over-achievement of Company performance; similarly, in the case of
under-achievement of corporate performance, the value of incentive awards will fall below their target value,
decreasing the total compensation opportunity. In addition, we assign a greater weighting to long-term incentives
than short-term awards in order to promote long-term decision-making to deliver top corporate performance, align
management to stockholder interests and retain executives. We believe that long-term equity-based awards with
vesting terms that are based on the achievement of pre-set financial targets serve as a strong retention incentive.
Determining Awards
Salary, short-term and long-term incentive compensation levels for executive officers (other than the CEO) are
recommended by the CEO and are subject to approval by the Compensation Committee. In formulating his
recommendation to the Compensation Committee,
these
executives and considers input from human resources personnel at the Company, as well as benchmarking data
from the compensation consultant and external market data (discussed below).
the CEO undertakes a performance review of
Salary, short-term and long-term incentive compensation levels for the CEO’s compensation are established by
the Compensation Committee within the parameters of Mr. Hall’s employment agreement with the Company. In
making its determination with respect to Mr. Hall’s compensation, the Compensation Committee evaluates his
from the
performance in conjunction with the Governance Committee and after soliciting additional
Chairman of the Board and other directors; considers input from the Committee’s compensation consultant; and
reviews benchmarking data pertaining to CEO compensation practices at our peer companies and general trends.
See Certain Employment Agreements with Executive Officers – Mr. Hall below for a detailed discussion of
Mr. Hall’s agreement.
input
Benchmarking and Peer Group
Executive compensation planning for 2019 began mid-year in 2018. Our Compensation Committee commissioned
Exequity, an independent compensation consultant,
to perform a competitive analysis of our executive
compensation practices (the “Compensation Study”). Exequity’s findings were considered by the Compensation
Committee and by management in planning our 2019 executive compensation program. The Compensation Study
utilized market data provided by Aon’s Radford Global Technology Survey for Gartner’s selected peer group of
companies for executive compensation benchmarking purposes (the “Peer Group”), effective as of January 1,
2019.
The Compensation Committee reviews the Peer Group annually to ensure comparability based on Gartner’s
operating characteristics, labor market relevance and defensibility. The Peer Group was modestly revised from
the previous year to exclude three companies and include three new companies in recognition of Gartner’s
enhanced capabilities in HR and marketing, as well as enhanced revenues. The Peer Group comprised 16
publicly-traded companies that resemble Gartner in size (in terms of revenues and number of employees), have a
similar business model and with whom Gartner competes for executive talent. Gartner ranked at the 54th
percentile in revenues relative to the Peer Group. The Peer Group companies included:
2020 Proxy Statement | 23
Compensation Discussion & Analysis
Adobe Inc.
Autodesk, Inc.
Aon plc
CA Inc.*
Citrix Systems,
Inc.
The Interpublic
Group of
Companies, Inc.
Equifax Inc.
IHS Markit Ltd
Intuit Inc.
Moody’s
Corporation
Nielsen
Holdings plc
Red Hat Inc.*
salesforce.com,
inc.
Synopsis, Inc.
Verisk Analytics,
Inc.
VMWare, Inc.
*CA Inc. and RedHat were acquired in 2018 and 2019, respectively.
The 2018 competitive benchmarking analysis used for setting 2019 pay levels compared Gartner’s target
compensation to that of the Peer Group. The Compensation Committee does not target NEO’s pay to a specified
percentile relative to the Peer Group, but rather reviews Peer Group market data at the 25th, 50th and 75th
percentile for each element of compensation, including Base Salary, Target Total Cash (Base Salary, plus Target
Bonus) and Target Total Compensation (Target Total Cash plus long-term incentives). Individual total target
compensation may be higher or lower than the 50th percentile based on a number of factors, including experience
and tenure, retention and succession planning considerations. In addition to the compensation benchmarking, the
Compensation Committee considers Company and individual performance and internal equity in evaluating and
determining executive compensation recommendations.
In addition, the Compensation Committee annually reviews an analysis conducted by Exequity that evaluates the
connection between Gartner’s executive pay and Company performance as measured by Total Shareholder
Return and Shareholder Value against the relationship exhibited by the Peer Group. The analysis indicates that
pay realized by Gartner’s NEOs is generally well aligned with Company performance.
Executive Compensation Elements Generally
Pay Mix
The following charts illustrate the relative mix of target compensation elements for the NEOs in 2019. Long-term
incentive compensation consists of stock-settled stock appreciation rights (“SARs”), performance-based restricted
stock units (“PSUs”) and time-based restricted stock units (“RSUs”), and represents a majority of
the
compensation we pay to our NEOs – 84% to the CEO, 72% to the CFO and 65% to all other NEOs. We weight
compensation more heavily to long-term incentives because we believe that it contributes to a greater degree to
the delivery of top performance and the retention of employees than does cash and short-term compensation
(bonus).
2020 Proxy Statement | 24
Compensation Discussion & Analysis
CEO
8%
8%
ALL OTHER NEO’S
18%
15%
84%
67%
Base
Bonus
Equity
Base
Bonus
Equity
Base Salary
We set base salaries of executive officers when they join the Company or are promoted to an executive role, by
evaluating the responsibilities of the position, the experience of the individual and the marketplace in which we
In addition, where possible, we consider salary information for
compete for the executive talent we need.
comparable positions for members of our Peer Group or other available benchmarking data. In determining
whether to award salary merit increases, we consider published projected U.S. salary increase data for the
technology industry and general market, as well as available world-wide salary increase data. Mr. Hall’s salary
increase is established each year by the Compensation Committee after completion of Mr. Hall’s performance
evaluation for the preceding year. The following table sets forth the 2018 and 2019 base salary of each NEO and
the corresponding year-over-year percentage increase:
NEO
2018 Base Salary ($)
2019 Base Salary ($)
Percentage Increase
Eugene A. Hall
Craig W. Safian
Alwyn Dawkins
Robin Kranich
David McVeigh
908,197
575,000
480,000
478,892
480,000
908,197
600,000
495,000
495,000
495,000
0%
4.3%
3.1%
3.4%
3.1%
Short-Term Incentive Compensation (Cash Bonuses)
All bonuses to executive officers are awarded pursuant to Gartner’s stockholder-approved Executive Performance
Bonus Plan. This plan is designed to motivate executive officers to achieve goals relating to the performance of
Gartner, its subsidiaries or business units, or other objectively determinable goals, and to reward them when
those objectives are satisfied. We believe that the relationship between proven performance and the amount of
short-term incentive compensation paid promotes, among executives, decision-making that increases stockholder
value and promotes Gartner’s success.
2020 Proxy Statement | 25
Compensation Discussion & Analysis
In 2019, bonus targets for all NEOs, including Mr. Hall, were based solely upon achievement of 2019 company-
wide financial performance objectives (with no individual performance component). The financial objectives and
weightings used for 2019 executive officer bonuses were:
•
•
2019 Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), which measures
overall profitability from business operations (weighted 50%), on a foreign exchange neutral basis, and
Contract Value (CV) at December 31, 2019 which, as described above, measures the long–term
prospects of our business (weighted 50%), on a foreign exchange neutral basis.
Management and our Compensation Committee continue to believe that CV and EBITDA and are the most
significant measurements of long-term business growth and profitability and for our Company, respectively. They
have been successfully used for several years as performance metrics applicable to short-term incentive
compensation that drive business performance and that motivate executive officers to achieve outstanding
performance.
Beginning in 2020, the Compensation Committee has changed the financial objectives
for executive officer bonuses to EBIDTA (weighted 50%) and Revenue (weighted 50%).
The Compensation Committee believes that changing one of the financial metrics from
CV to Revenue, which is a good indicator of short-term performance, will reinforce our
2020 business objective to grow EBITDA at least commensurate with revenue. Further,
the change eliminates the overlap of short-term and long-term performance metrics
and is better aligned with best practice.
For 2019, each executive officer was assigned a bonus target that was expressed as a percentage of salary,
which varied from 60% to 105% of salary depending upon the executive’s level of responsibility and in most cases
was 5% greater than the previous year. With respect to our NEOs, 2019 bonus targets as a percentage of base
salary, were 105% for Mr. Hall and 85% for each of Messrs. Safian, Dawkins, McVeigh and Ms. Kranich. The
maximum payout for 2019 bonus was 200% of target if the maximum level of EBITDA and CV were achieved; the
minimum payout was $0 if minimum levels were not achieved. The following table sets forth the threshold, target
and maximum payout amounts for each NEO:
NEO
Threshold ($)
Target ($)
Maximum ($)
Eugene A. Hall
Craig W. Safian
Alwyn Dawkins
Robin Kranich
David McVeigh
0
0
0
0
0
953,607
510,000
420,750
420,750
420,750
1,907,214
1,020,000
841,500
841,500
841,500
The chart below describes the performance metrics applicable to our 2019 short–term incentive compensation
element. When adopting these financial metrics, the Compensation Committee expressly reserved the authority to
adjust the performance goals to reflect the effect of any merger, acquisition and divestiture activity. In February
2020, the Compensation Committee certified that the results for each performance metric under the bonus plan
were as follows:
2019 Performance
Objective/ Weight
Target
(100%)
< Minimum
(0%)
2019 EBITDA/50%
$744 million
$608 million
=/>
Maximum
(200%)
$791 million
Actual Results
$684 million
12/31/19 Contract Value/50% $3,402 million $2,555 million $3,544 million
$3,446 million
2020 Proxy Statement | 26
Compensation Discussion & Analysis
The Contract Value results in the table above translated to a payout percentage of 141.7%. For the EBITDA
component, the results above translated to a payout percentage of 50.0%. Since each objective was weighted
50%, based on these results, the Compensation Committee determined that earned cash bonuses for each NEO
were 95.8% of target bonus amounts. These bonuses were paid in February 2020. See Summary Compensation
Table – Non-Equity Incentive Plan Compensation for the amount of cash bonuses earned by our NEOs in 2019.
Long-Term Incentive Compensation (Equity Awards)
Promoting stock ownership is a key element of our compensation program philosophy. Stock-based incentive
compensation awards – especially when they are assigned a combination of performance and time-based vesting
criteria–induce enhanced performance, promote retention of executive officers and align executives’ personal
rewards with long-term stock price appreciation, thereby integrating management and stockholder interests. We
have evaluated different types of long-term incentives based on their motivational value, cost to the Company and
appropriate share utilization under our stockholder-approved 2014 Long-Term Incentive Plan (the “2014 Plan”)
and have determined that SARs and PSUs create the right balance of motivation, retention, alignment with
stockholders and share utilization.
SARs permit executives to benefit from an increase in stock price over time. SAR value can be realized only after
the SAR vests. Our SARs are stock-settled and vested SARs may be exercised up to seven years from grant
date. When the SAR is exercised, the executive receives shares of our Common Stock equal in value to the
aggregate appreciation in the price of our Common Stock from the date of grant to the exercise date for all SARs
exercised. Therefore, SARs only have value to the extent the price of our Common Stock exceeds the grant price
of the SAR. In this way, SARs motivate our executives to increase stockholder value and thus align their interests
with those of our stockholders.
PSUs offer executives the opportunity to receive our Common Stock contingent on the achievement of
performance goals and continued service over the vesting period. PSU recipients are eligible to earn a target
fixed number of restricted stock units if and to the extent stipulated one-year performance goals are achieved.
They can earn more units if the Company over-performs (up to 200% of their target number of units), and they will
earn fewer units (and potentially none) if the Company under-performs. PSUs encourage executives to increase
stockholder value while promoting executive retention over the long-term. Released shares have value even if our
Common Stock price does not increase, which is not the case with SARs.
The value of long-term incentive awards granted to executives each year is based on several factors, including
external market practices, the Company’s financial performance, the value of awards granted in prior years,
succession considerations and individual performance. For 2019, the Compensation Committee increased LTI
awards for NEOs from last year based on those factors considered. The CEO’s LTI award increased by 7% (no
other increase in any other element of compensation was provided), the CFO’s LTI award increased by 21%, and
all other NEO’s LTI awards increased by 6%. The greatest
increase in LTI was reserved for the CFO in
recognition of the shortfall of his compensation relative to the market, due to his limited tenure in the role. It is the
Company’s philosophy to move an executive to fully competitive rates over time.
Consistent with weightings in prior years, when the compensation program was established in early 2019, 30% of
each executive’s long-term incentive compensation award value was granted in SARs and 70% was granted in
PSUs. PSUs deliver value utilizing fewer shares since the executive can earn the full share rather than just the
appreciation in value over the grant price (as is the case with SARs). Additionally, the cost efficiency of PSUs
enhances the Company’s ability to conservatively utilize the 2014 Plan share pool, which is why we conveyed a
larger portion of the 2019 overall
long-term incentive compensation value in PSUs rather than in SARs. For
purposes of determining the number of SARs awarded, the allocated SAR award value is divided by the Black-
Scholes-Merton valuation on the date of grant using assumptions appropriate on that date. For purposes of
determining the target number of PSUs awarded, the allocated target PSU award value is divided by the closing
price of our Common Stock on the date of grant as reported by the New York Stock Exchange.
2020 Proxy Statement | 27
Compensation Discussion & Analysis
All SARs and PSUs are earned, vest and, with respect to PSUs, release 25% per year commencing one (1) year
from grant and on each anniversary thereof, subject to continued service on the applicable vesting date. We
believe that this vesting schedule effectively focuses our executives on delivering long-term value growth for our
stockholders and drives retention. The maximum payout for the 2019 PSUs was 200% of target if the maximum
level of CV was achieved; the PSUs are subject to forfeiture if minimum levels of performance are not achieved.
The Compensation Committee approved CV (measured at December 31, 2019) as the performance measure
underlying PSUs awarded in 2019. As noted earlier, we continue to believe that CV is the best performance
metric to measure the long–term prospects of our business because it is predictive of future revenue.
The chart below describes the performance metrics applicable to the PSU portion of our 2019 long–term incentive
compensation element measured on a foreign exchange neutral basis. When adopting the performance metrics,
the Compensation Committee expressly reserved the authority to adjust the performance goals to reflect the
effects of any merger, acquisition and divestiture activity.
the Compensation Committee
certified the result as follows:
In February 2020,
2019 Performance
Objective/Weight
Target
(100%)
Target
Growth
YOY
< Minimum
(0%)
=/>
Maximum
(200%)
Actual
(measured at
12/31/19)
Payout
(% of
Target)
Actual
Growth
YOY
Contract
Value/100%
$3,402 million
10.2% $2,555 million $3,544 million $3,446 million 141.7% 11.7%
The CV target represented double digit growth. Actual CV certified by the Compensation Committee in early 2020
was $3,446 million, exceeding the target amount. Based on this, the Compensation Committee determined that
141.7% of the target number of PSUs was earned based on the established performance goals. The PSUs were
adjusted by this factor in early 2020 after certification of the achievement of this performance measure by the
Compensation Committee, and 25% of the adjusted awards vested on the first anniversary of the grant date. See
Grants of Plan-Based Awards Table – Possible Payouts Under Equity Incentive Plan Awards and accompanying
footnotes below for the actual number of SARs and PSUs awarded to our NEOs in 2019.
Additional Compensation Elements
We maintain a non-qualified deferred compensation plan for our highly compensated employees, including our
executive officers, to assist eligible participants with retirement and tax planning by allowing them to defer
compensation in excess of amounts permitted to be deferred under our 401(k) plan. The non-qualified deferred
compensation plan allows eligible participants to defer up to 50% of base salary and/or 100% of bonus to a future
period.
the Company presently matches
contributions by executive officers, subject to certain limits. For more information concerning this plan, see
Non-Qualified Deferred Compensation Table and accompanying narrative and footnotes below.
In addition, as a further inducement
to participation in this plan,
In order to further achieve our objective of providing a competitive compensation package with great retention
value, we provide various other benefits to our executive officers that we believe are typically available to, and
expected by, persons in senior business roles. Our basic executive perquisites program includes 35 days paid
time off (PTO) annually, severance and change in control benefits (discussed below) and relocation services
where necessary due to a promotion. Mr. Hall’s perquisites, severance and change in control benefits are
governed by his employment agreement with the Company, which is discussed in detail below under Certain
Employment Agreements with Executive Officers – Mr. Hall. For more information concerning perquisites, see
Other Compensation Table and accompanying footnotes below.
2020 Proxy Statement | 28
Compensation Discussion & Analysis
OTHER COMPENSATION POLICIES AND INFORMATION
Executive Stock Ownership and Holding Period Guidelines
In order to align management and stockholder interests, the Company has adopted stock ownership guidelines
for our executive officers as follows: the CEO is required to hold shares of Common Stock with a value at least
equal to six (6) times his base salary, and all other executive officers are required to hold shares of Common
Stock with a value at least equal to three (3) times their base salary. For purposes of computing the required
holdings, officers may count shares directly held, as well as vested and unvested restricted stock units and PSUs,
but not options or SARs.
Additionally, the Company imposes a holding period requirement on our executive officers. If an executive officer
of the Company is not in compliance with the stock ownership guidelines, the executive is required to maintain
ownership of at least 50% of the net after-tax shares of Common Stock acquired from the Company pursuant to
all equity-based awards received from the Company, until such individual’s stock ownership requirement is met.
At December 31, 2019, all the NEOs were in compliance with these guidelines.
Clawback Policy
The Company has adopted a clawback policy which provides that the Board (or a committee thereof) may seek
recoupment on behalf of the Company from a current or former executive officer of the Company who engages in
fraud, omission or intentional misconduct that results in a required restatement of any financial reporting under the
securities or other laws, and that the cash-based or equity-based incentive compensation paid to the officer
exceeds the amount that should have been paid based upon the corrected accounting restatement, resulting in an
excess payment. Recoupment includes the reimbursement of any cash-based incentive compensation (bonuses)
paid to the executive, cancellation of vested and unvested performance-based restricted stock units, stock options
and stock appreciation rights, and reimbursement of any gains realized on the sale of released stock unit awards
and the exercise of stock options or stock appreciation rights and subsequent sale of underlying shares.
Hedging and Pledging Policies
The Company’s Insider Trading Policy prohibits all directors, executive officers and other employees from
engaging in any short selling, hedging and/or pledging transactions with respect to Company securities.
Accounting and Tax Impact
In setting 2019 compensation, the Compensation Committee and management considered that for taxable years
beginning after December 31, 2017, the exemption from Code Section 162(m)’s deduction limit that formerly
for certain grandfathered
existed for certain “performance-based” compensation was repealed (except
that
compensation arrangements that were in effect as of November 2, 2017). Accordingly, we expect
compensation awarded to our executives who are “covered employees” under Section 162(m) in 2018 and
subsequent years will not be deductible to the extent that it results in compensation above the $1 million threshold
established under Section 162(m). Furthermore, the rules and regulations promulgated under Section 162(m) are
complicated and subject to change. As such, there can be no assurance that any grandfathered compensation
awarded in prior years will be fully tax deductible when paid. Notwithstanding repeal of the exemption for
“performance-based” compensation,
the Compensation Committee intends to operate our executive
compensation program in a manner that they believe best aligns compensation with our pay-for-performance
philosophy.
2020 Proxy Statement | 29
Compensation Discussion & Analysis
Grant of Equity Awards
The Board has a formal policy with respect to the grant of equity awards under our equity plans. Under our 2014
Plan, equity awards may include stock options, stock appreciation rights, restricted stock awards (RSAs),
restricted stock units (RSUs) and performance-based restricted stock units. The Compensation Committee may
not delegate its authority with respect to Section 16 persons, nor in any other way that would jeopardize the plan’s
qualification under Code Section 162(m) (as in effect prior to 2018 for grandfathered awards) or Exchange Act
Rule 16b-3. Accordingly, our policy specifies that all awards to our Section 16 executive officers must be
approved by the Compensation Committee on or prior to the award grant date, and that all such awards will be
made and priced on the date of Compensation Committee approval, except in the case of new hires, which is
discussed below.
Consistent with the 2014 Plan, the Compensation Committee annually approves a delegation of authority to the
CEO to make equity awards under our equity Plan to Gartner employees (other than Section 16 reporting
persons) on account of new hires, retention or promotion without the approval of the Compensation Committee. In
2019, the delegation of authority specified a maximum grant date award value of $500,000 per individual, and a
maximum aggregate grant date award value of $5,000,000 for the calendar year. For purposes of
this
computation, in the case of RSAs, RSUs and PSUs, value is calculated based upon the fair market value (defined
as the closing price on the date of grant as reported by NYSE) of a share of our Common Stock, multiplied by the
number of RSAs, RSUs or PSUs awarded. In the case of options and SARs, the grant date value of the award will
be the Black-Scholes-Merton calculation of the value of the award using assumptions appropriate on the award
date. Any awards made under the CEO-delegated authority are reported to the Compensation Committee at the
next regularly scheduled committee meeting.
As discussed above, the structure and value of annual
long-term incentive awards comprising the long-term
incentive compensation element of our compensation package to executive officers are established and approved
by the Compensation Committee in the first quarter of each year. The specific terms of the awards (number of
PSUs and SARs and related performance criteria) are determined, and the awards are approved and made, on
the same date and after the release of the Company’s prior year financial results.
It is the Company’s policy not to make equity awards to executive officers prior to the release of material
non-public information. Generally speaking, awards for newly hired executives that are given as an inducement to
joining the Company are made on the 15th or 30th day of the month first following the executive’s start date, and
retention and promotion awards are made on the 15th or 30th day of the month first following the date of
Compensation Committee approval; however, we may delay making these awards pending the release of material
non-public information.
2020 Proxy Statement | 30
Compensation Discussion & Analysis
COMPENSATION COMMITTEE REPORT
Inc. has reviewed and discussed the
The Compensation Committee of
the Board of Directors of Gartner,
the
Compensation Discussion and Analysis with management. Based upon this review and discussion,
Compensation Committee recommended to the Board of Directors that
the Compensation Discussion and
Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and
the Company’s proxy statement for the 2020 Annual Meeting of Stockholders.
Compensation Committee of the Board of Directors
Anne Sutherland Fuchs
Raul E. Cesan
Eileen M. Serra
2020 Proxy Statement | 31
COMPENSATION TABLES AND NARRATIVE DISCLOSURES
All compensation data contained in this Proxy Statement is stated in U.S. Dollars.
Summary Compensation Table
This table describes compensation earned by our NEOs in the years indicated. As you can see from the table and
consistent with our compensation philosophy discussed above, long-term incentive compensation in the form of
equity awards comprises a significant portion of total compensation.
Name and Principal
Position
Eugene A. Hall, Chief
Executive Officer
(PEO) (5)
Craig W. Safian, EVP
& Chief Financial Officer
(PFO)
Alwyn Dawkins, EVP,
Conferences
Robin Kranich, EVP,
Human Resources
David McVeigh, EVP,
Global Business Sales
Base
Salary
(1)
Stock
Awards
(2)
Option
Awards
(2)
Year
2019
908,197
7,007,347
3,003,182
2018
908,197
6,537,043
2,801,583
2017
908,197
6,889,130
2,523,939
2019
593,750
1,991,128
853,343
2018
568,750
1,644,887
704,983
2017
541,250
1,374,873
492,851
2019
491,250
1,201,570
514,983
2018
476,236
1,133,573
485,861
2017
461,559
1,076,004
386,189
2019
490,973
1,201,570
514,983
2018
475,405
1,133,573
485,861
2019
491.250
1,201,570
514,983
2018
476,236
1,133,573
485,861
2017
461,559
1,076,004
386,189
Non-Equity
Incentive Plan
Compensation
(1), (3)
All Other
Compensation
(4)
Total
913,555
1,119,534
1,432,317
488,580
540,040
619,575
403,078
450,816
523,759
403,078
449,775
403,078
450,816
523,759
127,964
11,960,245
136,160
11,502,517
120,647
11,874,230
55,287
3,982,088
47,533
3,506,193
47,158
3,075,707
48,961
2,659,842
49,414
2,595,900
43,530
2,491,041
37,630
2,648,234
39,967
2,584,581
44,358
2,655,239
40,000
2,586,486
34,675
2,482,186
(1) All NEOs elected to defer a portion of
their 2019 salary and/or 2019 bonus under the Company’s
Non-Qualified Deferred Compensation Plan. Amounts reported include the 2019 deferred portion, and
accordingly does not include amounts, if any, released in 2019 from prior years’ deferrals. See Non-Qualified
Deferred Compensation Table below.
(2) Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 of
performance-based restricted stock units, or PSUs (Stock Awards), time-based restricted stock units, or
RSUs (Stock Awards), and stock-settled stock appreciation rights, or SARs (Option Awards), granted to the
NEOs. The value reported for the annual PSU awards is based upon the probable outcome of
the
performance objective as of the grant date, which is consistent with the grant date estimate of the aggregate
compensation cost to be recognized over the service period, excluding the effect of forfeitures, for the target
grant date award value. The potential maximum value of all PSUs, assuming attainment of the highest level of
the performance conditions, is 200% of the target value. For 2019, the grant date fair value of these PSUs
assuming maximum payout
is as follows: $14,014,694 (Mr. Hall); $3,982,256 (Mr. Safian); $2,403,140
(Messrs. Dawkins and McVeigh and Ms. Kranich). All equity grants are subject to forfeiture. See footnote
(2) to Grants of Plan-Based Awards Table below for additional information. See also Note 10 – Stock-Based
Compensation - in the Notes to Consolidated Financial Statements contained in our Annual Report on
Form 10-K for the year ended December 31, 2019 for additional information.
(3) Represents performance-based cash bonuses earned at December 31 of the applicable year and paid in the
following February. See footnote (1) to Grants of Plan-Based Awards Table below for additional information.
2020 Proxy Statement | 32
(4) See Other Compensation Table below for additional information.
(5) Mr. Hall is a party to an employment agreement with the Company. See Certain Employment Agreements
Compensation Tables and Narrative Disclosures
with Executive Officers – Mr. Hall below.
Other Compensation Table
This table describes each component of the All Other Compensation column in the Summary Compensation
Table for 2019.
Company
Match
Under
Defined
Contribution
Plans
(1)
Company
Match Under
Non-qualified
Deferred
Compensation
Plan
(2)
7,200
7,200
7,200
7,200
7,200
73,909
38,152
30,483
30,430
30,483
Other
(3)
Total
46,855
127,964
9,935
11,278
—
6,675
55,287
48,961
37,630
44,358
Name
Eugene A. Hall
Craig W. Safian
Alwyn Dawkins
Robin Kranich
David McVeigh
(1) Represents the Company’s 4% matching contribution to the NEO’s 401(k) account (subject to limitations).
(2) Represents the Company’s matching contribution to the NEO’s contributions to our Non-Qualified Deferred
Compensation Plan. See Non-Qualified Deferred Compensation Table below for additional information.
(3) In addition to perquisites and benefits specified below, includes other perquisites and personal benefits
provided to the NEO.
For Mr. Hall,
includes a car allowance of $30,996 received by him per the terms of his employment
agreement. Also includes a tax gross-up payment of $7,382 that the Company paid to reimburse him on an
after-tax basis for the income imputed in respect of his spouse’s trip to the Company’s Winner’s Circle, which
is a reward event for the Company’s top sales associates.
For Messrs. Safian, Dawkins, and McVeigh, includes tax gross-up payments of $4,865, $4,638, and $3,269,
respectively, that the Company paid to reimburse each of them on an after-tax basis for the income imputed
in respect of their spouse’s trip to the Company’s Winner’s Circle. For Mr. Dawkins, also includes $864 of tax
gross-up payment that the Company paid to reimburse him on an after-tax basis for the income imputed in
respect of certain tax services he received.
2020 Proxy Statement | 33
Compensation Tables and Narrative Disclosures
Grants of Plan-Based Awards Table
This table provides information about awards made to our NEOs in 2019 pursuant to non-equity incentive plans
(our short-term incentive cash bonus program) and equity incentive plans (performance restricted stock units
(PSUs), and stock appreciation rights (SARs) awards comprising long-term incentive compensation under our
2014 Plan).
Possible Payouts Under Non-
Equity Incentive Plan
Awards (1)
Possible Payouts Under Equity
Incentive Plan Awards (2)
Grant
Date
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)
Maximum
(#)
All other
option
awards:
Number of
securities
underlying
options
(#)(2)
Exercise
or Base
Price of
Option
Awards
($/Sh)
($) (3)
Grant Date
Fair Value
of Stock
and Option
Awards
($) (4)
2/6/19
-
2/6/19
2/6/19
-
2/6/19
2/6/19
-
2/6/19
2/6/19
-
2/6/19
2/6/19
-
-
-
0
-
-
0
-
-
0
-
-
0
-
-
0
-
-
-
-
953,607
1,907,214
-
-
-
-
510,000
1,020,000
-
-
-
-
420,750
841,500
-
-
-
-
420,750
841,500
-
-
-
-
420,750
841,500
0
-
-
0
-
-
0
-
-
0
-
-
0
-
-
48,999 PSUs
97,998 PSUs
-
-
7,007,347
-
-
-
-
13,923 PSUs
27,846 PSUs
-
-
-
-
8,402 PSUs
16,804 PSUs
-
-
-
-
8,402 PSUs
16,804 PSUs
-
-
-
-
8,402 PSUs
16,804 PSUs
-
-
-
-
92,192 SARs
143.01
3,003,182
-
-
-
-
-
1,991,128
26,196 SARs
143.01
853,343
-
-
-
-
-
1,201,570
15,809 SARs
143.01
514,983
-
-
-
-
-
1,201,570
15,809 SARs
143.01
514,983
-
-
-
-
-
1,201,570
15,809 SARs
143.01
514,983
-
-
Name
Eugene A. Hall
Craig W. Safian
Alwyn Dawkins
Robin Kranich
David McVeigh
(1) Represents cash bonuses that could have been earned in 2019 based solely upon achievement of specified
financial performance objectives for 2019 and ranging from 0% (threshold) to 200% (maximum) of target
(100%). Bonus targets (expressed as a percentage of base salary) were 105% for Mr. Hall, and 85% for each
of Messrs. Safian, Dawkins and McVeigh and Ms. Kranich. Performance bonuses earned in 2019 and paid in
February 2020 were adjusted to 95.8% of
their target bonus. The cash bonuses are reported under
Non-Equity Incentive Plan Compensation in the Summary Compensation Table. See Short-Term Incentive
Compensation (Cash Bonuses) in the CD&A for additional information.
(2) Represents the number of PSUs and SARs awarded to the NEOs on February 6, 2019. The target number of
PSUs (100%) for the annual PSU award was subject to adjustment ranging from 0% (threshold) to 200%
(maximum) based solely upon achievement of an associated financial performance objective, and was
adjusted to 141.7% of target in February 2020. The adjusted number of such PSUs awarded was: Mr. Hall –
69,431; Mr. Safian – 19,728; Messrs. Dawkins and McVeigh and Ms. Kranich – 11,905. All PSUs and SARs
vest 25% per year commencing one year from grant, subject to continued employment on the vesting date
except
in the case of death, disability and retirement. See Long-Term Incentive Compensation (Equity
Awards) in the CD&A for additional information.
(3) Represents the closing price of our Common Stock on the New York Stock Exchange on the grant date.
(4) See footnote (2) to the Summary Compensation Table.
2020 Proxy Statement | 34
Compensation Tables and Narrative Disclosures
Certain Employment Agreements with Executive Officers
Our Chief Executive Officer, Mr. Hall, is a party to a long-term employment agreement with the Company. No
other NEO has an employment agreement with the Company.
Mr. Hall – Employment Agreement
The Company and Mr. Hall are parties to a Second Amended and Restated Employment Agreement pursuant to
which Mr. Hall has agreed to serve as chief executive officer of the Company and is entitled to be nominated to
the board of directors (the “CEO Agreement”) until December 31, 2021. The CEO Agreement provides for
automatic one year renewals commencing on January 1, 2022, and continuing each year thereafter, unless either
party provides the other with at least 60 days prior written notice of an intention not to extend the term.
Under the CEO Agreement, Mr. Hall is entitled to the following annual compensation components:
Component
Base Salary
Description
➣ $908,197, subject to adjustment on an annual basis by the Compensation
Committee
Target Bonus
➣ 105% of annual base salary (target), adjusted for achievement of specified
Company and individual objectives
➣ The actual bonus paid may be higher or lower than target based upon over- or
under-achievement of objectives, subject to a maximum actual bonus of 210%
of base salary
Long – term
incentive award
➣ Aggregate annual value on the date of grant at least equal to $9,874,375
minus the sum of base salary and target bonus for the year of grant (the
“Annual Incentive Award”)
➣ The Annual Incentive Award will be 100% unvested on the date of grant, and
vesting will depend upon the achievement of performance goals to be
determined by the Compensation Committee
➣ The terms and conditions of each Annual Incentive Award will be determined
by the Compensation Committee, and will be divided between restricted stock
units (RSUs) and stock appreciation rights (SARs)
➣ The number of RSUs initially granted each year will be based upon the
assumption that specified Company objectives set by the Compensation
Committee will be achieved, and may be adjusted so as to be higher or lower
than the number initially granted for over- or under-achievement of such
specified Company objectives
Other
➣ Car allowance
➣ All benefits provided to senior executives, executives and employees of the
Company generally from time to time, including medical, dental, life insurance
and long-term disability
➣ Entitled to be nominated for election to the Board
2020 Proxy Statement | 35
Compensation Tables and Narrative Disclosures
Termination and Related Payments – Mr. Hall
Involuntary or Constructive Termination (no Change in Control)
Mr. Hall’s employment is at will and may be terminated by him or us upon 60 days’ notice. If we terminate
Mr. Hall’s employment involuntarily (other than within 24 months following a Change In Control (defined below))
and without Business Reasons (as defined in the CEO Agreement) or a Constructive Termination (as defined in
the CEO Agreement) occurs, or if the Company elects not to renew the CEO Agreement upon its expiration and
Mr. Hall terminates his employment within 90 days following the expiration of the CEO Agreement, then Mr. Hall
will be entitled to receive the following benefits:
Component
Base Salary
Short-Term
Incentive Award
(Bonus)
Long – Term
Incentive Award
Description
➣ accrued base salary and unused paid time off (“PTO”) through termination
➣ 36 months continued base salary paid pursuant to normal payroll schedule
➣ earned but unpaid bonus
➣ 300% of the average of Mr. Hall’s earned annual bonuses for the three
years preceding termination, payable in a lump sum
➣ 36 months’ continued vesting in accordance with their terms (including
achievement of applicable performance objectives) of all outstanding equity
awards
➣ a lump sum payment in cash equal to the value of any ungranted Annual
Incentive Awards, multiplied by the percentage of such award that would
vest within 36 months following termination (i.e., 75% in the case of a four
year vesting period)
Other
➣ reimbursement for up to 36 months’ COBRA premiums for Mr. Hall and his
family
Payment of severance amounts is conditioned upon execution of a general release of claims against
Company and compliance with 36-month non-competition and non-solicitation covenants.
circumstances, payment will be delayed for six months following termination under Code Section 409A.
the
In certain
Involuntary or Constructive Termination, and Change in Control
Within 24 months of a Change in Control: if Mr. Hall’s employment is terminated involuntarily and without
Business Reasons; or a Constructive Termination occurs; or if the Company elects not to renew the CEO
Agreement upon its expiration and Mr. Hall terminates his employment within 90 days following the expiration of
the CEO Agreement (i.e., double trigger), Mr. Hall will be entitled to receive the following benefits:
Component
Base Salary
Short-Term
Incentive Award
(Bonus)
Long – Term
Incentive Award
Description
➣ accrued base salary and unused PTO through termination
➣ 3 times base salary then in effect, payable 6 months following termination
➣ any earned but unpaid bonus
➣ 3 times target bonus for fiscal year in which Change In Control occurs,
payable 6 months following termination
➣ any ungranted but earned Annual Incentive Awards will be granted
➣ all unvested outstanding equity will have the service requirement deemed
fully satisfied, all performance goals or other vesting criteria will be deemed
achieved (i) if the performance period has been completed, at actual level
of performance, or (ii) if the performance period has not been completed,
at target level of performance, and all stock options and SARs will be
exercisable as to all covered shares
Other
➣ reimbursement for up to 36 months’ COBRA premiums for Mr. Hall and his
family
2020 Proxy Statement | 36
Compensation Tables and Narrative Disclosures
For equity awards granted after February 7, 2019, Mr. Hall’s unvested outstanding equity awards will only vest in
connection with a Change in Control if Mr. Hall’s employment is terminated under the circumstances described
above within 24 months following the Change in Control (i.e., if a “double trigger” occurs). For equity awards
granted on or prior to February 7, 2019, immediately upon a Change in Control (regardless of whether there is a
termination of employment), all of Mr. Hall’s unvested outstanding equity awards will vest in full, all performance
goals or other vesting criteria will be deemed achieved at target levels and all stock options and SARs will be
exercisable as to all covered shares. Additionally, any ungranted, but accrued Annual Incentive Awards will be
awarded prior to consummation of the Change in Control.
Should any payments received by Mr. Hall upon a Change in Control constitute a “parachute payment” within the
meaning of Code Section 280G, Mr. Hall may elect to receive either the full amount of his Change in Control
payments, or such lesser amount as will ensure that no portion of his severance and other benefits will be subject
to excise tax under Code Section 4999. Additionally, certain payments may be delayed for six months following
termination under Code Section 409A.
The CEO Agreement utilizes the 2014 Plan definition of “Change in Control” which currently provides that a
Change in Control will occur when (i) there is a change in ownership of the Company such that any person (or
group) becomes the beneficial owner of 50% of our voting securities, (ii) there is a change in the ownership of a
substantial portion of the Company’s assets or (iii) there is a change in the effective control of the Company such
that a majority of members of the Board is replaced during any 12 month period by directors whose appointment
or election is not endorsed by a majority of the members of the Board prior to the date of appointment or election.
In the CEO Agreement, Mr. Hall also agrees not to engage in any competitive activities and not to solicit Gartner
employees for 36 months following termination of employment.
Termination and Related Payments – Other Executive Officers
In the event of termination for cause, voluntary resignation or as a result of death, disability or retirement, no
severance benefits are provided. In the event of termination for cause or voluntary resignation, all equity awards
are forfeited except as discussed below under Death, Disability and Retirement. In the event of termination
without cause (including in connection with a Change in Control), other executive officers are entitled to receive
the following benefits:
Component
Base Salary
Description
➣ accrued base salary and unused PTO (not to exceed 25 days) through
termination
➣ 12 months continued base salary paid pursuant
to normal payroll
schedule
Long–Term
Incentive Awards
➣ If
terminated within 12 months of a Change In Control, all unvested
outstanding equity will vest
if performance
adjustment has not occurred on termination), and all stock options and
SARs will be exercisable as to all covered shares for 12 months following
termination; otherwise unvested awards are forfeited
(upon adjustment
in full
➣ If no Change In Control, unvested equity awards are forfeited (except in
the case of death, disability and retirement, discussed below)
Other
➣ Reimbursement for up to 12 months’ COBRA premiums for executive and
family
In order to receive severance benefits, the executive officers who are terminated are required to execute and
comply with a separation agreement and release of claims in which, among other things, the executive reaffirms
to confidentiality, non-competition and non-solicitation obligations and releases the
his or her commitment
Company from various employment-related claims. In addition, in the case of NEOs (other than Mr. Hall),
severance will not be paid to any executive who refuses to accept an offer of comparable employment from
2020 Proxy Statement | 37
Compensation Tables and Narrative Disclosures
Gartner or who does not cooperate or ceases to cooperate when being considered for a new position with
Gartner, in each case as determined by the Company. Finally, under certain circumstances, payments and
release of shares may be delayed for six months following termination under Code Section 409A.
Death, Disability and Retirement
Our executive officers are entitled to immediate vesting of all outstanding awards in the case of termination due to
death or disability, and continued vesting depending upon the age of the officer in the case of retirement (as
defined) as described in the following table:
Termination Event
Treatment of Unvested Equity Awards
Death or Disability
Retirement – not eligible
Retirement – eligible (awards granted prior
to 2020)
➣ Retirement eligible if: (i) on the date of
retirement the officer is at least 55 years
old and has at least 5 years of service
and (ii) the sum of the officer’s age and
years of service is 65 or greater
Retirement – eligible (awards granted in
2020 or after)
➣ Retirement eligible if on the date of
retirement, the officer is at least 55 years
old and has at least 10 years of service
➣ 100% vesting upon event
➣ Unvested awards forfeited
➣ If < 60 years of age, 12 months of continued vesting
➣ If 60, 24 months of continued vesting
➣ If 61, 36 months of continued vesting
➣ If 62 or older, unvested awards will continue to vest in
full in accordance with their terms
➣ For a retirement in the year that an award is granted,
the unvested portion of such award that is eligible to
vest will be prorated based on the number of days in
the year of grant during which the officer was
employed
➣ Unvested awards continue to vest in full in accordance
with their terms (subject to certain conditions)
➣ For a retirement in the year that an award is granted,
the unvested portion of such award that is eligible to
vest will be prorated based on the number of days in
the year of grant during which the officer was
employed
In order to receive retirement vesting, an officer must be retirement “eligible” on the date of retirement, as
described in the table above; if not, all unvested awards are forfeited upon retirement. At December 31, 2019, of
our NEOs, only Mr. Hall would have qualified for the additional vesting benefit upon retirement for his outstanding
equity awards. Disability is defined in our current equity award agreements as total and permanent disability.
For all SAR awards granted prior to 2015, the SARs remain exercisable through the earlier of the applicable
expiration date or one year from termination in the case of death, disability or retirement. Commencing with the
2015 SAR awards, the SARs remain exercisable through the earlier of the applicable expiration date or one year
from termination in the case of death and disability, and through the expiration date in the case of retirement.
Upon termination for any other reason, vested SARs remain exercisable through the earlier of the applicable
expiration date or 90 days from the date of termination.
In the case of death, disability or retirement, unvested PSUs held by an officer that are eligible to vest will be
earned,
the related performance metric upon certification by the
Compensation Committee.
if at all, based upon achievement of
2020 Proxy Statement | 38
Compensation Tables and Narrative Disclosures
Potential Payments upon Termination or Change in Control
Certain Employment Agreements with Executive Officers above contains a detailed discussion of the payments
and other benefits to which our CEO and other NEOs are entitled in the event of termination of employment or
upon a Change In Control, and the amounts payable assuming termination under various circumstances at
December 31, 2019 are set forth below. In each case, each NEO would also be entitled to receive accrued
personal time off (PTO) and the balance in his or her deferred compensation plan account.
Mr. Hall, CEO
The table below quantifies (in dollars) amounts that would be payable by the Company, and the value of shares of
Common Stock underlying the equity awards that would vest, to Mr. Hall had his employment been terminated on
December 31, 2019 (the “Termination Date”) as a result of (i) involuntary termination without cause and/or
constructive termination; (ii) death, disability or retirement; or (iii) a Change In Control. See Outstanding Equity
Awards At Fiscal Year End Table below for a list of Mr. Hall’s unvested equity awards at the end of 2019. Mr. Hall
was eligible for retirement benefits at December 31, 2019.
Involuntary
termination
(severance
benefits)
(1)
Involuntary
termination
(continued
vesting of
equity
awards)
(2)
Death
or disability
(value of
unvested
equity
awards)
(3)
Retirement
(value of
unvested
equity
awards)
(4)
Change in
Control
(severance
benefits)
(5)
Total
Involuntary
termination
(1), (2)
Change in
Control
(acceleration
of
unvested
equity
awards)
(6)
Total
Change in
Control
(5), (6)
7,449,452
43,982,031
51,431,483
43,982,031
43,982,031
6,554,969
40,833,460
47,388,429
(1) Represents the sum of (w) three times base salary in effect at Termination Date; (x) 300% of the average
actual bonus paid for the prior three years (2016, 2017 and 2018); (y) earned but unpaid 2019 bonus; and
(z) the amount of health insurance premiums for Mr. Hall, his spouse and immediate family for 36 months (at
premiums in effect on the Termination Date).
(2) Represents (y) the fair market value using the closing price of our Common Stock on December 31, 2019 (the
last NYSE trading in 2019), or $154.10 (the “Year End Price”) of unvested PSUs that would have vested
within 48 months following the Termination Date, plus (z) the spread between the Year End Price and the
exercise price for all in-the-money SARs that would have vested within 48 months following the Termination
Date, multiplied by the number of such SARs. Since Mr. Hall is retirement-eligible, his termination would be
treated as a retirement for purpose of determining additional vesting of his PSUs and SARs and he would
receive full vesting of his equity awards. 2019 PSUs are adjusted based upon the performance factor
determined by the Compensation Committee in early 2020.
(3) Represents (y) the fair market value using the Year End Price of all unvested PSUs, plus (z) the spread
between the Year End Price and the exercise price for all in-the-money, unvested SARs, multiplied by the
number of such SARs. 2019 PSUs are adjusted based upon the performance factor determined by the
Compensation Committee in early 2020.
(4) Represents (y) the fair market value using the Year End Price of all unvested PSUs, plus (z) the spread
between the Year End Price and the exercise price for all in-the-money, unvested SARs, multiplied by the
number of such SARs. 2019 PSUs are adjusted based upon the performance factor determined by the
Compensation Committee in early 2020.
(5) Represents the sum of (w) three times base salary in effect at Termination Date, (x) three times 2019 target
bonus, (y) unpaid 2019 bonus, and (z) the amount of health insurance premiums for Mr. Hall, his spouse and
immediate family for 36 months (at premiums in effect on the Termination Date).
2020 Proxy Statement | 39
Compensation Tables and Narrative Disclosures
(6) Represents (y) the fair market value using the Year End Price of all unvested PSUs on the Termination Date
(at target in the case of unadjusted 2019 PSUs), plus (z) the spread between the Year End Price and the
exercise price of all in-the-money unvested SARs on the Termination Date, multiplied by the number of such
SARs.
Other Named Executive Officers
The table below quantifies (in dollars) amounts that would be payable by the Company, and the value of shares of
Common Stock that would be released, to our NEOs (other than Mr. Hall) had their employment been terminated
on December 31, 2019 (the “Termination Date”) as a result of (i) involuntary termination without cause and/or
constructive termination; (ii) death or disability; or (iii) a Change In Control. None of these NEOs were eligible for
retirement benefits at December 31, 2019. See Outstanding Equity Awards At Fiscal Year End Table below for a
list of unvested equity awards held by each NEO at the end of 2019.
Involuntary
termination
(severance
benefits)
(1)
616,633
511,633
511,157
517,252
Value of
unvested equity
awards
(death, disability
or retirement)
(2)
Value of
unvested equity
awards (Change
In Control)
(3)
10,150,488
7,114,252
7,114,252
7,114,252
9,329,905
6,631,919
6,631,919
6,631,919
Total Change In
Control
(1), (3)
9,946,538
7,143,552
7,143,076
7,149,170
Named Executive Officer
Craig W. Safian
Alwyn Dawkins
Robin Kranich
David McVeigh
(1) Represents 12 months’ base salary in effect on the Termination Date, plus the amount of health insurance
premiums for the executive, his or her spouse and immediate family for 12 months (at premiums in effect on
the Termination Date) payable in accordance with normal payroll practices.
(2) Represents (x) the fair market value using the Year End Price ($154.10) of 100% of unvested PSUs, plus
in-the money unvested SARs,
(y) the spread between the Year End Price and the exercise price of all
multiplied by the number of such SARs, plus (z) the fair market value using the Year End Price of all unvested
RSUs. 2019 PSUs are adjusted based upon applicable performance metrics. Messrs. Safian, Dawkins and
McVeigh and Ms. Kranich were not eligible for retirement benefits on December 31, 2019 and would have
forfeited all unvested equity had they retired on the Termination Date.
(3) Represents (x) the fair market value using the Year End Price of all unvested PSUs and RSUs on the
Termination Date (at target in the case of unadjusted 2019 PSUs), plus (y) the spread between the Year End
Price and the exercise price of all in-the-money unvested SARs on the Termination Date, multiplied by the
number of such SARs.
2020 Proxy Statement | 40
Compensation Tables and Narrative Disclosures
Outstanding Equity Awards at Fiscal Year-End Table
This table provides information on each option (including SARs) and stock (including RSUs and PSUs) award
held by each NEO at December 31, 2019. All performance criteria associated with these awards (except for the
2019 PSU award (see footnote 4)) were fully satisfied as of December 31, 2019, and the award is fixed. The
market value of the stock awards is based on the closing price of our Common Stock on the New York Stock
Exchange on December 31, 2019 (the last business day of the year), which was $154.10. Upon exercise of, or
release of restrictions on, these awards, the number of shares ultimately issued to each executive will be reduced
by the number of shares withheld by Gartner for tax withholding purposes and/or as payment of the exercise price
in the case of options and SARs.
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Name Executive Officer
Eugene A. Hall
Craig W. Safian
Alwyn Dawkins
Robin Kranich
David McVeigh
(1), (5)
(2), (5)
(3), (5)
(4), (5)
(6)
(5)
(1), (5)
(2), (5)
(3), (5)
(4), (5)
(7)
(5)
(1), (5)
(2), (5)
(3), (5)
(4), (5)
(7)
(1), (5)
(2), (5)
(3), (5)
(4), (5)
(7)
(1), (5)
(2), (5)
(3), (5)
(4), (5)
(7)
109,278
57,300
27.329
-
-
20,570
19,483
11,190
6,877
-
-
18,855
16,257
8,768
4,740
-
-
10,838
8,768
4,740
-
-
6,257
8,768
4,740
-
-
36,425
57,300
81,987
92,192
-
-
6,494
11,188
20,631
26,196
-
-
5,418
8,767
14,218
15,809
-
5,418
8,767
14,218
15,809
-
5,418
8,767
14,218
15,809
-
80.06
99.07
114.26
143.01
-
77.92
80.06
99.07
114.26
143.01
-
77.92
80.06
99.07
114.26
143.01
-
80.06
99.07
114.26
143.01
-
80.06
99.07
114.26
143.01
-
2/8/23
2/6/24
2/8/25
2/6/26
-
2/9/22
2/8/23
2/6/24
2/8/25
2/6/26
-
2/9/22
2/8/23
2/6/24
2/8/25
2/6/26
-
2/8/23
2/6/24
2/8/25
2/6/26
-
2/8/23
2/6/24
2/8/25
2/6/26
-
Number of
Shares or
Units of
Stock
That
Have
Not
Vested
(#)
Market
Value of
Shares
or Units
of Stock
That
Have
Not
Vested
($)
28,373 4,372,279
55,194 8,505,395
61,574 9,488,553
-
777,589
-
5,046
-
5,058
-
779,438
10,776 1,660,582
15,493 2,387,471
-
147,936
-
960
-
-
650,302
4,220
8,444 1,301,220
10,677 1,645,326
-
114,959
-
746
4,220
650,302
8,444 1,301,220
10,677 1,645,326
-
114,959
-
746
4,220
650,302
8,444 1,301,220
10,677 1,645,326
-
114,959
-
746
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
(#)
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units, or
Other
Rights
That
Have Not
Vested
($)
-
-
-
-
-
-
97,998 15,101,492
-
-
-
-
-
-
27,846
-
-
-
-
-
16,804
-
-
-
-
16,804
-
-
-
-
16,804
-
-
-
-
-
4,291,069
-
-
-
-
-
2,589,496
-
-
-
-
2,589,496
-
-
-
-
2,589,496
-
2020 Proxy Statement | 41
Compensation Tables and Narrative Disclosures
(1) Vest 25% per year commencing 2/8/17.
(2) Vest 25% per year commencing 2/6/18.
(3) Vest 25% per year commencing 2/8/19.
(4) Vests 25% per year commencing 2/6/20. The market value of the Stock Award is presented at maximum
level (200%), and the amount ultimately awarded could range from 0% to 200% of the target award. After
certification of the applicable performance metric in February 2020, the amount actually awarded on
account of Stock Awards was adjusted to 141.7% of target. The actual number of PSUs awarded to the
NEOs is reported in footnote (2) to the Grants of Plan-Based Awards Table.
(5) The amounts shown under Option Awards represent SARs that will be stock-settled upon exercise;
accordingly, the number of shares ultimately received upon exercise will be less than the number of SARs
held by the executive and reported in this table.
(6) Vest 25% per year commencing 2/6/18.
(7) Vest 25% per year commencing 8/10/18.
Option Exercises and Stock Vested Table
This table provides information for the NEOs for the aggregate number of SARs that were exercised, and stock
awards that vested and released, during 2019 on an aggregate basis, and does not reflect shares withheld by the
Company for exercise price or withholding taxes.
Option Awards
Stock Awards
Number of
Shares
Acquired on
Exercise
(#)
126,750
-
20,080
10,132
10,000
Value
Realized on
Exercise
($) (1)
10,482,225
-
1,869,247
769,074
778,600
Number of
Shares
Acquired on
Vesting
(#) (2)
105,644
20,412
16,337
16,337
13,806
Value
Realized on
Vesting
($) (3)
14,785,661
2,851,055
2,281,571
2,281,571
1,928,075
Name
Eugene A. Hall
Craig W. Safian
Alwyn Dawkins
Robin Kranich
David McVeigh
(1) Represents the spread between (i) the market price of our Common Stock at exercise and (ii) the exercise
price for all SARs exercised during the year, multiplied by the number of SARs exercised.
(2) Represents PSUs and RSUs awarded in prior years as long-term incentive compensation that released in
2019.
(3) Represents the number of shares that released multiplied by the market price of our Common Stock on the
release date.
Non-Qualified Deferred Compensation Table
The Company maintains a Non-Qualified Deferred Compensation Plan for certain officers and key personnel
whose grade profile was a 130 or higher in 2019, or those who have been previously grandfathered into the plan.
This plan currently allows qualified U.S.-based employees to defer up to 50% of annual salary and/or up to 100%
of annual bonus earned in a fiscal year. In addition, in 2019 the Company made a contribution to the account of
each Named Executive Officer who deferred compensation equal to the amount of such executive’s contribution
(not to exceed 4% of base salary and bonus), less $7,200. Deferred amounts are deemed invested in several
independently-managed investment portfolios selected by the participant for purposes of determining the amount
of earnings to be credited by the Company to that participant’s account. The Company may, but need not, acquire
investments corresponding to the participants’ designations.
2020 Proxy Statement | 42
Compensation Tables and Narrative Disclosures
Upon termination of employment for any reason, all account balances will be distributed to the participant in a
lump sum, except that a participant whose account balance is in excess of $25,000 may defer distributions for an
additional year, and/or elect to receive the balance in 20, 40 or 60 quarterly instalments. In the event of an
unforeseen emergency (which includes a sudden and unexpected illness or accident of the participant or a
dependent, a loss of
the participant’s property due to casualty or other extraordinary and unforeseeable
circumstance beyond the participant’s control), the participant may request early payment of his or her account
balance, subject to approval.
The following table provides information (in dollars) concerning contributions to the Deferred Compensation Plan
in 2019 by the participating Named Executive Officers, the Company’s matching contributions, 2019 earnings,
aggregate withdrawals and distributions and account balances at year end(1):
Name
Eugene A. Hall
Craig W. Safian
Alwyn Dawkins
Robin Kranich
David McVeigh
Executive
Contributions
in 2019 (2)
80,057
56,055
44,022
46,509
37,259
Company
Contributions
in 2019 (3)
73,909
38,152
30,483
30,430
30,483
Aggregate
Earnings
(loss) in
2019
79,034
68,864
43,556
158,673
24,511
Aggregate
Withdrawals/
Distributions
in 2019
(388,040)
-
(74,879)
-
(47,620)
Aggregate
Balance at
12/31/19 (4)
516,416
448,750
226,448
943,064
207,317
(1) Contribution amounts in this table have been reflected in the Summary Compensation Table and prior years’
summary compensation tables, as applicable. Aggregate earnings are not reflected in the Summary
Compensation Table and were not reflected in prior years’ summary compensation tables.
(2) Executive Contributions are included in the “Base Salary” and/or “Non-Equity Incentive Plan Compensation”
columns in the Summary Compensation Table for the NEOs.
(3) Company Contributions are included in the “All Other Compensation” column of the Summary Compensation
Table, and in the “Company Match Under Non-qualified Deferred Compensation Plan” column of the Other
Compensation Table for the NEOs.
(4) Amounts reported in the Aggregate Balance column reflect the cumulative value of the NEOs’ deferral
activities, including executive contributions, company contributions, withdrawals and investment earnings
thereon as of December 31, 2019.
Pay Ratio
The 2019 annual total compensation of the median compensated of all our employees who were employed as of
December 31, 2019, other than our CEO, Mr. Hall, was $110,383; Mr. Hall’s 2019 annual total compensation was
$11,960,245 and the ratio of these amounts was 1-to-108.
The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that
employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain
exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and
compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay
ratio reported above, as other companies have different employee populations and compensation practices and
may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on
our payroll and employment records, and the methodology described herein. For these purposes, we identified
2020 Proxy Statement | 43
Compensation Tables and Narrative Disclosures
the median compensated employee using the base salary determined as of December 31, 2019 and target cash
incentives for the 2019 performance year, which amounts were annualized for any employee who did not work for
the entire year. We considered all of our worldwide associates when examining the pay ratio. Based on our
consistently applied compensation measure, we identified a group of 10 associates within 0.1% of the median
amount and calculated annual
total compensation in accordance with Summary Compensation Table
requirements for these associates to identify our median compensated employee.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2019 regarding the number of shares of our
Common Stock that may be issued upon exercise of outstanding options, stock appreciation rights and other
rights (including restricted stock units, performance stock units and common stock equivalents) awarded under
our equity compensation plans (and, where applicable, related weighted average exercise price information), as
well as shares available for future issuance under our equity compensation plans. All equity plans with
outstanding awards or available shares have been approved by our stockholders.
Column A
Column B
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options
and Rights (1)
54,998
Weighted Average
Exercise Price of
Outstanding
Options
and Rights ($) (1)
60.96
1,777,465
107.13
Plan Category
2003 Long - Term Incentive Plan
2014 Long – Term Incentive Plan
2011 Employee Stock Purchase Plan
-
Total (3)
1,832,463
104.05
Column C
Number of Securities
Remaining Available
For Future Issuance
Under Equity
Compensation Plans
(excluding shares in
Column A)(2)
-
5,343,211
558,608
5,901,819
(1)
Includes 381,902 SARs, 1,339,220 PSUs and RSUs, and 111,341 CSEs. Because there is no
exercise price associated with PSUs, RSUs or CSEs, these stock awards are not included in the
weighted-average exercise price calculation presented in column B. For SARs, includes the number
of shares of Common Stock that would be issuable based on the difference between the closing
price of our Common Stock on December 31, 2019 ($154.10) and the exercise price of
in-the-money SARs as of that date.
(2) With respect to SARs, includes the number of shares of Common Stock that would be withheld for
the exercise price of in-the-money SARs based on the closing price of our Common Stock on
December 31, 2019 ($154.10).
(3)
In addition, the Company has outstanding equity compensation awards that the Company assumed
in the acquisition of CEB, Inc. These awards were granted by CEB under its 2012 Stock Incentive
Plan (the “CEB Plan”) in the period between 2012 to the closing of the acquisition by the Company
and were converted into an adjusted number of Company shares. As of December 31, 2019, there
were a total of 48,315 Company shares subject
to assumed CEB restricted stock units. No
additional restricted stock units, options or other awards have been granted under the CEB Plan
since the closing of the acquisition and no new awards will be granted in the future under that plan.
2020 Proxy Statement | 44
PROPOSAL TWO:
APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR
NAMED EXECUTIVE OFFICERS
In accordance with the requirements of Section 14A of the Exchange Act (which was added by the Dodd-Frank
Act) and the related rules of the SEC, we are including in this Proxy Statement a separate resolution subject to
stockholder vote to approve the compensation of our NEOs. The stockholder vote on this resolution is advisory
only. However, the Compensation Committee and the Board will consider the voting results when making future
executive compensation decisions.
The text of the resolution in respect of Proposal No. 2 is as follows:
Resolved, that the compensation of Gartner’s Named Executive Officers as disclosed in this
Proxy Statement pursuant to Item 402 of Regulation S-K, including the Compensation Discussion
and Analysis, compensation tables and narrative discussion, is hereby approved.
In considering your vote, stockholders may wish to review with care the information on Gartner’s compensation
policies and decisions regarding the NEOs presented in the CD&A on pages 17-30, including, in particular, the
information concerning Company performance included in the Executive Summary on pages 17-19 and highlights
of our Compensation Practices on page 19-20.
In particular, stockholders should note that the Compensation Committee bases its executive compensation
decisions on the following:
➣ the need to attract, motivate and retain highly talented, creative and entrepreneurial individuals in
a highly competitive industry and marketplace;
➣ the need to motivate our executives to maximize the performance of our Company through
pay-for-performance compensation components which have led executives to deliver
outstanding performance for the past several years;
➣ comparability to the practices of peers in our industry and other comparable companies
generally based upon available benchmarking data; and
➣ the alignment of our executive compensation programs with stockholder value through heavily
weighted performance-based compensation elements.
As noted in the Executive Summary commencing on page 17, 2019 was another year of strong performance for
Gartner, largely as a result of the achievements, focus and skill of our executive leadership team. The Board
believes that Gartner’s executive compensation program has a proven record of effectively driving superior levels
of financial performance, stockholder value, alignment of pay with performance, high ethical standards and
attraction and retention of highly talented executives.
RECOMMENDATION OF OUR BOARD
Our Board unanimously recommends that you vote FOR the foregoing resolution to approve, on
an advisory basis, the compensation of our Named Executive Officers as disclosed in this Proxy
Statement.
2020 Proxy Statement | 45
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Based on our review of information on file with the SEC and our stock records, the following table provides certain
information about beneficial ownership of shares of our Common Stock as of April 10, 2020 (including shares that
will release or are or will become exercisable within 60 days following April 10, 2020) held by: (i) each person (or
group of affiliated persons) which is known by us to own beneficially more than five percent (5%) of our Common
Stock; (ii) each of our directors; (iii) each NEO; and (iv) all directors, NEOs and other current executive officers as
a group. Percentage computations are based on 89,174,399 shares of Common Stock outstanding on April 10,
2020. Unless otherwise indicated, the address for those listed below is c/o Gartner, Inc., 56 Top Gallant Road,
Stamford, CT 06904. The amounts shown do not include CSEs that release upon termination of service as a
director, or deferred RSUs that will not release within 60 days. Since all stock appreciation rights (SARs) are
stock-settled (i.e., shares are withheld for the payment of exercise price and taxes), the number of shares
ultimately issued upon settlement will be less than the number of SARs exercised. Except as indicated by
footnote, and subject to applicable community property laws, the persons named in the table directly own, and
have sole voting and investment power with respect to, all shares of Common Stock shown as beneficially owned
by them. To the Company’s knowledge, none of these shares has been pledged.
Beneficial Owner
Peter E. Bisson
Richard J. Bressler (1)
Raul E. Cesan (2)(3)
Karen E. Dykstra
Anne Sutherland Fuchs (2)
William O. Grabe (2)(4)
Stephen G. Pagliuca (2)
Eileen M. Serra
James C. Smith (2)(5)
Eugene A. Hall (6)
Craig W. Safian (7)
Alwyn Dawkins (8)
Robin Kranich (9)(10)
David McVeigh (11)
All current directors, NEOs and other
executive officers as a group (21 persons) (12)
The Vanguard Group, Inc. (13)
100 Vanguard Blvd., Malvern, PA 19355
Blackrock, Inc. (14)
55 East 52nd Street, New York, NY 10055
Baron Capital Group, Inc. (15)
767 Fifth Avenue, New York, NY 10153
T. Rowe Price Group, Inc. (16)
Polen Capital Management, LLC (17)
1825 NW Corporate Blvd., Suite 300, Boca Raton, FL 33431
*
Less than 1%
(1) Includes 2,812 RSU shares that will release within 60 days.
(2) Includes 1,574 RSU shares that will release within 60 days.
Number of Shares
Beneficially
Owned
1,743
26,870
100,928
19,198
22,891
137,299
61,965
999
1,066,042
1,506,855
126,675
108,168
56,246
55,787
3,612,266
Percent
Owned
*
*
*
*
*
*
*
*
1.2
1.7
*
*
*
*
4.0
9,720,893
10.9
6,722,386
6,428,061
6,027,013
5,272,635
7.5
7.2
6.8
5.9
2020 Proxy Statement | 46
Security Ownership of Certain Beneficial Owners and Management
Includes 30,000 shares held by a family foundation as to which Mr. Cesan may be deemed a beneficial
owner.
Includes 135,388 shares held by three grantor retained annuity trusts (GRATs). These shares are held in
trust for the benefit of Mr. Grabe and his children. Mr. Grabe is the Trustee of the GRATs.
Includes 50,000 shares held by members of Mr. Smith’s immediate family and 211,900 shares held by a
family foundation as to which Mr. Smith may be deemed a beneficial owner.
Includes 309,359 vested and exercisable stock appreciation rights (“SARs”).
Includes 83,634 vested and exercisable SARs.
Includes 67,115 vested and exercisable SARs.
Includes 42,841 vested and exercisable SARs.
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
Includes 40 shares as to which Ms. Kranich may be deemed to share voting and investment power.
Ms. Kranich disclaims beneficial ownership of such shares.
(11)
Includes 38,260 vested and exercisable SARs.
(12)
Includes 13,245 RSUs shares that will release within 60 days, and 667,003 vested and exercisable SARs.
(13) Beneficial ownership information is based on a Schedule 13G/A filed by The Vanguard Group with the SEC
on February 12, 2020. The Vanguard Group has sole voting power over 136,438 shares and has sole
dispositive power over 9,560,185 shares. The Vanguard Group has shared voting power over 30,964 shares
and shared dispositive power over 160,708 shares. Vanguard Fiduciary Trust Company (“VFTC”), a wholly-
owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 105,875 shares as a result of its
serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd. (“VIA”), a
wholly-owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 83,832 shares as a result
of its serving as investment manager of Australian investment offerings.
(14) Beneficial ownership information is based on a Schedule 13G/A filed by BlackRock, Inc. with the SEC on
February 5, 2020. BlackRock, Inc. has sole voting power over 5,943,359 shares and sole dispositive power
over 6,722,386 shares.
(15) Beneficial ownership information is based on a Schedule 13G/A filed by Baron Capital Group, Inc., BAMCO,
Inc., a subsidiary of Baron Capital Group, Inc., Baron Capital Management, Inc., a subsidiary of Baron
Capital Group, Inc., and Ronald Baron, who owns a controlling interest in Baron Capital Group, Inc., with the
SEC on February 14, 2020. BAMCO, Inc. has shared voting power of 5,965,317 shares and shared
dispositive power of 6,148,717 shares. Baron Capital Group, Inc. has shared voting power of 6,244,661
shares and shared dispositive power of 6,428,061 shares. Baron Capital Management, Inc. has shared
voting power and shared dispositive power of 279,344 shares. Mr. Baron has shared voting power of
6,244,661 shares and shared dispositive power of 6,428,061 shares.
(16) Beneficial ownership information is based on a Schedule 13G filed by T. Rowe Price Associates, Inc. on
February 14, 2020. T. Rowe Price Associates, Inc. has sole voting power over 1,791,519 shares and sole
dispositive power over 6,027,013 shares.
(17) Beneficial ownership information is based on a Schedule 13G/A filed by Polen Capital Management, LLC
with the SEC on February 5, 2020. Polen Capital Management, LLC has shared voting power and shared
dispositive power with respect to all of the shares.
2020 Proxy Statement | 47
TRANSACTIONS WITH RELATED PERSONS
Gartner provides products and services to over 15,000 enterprises in more than 100 countries. Because of our
worldwide reach, it is not unusual for Gartner to engage in ordinary course of business transactions involving the
sale of research or consulting services with entities in which one of our directors, executive officers or a greater
than 5% owner of our stock, or immediate family member of any of them, may also be a director, executive officer,
partner or investor, or have some other direct or indirect interest. We will refer to these transactions generally as
related party transactions.
the relationship or
Our Governance Committee reviews all related party transactions to determine whether any director, executive
officer or a greater than 5% owner of our stock, or immediate family member of any of them, has a material direct
or indirect interest, or whether the independence from management of our directors may be compromised as a
transaction. Our Board Principles and Practices, which are posted on
result of
https://investor.gartner.com, require directors to disclose all actual or potential conflicts of interest regarding a
matter being considered by the Board or any of its committees and to excuse themselves from that portion of the
Board or committee meeting at which the matter is addressed to permit independent discussion. Additionally, the
member with the conflict must abstain from voting on any such matter. The Governance Committee is charged
with resolving any conflict of interest issues brought to its attention and has the power to request the Board to
take appropriate action, up to and including requesting the involved director to resign. Our Audit Committee and/
or Board reviews and approves all material related party transactions involving our directors in accordance with
applicable provisions of Delaware law and with the advice of counsel, if deemed necessary.
The Company maintains a written conflict of interest policy which is posted on our intranet and prohibits all
Gartner employees, including our executive officers, from engaging in any personal, business or professional
activity which conflicts with or appears to conflict with their employment responsibilities and from maintaining
financial interests in entities that could create an appearance of impropriety in their dealings with the Company.
Additionally, the policy prohibits all Gartner employees from entering into agreements on behalf of Gartner with
any outside entity if the employee knows that the entity is a related party to a Gartner employee; i.e., that the
contract would confer a financial benefit, either directly or indirectly, on a Gartner employee or his or her relatives.
All potential conflicts of interest and related party transactions involving Gartner employees must be reported to,
and pre-approved by, the General Counsel.
Since January 1, 2019, there were no related party transactions in which any director, executive officer or a
greater than 5% owner of our stock, or immediate family member of any of them, had or will have a direct or
indirect material interest.
2020 Proxy Statement | 48
PROPOSAL THREE:
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed KPMG LLP (“KPMG”) to serve as the Company’s
independent registered public accounting firm for the 2020 fiscal year. Additional information concerning the Audit
Committee and its activities with KPMG can be found in the Audit Committee Report and the Principal Accountant
Fees and Services below.
The Audit Committee is directly responsible for the appointment, compensation and oversight of the Company’s
independent registered public accounting firm. Ratification by the stockholders of the appointment of KPMG is not
the Board of Directors is submitting the
required by law,
appointment of KPMG for stockholder ratification to ascertain stockholders’ views on the matter. Representatives
of KPMG will attend the Annual Meeting to respond to appropriate questions and to make a statement if they
desire to do so.
the Company’s bylaws or otherwise. However,
Principal Accountant Fees and Services
The following table presents fees for professional services rendered by KPMG for the integrated audit of the
Company’s consolidated financial statements and internal control over financial reporting during the years ended
December 31, 2019 and 2018, and fees for other services rendered by KPMG during those periods:
Types of Fees
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
Total Fees
Audit Fees
2018 ($)
5,025,500
-
1,664,000
-
2019 ($)
5,724,000
36,000
1,186,000
-
6,689,500
6,946,000
Audit fees relate to professional services rendered by KPMG for the audit of the Company’s annual consolidated
financial statements contained in its Annual Report on Form 10-K, audit of
internal controls over financial
reporting as of December 31, 2019, and the review of the Company’s quarterly financial statements contained in
its Quarterly Reports on Form 10-Q, as well as work performed in connection with statutory and regulatory filings.
The amounts noted above include reimbursement for direct out-of-pocket travel and other sundry expenses.
Audit-Related Fees
Audit-related fees consist of fees for assurance and audit-related services performed for the Company or its
subsidiaries but not directly related to the audits. Audit-Related fees include attestation or agreed upon
procedures related to certain statutory requirements or local reporting requirements.
Tax Fees
Tax fees relate to professional services rendered by KPMG for permissible tax compliance in international and
domestic locations, tax planning, and routine tax advice.
All Other Fees
This category of fees covers all fees for any permissible service not included in the above categories.
2020 Proxy Statement | 49
Proposal Three: Ratification of Appointment of Independent Registered Public Accounting Firm
Pre-Approval Policies
The Audit Committee’s policy is to pre-approve all audit, audit-related and permissible non-audit services provided
by KPMG. These services may include domestic and international audit services, audit-related services, tax
services and other services. At the beginning of each fiscal year, the Audit Committee pre-approves aggregate
fee limits for specific types of permissible services (e.g., domestic and international tax compliance and tax
transfer pricing services, audit-related services and other permissible services) to allow
planning services;
management to engage KPMG expeditiously as needed when projects arise. At each regular quarterly meeting,
KPMG and management report to the Audit Committee regarding the services for which the Company has
engaged KPMG in the immediately preceding fiscal quarter in accordance with the pre-approved limits, and the
related fees for such services as well as year-to-date cumulative fees for KPMG services. Pre-approved limits
may be adjusted as necessary during the year, and the Audit Committee may also pre-approve particular services
on a case-by-case basis. All services provided by KPMG in 2019 were pre-approved by the Audit Committee.
AUDIT COMMITTEE REPORT
Pursuant to its responsibilities as set forth in the Audit Committee Charter, the Audit Committee has reviewed and
discussed with management and with KPMG Gartner’s audited consolidated financial statements for the year
ended December 31, 2019. The Audit Committee has discussed with KPMG the matters required to be discussed
under applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the Securities
and Exchange Commission. The Audit Committee has received the written disclosures and letter from KPMG
required by applicable requirements of the PCAOB regarding KPMG’s communications with the Audit Committee
concerning independence and has discussed with KPMG that firm’s independence.
Based on the review and discussions noted above, as well as discussions regarding Gartner’s internal control
over financial reporting and discussions with Gartner’s Internal Audit function, the Audit Committee recommended
to the Board of Directors that the audited consolidated financial statements for the year ended December 31,
2019 be included in Gartner’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 for filing
with the Securities and Exchange Commission.
Audit Committee of the Board of Directors
Richard J. Bressler
Karen E. Dykstra
James C. Smith
RECOMMENDATION OF OUR BOARD
Our Board unanimously recommends that you vote FOR ratification of the appointment of
KPMG LLP as the Company’s independent registered public accounting firm for the 2020 fiscal
year.
2020 Proxy Statement | 50
PROXY AND VOTING INFORMATION
Information Concerning Proxy Materials and the Voting of Proxies
Why is it Important to Vote?
Voting your shares is important to ensure that you have a say in the governance of the Company. Additionally,
repeated failure to vote may subject your shares to risk of escheatment. Please review the proxy materials and
follow the relevant instructions to vote your shares. We hope you will exercise your rights and fully participate as a
stockholder in the future of Gartner.
Why Did You Receive a Notice Regarding Availability of Proxy Materials?
The Securities and Exchange Commission (“SEC”) rules allow companies to furnish proxy materials to their
stockholders via the Internet. This “e-proxy” process expedites stockholders’ receipt of proxy materials, while
significantly lowering the costs and reducing the environmental impact of our annual meeting. Accordingly, on
April 22, 2020, we mailed to our stockholders (other than those who previously have requested printed proxy
materials) a Notice of Internet Availability of Proxy Materials (the “Notice”). If you received a Notice, you will not
receive a printed copy of the proxy materials unless you request one. The Notice provides instructions on how to
access our proxy materials for the Annual Meeting on a website, how to request a printed copy of the proxy
materials and how to vote your shares. We will mail printed copies of our proxy materials to those stockholders
who have already elected to receive printed proxy materials.
If Your Shares Are Held in “Street Name,” How Are Your Shares Voted?
If you are the beneficial owner of shares (meaning that your shares are held in the name of a bank, brokerage or
other nominee; i.e., “street name” accounts), you may receive a Notice of Internet Availability of Proxy Materials
from that firm containing instructions you must follow in order for your shares to be voted. Additionally, under
applicable New York Stock Exchange (“NYSE”) rules relating to the discretionary voting of proxies, banks, brokers
and other nominees are not permitted to vote shares with respect to “non-routine” matters, such as the election of
directors and the say on pay proposal presented this year without instructions from the beneficial owner, except
they are able to vote without instructions on “routine” matters, such as the ratification of the appointment of an
independent registered public accounting firm. Therefore, beneficial holders are advised that, if they do not timely
provide instructions to their bank, broker or other nominee, their shares will not be voted in connection with
Proposals One and Two, but may be voted in connection with Proposal Three. Generally, broker non-votes occur
on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owner
and instructions are not given.
If You Are the Holder of Record of Your Shares, How Are Your Shares Voted?
If you are the holder of record of your shares, you will either receive a Notice or printed proxy materials if you
have already elected to receive printed materials. The Notice will contain instructions you must follow to vote your
shares. If you received proxy materials in paper form, the materials include a proxy card instructing the holder of
record how to vote the shares.
How Can You Get Electronic Access to Proxy Materials?
The Notice provides instructions regarding how to view our proxy materials for the Annual Meeting online.
Additionally, proxy materials are available on www.proxyvote.com, 24 hours a day, seven days a week. You will
need the 12-digit Control number(s) located on your Notice to access the proxy materials online.
How Can You Request Paper or Email Copies of Proxy Materials?
If you received a Notice by mail, you will not receive a printed copy of the proxy materials. If you want to receive
paper or email copies of the proxy materials, you must request them. There is no charge for requesting a copy. To
facilitate timely delivery, please make your request on or before May 24, 2020. To request paper or email copies,
stockholders
to
sendmaterial@proxyvote.com. Please note that if you request materials by email, send a blank email with your
12-digit Control number(s) (located on your Notice) in the subject line.
to www.proxyvote.com,
1-800-579-1639
email
send
can
call
an
go
or
2020 Proxy Statement | 51
Proxy and Voting Information
How Can You Sign Up to Receive Future Proxy Materials Electronically?
You have the option to receive all future proxy statements, proxy cards and annual reports electronically via email
or the Internet. If you elect this option, the Company will only mail printed materials to you in the future if you
request that we do so. To sign up for electronic delivery, please follow the instructions below under How Can You
Vote to vote using the Internet and vote your shares. After submitting your vote, follow the prompts to sign up for
electronic delivery.
What is “Householding”?
We have adopted “householding” procedures that allow us to deliver proxy materials more cost-effectively. If you
are a beneficial owner of shares and you and other residents at your mailing address share the same last name
and also own shares of common stock in an account at the same bank, brokerage, or other nominee, your
nominee delivered a single Notice or set of proxy materials to your address. This method of delivery is known as
householding. Householding reduces the number of mailings you receive, saves on printing and postage costs
and helps the environment. Stockholders participating in householding continue to receive separate proxy cards
and control numbers for voting electronically.
We will deliver promptly a separate copy of the Notice or proxy materials to a stockholder at a shared address to
which a single copy was delivered. A stockholder who received a single Notice or set of proxy materials to a
shared address may request a separate copy of the Notice or proxy materials be sent to him or her by contacting
in writing Broadridge Financial Solutions, Inc. (“Broadridge”), Householding Department at 51 Mercedes Way,
Edgewood, New York, 11717, or calling 1-866-540-7095. If you would like to opt out of householding for future
deliveries of proxy materials, please contact your broker, bank or other nominee.
Beneficial owners of shares who share an address and receive multiple copies of the proxy materials but want to
receive only a single copy of these materials in the future should contact their bank, brokerage or other nominee
and make this request.
Who Can Vote at the Annual Meeting?
Only stockholders of record at the close of business on April 14, 2020 (the “Record Date”) may vote at the Annual
Meeting. As of the Record Date, there were 89,174,399 shares of Common Stock outstanding and eligible to be
voted. This amount does not include treasury shares which are not voted.
2020 Proxy Statement | 52
How Can You Vote?
You may vote using one of the following methods:
Proxy and Voting Information
➣ Internet
➣ Telephone
➣ Mail
➣ At the meeting
You may vote on the Internet up until 11:59 PM Eastern
Time on June 7, 2020 by going to the website for
Internet voting on the Notice or your proxy card
(www.proxyvote.com) and following the instructions on
your screen. Have your Notice or proxy card available
when you access the web page. If you vote by the
Internet, you should not return your proxy card.
number
You may vote by telephone by calling the toll-free
telephone
card
on
(1-800-690-6903), 24 hours a day and up until 11:59
PM Eastern Time on June 7, 2020, and following
card
pre-recorded instructions. Have your proxy
available when you call. If you vote by telephone, you
should not return your proxy card.
proxy
your
If you received your proxy materials by mail, you may
vote by mail by marking the enclosed proxy card, dating
in the postage-paid
and signing it, and returning it
envelope provided or
c/o
Broadridge, 51 Mercedes Way, Edgewood, N.Y. 11717.
to Vote Processing,
If there is a physical meeting in Stamford, Connecticut,
you may vote your shares in person by attending the
Annual Meeting and submitting your proxy at
the
meeting. Each stockholder may appoint only one proxy
holder or representative to attend the Annual Meeting on
his or her behalf. If we decide to hold a Virtual Annual
Meeting we will announce it in a press release available
at https://investor.gartner.com, you can vote by visiting
www.virtualshareholdermeeting.com/IT2020 and using
your 16-digit control number, but only if the meeting is
held virtually and not in Stamford, Connecticut. If you are
planning to attend our Annual Meeting, please monitor
our website prior to the meeting date.
All shares that have been voted properly by an unrevoked proxy will be voted at
the Annual Meeting in
accordance with your instructions. If you sign and submit your proxy card, but do not give voting instructions, the
shares represented by that proxy will be voted for each proposal as our Board recommends.
How to Revoke Your Proxy or Change Your Vote
A later vote by any means will cancel an earlier vote. You can revoke your proxy or change your vote before your
proxy is voted at the Annual Meeting by giving written notice of revocation to: Corporate Secretary, Gartner, Inc.,
56 Top Gallant Road, P.O. Box 10212, Stamford, Connecticut 06904-2212; or submitting another timely proxy by
the Internet, telephone or mail; or attending the Annual Meeting. If there is a physical meeting in Stamford,
Connecticut and your shares are held in the name of a bank, broker or other holder of record, to vote at the
2020 Proxy Statement | 53
Proxy and Voting Information
Annual Meeting you must obtain a proxy executed in your favor from your bank, broker or other holder of record
and bring it to the Annual Meeting in order to vote. Attendance at the Annual Meeting will not, by itself, revoke
your prior proxy.
How Many Votes You Have
Each stockholder has one vote for each share of our Common Stock owned on the Record Date for all matters
being voted on.
Quorum
A quorum is constituted by the presence, in person or by proxy, of holders of our Common Stock representing a
majority of the number of shares of Common Stock entitled to vote. Abstentions and broker non-votes (described
above) will be considered present to determine a quorum.
Votes Required
Proposal One: Each nominee must receive more “FOR” votes than “AGAINST” votes to be elected. Abstentions
and broker non-votes will have no effect on the outcome of the election. Any nominee who fails to achieve this
threshold must tender his or her resignation from the Board pursuant to the Company’s majority vote standard.
Proposals Two and Three: The affirmative “FOR” vote of a majority of the votes of shares of Common Stock
present in person or represented by proxy is required to approve Proposal Two—the advisory (non-binding)
approval of the Company’s executive compensation; and Proposal Three—the ratification of the appointment of
KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020.
For Proposals Two and Three, abstentions have the same effect as “AGAINST” votes. Broker non-votes, if any,
will have no effect on the outcome of these matters.
If any other matters are brought properly before the Annual Meeting, the persons named as proxies in the
accompanying proxy card will have the discretion to vote on those matters for you. If for any reason any of the
nominees is not available as a candidate for director at the Annual Meeting, the persons named as proxies will
vote your proxy for such other candidate or candidates as may be nominated by the Board of Directors. As of the
date of this Proxy Statement, we were unaware of any other matter to be raised at the Annual Meeting.
What Are the Recommendations of the Board?
The Board of Directors recommends that you vote:
✓ FOR
✓ FOR
✓ FOR
Election of each of the ten nominees to our Board of Directors
Approval, on an advisory basis, of the compensation of our named
executive officers
Ratification of
registered public accounting firm for the 2020 fiscal year
the appointment of KPMG LLP as our independent
Who Is Distributing Proxy Materials and Bearing the Cost of the Solicitation?
This solicitation of proxies is being made by the Board of Directors and we will bear the entire cost of this
solicitation, including costs associated with mailing the Notice and related Internet access to proxy materials, the
preparation, assembly, printing, and mailing of
the proxy card, and any additional
solicitation material that we may provide to stockholders. Gartner will request brokerage firms, fiduciaries and
custodians holding shares in their names that are beneficially owned by others to solicit proxies from these
persons and will pay the costs associated with such activities. The original solicitation of proxies may be
supplemented by solicitation by telephone, electronic mail and other means by our directors, officers and
employees. No additional compensation will be paid to these individuals for any such services. We have also
retained Georgeson LLC to assist with the solicitation of proxies at an anticipated cost of $8,000, which will be
paid by the Company.
this Proxy Statement,
2020 Proxy Statement | 54
Proxy and Voting Information
Where can I find the voting results of the Annual Meeting?
We will disclose voting results on a Form 8-K that will be filed with the SEC within four business days after the
Annual Meeting, which will also be available on our investor relations website – https://investor.gartner.com.
Who Can Answer Your Questions?
If you have questions about this Proxy Statement or the Annual Meeting, please call our Investor Relations
Department at (203) 316-6537.
Stockholder Communications
Stockholders and other interested parties may communicate with any of our directors by writing to them c/o
Corporate Secretary, Gartner,
Inc., 56 Top Gallant Road, P.O. 10212, Stamford, CT 06904-2212. All
communications other than those which on their face are suspicious, inappropriate or illegible will be delivered to
the director to whom they are addressed.
Available Information
Our website address is www.gartner.com. The investor
relations section of our website is located at
https://investor.gartner.com and contains, under the “Governance Documents” link, which can be found on the
“Governance” tab, current electronic printable copies of our:
➣
➣
➣
➣
➣
➣
CEO & CFO Code of Ethics, which applies to our Chief Executive Officer, Chief Financial Officer,
controller and other financial managers
Code of Conduct, which applies to all Gartner officers, directors and employees
Principles and Practices of the Board of Directors, the corporate governance principles that have
been adopted by our Board
Audit Committee Charter
Compensation Committee Charter
Governance/Nominating Committee Charter
This information is also available in print to any stockholder who makes a written request to Investor Relations,
Gartner, Inc., 56 Top Gallant Road, P.O. Box 10212, Stamford, CT 06904-2212.
Process for Submission of Stockholder Proposals for our 2021 Annual Meeting
The Company has adopted advance notice requirements related to stockholder business, including director
nominations. These requirements are contained in our Bylaws, which can be found at https://
investor.gartner.com, under the “Governance Documents” link, which can be found on the “Governance” tab
and are summarized below. This summary is qualified by reference to the full Bylaw provision.
If you are a stockholder of record and you want to nominate a director or introduce a proposal on other business
at the 2021 Annual Meeting without having it included in our proxy materials, you must deliver written notice no
earlier than the close of business on February 8, 2021 and no later than the close of business on March 10, 2021;
provided, however, that if the date of the 2021 Annual Meeting is more than 30 days before or after the
anniversary date of this year’s Annual Meeting, then you must deliver your written notice no earlier than the close
of business 120 days prior to the 2021 Annual Meeting and no later than the close of business 90 days prior to
the 2021 Annual Meeting or the 10th day after the Company publicly announces the date of the 2021 Annual
Meeting. The notice of such nomination or proposal must comply with the Bylaws.
2020 Proxy Statement | 55
Proxy and Voting Information
If you do not comply with all of the provisions of our advance notice requirements, then your proposal may not be
brought before the 2021 Annual Meeting. All stockholder notices should be addressed to the Corporate Secretary,
Gartner, Inc., 56 Top Gallant Road, P.O. Box 10212, Stamford, CT 06904-2212.
Additionally, if you want to make a proposal for consideration at next year’s Annual Meeting and have it included
in our proxy materials for that meeting, we must receive your proposal no later than the close of business on
December 23, 2020, and it must comply with the requirements of Exchange Act Rule 14a-8. All stockholder
proposals submitted pursuant to Exchange Act Rule 14a-8 should be addressed to the Corporate Secretary,
Gartner, Inc., 56 Top Gallant Road, P.O. Box 10212, Stamford, CT 06904-2212.
Annual Report
A copy of our Annual Report on Form 10-K for the year ended December 31, 2019 (the “2019 10-K”) has been
filed with the Securities and Exchange Commission and is available at www.sec.gov. You may also obtain a copy
at https://investor.gartner.com. A copy of the 2019 10-K is also contained in our 2019 Annual Report to
Stockholders, which accompanies this Proxy Statement. A copy of the 2019 10-K will be mailed, without
charge, to any stockholder who makes a written request to Investor Relations, Gartner, Inc., 56 Top
Gallant Road, P.O. Box 10212, Stamford, CT 06904-2212.
By Order of the Board of Directors
Jules Kaufman
Secretary
Stamford, Connecticut
April 22, 2020
2020 Proxy Statement | 56
2019
Annual
Report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
Commission file number: 1-14443
GARTNER, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
P.O. Box 10212
04-3099750
(I.R.S. Employer Identification No.)
56 Top Gallant Road
Stamford,
Connecticut
(Address of principal executive offices)
06902-7700
(Zip Code)
Registrant’s telephone number, including area code: (203) 316-1111
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Common Stock, $0.0005 par value per share
IT
Securities registered pursuant to Section 12(g) of the Act: None
Name of each exchange
on which registered
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
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
uu
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted d
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit such files). Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Smaller reporting company
Accelerated filer
Emerging growth company
Non-accelerated filer
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.
ff
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
As of June 30, 2019, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was
approximately $14.1 billion, based on the closing price as reported on the New York Stock Exchange.
As of January 31, 2020, there were 89,101,606 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive Proxy Statement for the Annual Meeting of Stockholders to be held on June 8, 2020 is incorporated by reference
into Part III to the extent described therein.
GARTNER, INC.
2019 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
ITEM 1.
BUSINESS
ITEM 1A.
RISK FACTORS
ITEM 1B.
UNRESOLVED STAFF COMMENTS
ITEM 2.
ITEM 3.
ITEM 4.
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES (not applicable)
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
ITEM 9A.
CONTROLS AND PROCEDURES
ITEM 9B.
OTHER INFORMATION
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11.
EXECUTIVE COMPENSATION
ITEM 12.
ITEM 13.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 16.
FORM 10-K SUMMARY
SIGNATURES
3
4
7
15
15
15
15
16
17
19
33
34
34
35
35
36
36
36
36
36
37
39
40
42
43
44
45
46
47
48
87
88
PART I
ITEM 1. BUSINESS.
GENERAL
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 enterprises in more than 100 countries — across all major functions, in every industry and enterprise size.
ff
Gartner delivers its products and services globally through three business 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 live.
g
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.
The fiscal year of Gartner is the twelve-month period from January 1 through December 31. All references to 2019, 2018 and
2017 herein refer to the fiscal year unless otherwise indicated. When used in this Annual Report on Form 10-K, the terms “Gartner,”
the “Company,” “we,” “us” or “our” refer to Gartner, Inc. and its consolidated subsidiaries.
MARKET OVERVIEW
Enterprise leaders face enormous pressure to stay ahead and grow profitably amidst constant change. Whether it is an impending
transition to digital business or large-scale regulatory changes, business leaders today are facing more disruptive change than ever
before. No enterprise can be operationally effective unless it incorporates the right strategy, management and technology decisions
into every part of its business. This requirement affects all business levels, functions and roles. Chief financial officers, heads of
human resources, chief marketing officers, chief information officers, and other executives and leaders across all enterprises turn
to Gartner for decision-making guidance and execution support to achieve their mission-critical priorities.
n
OUR SOLUTION
We believe our unmatched combination of expert-led, practitioner-sourced and data-driven research steers clients toward the right
decisions and actions on the issues that matter most. We employ a diversified business model that utilizes and leverages the breadth
and depth of our intellectual capital. The foundation of our business model is our ability to create and distribute our proprietary
research content as broadly as possible via published reports, interactive tools, facilitated peer networking, briefings, consulting
and advisory services, and our conferences, including the Gartner Symposium/Xpo series.
PRODUCTS AND SERVICES
Our diversified business model provides multiple entry points and sources of value for our clients that facilitate increased client
spending on our research and advisory services, conferences and consulting services. A critical part of our long-term strategy is
to increase business volume and penetration with our most valuable clients, identifying relationships with the greatest sales potential
and expanding those relationships by offering strategically relevant research and advice. We also seek to extend the Gartner brand
name to develop new client relationships, augment our sales capacity and expand into new markets around the world. In addition,
we seek to increase our revenue and operating cash flow through more effective pricing of our products and services. These
initiatives have created additional revenue streams through more effective packaging, campaigning and cross-selling of our products
and services.
dd
4
Our principal products and services are delivered through our three business segments, as described below.
•
•
•
RESEARCH. Gartner delivers independent, objective advice to leaders across an enterprise through subscription services
that include on-demand access to published research content, data and benchmarks, and direct access to a network of
approximately 2,300 research experts located around the globe. Gartner research is the fundamental building block for all
Gartner products and services. We combine our proprietary research methodologies with extensive industry and academic
relationships to create Gartner products and services that address each role across an enterprise. Within the Research segment,
Global Technology Sales ("GTS") sells products and services to users and providers of technology, while Global Business
Sales ("GBS") sells products and services to all other functional leaders, such as supply chain, marketing, HR, finance, legal
and sales.
Our research agenda is defined by clients’ needs, focusing on the critical issues, opportunities and challenges they face every
day. We are in steady contact with over 15,000 distinct client enterprises worldwide. We publish tens of thousands of pages
of original research annually, and our research experts have more than 400,000 direct client interactions every year. Our size
and scale enable us to commit vast resources toward broader and deeper research coverage and to deliver insight to our clients
based on what they need and where they are. The ongoing interaction of our research experts with our clients enables us to
identify the most pertinent topics to them and develop relevant product and service enhancements to meet the evolving needs
of users of our research. Our proprietary research content, presented in the form of reports, briefings, updates and related
tools, is delivered directly to the client’s desktop via our website and/or product-specific portals.
Clients normally sign subscription contracts that provide access to our research content and advisory services for individual
users over a defined period. We typically have a minimum contract period of twelve months for our research and advisory
subscription contracts and, at December 31, 2019, a significant portion of our contracts were multi-year.
CONFERENCES. Gartner attracts more than 85,000 business and technology professionals to its 70+ destination conferences
worldwide each year. Attendees experience sessions led by Gartner research experts, cutting-edge technology solutions, peer
exchange workshops, one-on-one analyst and advisor meetings, consulting diagnostic workshops, keynotes and more. Our
conferences also provide attendees with an opportunity to interact with business executives from the world’s leading technology
companies. In addition to role-specific summits and workshop-style seminars, Gartner hosts the Gartner Symposium/Xpo
series, including its unique, flagship IT Symposium/Xpo®, which is held at nine locations worldwide annually. We also host
700+ more intimate live meetings each year for peer collaboration, and 240+ exclusive C-level meetings through the Evanta
brand.
CONSULTING. Through its experienced consultants, Gartner Consulting serves chief information officers and other senior
executives who are driving technology-related strategic initiatives to optimize technology investments and drive business
impact. Gartner Consulting combines the power of Gartner’s market-leading research with custom analysis and on-the-ground
support to help clients to turn insights and advice into action and impact.
Consulting solutions capitalize on Gartner assets that are invaluable to information technology ("IT") decision-making,
including: (1) our extensive research, which ensures that our consulting analyses and advice are based on a deep understanding
of the IT environment and the business of IT; (2) our market independence, which keeps our consultants focused on our clients'
success; and (3) our market-leading benchmarking capabilities, which provide relevant comparisons and best practices to
assess and improve performance. Additionally, we provide actionable solutions for a range of IT-related priorities, including
IT cost optimization, technology modernization and IT sourcing optimization.
COMPETITION
We believe that the principal factors that differentiate us from our competitors are as follows:
•
Superior research content - We believe that we create the broadest, highest-quality and most relevant research coverage across
all major functional roles in an enterprise. Our independent operating model and research analysis generates unbiased insight
that we believe is timely, thought-provoking and comprehensive, and that is known for its high quality, independence and
objectivity.
• Our leading brand name - We have provided critical, trusted insight under the Gartner name for more than 40 years.
• Our global footprint and established customer base - We have a global presence with clients in more than 100 countries on
six continents. A substantial portion of our revenue is derived from sales outside of the United States.
5
• Experienced management team - Our management team is comprised of research veterans and experienced industry executives
with long tenure at Gartner.
•
Substantial operating leverage in our business model - We can distribute our intellectual property and expertise across multiple
platforms, including research and advisory subscription and membership programs, conferences and consulting engagements,
to derive incremental revenue and profitability.
• Vast network of research experts and consultants - As of December 31, 2019, we had approximately 2,300 research experts
and 780+ experienced consultants located around the world. Our research experts are located in more than 30 countries,
enabling us to cover vast aspects of business and technology on a global basis.
Notwithstanding these differentiating factors, we face competition from a significant number of independent providers of
information products and services. We compete indirectly with consulting firms and other data and information providers, including
electronic and print media companies. These indirect competitors could choose to compete directly with us in the future. In addition,
we face competition from free sources of information that are available to our clients through the internet. Limited barriers to
entry exist in the markets in which we do business. As a result, new competitors may emerge and existing competitors may start
to provide additional or complementary services. While we believe the breadth and depth of our research positions us well versus
our competition, increased competition could result in loss of market share, diminished value in our products and services, reduced
pricing, and increased sales and marketing expenditures.
dd
INTELLECTUAL PROPERTY
Our success has resulted in part from proprietary methodologies, software, reusable knowledge capital and other intellectual
property rights. We rely on a combination of patent, copyright, trademark, trade secret, confidentiality, non-compete and other
contractual provisions to protect our intellectual property rights. We have policies related to confidentiality, ownership, and the
use and protection of Gartner’s intellectual property. We also enter into agreements with our employees and third parties as
appropriate that protect our intellectual property, and we enforce these agreements if necessary. We recognize the value of our
intellectual property in the marketplace and vigorously identify, create and protect it. Additionally, we actively monitor and enforce
contract compliance by our end users.
d
EMPLOYEES
We had a total of 16,724 employees at December 31, 2019, an increase of 10% when compared to 15,173 employees at December
31, 2018. The overall growth in the number of employees was due, in part, to an increase in the total number of quota-bearing
sales associates during 2019.
We had 9,468 employees, or 57% of our total employees, located in the United States at December 31, 2019 in approximately 45
offices. At such date, we had 1,314 employees located at our headquarters facility in Stamford, Connecticut and nearby; 2,040
employees located at our Fort Myers, Florida offices; 1,457 employees located in Arlington, Virginia; 847 employees located in
Irving, Texas; and 3,810 employees located elsewhere in the United States.
We had 7,256 employees, or 43% of our total employees, located outside of the United States at December 31, 2019 in approximately
75 offices. At such date, 1,616 employees were located in Gurgaon, India; 1,180 employees were located in Egham, the United
Kingdom; and 4,460 employees were located elsewhere in the world.
Our employees may be subject to collective bargaining agreements at a company or industry level, or works councils, in those
foreign countries where such arrangements are part of the local labor law or practice. We have experienced no work stoppages
and consider our relations with our employees to be favorable.
GOVERNMENT CONTRACTS
Our U.S. government contracts are subject to the approval of appropriations by the U.S. Congress to fund the agencies contracting
for our products and services. Additionally, our contracts at the state and local levels, as well as foreign government contracts, are
subject to various governmental authorizations and funding approvals and mechanisms. Certain of these contracts may be terminated
at any time by the government entity without cause or penalty.
6
FINANCIAL INFORMATION
The Company's financial information by business segment for the three-year period ended December 31, 2019 is provided in Note
16 — Segment Information in the Notes to Consolidated Financial Statements. Additional information regarding revenues by
business segment is provided in Note 9 — Revenue and Related Matters in the Notes to Consolidated Financial Statements.
AVAILABLE INFORMATION
Our internet address is gartner.com and the Investor Relations section of our website is at investor.gartner.com. We make available
free of charge, on or through the Investor Relations section of our website, printable copies of our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). Unless
expressly noted, the information on our website or any other website is not incorporated by reference in this Form 10-K and should
not be considered part of this Form 10-K or any other filing we make with the SEC.
Also available at investor.gartner.com, under the “Governance” link, are printable and current copies of our: (i) CEO and CFO
Code of Ethics, which applies to our Chief Executive Officer, Chief Financial Officer, Controller and other financial managers;
(ii) Global Code of Conduct, which applies to all Gartner officers, directors and employees, wherever located; (iii) Principles and
Practices of the Board of Directors of Gartner, Inc., the corporate governance principles that have been adopted by our Board; and
(iv) charters for each of the Board’s standing committees: Audit, Compensation and Governance/Nominating.
ITEM 1A. RISK FACTORS.
We operate in a highly competitive and rapidly changing environment that involves numerous risks and uncertainties, some of
which are beyond our control. In addition, we and our clients are affected by global economic conditions and trends. The following
sections address significant factors, events and uncertainties that make an investment in our securities risky. We urge you to
consider carefully the factors described below and the risks that they present for our operations, as well as the risks addressed in
other reports and materials that we file with the SEC and the other information, included or incorporated by reference in this
Form 10-K. When the factors, events and contingencies described below or elsewhere in this Form 10-K materialize there could
be a material adverse impact on our business, prospects, results of operations, financial condition, and cash flows, and could
therefore have a negative effect on the trading price of our common stock. Additional risks not currently known to us or that we
now deem immaterial may also harm us and negatively affect your investment.
Our operating results could be negatively impacted by global economic conditions. Our business is impacted by general economic
conditions and trends in the United States and abroad. In its recent report, Global Economics Prospects, January 2020: Slow
Growth, Policy Challenges, the World Bank reported that global trade and investment are expected to recover modestly this year,
but advanced economies are expected to slow. The report also indicated that even if growth in emerging and developing economies
occurs as anticipated, the per capita growth is still expected to be less than long-term averages. Among the concerns cited were
increasing and accelerated global debt accumulation, slowdown in productivity, price controls in emerging markets and developing
economies, risk of re-escalating trade tensions and downturns in major economies. In the United States, the World Bank notes
that growth has decelerated in part due to lessening investment and exports, and it is expected that general uncertainty and the
diminishing impact of 2017 tax cuts will have a negative effect on growth in the near term. A downturn in growth could negatively
and materially affect future demand for our products and services in general, in certain geographic regions, in particular countries,
or industry sectors. Such difficulties could negatively impact our ability to maintain or improve the various business measurements
we utilize (which are defined in this annual report), such as contract value and consulting backlog growth, client retention, wallet
retention, consulting utilization rates, and the number of attendees and exhibitors at our conferences and other meetings. Failure
to achieve acceptable levels of these measurements or improve them will negatively impact our financial condition, results of
operations, and cash flows.
We face significant competition and our failure to compete successfully could materially adversely affect our results of operations,
financial condition, and cash flows. We face direct competition from a significant number of independent providers of information
products and services, including information available on the internet free of charge. We also compete indirectly against consulting
firms and other information providers, including electronic and print media companies, some of which have greater financial,
information gathering and marketing resources than we do. These indirect competitors could also choose to compete directly with
us in the future. In addition, low barriers to entry exist in the markets in which we do business. As a result, new competitors may
emerge, and existing competitors may start to provide additional or complementary services. Additionally, technological advances
may provide increased competition from a variety of sources.
7
There can be no assurance that we will be able to successfully compete against current and future competitors and our failure to
do so will result in loss of market share, diminished value in our products and services, reduced pricing and increased marketing
expenditures. Furthermore, we will not be successful if we cannot compete effectively on quality of research and analysis, timely
delivery of information, customer service, the ability to offer products to meet changing market needs for information and analysis,
or price.
We may not be able to maintain the quality of our existing products and services. We operate in a rapidly evolving market, and
our success depends on our ability to deliver high quality and timely research and analysis to our clients. Any failure to continue
to provide credible and reliable information and advice that is useful to our clients could have a material adverse effect on future
business and operating results. Further, if our published data, opinions or viewpoints prove to be wrong, lack independence, or
are not substantiated by appropriate research, our reputation will suffer and demand for our products and services may decline.
In addition, we must continue to improve our methods for delivering our products and services in a cost-effective manner via the
internet and mobile applications. Failure to maintain state of the art electronic delivery capabilities could materially adversely
affect our future business and operating results.
ff
We may not be able to enhance and develop our existing products and services or introduce the new products and services that
are needed to remain competitive. The market for our products and services is characterized by rapidly changing needs for
information and analysis. The development of new products is a complex and time-consuming process. Nonetheless, to maintain
our competitive position, we must continue to anticipate the needs of our clients, develop, enhance and improve our existing
products, as well as new products and services to address those needs, deliver all products and services in a timely, user-friendly
and state of the art manner, and appropriately position and price new products and services relative to the marketplace and our
costs of developing them. Any failure to achieve successful client acceptance of new products and services could have a material
adverse effect on our business, results of operations and financial position. Additionally, significant delays in new product or
service releases or significant problems in creating new products or services could materially adversely affect our business, results
of operations and financial position.
Technology is rapidly evolving, and if we do not continue to develop new product and service offerings in response to these changes,
our business could suffer. Disruptive technologies are rapidly changing the environment in which we, our clients, and our
competitors operate. We will need to continue to respond to these changes by enhancing our product and service offerings to
maintain our competitive position. However, we may not be successful in responding to these forces and enhancing our products
on a timely basis, and any enhancements we develop may not adequately address the changing needs of our clients. Our future
success will depend upon our ability to develop and introduce in a timely manner new or enhanced existing offerings that address
the changing needs of this constantly evolving marketplace. Failure to develop products that meet the needs of our clients in a
timely manner could have a material adverse effect on our business, results of operations, and financial position.
Our Research business depends on renewals of subscription-based services and sales of new subscription-based services for a
significant portion of our revenue, and our failure to renew at historical rates or generate new sales of such services will lead to
a decrease in our revenues. A large portion of our success depends on our ability to generate renewals of our subscription-based
research products and services and new sales of such products and services, both to new clients and existing clients. These products
and services constituted approximately 73% and 72% of total revenues from our on-going operations for 2019 and 2018,
respectively. Generating new sales of our subscription-based products and services, both to new and existing clients, is a challenging,
costly, and often time-consuming process. If we are unable to generate new sales, due to competition or other factors, our revenues
will be adversely affected.
Our research subscription contracts are typically for twelve months or longer. Our ability to maintain contract renewals is subject
to numerous factors, including the following:
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• delivering high-quality and timely analysis and advice to our clients;
• understanding and anticipating market trends and the changing needs of our clients; and
• providing products and services of the quality and timeliness necessary to withstand competition.
Additionally, as we continue to adjust our products and service offerings to meet our clients’ continuing needs, we may shift the
type and pricing of our products which may impact client renewal rates. While our Research client retention rate was 82% and
83% at December 31, 2019 and 2018, respectively, there can be no guarantee that we will continue to maintain this rate of client
renewals.
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The profitability and success of our conferences and other meetings are subject to external factors beyond our control. Our
Conferences business constituted approximately 11% of total revenues from our on-going operations in both 2019 and 2018. The
market for desirable dates and locations for our activities is highly competitive. If we cannot secure desirable dates and suitable
venues for our conferences their profitability will suffer, and our financial condition and results of operations may be adversely
affected. In addition, because our conferences are scheduled in advance and held at specific locations, the success of these activities
can be affected by circumstances outside of our control, such as the occurrence of or concerns related to labor strikes, transportation
shutdowns and travel restrictions, economic slowdowns, reductions in government spending, geopolitical crises, terrorist attacks,
war, weather, natural disasters, communicable diseases, and other occurrences impacting the global, regional, or national economies,
the occurrence of any of which could negatively impact the success of the conference or meeting. We also face the challenge of
procuring venues that are sizeable enough at a reasonable cost to accommodate some of our major activities.
Our Consulting business depends on non-recurring engagements and our failure to secure new engagements could lead to a
decrease in our revenues. Consulting segment revenues constituted approximately 9% of total revenues from our on-going
operations in both 2019 and 2018. Consulting engagements typically are project-based and non-recurring. In addition, revenue
from our contract optimization business can fluctuate significantly from period to period and is not predictable. Our ability to
replace consulting engagements is subject to numerous factors, including the following:
• delivering consistent, high-quality consulting services to our clients;
• tailoring our consulting services to the changing needs of our clients; and
• our ability to match the skills and competencies of our consulting staff to the skills required for the fulfillment of existing or
potential consulting engagements.
A material decline in our ability to replace consulting engagements will have an adverse impact on our revenues and our financial
condition.
Our sales to governments are subject to appropriations and some may be terminated early. We derive significant revenues from
research and consulting contracts with the United States government and its respective agencies, numerous state and local
governments and their respective agencies, and foreign governments and their agencies. At December 31, 2019 and 2018,
approximately $639 million and $555 million, respectively, of our outstanding revenue contracts were attributable to government
entities. Our U.S. government contracts are subject to the approval of appropriations by the U.S. Congress to fund the agencies
contracting for our services. Additionally, our contracts at the state and local levels, as well as foreign government contracts, are
subject to various governmental authorizations and funding approvals and mechanisms. Certain of these contracts may be terminated
at any time by the government entity without cause or penalty (“termination for convenience”). In addition, contracts with U.S.
federal, state and local, and foreign governments and their respective agencies are subject to increasingly complex bidding
procedures and compliance requirements, as well as intense competition. While terminations by governments have not been
significant historically, should appropriations for the various governments and agencies that contract with us be curtailed, or should
our government contracts be terminated for convenience, we may experience a significant loss of revenues.
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We may not be able to attract and retain qualified personnel which could jeopardize the quality of our products and services and
our future growth plans. Our success is based on attracting and retaining talented employees and we depend heavily upon the
quality of our senior management, research analysts, consultants, sales and other key personnel. The market for highly skilled
workers and leaders in our industry is extremely competitive. Maintaining our brand and reputation is important to our ability to
recruit and retain employees. We face competition for qualified professionals from, among others, technology companies, market
research firms, consulting firms, financial services companies and electronic and print media companies, some of which have a
greater ability to attract and compensate these professionals. Additionally, some of the personnel that we attempt to hire are subject
to non-compete agreements that could impede our short-term recruitment efforts. We may also be limited in our ability to recruit
internationally by restrictive domestic immigration laws, and changes to policies that restrain the flow of technical and professional
talent could inhibit our ability to adequately staff our research and development and other efforts. An inability to retain key personnel
or to hire and train additional qualified personnel could materially adversely affect the quality of our products and services, as
well as our future business and operating results. In addition, effective succession planning is important to our long-term success,
and failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic
planning and execution.
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We may not be able to maintain the equity in our brand name. We believe that our “Gartner” brand, in particular our independence,
is critical to our efforts to attract and retain clients and top talent, and that the importance of brand recognition will increase as
competition increases. We may also discover that our brand, though recognized, is not perceived to be relevant by new market
segments we have targeted. We may expand our marketing activities to promote and strengthen the Gartner brand and may need
9
to increase our marketing budget, hire additional marketing and public relations personnel, and expend additional sums to protect
our brand and otherwise increase expenditures to create and maintain client brand loyalty. If we fail to effectively promote, maintain,
and protect the Gartner brand, or incur excessive expenses in doing so, our future business and operating results could be materially
adversely impacted.
We are subject to risks from operating globally. We have clients in more than 100 countries and a substantial amount of our revenue
is earned outside of the United States. Our operating results are subject to all of the risks typically inherent in international business
activities, including general political and economic conditions in each country, challenges in staffing and managing foreign
operations, changes in regulatory requirements, compliance with numerous and complex foreign laws and regulations, currency
restrictions and fluctuations, the difficulty of enforcing client agreements, collecting accounts receivable and protecting intellectual
property rights including against economic espionage in international jurisdictions. Further, we rely on local distributors or sales
agents in some international locations. If any of these arrangements are terminated by our agent or us, we may not be able to
replace the arrangement on beneficial terms or on a timely basis, or clients of the local distributor or sales agent may not want to
continue to do business with us or our new agent.
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Tariffs, trade barriers and restrictions, and other acts by governments to protect domestic markets or to retaliate against the trade
tariffs and restrictions of other nations could negatively affect our business operations. In addition, the withdrawal of nations from
existing common markets or trading blocs, such as the exit of the United Kingdom from the European Union (the EU), commonly
referred to as Brexit, could be disruptive and negatively impact our business and the business of our clients. We continue to monitor
Brexit and its potential impacts on our results of operations and financial condition, but its specific effects on our operations depend
in part on what agreements are negotiated between the United Kingdom and the EU regarding post-Brexit access to EU markets.
If Brexit leads to legal uncertainty and potentially divergent national laws and regulations in the United Kingdom and EU, then
we, as well as our clients who have significant operations in the United Kingdom, may incur additional costs and expenses as we
adapt to the divergent regulatory frameworks. For example, if Brexit requires us to change our legal entity structure in the United
Kingdom and the EU, our contractual commitments in the United Kingdom and the rest of the EU may be impacted. Additionally,
separation from the EU may negatively impact the United Kingdom economy, result in the imposition of tariffs on us or result in
currency devaluations in the United Kingdom. The impact of any of these effects of Brexit, among others, could materially harm
our business and financial results.
Our failure to comply with complex US and foreign laws and regulations could have a material adverse effect on our operations
or financial condition. Our business and operations may be conducted in countries where corruption has historically penetrated
the economy. It is our policy to comply, and to require our local partners, distributors, agents, and those with whom we do business
to comply, with all applicable anti-bribery and anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and U.K.
Bribery Act, and with applicable local laws of the foreign countries in which we operate. There can be no assurance that all of our
employees, contractors and agents will comply with the Company’s policies that mandate compliance with these laws. Any
determination that we have violated or are responsible for violations of these laws, even if inadvertent, could be costly and disrupt
our business, which could have a material adverse effect on our business, results of operations, financial condition, liquidity and
cash flows, as well as on our reputation. For example, during the second half of 2018 we cooperated fully with a South African
government commission established to review a wide range of issues related to the country’s revenue service, including the
procurement and fulfillment of consulting agreements we entered into with the revenue service through a sales agent from late
2014 through early 2017. With respect to Gartner, the commission recommended that the revenue service explore lawful options
to invalidate the agreements, in whole or in part, and attempt to recover certain payments it made to us. We are in ongoing
discussions with the revenue service regarding the matter. In parallel with our cooperation in South Africa, we commenced an
internal investigation regarding this matter and voluntarily disclosed to the SEC and Department of Justice (DOJ) in November
2018 that the commission was reviewing our procurement of these agreements. We are cooperating fully with the SEC and DOJ
inquiries into this matter. At this time, we do not believe the ultimate outcome of these matters will have a material effect on our
financial results, however, an unexpected adverse resolution of these matters could negatively impact our financial condition,
results of operations, and liquidity.
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We are exposed to volatility in foreign currency exchange rates from our international operations. A significant portion of our
revenues are typically derived from sales outside of the United States. Revenues earned outside the United States are typically
transacted in local currencies, which may fluctuate significantly against the U.S. dollar. While we use forward exchange contracts
to a limited extent to seek to mitigate foreign currency risk, our revenues and results of operations could be adversely affected by
unfavorable foreign currency fluctuations.
Natural disasters, pandemics, terrorist acts, war, actions by governments, and other geopolitical activities could disrupt our
operations. We operate in numerous U.S. and international locations, and we have offices in a number of major cities across the
globe. The occurrence of, or concerns related to, a major weather event, earthquake, flood, drought, volcanic activity, disease or
pandemic, or other natural disaster could significantly disrupt our operations. In addition, acts of civil unrest, failure of critical
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infrastructure, terrorism, armed conflict, war, and abrupt political change, as well as responses by various governments and the
international community to such acts, can have a negative effect on our business. Such events could cause delays in initiating or
completing sales, impede delivery of our products and services to our clients, disrupt or shut down the internet or other critical
client-facing and business processes, impede the travel of our personnel and clients, dislocate our critical internal functions and
personnel, and in general harm our ability to conduct normal business operations, any of which can negatively impact our financial
condition and operating results. Such events could also impact the timing and budget decisions of our clients, which could materially
adversely affect our business.
Privacy concerns could damage our reputation and deter current and potential clients from using our products and services or
attending our conferences. Concerns relating to global data privacy have the potential to damage our reputation and deter current
and prospective clients from using our products and services or attending our conferences. In the ordinary course of our business
and in accordance with applicable laws, we collect personal information (i) from our employees (ii) from the users of our products
and services, including conference attendees; and (iii) from prospective clients. We collect only basic personal information from
our clients and prospects. While we believe our overall data privacy procedures are adequate, the theft or loss of such data, or
concerns about our practices, even if unfounded, with regard to the collection, use, disclosure, or security of this personal information
or other data protection related matters could damage our reputation and materially adversely affect our operating results. Any
systems failure or compromise of our security that results in the disclosure of our users’ personal data could seriously limit the
consumption of our products and services and the attendance at our conferences, as well as harm our reputation and brand and,
therefore, our business.
In addition, continuously evolving data protection laws and regulations, such as the European Union General Data Protection
Regulation (GDPR), and the new California Consumer Privacy Act (CCPA) (effective January 2020), pose increasingly complex
compliance challenges. We have implemented GDPR and CCPA compliance programs. In the meantime, Gartner will continue
to maintain and rely upon our comprehensive global data protection compliance program, which includes administrative, technical,
and physical controls to safeguard our associates’ and clients' personal data. The interpretation and application of these laws in
the United States, the EU and elsewhere are often uncertain, inconsistent and ever changing. Complying with these various laws
could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.
We are exposed to risks related to cybersecurity. A significant portion of our business is conducted over the internet and we rely
on the secure processing, storage and transmission of confidential, sensitive, proprietary and other types of information relating
to our business operations and confidential and sensitive information about its customers and employees in our computer systems
and networks, and in those of our third-party vendors. Individuals, groups, and state-sponsored organizations may take steps that
pose threats to our operations, our computer systems, our employees, and our customers. The cybersecurity risks we face range
from cyber attacks common to most industries, such as the development and deployment of malicious software to gain access to
our networks and attempt to steal confidential information, launch distributed denial of service attacks, or attempt other coordinated
disruptions, to more advanced threats that target us because of our prominence in the a global research and advisory field.
Like many multinational corporations, we, and some third parties upon which we rely, have experienced cyber attacks on our
computer systems and networks in the past and may experience them in the future, likely with more frequency and sophistication,
and involving a broader range of devices and modes of attack, all of which will increase the difficulty of detecting and successfully
defending against them. To date, none have resulted in any material adverse impact to our business, operations, products, services
or customers. We have implemented various security controls to both meet our security compliance obligations, while also defending
against constantly evolving security threats. Our security controls help to secure our information systems, including our computer
systems, intranet, proprietary websites, email and other telecommunications and data networks, and we scrutinize the security of
outsourced website and service providers prior to retaining their services. However, the security measures implemented by us or
by our outside service providers may not be effective and our systems (and those of our outside service providers) are vulnerable
to theft, loss, damage and interruption from a number of potential sources and events, including unauthorized access or securitytt
breaches, cyber attacks, computer viruses, power loss, or other disruptive events. Additionally, the security compliance landscape
continues to evolve, requiring us to stay apprised of changes in cybersecurity laws, regulations, and security requirements required
by our clients, such as GDPR, CCPA, International Organization for Standardization (ISO), and National Institute of Standards
and Technology (NIST). Recent well-publicized security breaches at other companies have led to enhanced government and
regulatory scrutiny of the measures taken by companies to protect against cyber attacks, and may in the future result in heightened
cybersecurity requirements, including additional regulatory expectations for oversight of vendors and service providers.
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A cyber attack, widespread internet failure or internet access limitations, or disruption of our critical information technology
systems through denial of service, viruses, or other events could cause delays in initiating or completing sales, impede delivery
of our products and services to our clients, disrupt other critical client-facing or business processes or dislocate our critical internal
functions. Additionally, any material breaches of cybersecurity or other technology-related catastrophe, or media reports of
perceived security vulnerabilities to our systems or those of our third parties, even if no breach has been attempted or occurred,
11
could cause us to experience reputational harm, loss of customers and revenue, fines, regulatory actions and scrutiny, sanctions
or other statutory penalties, litigation, liability for failure to safeguard our customers’ information, or financial losses that are either
not insured against or not fully covered through any insurance maintained by us.
Any of the foregoing may have a material adverse effect on our business, operating results and financial condition.
We may experience outages and disruptions of our online services if we fail to maintain an adequate operations infrastructure.
Our increasing user traffic and complexity of our products and services demand more computing power. We have spent and expect
to continue to spend substantial amounts for access to data centers and equipment and to move more of our workload into cloud
services, to upgrade our technology and network infrastructure to handle increased traffic on our websites, and to deliver our
products and services through emerging channels, such as mobile applications. However, any inefficiencies or operational failures
could diminish the quality of our products, services, and user experience, resulting in damage to our reputation and loss of current
and potential users, subscribers, and advertisers, potentially harming our financial condition and operating results.
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Our outstanding debt obligations could negatively impact our financial condition and future operating results. As of December 31,
2019, the Company had outstanding debt of $1.4 billion under its 2016 term loan and revolving credit facility, as amended (the
2016 Credit Agreement) and $800.0 million of Senior Notes Due 2025 (the Senior Notes). Additional information regarding the
2016 Credit Agreement and the Senior Notes is included in Note 6 - Debt in the Notes to Consolidated Financial Statements.
The debt service requirements of these borrowings could impair our future financial condition and operating results. In addition,
the affirmative, negative and financial covenants of the 2016 Credit Agreement, as well as the covenants related to the Senior
Notes, could limit our future financial flexibility. A failure to comply with these covenants could result in acceleration of all
amounts outstanding, which could materially impact our financial condition unless accommodations could be negotiated with our
lenders and noteholders. No assurance can be given that we would be successful in doing so, or that any accommodations that we
were able to negotiate would be on terms as favorable as those currently in place. The outstanding debt may limit the amount of
cash or additional credit available to us, which could restrain our ability to expand or enhance products and services, respond to
competitive pressures or pursue future business opportunities requiring substantial investments of additional capital.
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In addition, variable-rate borrowings under our 2016 Credit Agreement typically use LIBOR as a benchmark for establishing the
rate of interest. LIBOR is the subject of recent national and international regulatory scrutiny which may result in changes that
cause LIBOR to disappear entirely after 2021 or to cause it to perform differently than in the past. The consequences of these
LIBOR developments on our variable-rate borrowings, including the possible transition to other rates such as the Secured Overnight
Financing Rate (SOFR), cannot be predicted at this time, but could include an increase in the cost of our variable-rate indebtedness
and volatility in our earnings.
We may require additional cash resources which may not be available on favorable terms or at all. We may require additional
cash resources due to changed business conditions, implementation of our strategy and stock repurchase program, to repay
indebtedness or to pursue future business opportunities requiring substantial investments of additional capital, including
acquisitions. If our existing financial resources are insufficient to satisfy our requirements, we may seek additional borrowings or
issue debt. Prevailing credit and debt market conditions may negatively affect debt availability and cost, and, as a result, financing
may not be available in amounts or on terms acceptable to us, if at all. In addition, the incurrence of additional indebtedness would
result in increased debt service obligations and could require us to agree to operating and financial covenants that would further
restrict our operations.
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If we are unable to enforce and protect our intellectual property rights, our competitive position may be harmed. We rely on a
combination of copyright, trademark, trade secret, patent, confidentiality, non-compete and other contractual provisions to protect
our intellectual property rights. Despite our efforts to protect our intellectual property rights, unauthorized third parties may obtain
and use technology or other information that we regard as proprietary. Our intellectual property rights may not survive a legal
challenge to their validity or provide significant protection for us. The laws of certain countries, particularly in emerging markets,
do not protect our proprietary rights to the same extent as the laws of the United States. Accordingly, we may not be able to protect
our intellectual property against unauthorized third-party copying or use, which could adversely affect our competitive position.
Additionally, there can be no assurance that another party will not assert that we have infringed its intellectual property rights.
Our employees are subject to restrictive covenant agreements (which include restrictions on employees' ability to compete and
solicit customers and employees) and assignment of invention agreements, to the extent permitted under applicable law. When
the period expires relating to their particular restrictions, former employees may compete against us. If a former employee violates
the provisions of his/her restrictive covenant agreement, we seek to enforce the restrictions but there is no assurance that we will
be successful in our efforts.
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We have grown, and may continue to grow, through acquisitions and strategic investments, which could involve substantial risks.
We have made and may continue to make acquisitions of, or significant investments in, businesses that offer complementary
products and services or otherwise support our growth objectives. The risks involved in each acquisition or investment include
the possibility of paying more than the value we derive from the acquisition, dilution of the interests of our current stockholders
should we issue stock in the acquisition, decreased working capital, increased indebtedness, the assumption of undisclosed liabilities
and unknown and unforeseen risks, the ability to retain key personnel of the acquired company, the inability to integrate the
business of the acquired company, increase revenue or fully realize anticipated synergies, the time to train the sales force to market
and sell the products of the acquired business, the potential disruption of our ongoing business and the distraction of management
from our day to day business. The realization of any of these risks could adversely affect our business. Additionally, we face
competition in identifying acquisition targets and consummating acquisitions.
We face risks related to leased office space. We assumed a significant amount of leased office space, in particular in Arlington,
Virginia, in connection with the acquisition of CEB Inc. in 2017. In Arlington, we have consolidated all our businesses into a
single building and have sublet substantially all of the excess space in our other properties. Through our real estate consolidations
and other related activities, we have tried to secure quality sub-tenants with appropriate sub-lease terms. However, if subtenantsaa
default on their sublease obligations with us or otherwise terminate their subleases with us, we may experience a loss of planned
sublease rental income, which could result in a material charge against our operating results.
We are also in the process of adding new leased spaces to support our continued growth. If the new spaces are not completed on
schedule, or if the landlord defaults on its commitments and obligations pursuant to the new leases, we may incur additional
expenses. In addition, unanticipated difficulties in initiating operations in a new space, including construction delays, IT system
interruptions, or other infrastructure support problems, could result in a delay in moving into the new space, resulting in a loss of
employee and operational productivity and a loss of revenue and/or additional expenses, which could also have an adverse, material
impact on our operating results.
We face risks related to litigation. We are, and in the future may be, subject to a variety of legal actions, such as employment,
breach of contract, intellectual property-related, and business torts, including claims of unfair trade practices and misappropriation
of trade secrets. Given the nature of our business, we are also subject to defamation (including libel and slander), negligence, or
other claims relating to the information we publish. Regardless of the merits of any claim and despite vigorous efforts to defend
any such claim, claims can affect our reputation, and responding to any such claim could be time consuming, result in costly
litigation and require us to enter into settlements, royalty and licensing agreements which may not be offered or available on
reasonable terms. If a claim is made against us that we cannot defend or resolve on reasonable terms, our business, brand, and
financial results could be materially adversely affected.
We face risks related to taxation. We are a global company and a substantial amount of our earnings is generated outside of the
United States and taxed at rates less than the U.S. statutory federal income tax rate. Our effective tax rate, financial position and
results of operations could be adversely affected by earnings being higher than anticipated in jurisdictions with higher statutory
tax rates and, conversely, lower than anticipated in jurisdictions that have lower statutory tax rates, by changes in the valuation of
our deferred tax assets and/or by changes in tax laws or accounting principles and their interpretation by relevant authorities.
Corporate tax reform, base-erosion efforts and tax transparency continue to be high priorities in many countries. Tax reform
legislation is being proposed or enacted in a number of jurisdictions where we do business. The U.S. Tax Cuts and Jobs Act of
2017 (the Act) adopted broad U.S. corporate income tax reform and introduced several highly complex provisions. The U.S.
Treasury Department and other standard-setting bodies will continue to interpret and issue guidance on how provisions of the Act
will be applied and administered. We will continue to monitor and reflect the impact of the Act in future financial statements as
appropriate.
During 2015, the Organization for Economic Cooperation and Development (OECD) released final reports on various action items
associated with its initiative to prevent Base Erosion and Profit Shifting (BEPS). Numerous countries have and continue to propose
tax law changes intended to address BEPS. The future enactment by various governments of these and other proposals could
significantly increase our tax obligations in many countries where we do business. These actual, potential, and other changes, both
individually and collectively, could materially increase our effective tax rate and negatively impact our financial position, results
of operations, and cash flows.
In addition, our tax filings for various years are subject to examination by domestic and international taxing authorities and, during
the ordinary course of business, we are under audit by various tax authorities. Recent and future actions on the part of the OECD
and various governments have increased scrutiny of our tax filings. Although we believe that our tax filings and related accruals
are reasonable, the final resolution of tax audits may be materially different from what is reflected in our historical tax provisions
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and accruals and could have a material adverse effect on our effective tax rate, financial position, results of operations, and cash
flows.
d
As of December 31, 2019, we had approximately $142.0 million of accumulated undistributed earnings in our non-U.S. subsidiaries.
Our cash and cash equivalents are held in numerous locations throughout the world. At December 31, 2019, 92% of our cash and
cash equivalents was held overseas, with a substantial portion representing accumulated undistributed earnings of our non-U.S.
subsidiaries. Under generally accepted accounting principles in the United States of America, no provision for income taxes that
may result from the remittance of accumulated undistributed foreign earnings is required if the Company intends to reinvest such
earnings overseas indefinitely. The provisions of the Act significantly changed the way earnings of non-U.S. subsidiaries are taxed
in the United States. The Act imposed a one-time transition tax on earnings of foreign subsidiaries that were previously tax deferred,
adopted a system of current taxation of foreign global intangible low-taxed income and provided for a deduction on repatriation
of dividends from foreign subsidiaries. As a result of and subsequent to the enactment of the Act, the Company has remitted
previously undistributed earnings with minimal additional tax cost. The Company intends to continue to reinvest its accumulated
undistributed foreign earnings, except in instances where the repatriation of those earnings would result in minimal additional tax.
As a result, we have not recognized income tax expense on the amounts deemed permanently reinvested.
Our corporate compliance program cannot guarantee that we are in compliance with all applicable laws and regulations. We
operate in a number of countries, including emerging markets, and as a result we are required to comply with numerous, and in
many cases, changing international and U.S. federal, state and local laws and regulations. Accordingly, we have a corporate
compliance program that includes the creation of appropriate policies defining employee behavior that mandate adherence to laws,
employee training, annual affirmations, monitoring and enforcement. However, failure of any employee fails to comply with any
of these laws, regulations or our policies, could result in a range of liabilities for the employee and for the Company, including,
but not limited to, significant penalties and fines, sanctions and/or litigation, and the expenses associated with defending and
resolving any of the foregoing, any of which could have a negative impact on our reputation and business.
Risks related to our common stock
Our operating results may fluctuate from period to period and/or the financial guidance we have given may not meet the expectations
of investors, which may cause the price of our common stock to decline. Our quarterly and annual operating results fluctuate as a
result of many factors, including the timing of the execution of research contracts, the extent of completion of consulting
engagements, the timing of our conferences, the amount of new business generated, the mix of domestic and international business,
currency fluctuations, changes in market demand for our products and services, the timing of the development, introduction and
marketing of new products and services, competition in our industry, the impact of our acquisitions, and general economic
conditions. An inability to generate sufficient earnings and cash flow, and achieve our forecasts, may impact our operating and
other activities. Fluctuations in our operating results could cause period-to-period comparisons of operating results not to be
meaningful and may provide an unreliable indication of future operating results. Furthermore, our operating results may not meet
the expectations of investors or the financial guidance we have previously provided. If this occurs, the price of our common stock
could decline.
Our stock price may be impacted by factors outside of our control and you may not be able to resell shares of our common stock
at or above the price you paid. The price of our common stock is subject to significant fluctuations in response to, among other
factors, developments in the industries in which we do business, general economic conditions, general market conditions, geo-
political events, changes in the nature and composition of our stockholder base, changes in securities analysts’ recommendations
regarding our securities and our performance relative to securities analysts’ expectations for any quarterly period, as well as other
factors outside of our control, including any and all factors that move the securities markets generally. These factors may materially
adversely affect the market price of our common stock.
Future sales or issuances of our common stock in the public market could lower our stock price. Sales of a substantial number of
shares of common stock in the public market by our current stockholders, or the threat that substantial sales may occur, could
cause the market price of our common stock to decrease significantly or make it difficult for us to raise additional capital by selling
stock. The issuance of additional shares of our common stock could also lower the market price of our common stock. Furthermore,
we have various equity incentive plans that provide for awards in the form of stock appreciation rights, restricted stock, restricted
stock units and other stock-based awards, which have the effect of adding shares of common stock into the public market. We
have a board-approved share repurchase program and at December 31, 2019, approximately $715.5 million remained available
for share purchases under this program. No assurance can be given that we will continue these share repurchase activities in the
future after the current program is completed, or in the event that the price of our common stock reaches levels at which repurchases
are not accretive.
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Future sales of our common stock from grants and awards could lower our stock price. As of December 31, 2019, the aggregate
number of shares of our common stock issuable pursuant to outstanding grants and awards under our equity incentive plans was
approximately 2.6 million shares (approximately 0.6 million of which have vested). In addition, at the present time, approximately
4.5 million shares may be issued in connection with future awards under our equity incentive plans. Shares of common stock
issued under these plans are freely transferable and have been registered under the Securities Act of 1933, as amended (the
“Securities Act”), except for any shares held by affiliates (as that term is defined in Rule 144 under the Securities Act) which are
subject to certain limitations. We cannot predict the size of future issuances of our common stock or the effect, if any, that future
issuances and sales of shares of our common stock will have on the market price of our common stock.
Interests of certain of our significant stockholders may conflict with our interests or the interests of other stockholders. To our
knowledge, as of the date hereof, and based upon publicly-available SEC filings, five institutional investors each presently hold
over 5% of our common stock. While no stockholder or institutional investor individually holds a majority of our outstanding
shares, these significant stockholders may be able, either individually or acting together, to exercise significant influence over
matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation, adoption
or amendment of equity plans and approval of significant transactions such as mergers, acquisitions, consolidations and sales or
purchases of assets. In addition, in the event of a proposed acquisition of the Company by a third party, this concentration of
ownership may delay or prevent a change of control in us. Accordingly, the interests of these stockholders may not always coincide
with our interests or the interests of other stockholders, or otherwise be in the best interests of us or all stockholders.
Our anti-takeover protections may discourage or prevent a change of control, even if a change in control would be beneficial to
our stockholders. Provisions of our restated certificate of incorporation and bylaws and Delaware law may make it difficult for
any party to acquire control of us in a transaction not approved by our Board of Directors. These provisions include: (i) the ability
of our Board of Directors to issue and determine the terms of preferred stock; (ii) advance notice requirements for inclusion of
stockholder proposals at stockholder meetings; and (iii) the anti-takeover provisions of Delaware law. These provisions could
discourage or prevent a change of control or change in management that might provide stockholders with a premium to the market
price of their common stock.
a
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
As of December 31, 2019, we leased approximately 45 domestic and 75 international office properties for our ongoing business
operations. These offices, which exclude certain properties that we sublease to others, support our executive and administrative
activities, research and consulting, sales, systems support, operations, and other functions. Our corporate office is based in Stamford,
Connecticut. We also maintain an important presence in: Fort Myers, Florida; Arlington, Virginia; Egham, the United Kingdom;
Gurgaon, India; Irving, Texas; and Barcelona, Spain. The Company does not own any real property.
Our Stamford corporate headquarters is comprised of leased office space in three buildings located on the same campus. Our lease
for the Stamford headquarters facility expires in 2027 and contains three five-year renewal options at fair value. Additionally, we
lease office space in a fourth building adjacent to our Stamford headquarters facility under a lease designed to be co-terminus with
our headquarters lease. We have options for additional space in this fourth building.
yy
We expect to continue to invest in our business by adding headcount and, as a result, we may need additional office space in
various locations. Should additional space be necessary, we believe that it will be available on reasonable terms.
ITEM 3. 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.
t
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
15
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
Our common stock is listed on the New York Stock Exchange under the symbol "IT". As of January 31, 2020, there were 1,113
holders of record of our common stock. Our 2020 Annual Meeting of Stockholders will be held on June 8, 2020 at the Company’s
corporate headquarters in Stamford, Connecticut. We did not submit any matter to a vote of our stockholders during the fourth
quarter of 2019.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The equity compensation plan information set forth in Part III, Item 12 of this Annual Report on Form 10-K is hereby incorporated
by reference into this Part II, Item 5.
SHARE REPURCHASES
The Company has a $1.2 billion board authorization to repurchase its 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
common stock during the three months ended December 31, 2019 pursuant to our $1.2 billion share repurchase authorization and
the settlement of stock-based compensation awards.
Period
October 1, 2019 to October 31, 2019
November 1, 2019 to November 30, 2019
December 1, 2019 to December 31, 2019
Total for the quarter (1)
Total
Number of
Shares
Purchased
(#)
Average
Price Paid
Per Share
($)
Total Number of
Shares Purchased
Under Announced
Programs
(#)
Maximum Approximate
Dollar Value of Shares
That May Yet Be
Purchased Under the
Plans or Programs
(in thousands)
25,240
$
54,039
360,836
440,115
$
138.99
158.83
153.85
153.61
25,094
$
15,006
358,877
$
398,977
773,017
770,680
715,473
(1) The repurchased shares during the three months ended December 31, 2019 included purchases for both the settlement of
stock-based compensation awards and open market purchases.
16
ITEM 6. SELECTED FINANCIAL DATA.
The fiscal years presented below are for the twelve-month periods from January 1 through December 31. Data for all years was
derived or compiled from our audited consolidated financial statements included herein or from submissions of our Forms 10-K
in prior years. The selected consolidated financial data should be read in conjunction with our consolidated financial statements
and related notes contained in this Annual Report on Form 10-K and prior year filings with the Securities and Exchange Commission.
(In thousands, except per share data)
STATEMENT OF OPERATIONS DATA
2019
2018
2017
2016
2015
Revenues:
Research
Conferences
Consulting
Other
Total revenues
Operating income (loss)
Net income
PER SHARE DATA
Basic income per share
Diluted income per share
Weighted average shares outstanding:
Basic
Diluted
OTHER DATA
Cash and cash equivalents
Total assets
Long-term debt
Stockholders’ equity (deficit)
Cash provided by operating activities
$3,374,548 $3,105,764 $2,471,280 $1,857,001 $1,614,904
476,869
393,904
410,461
353,667
— 105,562
337,903
327,661
174,650
268,605
318,934
—
251,835
296,317
—
$ 370,087 $ 259,715 $
$4,245,321 $3,975,454 $3,311,494 $2,444,540 $2,163,056
(6,329) $ 305,141 $ 287,997
3,279 $ 193,582 $ 175,635
$ 233,290 $ 122,456 $
$
$
2.60 $
2.56 $
1.35 $
1.33 $
0.04 $
0.04 $
2.34 $
2.31 $
2.09
2.06
89,817
90,971
90,827
92,122
88,466
89,790
82,571
83,820
83,852
85,056
$ 280,836 $ 156,368 $ 538,908 $ 474,233 $ 372,976
7,151,294
6,201,474
7,283,173
2,367,335
2,168,517
2,146,514
2,067,796
790,000
(132,400)
$ 565,436 $ 471,158 $ 254,517 $ 365,632 $ 345,561
2,943,341
672,500
983,465
850,757
938,593
60,878
The items described below impacted the presentation and comparability of our selected financial data.
• During 2018, the Company divested all of the non-core businesses that comprised its Other segment and moved a small
residual product from the Other segment into the Research business and, as a result, no operating activity has been recorded
in the Other segment in 2019. Note 2 — Acquisitions and Divestitures in the Notes to Consolidated Financial Statements
provides additional information regarding the Company's 2018 divestitures.
• During 2017, the Company acquired CEB Inc. The operating results of CEB Inc. have been included in the Company's operating
results since the acquisition date. The Company also made other acquisitions in the years presented in the above table. Note
2 — Acquisitions and Divestitures in the Notes to Consolidated Financial Statements provides additional information regarding
the Company's recent acquisitions.
• During 2019, 2018 and 2017, the Company recognized $9.5 million, $107.2 million and $158.5 million, respectively, of
acquisition and integration charges related to its acquisitions. Note 2 — Acquisitions and Divestitures in the Notes to
Consolidated Financial Statements provides additional information regarding the Company's acquisition and integration
charges.
• During 2019, the Company recorded a net tax benefit of approximately $38.1 million related to an intercompany sale of certain
intellectual property, which increased our diluted earnings per share by $0.42 per share. Note 12 — Income Taxes in the Notes
to Consolidated Financial Statements provides additional information regarding the Company's income taxes.
17
• During 2017, the Company recorded a $59.6 million tax benefit related to the U.S. Tax Cuts and Jobs Act of 2017, which
increased our diluted earnings per share by $0.66 per share. Note 12 — Income Taxes in the Notes to Consolidated Financial
Statements provides additional information regarding the Company's income taxes.
• On January 1, 2019, the Company adopted Accounting Standards Update No. 2016-02, Leases, which resulted in a net increase
of $638.7 million in its total assets on that date. The adoption of this new lease standard did not affect the Company's
stockholders’ equity. Note 1 — Business and Significant Accounting Policies and Note 7 — Leases provide additional
information regarding the Company's adoption of Accounting Standards Update No. 2016-02.
• During 2017, the Company borrowed approximately $2.8 billion and issued approximately 7.4 million shares of its common
stock in connection with the acquisition of CEB Inc. Note 2 — Acquisitions and Divestitures and Note 6 — Debt in the Notes
to Consolidated Financial Statements provide additional information regarding the Company's acquisition of CEB Inc. and
its debt arrangements, respectively.
• The Company repurchased 1.4 million, 2.1 million, 0.4 million, 0.6 million and 6.2 million shares of its common stock in
2019, 2018, 2017, 2016 and 2015, respectively. We used $199.0 million, $260.8 million, $41.3 million, $59.0 million and
$509.0 million in cash for share repurchases in 2019, 2018, 2017, 2016 and 2015, respectively. Note 8 — Stockholders’ Equity
in the Notes to Consolidated Financial Statements provides additional information regarding the Company's share repurchase
activity.
18
ITEM 7. 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 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 thist
discussion in conjunction with our consolidated financial statements and related notes included in this Annual Report on Form
10-K. Historical results and percentage relationships are not necessarily indicative of operating results for future periods. References
to “Gartner,” the "Company,” “we,” “our” and “us” in this MD&A are to Gartner, Inc. and its consolidated subsidiaries.
This MD&A provides an analysis of our consolidated financial results, segment results and cash flows for 2019 and 2018 under
the headings "Results of Operations," "Segment Results" and "Liquidity and Capital Resources." For a similar detailed discussion
comparing 2018 and 2017, refer to those headings under Item 7., "Management’s Discussion and Analysis of Financial Condition
and Results of Operations," in our Annual Report on Form 10-K for the year ended December 31, 2018.
Acquisition of TOPO Research LLC
On October 1, 2019, the Company acquired 100% of the outstanding membership interests of TOPO Research LLC ("TOPO"), a
privately-held company based in Redwood City, California, for $25.0 million. TOPO is a subscription-based research and advisory
business that helps sales leaders at the world’s fastest-growing companies achieve their growth objectives.
Business Divestitures
During 2018, the Company divested all of the non-core businesses that comprised its Other segment and moved a small residual
product from 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 $105.6 million of revenue during 2018, while gross contribution was $65.1 million.
Note 2 — Acquisitions and Divestitures in the Notes to Consolidated Financial Statements provides additional information
regarding the TOPO acquisition and the Company's 2018 divestitures.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report on Form 10-K contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements are any statements other than statements of historical fact, including statements regarding
our expectations, beliefs, hopes, intentions, projections or strategies regarding the future. In some cases, forward-looking statements
can be identified by the use of words such as “may,” “will,” “expect,” “should,” “could,” “believe,” “plan,” “anticipate,” “estimate,”
“predict,” “potential,” “continue” or other words of similar meaning.
We operate in a very competitive and rapidly changing environment that involves numerous risks and uncertainties, some of which
are beyond our control. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable,
actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future quarterly
and annual revenues, operating income, results of operations and cash flows, as well as any forward-looking statement, are subject
to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in our filings with the
Securities and Exchange Commission. Important factors that could cause our actual results, performance and achievements, or
industry results to differ materially from estimates or projections contained in our forward-looking statements include, among
others, the following: the timing of our Gartner Symposium/Xpo 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 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; changes in
market demand for our products and services; changes in foreign currency rates; 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. The potential
fluctuations in our operating income could cause period-to-period comparisons of operating results not to be meaningful and could
provide an unreliable indication of future operating results. A description of the risk factors associated with our business is included
under “Risk Factors” in Item 1A. of this Annual Report on Form 10-K, which is incorporated herein by reference.
aa
Forward-looking statements are subject to risks, estimates and uncertainties that could cause actual results to differ materially
from those discussed in, or implied by, the forward-looking statements. Factors that might cause such a difference include, but
19
are not limited to, those listed above or described under “Risk Factors” in Item 1A. of this Annual Report on Form 10-K. Readers
should not place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date on
which they were made. Forward-looking statements in this Annual Report on Form 10-K speak only as of the date hereof, and
forward-looking statements in documents attached that are incorporated by reference speak only as of the date of those documents.
Except as required by law, we disclaim any obligation to review or update these forward-looking statements to reflect events or
circumstances as they occur.
BUSINESS OVERVIEW
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 enterprises in more than 100 countries — across all major functions, in every industry and enterprise size.
ff
Gartner delivers its products and services globally through three business 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 live.
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.
20
BUSINESS MEASUREMENTS
We believe that the following business measurements are important performance indicators for our business segments:
BUSINESS SEGMENT
Research
BUSINESS MEASUREMENT
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 Sales contract value, which includes sales to users and providers
of technology, and Global Business Sales contract value, which includes sales to all other
functional leaders.
Client retention rate represents a measure of client satisfaction and renewed business
relationships at a specific point in time. Client retention is calculated on a percentage basis by
dividing our current clients, who were also clients a year ago, by all clients from a year ago.
Client retention is calculated at an enterprise level, which represents a single company or
customer.
Wallet retention rate represents a measure of the amount of contract value we have retained
with clients over a twelve-month period. Wallet retention is calculated on a percentage basis by
dividing the contract value of our current clients, who were also clients a 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
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.
21
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 $4.2 billion in 2019, an increase of 7% compared to 2018 on a reported basis and 9% excluding the
foreign currency impact. There was $105.6 million of Other segment revenue on a reported basis in 2018 that did not recur in
2019. Net income increased to $233.3 million in 2019 from $122.5 million in 2018 and, as a result, diluted earnings per share was
$2.56 in 2019 compared to (cid:7)(cid:20)(cid:17)(cid:22)(cid:22) in 2018.
Research revenues increased to $3.4 billion in 2019, an increase of 9% compared to 2018 on a reported basis and 10% excluding
the foreign currency impact. The Research gross contribution margin was 70% and 69% in 2019 and 2018, respectively. Total
contract value was $3.4 billion at December 31, 2019, an increase of 12% compared to December 31, 2018 on a foreign currency
neutral basis.
Conferences revenues increased to $476.9 million in 2019, an increase of 16% compared to 2018 on a reported basis and 18%
excluding the foreign currency impact. The Conferences gross contribution margin was 51% and 50% in 2019 and 2018,
respectively. We held 72 and 70 destination conferences in 2019 and 2018, respectively.
Consulting revenues increased to $393.9 million in 2019, an increase of 11% compared to 2018 on a reported basis and 14%
excluding the foreign currency impact. The Consulting gross contribution margin was 30% and 29% in 2019 and 2018, respectively.
Backlog was $115.7 million at December 31, 2019.
Cash provided by operating activities was $565.4 million and $471.2 million during 2019 and 2018, respectively. As of
December 31, 2019, we had $280.8 million of cash and cash equivalents and $1.0 billion of available borrowing capacity on our
revolving credit facility. During 2019, we repurchased 1.4 million shares of the Company's common stock for an aggregate purchase
price of approximately $194.0 million.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our consolidated financial statements requires the application of appropriate accounting policies and the use
of estimates. Our significant accounting policies are described in Note 1 — Business and Significant Accounting Policies in the
Notes to Consolidated Financial Statements. Management considers the policies discussed below to be critical to an understanding
of our consolidated financial statements because their application requires complex and subjective management judgments and
estimates. Specific risks for these critical accounting policies are also described below.
The preparation of our consolidated financial statements requires us to make estimates and assumptions about future events. We
develop our estimates using both current and historical experience, as well as other factors, including the general economic
environment and actions we may take in the future. We adjust such estimates when facts and circumstances dictate. However, our
estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates
are based on our best judgment at a point in time and, as such, they may ultimately differ materially from actual results. Ongoing
changes in our estimates could be material and would be reflected in the Company’s consolidated financial statements in future
periods.
Our critical accounting policies 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 and disclosure 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 were not 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 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. ASU No. 2016-02 also requires significantly expanded disclosures to meet the objective of enabling
users of financial statements to assess the amount, timing and uncertainty of cash flows related to leases.
22
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 Consolidated Statements of Operations
and its cash provided by operating activities in the Consolidated Statements of Cash Flows for 2019 were not materially impacted
by the adoption of the new lease standard. Note 1 — Business and Significant Accounting Policies and Note 7 — Leases in the
Notes to Consolidated Financial Statements provide additional information regarding the Company's leases and the adoption of
ASU No. 2016-02.
Revenue recognition — For 2019 and 2018, revenue was recognized in accordance with the requirements of Accounting Standards
Update No. 2014-09, Revenue from Contracts with Customers (as amended, "ASU No. 2014-09"). Prior to January 1, 2018, the
Company recognized revenue in accordance with then-existing generally accepted accounting principles in the United States of
America and SEC Staff Accounting Bulletin No. 104, Revenue Recognition (collectively, “Prior GAAP”). Under both ASU No.
2014-09 and Prior GAAP, revenue can only be recognized when all of the required criteria for revenue recognition have been met.
Although there were certain changes to the Company’s revenue recognition policies and procedures with the adoption of ASU
No. 2014-09 on January 1, 2018, there were no material differences between the pattern and timing of revenue recognition under
ASU No. 2014-09 and Prior GAAP.
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 materials 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 engagements are
contingent in nature and are only recognized upon satisfaction of all conditions related to their payment.
The majority of our 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 Significant Accounting Policies and Note 9 — Revenue and Related Matters in the Notes to Consolidated
Financial Statements provide additional information regarding our revenues and the adoption of ASU No. 2014-09 on January 1,
2018.
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 isn
23
inherently judgmental and requires the use of 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).
Gross fees receivable
Allowance for losses
Fees receivable, net
December 31,
2019
$
$
1,334,012
(8,000)
1,326,012
(cid:7)
(cid:7)
2018
(cid:20)(cid:15)(cid:21)(cid:25)(cid:21)(cid:15)(cid:27)(cid:20)(cid:27)
(7,700)
(cid:20)(cid:15)(cid:21)(cid:24)(cid:24)(cid:15)(cid:20)(cid:20)(cid:27)
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 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 a 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 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.
tt
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's goodwill is evaluated 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 plans 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.
t
When performing our annual assessment of the recoverability of goodwill, we 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
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 indicate that it is more likely than not that the fair value of a reporting unit
is less than its respective carrying amount, then we perform a two-step quantitative impairment test.
Evaluating the recoverability of goodwill requires judgments and assumptions regarding future trends and events. As a result, both
the precision and reliability of our estimates are subject to uncertainty. Among the factors that we consider in our 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. To determine the fair values of our
reporting units for a quantitative analysis, we typically utilize detailed financial projections, which include significant variables,
such as projected rates 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.
24
Our most recent annual impairment test of goodwill was a qualitative analysis conducted during the quarter ended September 30,
2019 that indicated no impairment. Subsequent to completing our 2019 annual impairment test, no events or changes in
circumstances were noted that required an interim goodwill impairment test. Note 1 — Business and Significant Accounting
Policies and Note 3 — Goodwill and Intangible Assets in the Notes to Consolidated Financial Statements provide additional
information regarding the Company's 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 the Company operates. This process involves estimating our current tax expense
or benefit together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes.
These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheets. 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. Recognized tax positions are measured at the largest amount of benefit with greater than a 50%
likelihood of being realized. The Company uses estimates in determining the amount of unrecognized tax benefits associated with
uncertain tax positions. Significant judgment is required in evaluating tax law and measuring the benefits likely to be
realized. Uncertain tax positions are periodically re-evaluated and adjusted as more information about their ultimate realization
becomes available.
d
rr
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 10
— Stock-Based Compensation in the Notes to 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
future operating 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.
25
RESULTS OF OPERATIONS
Consolidated Results
The table below presents an analysis of selected line items and year-over-year changes in our Consolidated Statements of Operations
for the years indicated (in thousands).
Total revenues
Costs and expenses:
Cost of services and product development
Selling, general and administrative
Depreciation
Amortization of intangibles
Acquisition and integration charges
Operating income
Interest expense, net
(Loss) gain from divested operations
Other income, net
Provision for income taxes
Net income
Year Ended
December 31,
2019
Year Ended
December 31,
2018
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
4,245,321
$
3,975,454
$
269,867
7%
1,550,568
2,103,424
82,066
129,713
9,463
370,087
(99,805)
(2,075)
7,532
42,449
1,468,800
1,884,141
68,592
187,009
107,197
259,715
(124,208)
45,447
167
58,665
$
233,290
$
122,456
$
81,768
219,283
13,474
(57,296)
(97,734)
110,372
(24,403)
(47,522)
7,365
(16,216)
110,834
6
12
20
(31)
(91)
42
(20)
>(100)
>100
(28)
91%
Total revenues for 2019 were $4.2 billion, an increase of $269.9 million, or 7% compared to 2018 on a reported basis and 9%
excluding the foreign currency impact. The tables below present (i) revenues by geographic region (based on where the sale is
fulfilled) and (ii) revenues by segment for the years indicated (in thousands).
Primary Geographic Market
United States and Canada
Europe, Middle East and Africa
Other International
Total revenues (1)
Segment
Research
Conferences
Consulting
Other (1)
Year Ended
December 31,
2019
Year Ended
December 31,
2018
2,734,490
$
2,514,952
996,004
514,827
1,000,490
460,012
Increase
(Decrease)
$ 219,538
(4,486)
54,815
4,245,321
$
3,975,454
$ 269,867
$
$
Percentage
Increase
(Decrease)
9%
—
12
7%
Year Ended
December 31,
2019
(cid:22)(cid:15)(cid:22)(cid:26)(cid:23)(cid:15)(cid:24)(cid:23)(cid:27)
476,869
(cid:7)
393,904
—
Year Ended
December 31,
2018
3,105,764
$
410,461
353,667
105,562
Increase
(Decrease)
$ 268,784
66,408
40,237
(105,562)
$ 269,867
Percentage
Increase
(Decrease)
9%
16
11
>(100)
7%
Total revenues (1)
$
4,245,321
$
3,975,454
(1) During 2018, the Company divested all of the non-core businesses that comprised its Other segment and moved a small
residual product from the Other segment into the Research business and, as a result, no revenue has been recorded in the Other
segment in 2019. Revenue from the Company's divested operations was approximately $97.3 million during 2018. Note 9 —
Revenue and Related Matters in the Notes to Consolidated Financial Statements provides additional information regarding
the Company's revenue by geography and by segment.
Refer to the section of this MD&A below entitled “Segment Results” for a discussion of revenues and results by segment.
26
Cost of services and product development was $1.6 billion in 2019, an increase of $81.8 million compared to 2018, or 6% on a
reported basis and 7% excluding the foreign currency impact. The increase in Cost of services and product development was
primarily due to higher payroll and related benefits costs resulting from increased headcount, partially offset by a reduction in
expense from certain businesses that were divested during 2018. Cost of services and product development as a percent of revenues
was 37% during both 2019 and 2018.
Selling, general and administrative (“SG&A”) expense was $2.1 billion in 2019, an increase of $219.3 million compared to 2018,
or 12% on a reported basis and 14% excluding the foreign currency impact. The increase in SG&A expense was primarily due to:
(i) higher commissions from increased sales bookings; (ii) more payroll and related benefits costs, which were driven mostly by
increased headcount; and (iii) higher facilities and corporate costs. These items were partially offset by a reduction in SG&A
expense from certain businesses that were divested during 2018 and a reduction in travel and entertainment expenses during 2019.
The overall headcount growth included quota-bearing sales associate increases in Global Technology Sales and Global Business
Sales to 3,267 and 869, respectively, at December 31, 2019. On a combined basis, the total number of quota-bearing sales associates
increased by 6% when compared to December 31, 2018. SG&A expense as a percent of revenues was 50% and 47% during 2019
and 2018, respectively. SG&A expense increased at a faster pace than our revenue in 2019 as we grew sales capacity and the
enabling infrastructure during the year to promote future revenue growth.
Depreciation increased by 20% during 2019 compared to 2018. This increase was due to additional investments, including new
leasehold improvements as additional office space went into service and capitalized software.
Amortization of intangibles decreased by 31% during 2019 compared to 2018 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 declined by $97.7 million during 2019 compared to 2018. This decrease was the result of the
Company having completed two acquisitions in 2017, no acquisitions in 2018 and one minor acquisition in late 2019.
Operating income was $370.1 million and $259.7 million during 2019 and 2018, 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, primarily in our Research and Conferences segments and, to a lesser extent, Consulting, which were partially
offset by higher SG&A expense and Depreciation.
Interest expense, net declined by $24.4 million during 2019 compared to 2018. This decrease was primarily due to lower average
outstanding borrowings during 2019 and nominally lower weighted average annual effective interest rates on the Company's total
outstanding debt.
Gain from divested operations of $45.4 million in 2018 was due to sales of certain business units and other miscellaneous assets.
Loss from divested operations of $2.1 million in 2019 was primarily due to adjustments of certain working capital balances related
to the Company's 2018 divestitures. Note 2 — Acquisitions and Divestitures in the Notes to Consolidated Financial Statements
provides additional information regarding the Company's 2018 divestitures.
Other income, net for the years presented herein included the net impact of foreign currency gains and losses from our hedging
activities, as well as sales of certain state tax credits and the recognition of other tax incentives. During 2019, Other income, net
also included a pretax gain of $9.1 million from the Company's sale a minority equity investment.
The provision for income taxes was $42.4 million and $58.7 million during 2019 and 2018, respectively, with an effective income
tax rate of 15.4% in 2019 and 32.4% in 2018. The 2019 effective tax rate includes a significant benefit from the intercompany
sale of certain intellectual property, while no such benefit occurred in 2018. Note 12 — Income Taxes in the Notes to Consolidated
Financial Statements provides additional information regarding the Company's income taxes.
Net income was $233.3 million and $122.5 million during 2019 and 2018, respectively. Additionally, our diluted net income per
share increased by $1.23 in 2019 compared to 2018. These year-over-year changes reflect: (i) increases in our 2019 operating
income; (ii) lower interest expense; and (iii) a lower effective income tax rate in 2019 compared to 2018. Partially offsetting these
items was a loss from divested operations during 2019 compared to a corresponding gain during 2018.
27
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 from 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 $105.6 million of revenue during 2018, while gross contribution was $65.1 million. Note
2 — Acquisitions and Divestitures in the Notes to Consolidated Financial Statements provides additional information regarding
the Company's 2018 divestitures.
Reportable Segments
The Company’s reportable segments are as follows:
•
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 live.
•
g
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.
The sections below present the results of the Company's three reportable business segments.
Research
Financial Measurements:
Revenues (1)
Gross contribution (1)
Gross contribution margin
Business Measurements:
Global Technology Sales (2):
Contract value (1), (3)
Client retention
Wallet retention
Global Business Sales (2):
Contract value (1), (3)
Client retention
Wallet retention
As Of And For
The Year Ended
December 31,
2019
As Of And For
The Year Ended
December 31,
2018
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
$
$
$
3,374,548
2,351,720
$
$
70%
3,105,764
2,144,097
69%
$ 268,784
$ 207,623
1 point
2,799,000
$
2,492,000
82%
104%
83%
105%
$ 307,000
(1) point
(1) point
647,000
$
594,000
$
82%
101%
82%
95%
53,000
—
6 points
9%
10%
—
12%
—
—
9%
—
—
(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.
(3) Contract values are on a foreign exchange neutral basis. Contract values as of December 31, 2018 have been calculated using
the same foreign currency rates as 2019.
28
Research revenues increased by $268.8 million during 2019 compared to 2018, or 9% on a reported basis and 10% excluding the
foreign currency impact. The gross contribution margin was 70% in 2019 compared to 69% in 2018. The increase in revenues
during 2019 was primarily due to the same factors driving the trend in our Research contract value, which are discussed below.
The improvement in margin was primarily due to strong fourth quarter results in 2019 wherein program costs and travel and
entertainment expenses grew at a slower pace than the corresponding quarterly revenue.
Total contract value increased to $3.4 billion at December 31, 2019, or 12% compared to December 31, 2018 on a foreign exchange
neutral basis. Total contract value at December 31, 2019 increased by double-digits across more than half of the Company’s client
sizes and half of its industry segments when compared to December 31, 2018. Global Technology Sales ("GTS") contract value
increased by 12% at December 31, 2019 when compared to December 31, 2018. The increase in GTS contract value was primarily
due to additional sales headcount and productivity improvements. Global Business Sales ("GBS") contract value increased by 9%
year-over-year (8% on a foreign exchange neutral basis after excluding the effects of the Company's 2019 acquisition of TOPO
Research LLC), primarily driven by the combined effect of improved retention and new business, with a large portion of the new
business coming from newly launched products.
GTS client retention was 82% and 83% as of December 31, 2019 and 2018, respectively, while wallet retention was 104% and
105%, respectively. GBS client retention was 82% as of both December 31, 2019 and 2018, while wallet retention was 101% and
95%, respectively. The increase in GBS wallet retention was largely due to increased spending by retained clients. The number
of GTS client enterprises increased by 1% at December 31, 2019 when compared to December 31, 2018, while GBS client
enterprises declined by 6%.
Conferences
As Of And For
The Year Ended
December 31,
2019
As Of And For
The Year Ended
December 31,
2018
Increase
(Decrease)
Percentage
Increase
(Decrease)
$
$
476,869
241,757
$
$
51%
410,461
207,260
$
$
50%
66,408
34,497
1 point
72
85,750
70
78,136
2
7,614
16%
17%
—
3%
10%
Financial Measurements:
Revenues (1)
Gross contribution (1)
Gross contribution margin
Business Measurements:
Number of destination conferences (2)
Number of destination conferences attendees (2)
(1) Dollars in thousands.
(2) Single day, local meetings are excluded.
Conferences revenues increased by $66.4 million during 2019 compared to 2018, or 16% on a reported basis and 18% 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 2019 compared to 2018. We held 72 destination conferences in
2019 with a 10% increase in the number of attendees and a 15% increase in exhibitors when compared to 2018, while the average
revenue per attendee and exhibitor both increased by 3%. The segment gross contribution margin was 51% and 50% in 2019 and
2018, respectively. The higher gross contribution margin during 2019 was primarily due to improvements in our average revenue
per attendee and exhibitor, improved margins from our single day, local meetings and our continuing efforts to efficiently manage
our conference-related expenses. Partially offsetting these items were higher costs associated with increased headcount.
29
Consulting
As Of And For
The Year Ended
December 31,
2019
As Of And For
The Year Ended
December 31,
2018
Increase
(Decrease)
Percentage
Increase
(Decrease)
Financial Measurements:
Revenues (1)
Gross contribution (1)
Gross contribution margin
Business Measurements:
Backlog (1), (2)
Billable headcount
Consultant utilization
Average annualized revenue per billable headcount (1) $
$
$
$
393,904
118,450
$
$
30%
353,667
102,541
29%
115,700
$
108,400
784
62%
373
$
718
63%
375
$
$
$
$
40,237
15,909
1 point
7,300
66
(1) point
(2)
11 %
16 %
—
7 %
9 %
—
(1)%
(1) Dollars in thousands.
(2) Backlog is on a foreign exchange neutral basis. Backlog as of December 31, 2018 has been calculated using the same foreign
currency rates as 2019.
Consulting revenues increased 11% during 2019 compared to 2018 on a reported basis and 14% excluding the foreign currency
impact, with revenue improvements in labor-based core consulting and contract optimization of 7% and 31%, respectively, on a
reported basis. Contract optimization revenue may vary significantly and, as such, 2019 revenues may not be indicative of future
results. The segment gross contribution margin was 30% and 29% in 2019 and 2018, respectively. The higher gross contribution
margin during 2019 was primarily due to the increase in contract optimization revenue, which has a higher contribution margin
than our labor-based core consulting, billing rate increases, improvements in our labor-based consulting margins and benefits
derived from certain cost-reduction initiatives, partially offset by increased personnel costs and commissions.
Backlog increased by $7.3 million, or 7%, from December 31, 2018 to December 31, 2019. The $115.7 million of backlog at
December 31, 2019 represented approximately four months of backlog, which is in line with the Company's operational target.
30
LIQUIDITY AND CAPITAL RESOURCES
We finance our operations through cash generated from our operating activities and borrowings. Note 6 — Debt in the Notes to
Consolidated Financial Statements provides additional information regarding the Company's outstanding debt obligations. At
December 31, 2019, we had $280.8 million of cash and cash equivalents and approximately $1.0 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.
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
continuously strong operating cash flow. Cash flow generation has also benefited 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 92% held overseas at December 31, 2019.
The Company intends to reinvest substantially all of its 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 years indicated (in thousands).
Cash provided by operating activities
Cash (used in) provided by investing activities
Cash used in financing activities
Net increase (decrease) in cash and cash equivalents and restricted cash
Effects of exchange rates
Beginning cash and cash equivalents and restricted cash
Ending cash and cash equivalents and restricted cash
$
$
Year Ended December 31,
2019
565,436
(160,885)
(285,992)
118,559
3,614
158,663
280,836
$
$
2018
471,158
384,051
(1,257,115)
(401,906)
(6,489)
567,058
158,663
$
$
Increase
(Decrease)
94,278
(544,936)
971,123
520,465
10,103
(408,395)
122,173
Operating
Cash provided by operating activities was $565.4 million and $471.2 million in 2019 and 2018, respectively. This year-over-year
increase was primarily due to (i) greater profitability in 2019, including lower cash payments for both acquisition-related costs
and interest on our borrowings, and (ii) improved collections of our fees receivable during 2019. Partially offsetting these items
were higher payments for income taxes, net of refunds received, during 2019.
Investing
Cash used in investing activities was $160.9 million in 2019 compared to cash provided by investing activities of $384.1 million
in 2018. The cash used in 2019 was primarily for capital expenditures and the acquisition of TOPO Research LLC, partially offset
by $14.1 million of cash proceeds from the sale of a minority equity investment. During 2018, $526.8 million of net cash was
realized from business unit divestitures and other miscellaneous asset sales, partially offset by payments of $126.9 million for
capital expenditures and $15.9 million for deferred consideration from a pre-2018 acquisition.
Financing
Cash used in financing activities was $286.0 million in 2019 compared to cash used of $1.3 billion in 2018. During 2019, the
Company borrowed $5.0 million under a financial program offered by the State of Connecticut and repaid $109.6 million of other
borrowings. We also used $199.0 million of cash during 2019 for share repurchases. During 2018, the Company paid $1.0 billion
in debt principal repayments and $260.8 million for share repurchases.
31
OBLIGATIONS AND COMMITMENTS
Debt
As of December 31, 2019, the Company had $2.2 billion of principal amount of debt outstanding. Note 6 — Debt in the Notes to
Consolidated Financial Statements provides additional information regarding the Company's outstanding debt obligations.
Off-Balance Sheet Arrangements
Through December 31, 2019, the Company has not entered into any material off-balance sheet arrangements or transactions with
unconsolidated entities or other persons.
Contractual Cash Commitments
The table below summarizes the Company's future contractual cash commitments as of December 31, 2019 (in thousands).
Commitment Description
Due In Less
Than
1 Year
Due In 2-3
Years
Due In 4-5
Years
Due In
More Than
5 Years
Total
Debt – principal and interest (1)
$
237,948
$ 1,422,379
$
100,141
$
822,585
$ 2,583,053
Operating leases (2)
Deferred compensation arrangements (3)
Other (4)
Totals
142,352
10,116
30,836
273,920
14,725
34,606
249,635
8,784
12,712
682,883
1,348,790
45,931
35,834
79,556
113,988
(cid:7)
(cid:23)(cid:21)(cid:20)(cid:15)(cid:21)(cid:24)(cid:21)
$ 1,745,630
$
371,272
$ 1,587,233
$ 4,125,387
(1) Principal repayments of the Company's debt obligations were classified in the above table based on the contractual repayment
dates. Interest payments were based on the effective interest rates as of December 31, 2019, including the effects of the
Company’s interest rate swap contracts. Note 6 — Debt in the Notes to Consolidated Financial Statements provides information
regarding the Company's debt obligations and interest rate swap contracts.
(2) The Company leases various facilities, automobiles, computer equipment and other assets under non-cancelable operating
lease agreements expiring between 2020 and 2038. The total commitment excludes approximately $360.6 million of estimated
future cash receipts from the Company's subleasing arrangements. Note 1 — Business and Significant Accounting Policies
and Note 7 — Leases in the Notes to Consolidated Financial Statements provide additional information regarding the
Company's leases.
(3) The Company has supplemental deferred compensation arrangements with certain of its employees. Amounts payable with
known payment dates have been classified in the above table based on those scheduled payment dates. Amounts payable
whose payment dates are unknown have been included in the Due In More Than 5 Years category because the Company
cannot determine when the amounts will be paid. Note 15 — Employee Benefits in the Notes to Consolidated Financial
Statements provides additional information regarding the Company's supplemental deferred compensation arrangements.
(4) Other includes: (i) contractual commitments (a) to secure sites for our Conferences business and (b) for software, telecom
and other services; (ii) amounts due for share repurchase transactions that occurred in late December 2019 but were settled
in cash in January 2020; and (iii) projected cash contributions to the Company's defined benefit pension plans. Note 15 —
Employee Benefits in the Notes to Consolidated Financial Statements provides additional information regarding the Company's
defined benefit pension plans.
In addition to the contractual cash commitments included in the above table, the Company has other payables and liabilities that
may be legally enforceable but are not considered contractual commitments. Information regarding the Company's payables and
liabilities is included in Note 5 — Accounts Payable and Accrued and Other Liabilities in the Notes to Consolidated Financial
Statements.
32
QUARTERLY FINANCIAL DATA
The tables below present our quarterly operating results for the two-year period ended December 31, 2019.
2019
(In thousands, except per share data)
First
Second
Third
Fourth
Revenues
Operating income
Net income (1)
Net income per share (1), (2):
Basic
Diluted
2018
(In thousands, except per share data)
Revenues
Operating income (loss)
Net income (loss)
Net income (loss) per share:
Basic
Diluted
$
970,444
$
1,070,882
$
1,000,502
(cid:7)
(cid:20)(cid:15)(cid:21)(cid:19)(cid:22)(cid:15)(cid:23)(cid:28)(cid:22)
48,799
20,795
116,002
103,406
69,147
41,388
(cid:20)(cid:22)(cid:25)(cid:15)(cid:20)(cid:22)(cid:28)
(cid:25)(cid:26)(cid:15)(cid:26)(cid:19)(cid:20)
$
$
$
$
$
0.23
0.23
$
$
1.15
1.13
$
$
0.46
0.46
(cid:7)
(cid:7)
(cid:19)(cid:17)(cid:26)(cid:25)
(cid:19)(cid:17)(cid:26)(cid:24)
First
Second
Third
Fourth
963,565
(8,711)
(19,587)
$
1,001,336
$
921,674
$
1,088,878
86,096
46,270
52,724
11,753
129,606
84,020
(0.22) $
(0.22) $
0.51
0.50
$
$
0.13
0.13
$
$
0.93
0.92
(1) In April 2019, we completed an intercompany sale of certain intellectual property and, as a result, the Company recorded a
net tax benefit of approximately $38.1 million. The tax benefit increased our net income and each of our basic and diluted
net income per share for the second quarter of 2019 by approximately $0.42 per share. Note 12 — Income Taxes in the Notes
to Consolidated Financial Statements provides additional information regarding the tax impact of our intercompany sale of
certain intellectual property.
(2) The aggregate of the four quarters’ basic and diluted net income per share may not equal the reported full calendar year
amounts due to the effects of share repurchases, dilutive equity compensation and rounding.
RECENTLY ISSUED ACCOUNTING STANDARDS
The FASB has issued accounting standards that had not yet become effective as of December 31, 2019 and may impact the
Company’s consolidated financial statements or its disclosures in future periods. Note 1 — Business and Significant Accounting
Policies in the Notes to Consolidated Financial Statements provides information regarding those accounting standards.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
INTEREST RATE RISK
As of December 31, 2019, the Company had $2.2 billion in total debt principal outstanding. Note 6 — Debt in the Notes to
Consolidated Financial Statements provides additional information regarding the Company's outstanding debt obligations.
Approximately $1.4 billion of the Company's total debt outstanding as of December 31, 2019 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 floating base interest rates 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 December 31, 2019, the Company was effectively fully hedged against the base interest rate risk on its
floating rate borrowings.
n
FOREIGN CURRENCY RISK
A significant portion of 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
33
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 December 31, 2019, we
had $280.8 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 December 31, 2019 could have increased or decreased by approximately $26.0 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.
ff
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 ind
current period earnings. We typically enter into foreign currency forward exchange contracts to mitigate the effects of some of
this foreign currency transaction risk. Our outstanding foreign currency forward exchange contracts as of December 31, 2019 had
an immaterial net unrealized 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, fees 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. Fees receivable balances deemed to be collectible from
customers have limited concentration of credit risk due to our diverse customer base and geographic dispersion.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our financial statements for 2019, 2018 and 2017, together with the reports of KPMG LLP, our independent registered public
accounting firm, are included herein in this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
34
ITEM 9A. CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
Management conducted an evaluation, as of December 31, 2019, of the effectiveness of the design and operation of our disclosure
controls and procedures (as such term is defined in Rules 13a- 15(e) and 15d- 15(e) under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)), under the supervision and with the participation of our chief executive officer and chief financial
officer. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that 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.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Gartner management is responsible for establishing and maintaining adequate internal control over financial reporting as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f). Gartner’s internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate. Management assessed
the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, management
used the criteria set forth in the Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Management’s assessment was reviewed with the Audit Committee of the
Board of Directors.
Based on its assessment of internal control over financial reporting, management has concluded that, as of December 31, 2019,
Gartner’s internal control over financial reporting was effective. The effectiveness of management’s internal control over financial
reporting as of December 31, 2019 has been audited by KPMG LLP, an independent registered public accounting firm, as stated
in their report, which is included in this Annual Report on Form 10-K in Part IV, Item 15.
a
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in the Company's internal control over financial reporting during the quarter ended December 31,
2019 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION.
Not applicable.
35
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required to be furnished pursuant to this item will be set forth under the captions “The Board of Directors,"
"Proposal One: Election of Directors,” “Executive Officers,” “Corporate Governance,” “Delinquent Section 16(a) Reports” (if
necessary) and “Proxy and Voting Information — Available Information” in the Company’s Proxy Statement to be filed with the
SEC no later than April 29, 2020. If the Proxy Statement is not filed with the SEC by April 29, 2020, such information will be
included in an amendment to this Annual Report filed by April 29, 2020. See also Item 1. Business — Available Information.
ITEM 11. EXECUTIVE COMPENSATION.
The information required to be furnished pursuant to this item is incorporated by reference from the information set forth under
the captions “Compensation Discussion & Analysis,” “Compensation Tables and Narrative Disclosures,” “The Board of Directors
- Compensation of Directors,” “The Board of Directors - Director Compensation Table,” “Corporate Governance - Risk Oversight
- Risk Assessment of Compensation Policies and Practices,” and “Corporate Governance - Compensation Committee” in the
Company’s Proxy Statement to be filed with the SEC no later than April 29, 2020. If the Proxy Statement is not filed with the
SEC by April 29, 2020, such information will be included in an amendment to this Annual Report filed by April 29, 2020.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
The information required to be furnished pursuant to this item will be set forth under the captions "Compensation Tables and
Narrative Disclosures — Equity Compensation Plan Information" and “Security Ownership of Certain Beneficial Owners and
Management” in the Company’s Proxy Statement to be filed with the SEC by April 29, 2020. If the Proxy Statement is not filed
with the SEC by April 29, 2020, such information will be included in an amendment to this Annual Report filed by April 29, 2020.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
The information required to be furnished pursuant to this item will be set forth under the captions “Transactions With Related
Persons” and “Corporate Governance — Director Independence” in the Company’s Proxy Statement to be filed with the SEC by
April 29, 2020. If the Proxy Statement is not filed with the SEC by April 29, 2020, such information will be included in an
amendment to this Annual Report filed by April 29, 2020.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information required to be furnished pursuant to this item will be set forth under the caption “Proposal Three: Ratification of
Appointment of Independent Registered Public Accounting Firm” in the Company’s Proxy Statement to be filed with the SEC no
later than April 29, 2020. If the Proxy Statement is not filed with the SEC by April 29, 2020, such information will be included
in an amendment to this Annual Report filed by April 29, 2020.
36
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) 1. and 2. Financial Statements and Schedules
The reports of our independent registered public accounting firm and financial statements listed in the Index to Consolidated
Financial Statements herein are filed as part of this report.
All financial statement schedules not listed in the Index have been omitted because the information required is not applicable or
is shown in the consolidated financial statements or notes thereto.
3. Exhibits
EXHIBIT NUMBER DESCRIPTION OF DOCUMENT
2.1(1)
Agreement and Plan of Merger by and among the Company, Cobra Acquisition Corp. and CEB Inc.,
dated as of January 5, 2017.
3.1(2)
3.2(3)
4.1(2)
4.2(4)
4.3(4)
4.4(5)
4.5(6)
4.6(7)
4.7(8)
4.8*
10.1(9)
10.2(9)
10.3(10)+
10.4(11)+
10.5(12)+
10.6(12)+
10.7(13)+
10.8(14)+
10.9(14)+
10.10(15)+
Restated Certificate of Incorporation of the Company.
By-laws of Gartner, Inc. (January 30, 2020).
Form of Certificate for Common Stock as of June 2, 2005.
Credit Agreement, dated as of June 17, 2016, among the Company, the several lenders from time to time
parties thereto, and JPMorgan Chase Bank, N.A. as administrative agent.
Guarantee and Collateral Agreement, dated as of June 17, 2016, among the Company and certain of its
subsidiaries, in favor of JPMorgan Chase Bank, N.A. as administrative agent.
First Amendment to Credit Agreement, dated as of January 20, 2017, among the Company, the several
lenders from time to time parties thereto, and JPMorgan Chase Bank, N.A. as administrative agent, filed
as of January 24, 2017.
Second Amendment, dated as of March 20, 2017, among the Company, each other Loan Party party
thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.
Incremental Amendment, dated as of April 5, 2017, among the Company, each other Loan Party party
thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.
Indenture (including form of Notes), dated as of March 30, 2017, among the Company, the guarantors
named therein and U.S. Bank National Association, as trustee, relating to the $800,000,000 aggregate
principal amount of 5.125% Senior Notes due 2025.
Description of Gartner, Inc.'s Common Stock.
Amended and Restated Lease dated April 16, 2010 between Soundview Farms and the Company for
premises at 56 Top Gallant Road, 70 Gatehouse Road, and 88 Gatehouse Road, Stamford, Connecticut.
First Amendment to Amended and Restated Lease dated April 16, 2010 between Soundview Farms and
the Company for premises at 56 Top Gallant Road, 70 Gatehouse Road, and 88 Gatehouse Road, Stamford,
Connecticut.
2011 Employee Stock Purchase Plan.
2003 Long-Term Incentive Plan, as amended and restated effective June 4, 2009.
Gartner, Inc. Long-Term Incentive Plan, as amended and restated effective January 31, 2019.
Amended and Restated Employment Agreement between Eugene A. Hall and the Company dated as of
February 14, 2019.
Company Deferred Compensation Plan, effective January 1, 2009.
Form of 2017 Stock Appreciation Right Agreement for executive officers.
Form of 2017 Performance Stock Unit Agreement for executive officers.
Form of 2017 Restricted Stock Unit Agreement for certain officers.
37
10.11(16)+
10.12(16)+
10.13(12)+
10.14(12)+
10.15+*
10.16+*
Form of 2018 Stock Appreciation Right Agreement for executive officers.
Form of 2018 Performance Stock Unit Agreement for executive officers.
Form of 2019 Stock Appreciation Right Agreement for executive officers.
Form of 2019 Performance Stock Unit Agreement for executive officers.
Form of 2020 Stock Appreciation Right Agreement for executive officers.
Form of 2020 Performance Stock Unit Agreement for executive officers.
10.17(17)+
Form of Restricted Stock Unit Agreement for non-employee directors.
10.18+*
Enhanced Executive Rewards Policy.
21.1*
23.1*
24.1*
31.1*
31.2*
32*
101.INS*
101.SCH*
101.CAL*
101.LAB*
101.PRE*
101.DEF*
104*
Subsidiaries of Registrant.
Consent of Independent Registered Public Accounting Firm.
Power of Attorney (see Signature Page).
Certification of chief executive officer under Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of chief financial officer under Section 302 of the Sarbanes-Oxley Act of 2002.
Certification under Section 906 of the Sarbanes-Oxley Act of 2002.
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.
XBRL Taxonomy Extension Schema Document.
XBRL Taxonomy Extension Calculation Linkbase Document.
XBRL Taxonomy Extension Label Linkbase Document.
XBRL Taxonomy Extension Presentation Linkbase Document.
XBRL Taxonomy Extension Definition Linkbase Document.
Cover Page Interactive Data File, formatted in Inline XBRL (included as Exhibit 101).
Filed with this document.
*
+ Management compensation plan or arrangement.
Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 5, 2017.
(1)
Incorporated by reference from the Company’s Current Report on Form 8-K filed on July 6, 2005.
(2)
Incorporated by reference from the Company’s Current Report on Form 8-K filed on February 5, 2020.
(3)
Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on August 4, 2016.
(4)
Incorporated by reference from the Company’s Current Report on Form 8-K filed on January 24, 2017.
(5)
Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 21, 2017.
(6)
Incorporated by reference from the Company’s Current Report on Form 8-K filed on April 6, 2017.
(7)
Incorporated by reference from the Company’s Current Report on Form 8-K filed on March 30, 2017.
(8)
(9)
Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on August 9, 2010.
(10) Incorporated by reference from the Company’s Proxy Statement (Schedule 14A) filed on April 18, 2011.
(11) Incorporated by reference from the Company’s Proxy Statement (Schedule 14A) filed on April 21, 2009
(12) Incorporated by reference from the Company’s Annual Report on Form 10-K filed on February 22, 2019.
(13) Incorporated by reference from the Company’s Annual Report on Form 10-K filed on February 20, 2009.
(14) Incorporated by reference from the Company’s Current Report on Form 8-K dated on February 7, 2017.
(15) Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on November 2, 2017.
(16) Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on May 8, 2018.
(17) Incorporated by reference from the Company’s Quarterly Report on Form 10-Q filed on August 1, 2018.
38
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
GARTNER, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Operations for the Three-Year Period Ended December 31, 2019
Consolidated Statements of Comprehensive Income for the Three-Year Period Ended December 31, 2019
Consolidated Statements of Stockholders’ Equity for the Three-Year Period Ended December 31, 2019
Consolidated Statements of Cash Flows for the Three-Year Period Ended December 31, 2019
Notes to Consolidated Financial Statements
40
42
43
44
45
46
47
48
All financial statement schedules have been omitted because the information required is not applicable or is shown in the
consolidated financial statements or notes thereto.
39
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Gartner, Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Gartner, Inc. and subsidiaries (the Company) as of December 31,
2019 and 2018, the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows
for each of the years in the three-year period ended December 31, 2019, and the related notes (collectively, the consolidated
financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
a
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 19, 2020 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as
of January 1, 2019 due to the adoption of ASU No. 2016-02, Leases.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether
due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or
complex judgment. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on
the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of unrecognized tax benefits
As discussed in Notes 1 and 12 to the consolidated financial statements, the Company has recorded gross unrecognized tax
benefits of $102.8 million as of December 31, 2019. The Company recognizes tax positions when it believes there is more than
a 50 percent likelihood of such positions being sustained based on the technical merits of the position. Recognized tax positions
are measured at the largest amount of benefit greater than 50 percent likely of being realized. The Company uses estimates and
assumptions in determining the amount of unrecognized tax benefits associated with uncertain tax positions.
40
We identified the assessment of unrecognized tax benefits relating to transfer pricing and certain other intercompany transactions
as a critical audit matter. Complex auditor judgment was required in evaluating the Company’s interpretation of tax law and its
determination of the recognition and measurement of the tax benefits that are recognized. This included judgments about re-
measuring liabilities for positions taken in prior years’ tax returns, in light of new information.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal
controls over the Company’s unrecognized tax benefits process, including controls over assessing the tax implications of transfer
pricing and certain other intercompany transactions. We involved tax and transfer pricing professionals with specialized skills
and knowledge, who assisted in:
ff
• Evaluating the Company’s interpretation of tax laws and income tax consequences of intercompany transactions,
including internal restructurings and intra-entity transfers of assets;
• Assessing intercompany agreements and related transfer pricing studies for compliance with relevant tax laws and
regulations;
• Performing an independent assessment of the Company’s tax positions and determination of unrecognized tax benefits
and comparing the results to the Company’s assessment; and
Inspecting settlement documents with applicable taxing authorities.
•
In addition, we assessed the Company’s ability to estimate its unrecognized tax benefits by comparing historical unrecognized
tax benefits to actual results upon conclusion of tax audits by applicable taxing authorities.
/s/ KPMG LLP
We have served as the Company’s auditor since 1996.
New York, New York
February 19, 2020
41
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Gartner, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Gartner, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2019,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements
of operations, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended
December 31, 2019, and the related notes (collectively, the consolidated financial statements), and our report dated February 19,
2020 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on
Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material
respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessaryrr
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
ff
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
a
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
New York, New York
February 19, 2020
42
GARTNER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
Current assets:
Cash and cash equivalents
Fees receivable, net of allowances of $8,000 and $7,700, respectively
Deferred commissions
Prepaid expenses and other current assets
Total current assets
Property, equipment and leasehold improvements, net
Operating lease right-of-use assets
Goodwill
Intangible assets, net
Other assets
Total Assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities
Deferred revenues
Current portion of long-term debt
Total current liabilities
Long-term debt, net of deferred financing fees
Operating lease liabilities
Other liabilities
Total Liabilities
Stockholders’ Equity:
Preferred stock:
$0.01 par value, authorized 5,000,000 shares; none issued or outstanding
Common stock:
$0.0005 par value, 250,000,000 shares authorized; 163,602,067 shares issued for both
periods
Additional paid-in capital
Accumulated other comprehensive loss, net
Accumulated earnings
Treasury stock, at cost, 74,444,288 and 73,899,977 common shares, respectively
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
See Notes to Consolidated Financial Statements.
43
December 31,
2019
2018
$
280,836
$
156,368
1,326,012
1,255,118
265,867
146,026
235,016
165,237
2,018,741
1,811,739
344,579
267,665
(cid:26)(cid:19)(cid:21)(cid:15)(cid:28)(cid:20)(cid:25)
2,937,726
925,087
222,245
(cid:178)
2,923,136
1,042,565
156,369
$ 7,151,294
$ 6,201,474
$
788,796
$
710,113
1,928,020
1,745,244
139,718
2,856,534
2,043,888
(cid:27)(cid:22)(cid:21)(cid:15)(cid:24)(cid:22)(cid:22)
479,746
165,578
2,620,935
2,116,109
(cid:178)
613,673
6,212,701
5,350,717
—
82
—
82
1,899,273
(77,938)
1,988,722
(2,871,546)
938,593
1,823,710
(39,867)
1,755,432
(2,688,600)
850,757
$ 7,151,294
$ 6,201,474
GARTNER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
Research
Conferences
Consulting
Other
Total revenues
Costs and expenses:
Cost of services and product development
Selling, general and administrative
Depreciation
Amortization of intangibles
Acquisition and integration charges
Total costs and expenses
Operating income (loss)
Interest income
Interest expense
(Loss) gain from divested operations
Other income, net
Income (loss) before income taxes
Provision (benefit) for income taxes
Net income
Net income per share:
Basic
Diluted
Weighted average shares outstanding:
Basic
Diluted
See Notes to Consolidated Financial Statements.
Year Ended December 31,
2019
2018
2017
$
3,374,548
$
3,105,764
$
2,471,280
476,869
393,904
—
410,461
353,667
105,562
337,903
327,661
174,650
4,245,321
3,975,454
3,311,494
1,550,568
2,103,424
82,066
129,713
9,463
1,468,800
1,884,141
68,592
187,009
107,197
3,875,234
3,715,739
370,087
3,026
(102,831)
(2,075)
7,532
275,739
42,449
259,715
2,566
(126,774)
(cid:23)(cid:24)(cid:15)(cid:23)(cid:23)(cid:26)
167
181,121
58,665
233,290
$
122,456
$
2.60
2.56
$
$
1.35
1.33
$
$
89,817
90,971
90,827
92,122
1,320,198
1,599,004
63,897
176,274
158,450
3,317,823
(6,329)
3,011
(127,947)
(cid:178)
3,448
(127,817)
(131,096)
3,279
0.04
0.04
88,466
89,790
$
$
$
44
GARTNER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
Net income
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments
Interest rate swaps - net change in deferred gain or loss
Pension plans - net change in deferred actuarial loss
Other comprehensive (loss) income, net of tax
Comprehensive income
See Notes to Consolidated Financial Statements.
Year Ended December 31,
2019
2018
2017
$
233,290
$
122,456
$
3,279
4,169
(39,394)
(2,846)
(38,071)
195,219
$
(31,245)
(10,844)
123
(41,966)
80,490
$
$
47,363
3,892
(64)
51,191
54,470
45
GARTNER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(IN THOUSANDS)
Common
Stock
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
(Loss) Income,
Net
Accumulated
Earnings
Treasury
Stock
Total
Stockholders’
Equity
Balance at December 31, 2016
$
Net income
Other comprehensive income
Issuances under stock plans and for
an acquisition
Common share repurchases
Stock-based compensation expense
Balance at December 31, 2017
Adoption of ASU No. 2018-02
Adoption of ASU No. 2016-16
Net income
Other comprehensive loss
Issuances under stock plans
Common share repurchases
Stock-based compensation expense
Balance at December 31, 2018
Net income
Other comprehensive loss
Issuances under stock plans
Common share repurchases
Stock-based compensation expense
Balance at December 31, 2019
(cid:7)
78
—
—
4
—
—
82
—
—
—
—
—
—
—
82
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:27)(cid:21)
See Notes to Consolidated Financial Statements.
$ 863,127
$
—
—
819,313
—
78,943
1,761,383
—
—
—
—
(3,845)
—
66,172
1,823,710
(cid:178)
(cid:178)
(cid:25)(cid:15)(cid:24)(cid:24)(cid:24)
(cid:178)
(cid:25)(cid:28)(cid:15)(cid:19)(cid:19)(cid:27)
(49,683) $
—
51,191
1,644,005
3,279
—
—
—
—
1,508
591
—
—
(41,966)
—
—
—
(39,867)
(cid:178)
(cid:11)(cid:22)(cid:27)(cid:15)(cid:19)(cid:26)(cid:20)(cid:12)
(cid:178)
(cid:178)
(cid:178)
—
—
—
1,647,284
(591)
(13,717)
122,456
—
—
—
—
1,755,432
(cid:21)(cid:22)(cid:22)(cid:15)(cid:21)(cid:28)(cid:19)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
$ (2,396,649) $
—
—
11,129
(41,272)
—
(2,426,792)
—
—
—
—
14,026
(275,834)
—
(2,688,600)
(cid:178)
(cid:178)
(cid:20)(cid:20)(cid:15)(cid:19)(cid:28)(cid:23)
60,878
3,279
51,191
830,446
(41,272)
78,943
983,465
—
(13,717)
122,456
(41,966)
10,181
(275,834)
66,172
850,757
(cid:21)(cid:22)(cid:22)(cid:15)(cid:21)(cid:28)(cid:19)
(cid:11)(cid:22)(cid:27)(cid:15)(cid:19)(cid:26)(cid:20)(cid:12)
(cid:20)(cid:26)(cid:15)(cid:25)(cid:23)(cid:28)
(cid:11)(cid:20)(cid:28)(cid:23)(cid:15)(cid:19)(cid:23)(cid:19)(cid:12)
(cid:11)(cid:20)(cid:28)(cid:23)(cid:15)(cid:19)(cid:23)(cid:19)(cid:12)
(cid:178)
(cid:25)(cid:28)(cid:15)(cid:19)(cid:19)(cid:27)
(cid:7)(cid:20)(cid:15)(cid:27)(cid:28)(cid:28)(cid:15)(cid:21)(cid:26)(cid:22)
(cid:7)
(cid:11)(cid:26)(cid:26)(cid:15)(cid:28)(cid:22)(cid:27)(cid:12) (cid:7)
(cid:20)(cid:15)(cid:28)(cid:27)(cid:27)(cid:15)(cid:26)(cid:21)(cid:21)
(cid:7) (cid:11)(cid:21)(cid:15)(cid:27)(cid:26)(cid:20)(cid:15)(cid:24)(cid:23)(cid:25)(cid:12) (cid:7)
(cid:28)(cid:22)(cid:27)(cid:15)(cid:24)(cid:28)(cid:22)
46
GARTNER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation expense
Deferred taxes
Loss (gain) from divested operations
Gain on sale of an equity security
Reduction in the carrying amount of operating lease right-of-use assets
Amortization and write-off of deferred financing fees
Changes in assets and liabilities, net of acquisitions and divestitures:
Fees receivable, net
Deferred commissions
Prepaid expenses and other current assets
Other assets
Deferred revenues
Accounts payable and accrued and other liabilities
Cash provided by operating activities
Investing activities:
Additions to property, equipment and leasehold improvements
Acquisitions - cash paid (net of cash acquired)
Divestitures - cash received (net of cash transferred)
Proceeds from the sale of an equity security
Cash (used in) provided by investing activities
Financing activities:
Proceeds from employee stock purchase plan
Proceeds from borrowings
Payments for deferred financing fees
Payments on borrowings
Purchases of treasury stock
Cash (used in) provided by financing activities
Net increase (decrease) in cash and cash equivalents and restricted cash
Effects of exchange rates on cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash, beginning of year
Year Ended December 31,
2019
2018
2017
$
233,290
$
122,456
$
3,279
211,779
69,008
(55,787)
2,075
(cid:11)(cid:28)(cid:15)(cid:20)(cid:21)(cid:19)(cid:12)
(cid:27)(cid:25)(cid:15)(cid:23)(cid:25)(cid:25)
6,497
(66,729)
(30,315)
18,985
(27,303)
181,203
(54,613)
565,436
255,601
66,172
1,524
(45,447)
(cid:178)
(cid:178)
13,815
(115,003)
(31,247)
(50,551)
11,456
187,147
55,235
471,158
240,171
78,943
(217,414)
—
(cid:178)
(cid:178)
15,062
(368,516)
(61,393)
13,251
(18,529)
382,852
186,811
254,517
(149,016)
(126,873)
(110,765)
(cid:11)(cid:21)(cid:24)(cid:15)(cid:28)(cid:27)(cid:28)(cid:12)
(cid:11)(cid:20)(cid:24)(cid:15)(cid:27)(cid:24)(cid:24)(cid:12)
(cid:11)(cid:21)(cid:15)(cid:25)(cid:23)(cid:20)(cid:15)(cid:26)(cid:27)(cid:19)(cid:12)
(cid:178)
(cid:20)(cid:23)(cid:15)(cid:20)(cid:21)(cid:19)
(160,885)
17,629
5,000
—
(109,579)
(199,042)
(285,992)
118,559
3,614
158,663
(cid:24)(cid:21)(cid:25)(cid:15)(cid:26)(cid:26)(cid:28)
(cid:178)
384,051
(cid:178)
(cid:178)
(2,752,545)
14,689
11,711
—
3,025,000
—
(1,010,972)
(260,832)
(1,257,115)
(401,906)
(6,489)
567,058
(51,171)
(404,438)
(41,272)
2,539,830
41,802
25,902
499,354
Cash and cash equivalents and restricted cash, end of year
$
280,836
$
158,663
$
567,058
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest
Income taxes, net of refunds received
See Notes to Consolidated Financial Statements.
47
$
$
102,298
119,156
$
$
117,500
95,800
$
$
98,500
76,100
GARTNER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 — BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
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 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 three business segments: Research, Conferences and
Consulting. Note 9 — Revenue and Related Matters and Note 16 — Segment Information describe the products and services
offered by each of our segments and provide additional financial information for those segments.
During 2018, the Company divested all of the non-core businesses that comprised its Other segment and moved a small residual
product from the Other segment into the Research business and, as a result, no operating activity has been recorded in the Other
segment in 2019. Note 2 — Acquisitions and Divestitures provides additional information regarding the Company's 2018
divestitures.
Basis of presentation. The accompanying 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”), for financial information and with the applicable instructions of
U.S. Securities and Exchange Commission (“SEC”) Regulation S-X.
The fiscal year of Gartner is the twelve-month period from January 1 through December 31. All references to 2019, 2018 and
2017 herein refer to the fiscal year unless otherwise indicated. 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 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 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 the accompanying 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.
tt
Business acquisitions. The Company accounts for business acquisitions in accordance with the acquisition method of accounting
as prescribed by FASB ASC Topic 805, Business Combinations. The acquisition method of accounting requires the Company to
record the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with certain
exceptions. Any excess of the consideration transferred over the estimated fair value of the net assets acquired, including identifiable
intangible assets, is recorded as goodwill. Under the acquisition method, the operating results of acquired companies are included
in the Company's consolidated financial statements beginning on the date of acquisition. The Company completed business
acquisitions in both 2019 and 2017. Note 2 — Acquisitions and Divestitures provides additional information regarding those
business acquisitions.
The determination of the fair values of intangible and other assets acquired in an acquisition requires management judgment and
the consideration of a number of factors, including the historical financial performance of acquired businesses and their projected
future performance, and estimates surrounding customer turnover, as well as assumptions regarding the level of competition and
48
the costs necessary to reproduce certain assets. Establishing the useful lives of intangible assets also requires management judgment
and the evaluation of a number of factors, including the expected use of an 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.
Charges that are directly related to the Company's acquisitions are expensed as incurred and classified as Acquisition and integration
charges in the Consolidated Statements of Operations. Note 2 — Acquisitions and Divestitures provides additional information
regarding the Company's Acquisition and integration charges.
Revenue recognition. On January 1, 2018, the Company adopted Accounting Standards Update ("ASU") No. 2014-09, Revenue
from Contracts with Customers (as amended, "ASU No. 2014-09") using the modified retrospective method of adoption. Under
that approach, the cumulative effect of applying the new accounting standard is recorded on the date of initial application, with
no restatement of the comparative prior periods presented. Although the adoption of ASU No. 2014-09 did not have a material
impact on the Company’s consolidated financial statements, implementation of the new accounting standard resulted in changes
in our revenue recognition policies and enhanced footnote disclosures. Note 9 — Revenue and Related Matters (i) provides
information regarding our adoption of ASU No. 2014-09 and its impact on the Company's consolidated financial statements and
(ii) includes the new enhanced disclosures required by ASU No. 2014-09. Prior to January 1, 2018, the Company recognized
revenue in accordance with then-existing U.S. GAAP and SEC Staff Accounting Bulletin No. 104, Revenue Recognition.
Allowance for losses. The Company maintains an allowance for losses that provides for estimated uncollectible fees receivable
due to credit and other associated risks. The allowance for losses is classified as an offset to the gross amount of fees receivable.
Provisions to the allowance for losses due to credit and other associated risks are recorded as bad debt expense.
The allowance for losses for bad debts 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 the use of estimates. The allowance for losses for bad debts is periodically re-evaluated and adjusted as more information
about the ultimate collectability of fees receivable becomes available. Circumstances that could cause such allowance for losses
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.
ff
Cost of services and product development (“COS”
of our products and services. These costs primarily relate to personnel.
((
).” COS expense includes the direct costs incurred in the creation and delivery
Selling, general and administrative (“SG&A”
costs, facility costs and bad debt expense.
((
).” SG&A expense includes direct and indirect selling costs, general and administrative
Commission expense. The Company records deferred commissions upon signing a customer contract and amortizes the deferred
amount over a period that aligns with the transfer to the customer of the services to which the commissions relate. Note 9 —
Revenue and Related Matters provides additional information regarding deferred commissions and the amortization of such costs.
Stock-based compensation expense. The Company accounts for stock-based compensation awards in accordance with FASB ASC
Topics 505 and 718 and SEC Staff Accounting Bulletins No. 107 and No. 110. Stock-based compensation expense for equity
awards is based on the fair value of the award on the date of grant. The Company recognizes stock-based compensation expense
over the period that the related service is performed, which is generally the same as the vesting period of the underlying award.
Forfeitures are recognized as they occur. Note 10 — Stock-Based Compensation provides additional information regarding the
Company's stock-based compensation activity.
Other income, net. During 2019, the Company sold a minority equity investment for $14.1 million in cash and recognized a pretax
gain of $9.1 million that was recorded in Other income, net in the Consolidated Statements of Operations.
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. Recognized tax positions are measured at the largest amount of benefit with greater than a 50% likelihood of being
realized. The Company uses estimates in determining the amount of unrecognized tax benefits associated with uncertain tax
49
positions. Significant judgment is required in evaluating tax law and measuring the benefits likely to be realized. Uncertain tax
positions are periodically re-evaluated and adjusted as more information about their ultimate realization becomes available. Note
12 — Income Taxes provides additional information regarding the Company's income taxes.
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"). ASU No. 2018-02 provides an entity with the option to reclassify to retained
earnings the tax effects from items that have been stranded in accumulated other comprehensive income as a result of the U.S.
Tax Cuts and Jobs Act of 2017 (the “Act”). Gartner elected to early adopt ASU No. 2018-02 as of the beginning of the second
quarter of 2018, which resulted in a reclassification of $0.6 million of stranded tax amounts related to the Act from Accumulated
other comprehensive (loss) income, net to Accumulated earnings. ASU No. 2018-02 had no impact on the Company's operating
results in 2019 or 2018.
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. U.S. GAAP previously
required deferral of the income tax implications of an intercompany sale of assets until the assets were sold to a third party or
recovered through use. Under ASU No. 2016-16, a seller’s tax effects and a buyer’s deferred taxes on asset transfers are immediately
recognized upon a sale. Pursuant to the transition rules in ASU No. 2016-16, any taxes attributable to pre-2018 intra-entity transfers
that were previously deferred should be accelerated and recorded to accumulated earnings on the date of adoption. As a result,
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. Additionally, in accordance with the new requirements
of ASU No. 2016-16, the Company recorded income tax benefits of approximately (i) $38.1 million in 2019 from an intercompany
sale of certain intellectual property and (ii) $6.8 million in 2018 related to intra-entity transfers upon the merger of certain foreign
subsidiaries. In the future, there could be a material impact from ASU No. 2016-16, depending on the nature, size and tax
consequences of intra-entity transfers, if any.
Cash and cash equivalents and restricted cash. Cash and cash equivalents includes cash and all highly liquid investments with
original maturities of three months or less, which are considered to be cash equivalents. The carrying value of cash equivalents
approximates fair value due to the short-term maturity of such instruments. Investments with maturities of more than three monthstt
are classified as marketable securities. Interest earned is recorded in Interest income in the Consolidated Statements of Operations.
U.S. GAAP requires that amounts generally described as restricted cash and restricted cash equivalents be presented with cash
and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts presented on an entity's statement
of cash flows. Below is a table presenting the beginning-of-period and end-of-period cash amounts from the Company's
Consolidated Balance Sheets and the total cash amounts presented in the Consolidated Statements of Cash Flows (in thousands).
Cash and cash equivalents
Restricted cash classified in (1), (2):
Prepaid expenses and other current assets
Other assets
Cash classified as held-for-sale (3)
Cash and cash equivalents and restricted cash per the Consolidated
Statements of Cash Flows
December 31,
2019
$ 280,836
2018
$156,368
2017
$ 538,908
2016
$ 474,233
(cid:178)
—
—
(cid:21)(cid:15)(cid:21)(cid:28)(cid:24)
—
—
(cid:20)(cid:24)(cid:15)(cid:20)(cid:23)(cid:27)
3,002
10,000
(cid:21)(cid:24)(cid:15)(cid:20)(cid:21)(cid:20)
—
—
$ 280,836
$158,663
$ 567,058
$ 499,354
(1) Restricted cash consists of escrow accounts established in connection with certain of the Company's business acquisitions.
Generally, such cash is restricted to use due to provisions contained in the underlying stock or asset purchase agreement. The
Company will disburse the restricted cash to the sellers of the businesses upon satisfaction of any contingencies described in
such agreements (e.g., potential indemnification claims, etc.).
(2) Restricted cash is recorded in Prepaid expenses and other current assets and Other assets in the Company's consolidated
balance sheets with the short-term or long-term classification dependent on the projected timing of disbursements to the
sellers.
(3) Represents cash classified as a held-for-sale asset for the CEB Talent Assessment business, which was divested in 2018. Note
2 — Acquisitions and Divestitures provides additional information regarding the Company's 2018 divestitures.
Leases. On January 1, 2019, the Company adopted ASU No. 2016-02, Leases. Prior to January 1, 2019, the Company recognized
lease expense in accordance with then-existing U.S. GAAP under FASB ASC Topic 840, Leases. Information regarding the
50
Company's lease accounting, including our adoption of the new accounting standard, is provided below under the heading "Adoption
of new accounting standards" and at Note 7 — Leases.
Property, equipment and leasehold improvements. Equipment, leasehold improvements and other fixed assets owned by the
Company are recorded at cost less accumulated depreciation and amortization. Fixed assets, other than leasehold improvements,
are depreciated using the straight-line method over the estimated useful life of the underlying asset. Leasehold improvements are aa
amortized using the straight-line method over the shorter of the estimated useful life of the improvement or the remaining term
of the related lease. Depreciation and amortization expense for fixed assets was $82.1 million, $68.6 million and $63.9 million in
2019, 2018 and 2017, respectively. Property, equipment and leasehold improvements, net are presented in the table below (in
thousands).
Category
Computer equipment and software
Furniture and equipment
Leasehold improvements
Total cost
Less — accumulated depreciation and amortization
Property, equipment and leasehold improvements, net
Useful Life
December 31,
(Years)
2019
2018
(cid:21)(cid:16)(cid:26)
(cid:22)(cid:16)(cid:27)
(cid:21)(cid:16)(cid:20)(cid:24)
(cid:7)
(cid:21)(cid:24)(cid:25)(cid:15)(cid:23)(cid:24)(cid:20)
(cid:7)
(cid:21)(cid:20)(cid:19)(cid:15)(cid:28)(cid:24)(cid:24)
(cid:20)(cid:19)(cid:23)(cid:15)(cid:22)(cid:26)(cid:19)
(cid:21)(cid:26)(cid:24)(cid:15)(cid:20)(cid:20)(cid:23)
(cid:25)(cid:22)(cid:24)(cid:15)(cid:28)(cid:22)(cid:24)
(cid:27)(cid:24)(cid:15)(cid:19)(cid:19)(cid:21)
(cid:21)(cid:20)(cid:27)(cid:15)(cid:23)(cid:19)(cid:24)
(cid:24)(cid:20)(cid:23)(cid:15)(cid:22)(cid:25)(cid:21)
(cid:11)(cid:21)(cid:28)(cid:20)(cid:15)(cid:22)(cid:24)(cid:25)(cid:12)
344,579
$
(cid:11)(cid:21)(cid:23)(cid:25)(cid:15)(cid:25)(cid:28)(cid:26)(cid:12)
267,665
$
The Company incurs costs to develop internal-use software used in its operations. Certain of those costs that meet the criteria in
FASB ASC Topic 350, Intangibles - Goodwill and Other are capitalized and amortized over future periods. Net capitalized internal-
use software development costs were $55.7 million and $37.4 million at December 31, 2019 and 2018, respectively, and are
included in Computer equipment and software in the table above. Amortization expense for capitalized internal-use software
development costs, which is included with Depreciation in the Consolidated Statements of Operations, totaled $20.0 million, $13.2
million and $9.9 million in 2019, 2018 and 2017, respectively.
a
r
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.
When performing our annual assessment of the recoverability of goodwill, we 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
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 indicate that it is more likely than not that the fair value of a reporting unit
is less than its respective carrying amount, then we perform a two-step quantitative impairment test. Evaluating the recoverability
of goodwill requires judgments and assumptions regarding future trends and events. As a result, both the precision and reliability
of our estimates are subject to uncertainty.
Our most recent annual impairment test of goodwill was a qualitative analysis conducted during the quarter ended September 30,
2019 that indicated no impairment. Subsequent to completing our 2019 annual impairment test, no events or changes in
circumstances were noted that required an interim goodwill impairment test. Note 3 — Goodwill and Intangible Assets provides
additional information regarding the Company's goodwill.
Finite-lived intangible assets. The Company has finite-lived intangible assets that are amortized using the straight-line method
over the expected useful life of the underlying asset. Note 3 — Goodwill and Intangible Assets provides additional information
regarding the Company's finite-lived intangible assets.
Impairment of long-lived assets. The Company's long-lived assets primarily consist of intangible assets other than goodwill and
property, equipment and leasehold improvements. The Company reviews its long-lived asset groups for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset or an asset group may not be recoverable. Such
evaluation may be based on a number of factors, including current and projected operating results and cash flows, and changes in
management’s strategic direction as well as external economic and market factors. The Company evaluates the recoverability of
assets and asset groups by determining whether their carrying values can be recovered through undiscounted future operating cash
flows. If events or circumstances indicate that the carrying values might not be recoverable based on undiscounted future operating
51
cash flows, an impairment loss may be recognized. The amount of impairment is measured based on the difference between the
projected discounted future operating cash flows, using a discount rate reflecting the Company’s average cost of funds, and the
carrying value of the asset or asset group. The Company did not record any impairment charges for long-lived assets or asset
groups during the three-year period ended December 31, 2019.
Pension obligations. The Company has defined benefit pension plans at several of its international locations. Benefits earned and
paid under those 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. The Company determines the periodic pension
expense and related liabilities for its defined benefit pension plans through actuarial assumptions and valuations. The service cost
component of pension expense is recorded as SG&A expense and all other components of pension expense are recorded as Other
income, net in the Consolidated Statements of Operations. Note 15 — Employee Benefits provides additional information regarding
the Company's defined benefit pension plans.
Debt. The Company presents amounts borrowed in the Consolidated Balance Sheets, net of deferred financing fees. Interest accrued
on amounts borrowed is recorded as Interest expense in the Consolidated Statements of Operations. Note 6 — Debt provides
additional information regarding the Company's debt arrangements.
Foreign currency exposure. The functional currency of our foreign subsidiaries is typically the local currency. All assets and
liabilities of foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and
expense items are translated at average exchange rates for the year. The resulting translation adjustments are recorded as foreign
currency translation adjustments, a component of Accumulated other comprehensive (loss) income, net within Stockholders’ Equity
on the Consolidated Balance Sheets.
Currency transaction gains or losses arising from transactions denominated in currencies other than the functional currency of a
subsidiary are recognized in results of operations as part of Other income, net in the Consolidated Statements of Operations. The
Company had net currency transaction gains (losses) of $(1.1) million, $9.2 million and $(5.5) million in 2019, 2018 and 2017,
respectively. The Company enters into foreign currency forward exchange contracts to mitigate the effects of adverse fluctuations
in foreign currency exchange rates on certain transactions. Those contracts generally have short durations and are recorded at fair
value with both realized and unrealized gains and losses recorded in Other income, net. The net gain (loss) from foreign currency
forward exchange contracts was $(2.5) million, $(10.4) million and $0.8 million in 2019, 2018 and 2017, respectively. Note 13
— Derivatives and Hedging provides additional information regarding the Company's foreign currency forward exchange contracts.
Fair value disclosures. The Company has a limited number of assets and liabilities that are adjusted to fair value at each balance
sheet date. The Company's required fair value disclosures are provided at Note 14 — Fair Value Disclosures.
Concentrations of credit risk. Assets that may subject the Company to concentration of credit risk consist primarily of short-term,
highly liquid investments classified as cash equivalents, fees receivable, contract assets, interest rate swaps and a pension
reinsurance asset. The majority of the Company’s cash equivalent investments and its interest rate swap contracts are with investment
grade commercial banks. Fees receivable and contract asset balances deemed to be collectible from customers have limited
concentration of credit risk due to our diverse customer base and geographic dispersion. The Company’s pension reinsurance asset
(see Note 15 — Employee Benefits) is maintained with a large international insurance company that was rated investment grade
as of December 31, 2019 and 2018.
Stock repurchase programs. The Company records the cost to repurchase shares of its own common stock as treasury stock. Shares
repurchased by the Company are added to treasury shares and are not retired. Note 8 — Stockholders' Equity provides additional
information regarding the Company's common stock repurchase activity.
Adoption of new accounting standards. The Company adopted the accounting standards described below during 2019.
Targeted Improvements to Accounting for Hedging Activities — On January 1, 2019, the Company adopted 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.
g
Leases — On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (as amended, "ASU No. 2016-02" or the “new
lease standard”) using a modified retrospective approach. 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
52
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 the new lease standard had a material impact on the Company's Consolidated Balance Sheet as of December 31,
2019, while the Consolidated Statement of Operations and the cash provided by operating activities in the Consolidated Statement
of Cash Flows in 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 (“ASC Topic 840”). 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 in 2019 and ASC Topic 840 in 2018 and 2017 were substantively the same.
As required by the new lease standard, the Company's disclosures regarding its 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.
Information regarding our adoption of ASU No. 2016-02 and its impact on the Company's consolidated financial statements and
related disclosures is provided at Note 7 — Leases.
Accounting standards issued but not yet adopted. The FASB has issued accounting standards that had not yet become effective as
of December 31, 2019 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. Gartner adopted ASU No. 2018-15 on January 1, 2020 on a prospective basis. We have concluded that the adoption
of ASU No. 2018-15 will not 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 in 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.
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. We have concluded that the adoption of ASU No. 2018-13 will not have a material impact on the Company's
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. We have concluded that the adoption of ASU No. 2017-04 will not have a material impact
on the Company's consolidated financial statements.
t
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. We have concluded that the adoption of ASU No. 2016-13
will not have a material impact on the Company's consolidated financial statements; however, certain enhanced disclosures required
by the standard will be provided in the Company's Form 10-Q filing for the quarterly period ending March 31, 2020.
53
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. We are currently
evaluating the potential impact of ASU No. 2019-12 on our consolidated financial statements.
2 — ACQUISITIONS AND DIVESTITURES
Acquisitions
Year Ended December 31, 2019
On October 1, 2019, the Company acquired 100% of the outstanding membership interests of TOPO Research LLC ("TOPO"), a
privately-held company based in Redwood City, California, for $25.0 million. TOPO is a subscription-based research and advisory
business. The acquisition of TOPO expanded our market presence, product offerings and other business opportunities.
r
For cash flow reporting purposes, the Company paid $23.7 million in cash for TOPO after considering the cash acquired with the
business and certain other purchase price adjustments at closing. In addition to the purchase price, the Company may also be
required to pay up to $6.5 million in cash in the future based on the continuing employment of certain key employees. Such amount u
will be recognized as compensation expense over two years and will be reported in Acquisition and integration charges in the
Consolidated Statements of Operations.
As of December 31, 2019, the allocation of the purchase price for the TOPO acquisition is preliminary with respect to certain tax
matters and the finalization of working capital adjustments. The table below summarizes the preliminary purchase price allocation
based on the fair value of the assets acquired and liabilities assumed (in thousands).
Assets:
Cash
Fees receivable
Prepaid expenses and other assets
Goodwill (1)
Finite-lived intangible assets (2)
Total assets acquired
Total liabilities assumed (primarily deferred revenues)
Net assets acquired
$
$
1,281
1,402
166
19,293
5,250
27,392
2,417
24,975
(1) We believe that the recorded goodwill is supported by the anticipated synergies resulting from the acquisition. All of the
recorded goodwill is expected to be deductible for tax purposes.
(2) The acquired finite-lived intangible assets primarily consisted of customer relationships and content, which are being amortized
over 6 years and 1.5 years, respectively. To determine the fair values of the acquired intangible assets, we primarily relied on
income valuation methodologies, in particular, discounted cash flow models.
rr
The operating results of the acquired TOPO business and the related goodwill are being reported as part of the Company's Research
and Conferences segments. The operating results of TOPO have been included in the Company's consolidated financial statements
since the date of acquisition; however, such operating results were not material to the Company's consolidated operating results
and segment results. Had the Company acquired TOPO in prior periods, the impact on the Company's operating results would not
have been material and, as a result, pro forma financial information for prior periods has not been presented herein.
During 2019, the Company also paid $2.3 million of restricted cash for deferred consideration from a 2017 acquisition.
54
Year Ended December 31, 2018
Although the Company did not complete any business acquisitions during 2018, it paid $15.9 million of restricted cash during
that year for deferred consideration from a 2017 acquisition.
Year Ended December 31, 2017
CEB Inc. ("CEB")
On April 5, 2017, the Company acquired 100% of the outstanding capital stock of CEB for an aggregate purchase price of $3.5
billion. The consideration transferred by Gartner included approximately $2.7 billion in cash and Gartner common shares with a
fair value of $818.7 million. CEB was a publicly-traded company headquartered in Arlington, Virginia with approximately 4,900
employees. CEB's primary business was to serve as a leading provider of subscription-based, best practice research and analysis
focusing on human resources, sales, finance, IT and legal. CEB served executives and professionals at corporate and middle market
institutions in over 70 countries.
L2, Inc. ("L2")
On March 9, 2017, the Company acquired 100% of the outstanding capital stock of L2, a privately-held company based in New
York City with 150 employees, for an aggregate purchase price of $134.2 million. L2 is a subscription-based research business
that benchmarks the digital performance of brands.
Total consideration transferred
The table below summarizes the aggregate consideration transferred for the Company's acquisitions during 2017 (in thousands).
(1):
gg g
Aggregate consideration
Cash paid at close (2), (3)
Additional cash paid (2)
Fair value of Gartner equity (4)
Total
CEB
$ 2,687,704
12,465
818,660
$ 3,518,829
$
$
L2
134,199
—
—
134,199
Total
$ 2,821,903
12,465
818,660
$ 3,653,028
(1) Includes the total consideration transferred for 100% of the outstanding capital stock of the acquired businesses.
(2) The cash paid at close represents the gross contractual amount paid. The Company paid an additional $12.5 million in cash
during the third quarter of 2017. Net of cash acquired and for cash flow reporting purposes, the Company paid a total of
approximately $2.64 billion in cash for acquisitions in 2017.
(3) The Company borrowed a total of approximately $2.8 billion in conjunction with the CEB acquisition (see Note 6 — Debt
for additional information).
(4) Consists of the fair value of (i) Gartner common stock issued and (ii) stock-based compensation replacement awards. As part
of the consideration for the CEB acquisition, the Company issued approximately 7.4 million shares of its common stock at a
fair value of $109.65 per common share. The fair value of the Company's common stock was determined based on an average
of the high and low prices of the common stock as reported by the New York Stock Exchange on April 5, 2017, the date of
the acquisition.
55
Allocation of Purchase Price
The table below summarizes the allocation of the aggregate purchase price for the CEB and L2 acquisitions to the fair value of
the assets acquired and liabilities assumed (in thousands).
Assets:
Cash
Fees receivable
Prepaid expenses and other current assets
Property, equipment and leasehold improvements
Goodwill (1)
Finite-lived intangible assets (2)
Other assets
Total assets
Liabilities:
Accounts payable and accrued liabilities
Deferred revenues (current)
Other liabilities
Total liabilities
Net assets acquired
CEB (3)( )( )
L2 (4)( )( )
Total
$
194,706
175,440
53,610
51,399
2,349,589
1,584,300
66,818
4,475,862
142,134
246,472
568,427
957,033
,
$ 3,518,829
,
$
$
4,852
8,277
1,167
663
108,202
15,890
13,067
152,118
3,050
13,200
1,669
17,919
,
134,199
$
199,558
183,717
54,777
52,062
2,457,791
1,600,190
79,885
4,627,980
145,184
259,672
570,096
974,952
,
$ 3,653,028
,
(1) The Company believes that the goodwill resulting from the CEB and L2 acquisitions is supportable based on synergies that
were anticipated prior to the respective closing dates. For CEB, among the factors contributing to the anticipated synergies
were a broader market presence, expanded product offerings and market opportunities, and an acceleration of CEB's growth
by leveraging Gartner's global infrastructure and best practices in sales productivity and other areas. None of the goodwill is
deductible for tax purposes.
(2) All of the acquired intangible assets were finite-lived. The determination of the fair values of such intangible assets required
judgment and the consideration of a number of factors. In determining the fair values, management primarily relied on income
valuation methodologies, in particular, discounted cash flow models. The discounted cash flow models required the use of
certain estimates, including projected cash flows related to the asset being evaluated; the useful lives of the affected assets;
the selection of royalty and discount rates used in the models; and certain published industry benchmark data. When establishing
the estimated useful lives of the finite-lived intangible assets, the Company relied on both internally-generated data for similar
assets as well as certain published industry benchmark data. We believe that the values assigned to the finite-lived intangible
assets are both reasonable and supportable.
qq
(3) The Company's consolidated financial statements include the operating results of CEB beginning on April 5, 2017, the date
of acquisition. CEB's operating results and the related goodwill have been reported as part of the Company's Research,
Conferences and Other segments. Had the Company acquired CEB in prior periods, the impact on the Company's operating
results would have been material. If the Company had acquired CEB on January 1, 2016, the pro forma consolidated financial
results for 2017 would have approximated the amounts shown in the table below (in thousands, except per share data).
Pro forma total revenue
Pro forma net income
Pro forma basic and diluted income per share
$ 3,726,470
150,167
1.66
$
The pro forma results have been prepared in accordance with U.S. GAAP and include the following pro forma adjustments:
(a) An increase in interest expense and amortization of debt issuance costs related to the financing of the CEB acquisition.
Note 6 — Debt provides further information regarding the Company's borrowings related to the CEB acquisition.
(b) A change in revenue as a result of the required fair value adjustment to deferred revenue.
(c) An adjustment for additional depreciation and amortization expense as a result of the purchase price allocation for finite-
lived intangible assets and property, equipment and leasehold improvements.
(4) The Company's consolidated financial statements include the operating results of L2 beginning on March 9, 2017, the date
of acquisition. L2's operating results and the related goodwill are being reported as part of the Company's Research segment.
For 2017, L2's operating results were not material to the Company's consolidated operating results and segment results. Had
the Company acquired L2 in prior periods, the impact on the Company's operating results would not have been material and,
as a result, pro forma prior period financial information for L2 has not been presented herein.
56
Acquisition and Integration Charges
The Company recognized $9.5 million, $107.2 million and $158.5 million of Acquisition and integration charges during 2019,
2018 and 2017, 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 2018
and 2017, the charges included $58.3 million and $13.1 million of exit costs for certain acquisition-related office space in Arlington,
Virginia that the Company did not occupy. The Company recorded no exit costs for facilities during 2019.
The table below presents a summary of the activity related to our accrual for exit costs at all of our facilities during 2018 and 2017
(in thousands) (1).
aa
Liability balance at beginning of the year
Charges and adjustments, net (2)
Payments, net of $2,515 in sublease rent during 2018
Liability balance at end of the year (3)
2018
2017
$
$
12,961
69,790
(26,087)
56,664
$
$
—
13,087
(126)
12,961
(1) With the adoption of ASU No. 2016-02 on January 1, 2019, the accrual for exit costs was reclassified to offset the Company's
right-of-use assets and the present value of our remaining lease payments was recorded as an operating lease liability. Moreover,
there were no new exit cost activities during 2019. Note 1 — Business and Significant Accounting Policies and Note 7 —
Leases provide additional information regarding the Company's leases and the adoption of ASU No. 2016-02.
(2) During 2018, the Company recognized $7.5 million of expense for changes in the original estimates of its exit cost obligations.
The corresponding amount for 2017 was a benefit of $10.1 million.
(3) Through December 31, 2018, in the aggregate, we had expensed $82.9 million and had net cash outlays of $26.2 million
related to the exit cost activities at all of our facilities.
Divestitures
During 2018, the Company completed the divestitures of all three of the non-core businesses comprising its Other segment, each
of which were acquired in the CEB acquisition. Revenue from those divested operations was approximately $97.3 million and
$165.7 million in 2018 and 2017, respectively, while the gross contribution was $60.5 million and $86.5 million, respectively.
The Company used the cash proceeds from these divestitures to pay down debt.
Additional information regarding the Other segment divestitures is provided below.
CEB Challenger training business
On August 31, 2018, the Company sold its CEB Challenger training business for $119.1 million and realized approximately $116.0
million in cash, which is net of working capital adjustments and certain closing costs. The Company recorded a pretax gain on
the sale of approximately $8.3 million.
CEB Workforce Survey and Analytics business
On May 1, 2018, the Company sold its CEB Workforce Survey and Analytics business for $28.0 million and realized
approximately $26.4 million in cash, which is net of certain closing costs. The Company recorded a pretax gain on the sale of
approximately $8.8 million.
CEB Talent Assessment business
On April 3, 2018, the Company sold its CEB Talent Assessment business for $403.0 million and realized approximately $375.8
million in cash from the sale, which is net of cash transferred with the business and certain closing costs. The Company recorded
a pretax gain of approximately $15.5 million on the sale.
Other asset sales
During 2018, the Company also received $8.6 million in cash proceeds as well as other consideration and recorded a net pretax
gain of approximately $12.8 million from the sale of certain non-core assets originally acquired in the CEB transaction. These
amounts include the sale of a small Research segment product called Metrics That Matter on October 31, 2018.
57
3 — GOODWILL AND INTANGIBLE ASSETS
Goodwill. The table below presents changes to the carrying amount of goodwill by segment during the two-year period ended
December 31, 2019 (in thousands).
Research
Conferences Consulting
Other
Total
Balance at December 31, 2017 (1)
Divestitures (2)
Foreign currency translation impact and other (3)
Balance at December 31, 2018
Additions due to an acquisition (4)
Foreign currency translation impact
Balance at December 31, 2019
$ 2,619,677
(2,500)
21,241
2,638,418
17,557
(4,915)
$ 2,651,060
$
187,920
$
97,798
$
—
(266)
187,654
1,736
251
$
189,641
$
—
(734)
97,064
—
(39)
97,025
$
81,899
(90,078)
8,179
—
—
—
$
— $
2,987,294
(92,578)
28,420
2,923,136
19,293
(4,703)
2,937,726
(1) The Company does not have any accumulated goodwill impairment losses. The goodwill balance at December 31, 2017
excludes certain amounts related to held-for-sale operations.
(2) Represents amounts related to divested businesses. See Note 2 — Acquisitions and Divestitures for additional information.
(3) Includes the foreign currency translation impact and certain measurement period adjustments related to the acquisition of
CEB. See Note 2 — Acquisitions and Divestitures for additional information.
(4) The 2019 additions are due to the acquisition of TOPO. See Note 2 – Acquisitions and Divestitures for additional information.
Finite-lived intangible assets. Changes in finite-lived intangible assets during the two-year period ended December 31, 2019 are
presented in the tables below (in thousands).
December 31, 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
Additions due to an acquisition (1)
Intangible assets fully amortized
Foreign currency translation impact
Gross cost
Accumulated amortization (2)
Balance at December 31, 2019
3,600
—
9,853
—
—
332
1,145,109
(283,369)
861,740
$
$
111,033
(61,564)
49,469
$
1,200
(85,900)
(2)
14,140
(11,225)
2,915
December 31, 2018
Customer
Relationships
Software
Content
Gross cost at December 31, 2017 (3)
$
1,200,316
$
Intangible assets fully amortized
Divestitures (4)
Foreign currency translation impact and other (5)
Gross cost
Accumulated amortization (2)
Balance at December 31, 2018
(cid:11)(cid:22)(cid:19)(cid:22)(cid:12)
(45,175)
(23,182)
1,131,656
(184,918)
946,738
$
$
123,424
(11,715)
(321)
(687)
110,701
(38,901)
71,800
$ 104,313
(669)
(473)
(4,329)
98,842
(92,717)
6,125
$
450
(21,358)
84
30,838
(19,875)
10,963
5,250
(107,258)
10,267
1,301,120
(376,033)
$
925,087
Other
Total
54,929
(3,311)
(160)
204
51,662
(33,760)
17,902
$ 1,482,982
(15,998)
(46,129)
(27,994)
1,392,861
(350,296)
$ 1,042,565
$
$
$
(1) The 2019 additions are due to the acquisition of TOPO. See Note 2 – Acquisitions and Divestitures for additional information.
(2) Finite-lived intangible assets are amortized using the straight-line method over the following periods: Customer relationships
—4 to 13 years; Software—3 to 7 years; Content—1.5 to 4 years; and Other —2 to 11 years.
(3) Excludes certain amounts related to held-for-sale operations.
(4) Represents amounts related to divested businesses. See Note 2 — Acquisitions and Divestitures for additional information.
(5) Includes the foreign currency translation impact and certain other adjustments.
58
Amortization expense related to finite-lived intangible assets was $129.7 million, $187.0 million and $176.3 million in 2019, 2018
and 2017, respectively. The estimated future amortization expense by year for finite-lived intangible assets is presented in the
table below (in thousands).
2020
2021
2022
2023
2024
2025 and thereafter
4 — OTHER ASSETS
The Company's other assets are summarized in the table below (in thousands).
Benefit plan-related assets
Non-current deferred tax assets
Other
Total other assets
$
$
126,081
105,007
95,194
95,179
(cid:27)(cid:28)(cid:15)(cid:27)(cid:25)(cid:22)
(cid:23)(cid:20)(cid:22)(cid:15)(cid:26)(cid:25)(cid:22)
925,087
December 31,
2019
2018
$
$
84,600
$
79,618
58,027
75,653
34,494
46,222
222,245
$
156,369
5 — ACCOUNTS PAYABLE AND ACCRUED AND OTHER LIABILITIES
The Company's Accounts payable and accrued liabilities are summarized in the table below (in thousands).
Accounts payable
Payroll and employee benefits payable
Severance and retention bonus payable
Bonus payable
Commissions payable
Taxes payable
Current portion of operating lease liabilities (1)
Other accrued liabilities
Total accounts payable and accrued liabilities
December 31,
2019
2018
$
32,995
$
165,449
24,281
192,100
142,499
7,878
(cid:26)(cid:25)(cid:15)(cid:24)(cid:20)(cid:25)
147,078
$
788,796
$
37,508
143,803
28,292
170,719
126,844
19,725
(cid:178)
183,222
710,113
(1) Note 1 — Business and Significant Accounting Policies and Note 7 — Leases provide additional information regarding the
Company's leases and certain changes in lease accounting effective January 1, 2019.
59
The Company's Other liabilities are summarized in the table below (in thousands).
Non-current deferred revenues
Long-term taxes payable
Benefit plan-related liabilities
Lease-related matters prior to the adoption of ASU No. 2016-02 (1)
Non-current deferred tax liabilities
Other, including fair value of interest rate swap contracts
December 31,
2019
2018
$
24,409
$
63,565
108,615
—
189,814
93,343
21,194
66,304
96,033
165,374
214,687
50,081
Total other liabilities
$
479,746
$
613,673
(1) With the adoption of ASU No. 2016-02 on January 1, 2019, the accrual for lease-related matters was reclassified to offset the
Company's right-of-use assets and the present value of our remaining lease payments was recorded as an operating lease
liability. Note 1 — Business and Significant Accounting Policies and Note 7 — Leases provide additional information regarding
the Company's leases and the adoption of ASU No. 2016-02.
6 — DEBT
2016 Credit Agreement
The Company entered into a term loan and revolving credit facility on June 17, 2016 (the "2016 Credit Agreement"). As discussed
below, the 2016 Credit Agreement was amended during 2017 in connection with the acquisition of CEB. The 2016 Credit
Agreement, as amended, provided for a $1.5 billion Term loan A facility, a $500.0 million Term loan B facility and a $1.2 billion
revolving credit facility. The 2016 Credit Agreement contains certain customary restrictive loan covenants, including, among
others, financial covenants that apply a maximum leverage ratio and a minimum 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. The Company was in full compliance with the covenants
as of December 31, 2019.
u
aa
During 2017, the Company borrowed approximately $2.8 billion for the CEB acquisition. The Company borrowed $1.675 billion
under the 2016 Credit Agreement, which consisted of $900.0 million under an increased Term loan A facility, $500.0 million under
a new Term loan B facility and $275.0 million on an existing revolving credit facility. The $1.675 billion drawn under the 2016
Credit Agreement, along with funds raised through the issuance of $800.0 million Senior Notes due 2025 and a $300.0 million
364-day Bridge Credit Facility, were used to fund the CEB acquisition and related costs. The funds borrowed under the 364-day
Bridge Credit Facility were completely repaid during 2017 and the borrowings under the Term loan B facility were completely
repaid during 2018.
On January 20, 2017, the Company entered into a first amendment to the 2016 Credit Agreement, which was entered into to permit
the acquisition of CEB and the incurrence of additional debt to finance, in part, the acquisition and repay certain debt of CEB,
and to modify certain covenants. On March 20, 2017, the Company entered into a second amendment to the 2016 Credit Agreement.
The second amendment was also entered into in connection with the acquisition of CEB and was executed primarily to extend the
maturity date of the Term loan A facility and the revolving credit facility through March 20, 2022 and to revise the interest rate
and amortization schedule. On April 5, 2017, in conjunction with the closing of the CEB acquisition, the Company entered into
a third amendment to the 2016 Credit Agreement, which increased the aggregate principal amount of the existing Term loan A
facility by $900.0 million and added the Term loan B facility in an aggregate principal amount of $500.0 million.
The Term loan A facility 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. 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 the Term loan A facility and the
revolving credit facility bear interest at a rate equal to, at 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%, in each case plus
a margin equal to between 0.125% and 1.50%, depending on Gartner’s consolidated leverage ratio as of the end of the four
consecutive fiscal quarters most recently ended; or
60
(ii) the eurodollar rate (adjusted for statutory reserves) plus a margin equal to between 1.125% and 2.50%, depending on Gartner’s
consolidated leverage ratio as of the end of the four consecutive fiscal quarters most recently ended.
During 2018, the Company repaid the entire $496.3 million that was outstanding under the Term loan B facility. The Term loan
B facility was scheduled to mature on April 5, 2024 and the amounts outstanding thereunder bore interest at a rate per annum
equal to, at the option of Gartner, (i) adjusted LIBOR plus 2.00% or (ii) an alternate base rate plus 1.00%.
364-day Bridge Credit Facility
On April 5, 2017, the Company entered into a senior unsecured 364-day Bridge Credit Facility in an aggregate principal amount
of $300.0 million, which was immediately drawn down to fund a portion of the purchase price associated with the CEB acquisition.
The Company repaid the entire $300.0 million of the 364-day Bridge Credit Facility during 2017.
Senior Notes
On March 30, 2017, the Company issued $800.0 million aggregate principal amount of 5.125% Senior Notes due 2025 (the “Senior
Notes”). The proceeds of the Senior Notes were used to fund a portion of the purchase price associated with the CEB acquisition.
The Senior Notes were issued at an issue price of 100.0% 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.
mm
The Senior 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 the 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.
Outstanding Borrowings
The table below summarizes the Company’s total outstanding borrowings as of the dates indicated (in thousands).
Description
2016 Credit Agreement - Term loan A facility (1)
2016 Credit Agreement - Revolving credit facility (1), (2)
Senior notes (3)
Other (4)
Principal amount outstanding (5), (6)
Less: deferred financing fees (7)
Net balance sheet carrying amount
December 31,
2019
2018
$
1,252,969
$
1,355,062
148,000
800,000
6,545
2,207,514
(23,908)
2,183,606
$
$
155,000
800,000
2,030
2,312,092
(30,405)
2,281,687
(1) The contractual annualized interest rate as of December 31, 2019 on the Term loan A facility and the revolving credit facility
was 3.30%, which consisted of a floating eurodollar base rate of 1.80% 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 $1.0 billion of available borrowing capacity on the revolver (not including the expansion
feature) as of December 31, 2019.
(3) Consists of 800.0 million principal amount of Senior Notes outstanding. The Senior Notes bear interest at a fixed rate of
5.125% and mature on April 1, 2025.
61
(4) Consists of two State of Connecticut economic development loans as of December 31, 2019. One of the loans originated in
2012, has a 10-year maturity and the outstanding balance of $1.5 million as of December 31, 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 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 rate on the Company's outstanding debt for 2019, including the effects of its interest
rate swaps discussed below, was 4.11%.
(6) The contractual due dates of principal amounts by year for the Company's outstanding debt as of December 31, 2019 were
as follows: $139.7 million in 2020; $37.6 million in 2021; $1.2 billion in 2022; $800.0 million in 2025 and $5.0 million
thereafter.
(7) Deferred financing fees are being amortized to Interest expense over the term of the related debt obligation. The Company
wrote off approximately $6.9 million of deferred financing fees in 2018 related to the repayment of the Term loan B facility.
During 2017, the Company paid $51.2 million for deferred financing fees and recorded a charge of approximately $6.1 million
for the write-off of deferred financing fees related to a prior financing arrangement.
Interest Rate Swaps
As of December 31, 2019, the Company had (cid:73)(cid:82)(cid:88)(cid:85) fixed-for-floating interest rate swap contracts with a total notional value of $1.4
billion that mature through 2025. The Company designates the swaps as accounting hedges of the forecasted interest payments
on $1.4 billion of its 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 eurodollar base rate on 30-day notional borrowings.
(cid:85)
The Company accounts for its interest rate swap contracts as cash flow hedges in accordance with FASB ASC Topic 815. Because
the swaps hedge forecasted interest payments, changes in the fair values of the swaps are recorded in accumulated other
comprehensive income (loss), a component of stockholders' equity, as long as the swaps continue to be highly effective hedges
of the designated interest rate risk. Any ineffective portion of a change in the fair value of a hedge is recorded in earnings. All of
the Company's interest rate swaps were considered highly effective hedges of the forecasted interest payments as of both
December 31, 2019 and 2018. The interest rate swaps had net negative unrealized fair values (liabilities) of $64.8 million and
$10.7 million as of December 31, 2019 and 2018, respectively. Such amounts were deferred and recorded in Accumulated other
comprehensive loss, net of tax effect. See Note 14 — Fair Value Disclosures for the determination of the fair values of Company's
interest rate swaps.
7 — LEASES
As discussed in Note 1 — Business and Significant Accounting Policies, 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 ASC Topic 840, which was the U.S. GAAP lease accounting standard before ASU No. 2016-02, 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 December 31, 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, we elected to use certain practical expedients under the new lease standard
and made other elections that impact the Company's lease accounting. We 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.
62
• Lease components and nonlease components (e.g., common area maintenance charges, etc.) for each 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
2020 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 the Company's lease agreements include (i) renewal options to extend the lease term for up to ten years
and/or (ii) options to terminate the agreement within one year. Additionally, certain of the Company’s lease agreements provide
standard recurring escalations of lease payments for, among other things, increases in a lessor’s maintenance costs and taxes.
Under some lease agreements, the Company may be entitled to allowances, free rent, lessor-financed tenant improvements and
other incentives. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive
covenants.
Prior to January 1, 2019, the Company recognized lease expense in accordance with ASC Topic 840. Because both ASU No.
2016-02 and ASC Topic 840 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 2019, 2018 and 2017 were substantively the same.
Except for lease arrangements pertaining to facilities, all other operating lease activity is not material. As such, operating leases
for office equipment and other assets (collectively, the “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 Consolidated Balance
Sheet as of December 31, 2019; and (iii) excluded from the quantitative disclosures provided below, other than the disclosures
under the heading "Lease Disclosures Under ASC Topic 840." The Other Leases are accounted for similar to the guidance for
operating leases under ASC Topic 840, 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 2020 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.
63
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 twelve months or less are accounted for in the same manner as long-term lease
arrangements, including any related disclosures. Lease expense for operating leases is generally recognized on a straight-line basis
over the lease term, unless the related right-of-use asset was previously impaired.
All of 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 a
practical expedient 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 projected 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 the related right-of-use asset may not be fully recoverable. In those
situations, 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 2019.
On the Consolidated Balance Sheet as of December 31, 2019, right-of-use assets are classified and reported in Operating lease
right-of-use assets, and the related lease liabilities are included in Accounts payable and accrued liabilities (current) and Operating
lease liabilities (long-term). On the Consolidated Statement of Cash Flows for 2019, the reduction in the carrying amount of right-
of-use assets is presented separately and the change in operating lease liabilities is included under Accounts payable and accrued
and other liabilities in the reconciliation of net income to cash provided by operating activities.
rr
Lease Disclosures Under ASU No. 2016-02
All of the Company’s leasing and subleasing activity for 2019 is recognized in Selling, general and administrative expense in the
Consolidated Statements of Operations. The table below presents the Company’s net lease cost and certain other information
related to our leasing activities as of and for the year ended December 31, 2019 (dollars in thousands).
t
Description
Year Ended December 31, 2019:
Operating lease cost (1)
Variable lease cost (2)
Sublease income
Total lease cost, net (3)
Cash paid for amounts included in the measurement of operating lease liabilities
Cash receipts from sublease arrangements
Right-of-use assets obtained in exchange for new operating lease liabilities
As of December 31, 2019:
Weighted average remaining lease term for operating leases (in years)
Weighted average discount rate for operating leases
$
$
$
$
$
144,727
16,404
(38,901)
122,230
135,799
34,441
136,997
10.2
6.7%
(1) Included in operating lease cost was $43.2 million of costs for subleasing activities during 2019.
(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 2019.
64
As of December 31, 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):
Period ending December 31,
2020
2021
2022
2023
2024
Thereafter
Total future minimum operating lease payments and estimated sublease cash receipts (1)
Imputed interest
Total operating lease liabilities per the Consolidated Balance Sheet
Operating
Lease
Payments
Sublease
Cash
Receipts
$
134,579
$
134,707
129,741
126,435
114,948
643,129
$
1,283,539
(374,490)
909,049
$
39,941
44,382
45,582
46,520
40,643
143,547
360,615
(1) Approximately 82% 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 Consolidated
Balance Sheet as of December 31, 2019 (in thousands).
Description
Accounts payable and accrued liabilities
Operating lease liabilities
Total operating lease liabilities per the Consolidated Balance Sheet
$
$
76,516
832,533
909,049
As of December 31, 2019, the Company had additional operating leases for facilities that have not yet commenced. These operating
leases, which aggregated $50.2 million of undiscounted lease payments, are scheduled to commence during 2020 and 2021 with
lease terms of up to ten years.
Lease Disclosures Under ASC Topic 840
Based on the Company's selected method of adoption for ASU No. 2016-02, the disclosures presented below from ASC Topic
840 are required herein.
As of December 31, 2018, future minimum annual cash payments under non-cancelable operating lease agreements for facilities,
office equipment and other assets, which expired in 2019 and through 2038, were as follows (in thousands):
Year ended or ending December 31,
2019
2020
2021
2022
2023
Thereafter
Total minimum lease payments (1)
(1) Excludes approximately $372.0 million of sublease income.
$
130,991
121,802
118,945
111,117
106,113
689,360
$
1,278,328
The Company's operating lease expense under ASC Topic 840 for its facilities, office equipment and other assets was $93.5 million
and $87.9 million in 2018 and 2017, respectively. The cost of such operating leases, including any contractual rent increases, rent
concessions and landlord incentives, was recognized ratably over the life of the related lease agreement.
65
8 — STOCKHOLDERS’ EQUITY
Common stock. Holders of Gartner’s common stock, par value $0.0005 per share, are entitled to one vote per share on all matters
to be voted by stockholders. The Company does not currently pay cash dividends on its common stock. Also, our 2016 Credit
Agreement contains a negative covenant that may limit our ability to pay dividends. The table below summarizes transactions
relating to the Company's common stock for the three years ended December 31, 2019.
Balance at December 31, 2016
Issued in connection with the acquisition of CEB (1)
Issuances under stock plans
Purchases for treasury (2)
Balance at December 31, 2017
Issuances under stock plans
Purchases for treasury (2), (3)
Balance at December 31, 2018
Issuances under stock plans
Purchases for treasury (2), (3)
Balance at December 31, 2019
Issued
Shares
Treasury
Stock
Shares
156,234,415
73,583,172
(cid:26)(cid:15)(cid:22)(cid:25)(cid:26)(cid:15)(cid:25)(cid:24)(cid:21)
—
—
163,602,067
—
—
163,602,067
—
—
(cid:178)
(1,186,150)
382,183
(cid:26)(cid:21)(cid:15)(cid:26)(cid:26)(cid:28)(cid:15)(cid:21)(cid:19)(cid:24)
(933,246)
2,054,018
73,899,977
(825,115)
1,369,426
(cid:20)(cid:25)(cid:22)(cid:15)(cid:25)(cid:19)(cid:21)(cid:15)(cid:19)(cid:25)(cid:26)
(cid:26)(cid:23)(cid:15)(cid:23)(cid:23)(cid:23)(cid:15)(cid:21)(cid:27)(cid:27)
(1) Note 2 — Acquisitions and Divestitures provides additional information regarding the CEB acquisition.
(2) The Company used a total of $199.0 million, $260.8 million and $41.3 million in cash for share repurchases during 2019,
2018 and 2017, respectively.
(3) The number of shares repurchased in 2018 included shares repurchased in December 2018 that settled in January 2019.
Additionally, the shares repurchased during 2019 included shares repurchased in December 2019 that settled in January 2020.
Share repurchase authorization. The Company has a $1.2 billion board authorization to repurchase its common stock, of which
$0.7 billion remained available as of December 31, 2019. 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.
66
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 years indicated (net of tax, in thousands) (1).
Year Ended December 31, 2019
Interest
Rate Swaps
Defined
Benefit
Pension
Plans
Foreign
Currency
Translation
Adjustments
Total
Balance - December 31, 2018
(cid:7)
(cid:11)(cid:26)(cid:15)(cid:26)(cid:26)(cid:19)(cid:12) (cid:7)
(cid:11)(cid:24)(cid:15)(cid:26)(cid:22)(cid:27)(cid:12) (cid:7)
(cid:11)(cid:21)(cid:25)(cid:15)(cid:22)(cid:24)(cid:28)(cid:12) (cid:7) (cid:11)(cid:22)(cid:28)(cid:15)(cid:27)(cid:25)(cid:26)(cid:12)
Other comprehensive income (loss) activity during the year:
Change in AOCI/L before reclassifications to income
Reclassifications from AOCI/L to income (2), (3)
Other comprehensive income (loss) for the year
(cid:11)(cid:22)(cid:25)(cid:15)(cid:28)(cid:23)(cid:28)(cid:12)
(cid:11)(cid:21)(cid:15)(cid:23)(cid:23)(cid:24)(cid:12)
(cid:11)(cid:22)(cid:28)(cid:15)(cid:22)(cid:28)(cid:23)(cid:12)
(cid:11)(cid:22)(cid:15)(cid:19)(cid:20)(cid:20)(cid:12)
(cid:20)(cid:25)(cid:24)
(cid:11)(cid:21)(cid:15)(cid:27)(cid:23)(cid:25)(cid:12)
(cid:23)(cid:15)(cid:20)(cid:25)(cid:28)
(cid:178)
(cid:23)(cid:15)(cid:20)(cid:25)(cid:28)
(cid:11)(cid:22)(cid:24)(cid:15)(cid:26)(cid:28)(cid:20)(cid:12)
(cid:11)(cid:21)(cid:15)(cid:21)(cid:27)(cid:19)(cid:12)
(cid:11)(cid:22)(cid:27)(cid:15)(cid:19)(cid:26)(cid:20)(cid:12)
Balance - December 31, 2019
(cid:7)
(cid:11)(cid:23)(cid:26)(cid:15)(cid:20)(cid:25)(cid:23)(cid:12) (cid:7)
(cid:11)(cid:27)(cid:15)(cid:24)(cid:27)(cid:23)(cid:12) (cid:7)
(cid:11)(cid:21)(cid:21)(cid:15)(cid:20)(cid:28)(cid:19)(cid:12) (cid:7) (cid:11)(cid:26)(cid:26)(cid:15)(cid:28)(cid:22)(cid:27)(cid:12)
Year Ended December 31, 2018
Balance - December 31, 2017
Adoption of ASU No. 2018-02 (4)
Other comprehensive income (loss) activity during the year:
Change in AOCI/L before reclassifications to income
Reclassifications from AOCI/L to income (2), (3), (5)
Other comprehensive income (loss) for the year
Balance - December 31, 2018
Interest
Rate
Swaps
Defined
Benefit
Pension
Plans
Foreign
Currency
Translation
Adjustments
Total
$
2,483
$
591
(5,861) $
—
4,886
$
1,508
—
591
(9,447)
(1,397)
(10,844)
(7,770) $
$
—
123
123
(5,738) $
19,619
29,066
(61,585)
(60,311)
(41,966)
(31,245)
(26,359) $ (39,867)
(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 13 – Derivatives and Hedging for information regarding the cash flow hedges.
(3) The reclassifications related to defined benefit pension plans were primarily recorded in Selling, general and administrative
expense, net of tax effect. See Note 15 – Employee Benefits for information regarding the Company’s defined benefit pension
plans.
(4) See Note 1 – Business and Significant Accounting Policies for additional information regarding the Company's adoption of
ASU No. 2018-02.
(5) The reclassification related to foreign currency translation adjustments in 2018 was recorded in (Loss) gain from divested
operations. See Note 2 – Acquisitions and Divestitures for information regarding our divestitures in 2018.
9 — REVENUE AND RELATED MATTERS
As discussed in Note 1 — Business and Significant Accounting Policies, the Company adopted ASU No. 2014-09 on January 1,
2018. ASU No. 2014-09 is intended to clarify the principles for recognizing revenue by removing inconsistencies and weaknesses
in previously existing revenue recognition rules; provide a more robust framework for addressing revenue recognition issues;
improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets; and provide
more useful information to users of financial statements through improved disclosures.
The adoption of ASU No. 2014-09 did not have a material impact on the Company's consolidated financial statements. However,
the new accounting standard requires significantly expanded disclosures around the nature, amount, timing and uncertainty of
revenue and cash flows arising from contracts with customers, which disclosures are provided below. Additionally, the Company's
accounting policies have been updated to reflect the adoption of ASU No. 2014-09.
67
Our Business and Revenues
Gartner delivers its products and services globally through three business segments: Research, Conferences and Consulting. Our
revenues from those business segments are discussed below.
Research
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.
Research revenues are mainly derived from subscription contracts for research products, representing approximately 90% of the
segment’s revenue. The related revenues are deferred and recognized ratably over the applicable contract term (i.e., as we provide
services over the contract period). Fees derived from assisting organizations in selecting the right business software for their needs
are recognized at a point in time (i.e., when the lead is provided to the vendor).
The Company enters into subscription contracts for research products that generally are for twelve-month periods or longer.
Approximately 80% to 85% of our annual and multi-year Research subscription contracts provide for billing of the first full service
period upon signing. In subsequent years, multi-year subscription contracts are normally billed prior to the contract’s anniversary
date. Our other Research subscription contracts are usually invoiced in advance, commencing with the contract signing, on (i) a
quarterly, monthly or other recurring basis or (ii) in accordance with a customized invoicing schedule. Research contracts are
generally non-cancelable and non-refundable, except for government contracts that may have cancellation or fiscal funding clauses,
which have not historically resulted in material cancellations. It is 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.
rr
Conferences
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 live.
We earn revenues from both the attendees and exhibitors at our conferences and meetings. Attendees are generally invoiced for
the full attendance fee upon their completion of an online registration form or their signing of a contract, while exhibitors typically
make several individual payments commencing with the signing of a contract. We collect almost all of the invoiced amounts in
advance of the related activity, resulting in the recording of deferred revenue. We recognize both the attendee and exhibitor revenue
as we satisfy our related performance obligations (i.e., when the related activity is held).
tt
The Company defers certain costs directly related to specific conferences and meetings and expenses those costs in the period
during which the related activity occurs. The Company's policy is to defer only those costs that are incremental and directly
attributable to a specific activity, primarily prepaid site and production services costs. Other costs of organizing and producing
our conference activities, primarily Company personnel and non-conference specific expenses, are expensed in the period incurred.
Consulting
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.
t
Consulting revenues, primarily derived from custom consulting and measurement services, are principally generated from fixed
fee or time and materials engagements. Revenues from fixed fee engagements are recognized as we work to satisfy our performance
obligations, while revenues from time and materials engagements are recognized as work is delivered and/or services are provided.
In both of these circumstances, we satisfy our performance obligations and control of the services are passed to our customers
over time (i.e., during the duration of the contract or consulting engagement). On a contract-by-contract basis, we typically use
actual labor hours incurred compared to total expected labor hours to measure the Company’s performance in respect of our fixed
fee engagements. If our labor and other costs on an individual contract are expected to exceed the total contract value or the
contract’s funded ceiling amount, the Company reflects an adjustment to the contract’s overall profitability in the period determined.
Revenues related to contract optimization engagements are contingent in nature and are only recognized at the point in time when
all of the conditions related to their payment have been satisfied.
68
Consulting customers are invoiced based on the specific terms and conditions in their underlying contracts. We typically invoice
our Consulting customers after we have satisfied some or all of the related performance obligations and the related revenue has
been recognized. We record fees receivable for amounts that are billed or billable. We also record contract assets, which represent
amounts for which we have recognized revenue but lack the unconditional right to payment as of the balance sheet date due to
our required continued performance under the relevant contract, progress billing milestones or other billing-related restrictions.
General and Overview of ASU No. 2014-09 Adoption
ASU No. 2014-09 requires a five-step evaluative process that consists of the following:
(1) Identifying the contract with the customer;
(2) Identifying the performance obligations in the contract;
(3) Determining the transaction price for the contract;
(4) Allocating the transaction price to the performance obligations in the contract; and
(5) Recognizing revenue when (or as) performance obligations are satisfied.
The Company adopted ASU No. 2014-09 using the modified retrospective method of adoption. Under that approach, the cumulative
effect of applying the new accounting standard is recorded on the date of initial application, with no restatement of the comparative
prior periods presented. The Company's adoption of ASU No. 2014-09 did not result in a cumulative effect adjustment to its
Accumulated earnings. However, the adoption of the new accounting standard required certain changes in the presentation of the
Company’s consolidated balance sheet, including the reclassification of a refund liability, which aggregated $6.2 million on January
1, 2018, from the allowance for fees receivable to Accounts payable and accrued liabilities.
aa
aa
Related to our adoption of ASU No. 2014-09, we elected to (i) apply the provisions of the new accounting standard only to contracts
that were not completed at the date of initial application and (ii) utilize a practical expedient whereby we reflected the aggregate
effect of all contract modifications that occurred prior to January 1, 2018 (rather than retrospectively restating the affected contracts)
when identifying our satisfied and unsatisfied performance obligations, determining the transaction prices with our customers and
allocating such transaction prices to our satisfied and unsatisfied performance obligations. These two elections had no financial
impact.
d
aa
Prior to January 1, 2018, the Company recognized revenue in accordance with then-existing U.S. GAAP and SEC Staff Accounting
Bulletin No. 104, Revenue Recognition (collectively, “Prior GAAP”). Under both ASU No. 2014-09 and Prior GAAP, revenue
can only be recognized when all of the required criteria are met. Although there were certain changes to the Company’s revenue
recognition policies and procedures effective January 1, 2018 with the adoption of ASU No. 2014-09, there were no material
differences between the pattern and timing of revenue recognition under ASU No. 2014-09 and Prior GAAP.
ASU No. 2014-09 requires that we assess at inception all of the promises in a customer contract to determine if a promise is a
separate performance obligation. To identify our performance obligations, we consider all of the services promised in a customer
contract, regardless of whether they are explicitly stated or implied by customary business practices. If we conclude that a service
is separately identifiable and distinct from the other offerings in a contract, we account for it as a separate performance obligation.
If a customer contract has more than one performance obligation, then the total contract consideration is allocated among the
separate deliverables based on their stand-alone selling prices, which are determined based on the prices at which the Company
discretely sells the stand-alone services. If a contract includes a discount or other pricing concession, the transaction price is
allocated among the performance obligations on a proportionate basis using the relative stand-alone selling prices of the individual
deliverables being transferred to the customer, unless the discount or other pricing concession can be ascribed to specifically
identifiable performance obligations.
The contracts with our customers delineate the final terms and conditions of the underlying arrangements, including product
descriptions, subscription periods, deliverables, quantities and the price of each service purchased. Since the transaction price of
almost all of our customer contracts is typically agreed upon upfront and generally does not fluctuate during the duration of the
contract, variable consideration is insignificant. The Company may engage in certain financing transactions with its customers
but those arrangements have been limited in number and not material.
t
The Consolidated Statements of Operations present revenue net of any sales or value-added taxes that we collect from customers
and remit to government authorities.
69
Disaggregated Revenue
Our disaggregated revenue by reportable segment is presented in the tables below for the years indicated (in thousands).
By Primary Geographic Market
g p
y
y
( ), ( )
(1), (2)
Year Ended December 31, 2019
Primary Geographic Market
United States and Canada
Europe, Middle East and Africa
Other International
Total revenues
Year Ended December 31, 2018
Primary Geographic Market
United States and Canada
Europe, Middle East and Africa
Other International
Total revenues
Year Ended December 31, 2017
Primary Geographic Market
United States and Canada
Europe, Middle East and Africa
Other International
Total revenues
Research Conferences Consulting
Total
$ 2,199,008 $
295,857 $
239,625 $ 2,734,490
751,267
424,273
122,591
58,421
122,146
32,133
996,004
514,827
$ 3,374,548 $
476,869 $
393,904 $ 4,245,321
Research Conferences Consulting
Other
Total
$ 1,994,016 $
256,219 $
205,874 $
58,843 $ 2,514,952
737,129
374,619
105,909
48,333
119,258
28,535
38,194
1,000,490
8,525
460,012
$ 3,105,764 $
410,461 $
353,667 $
105,562 $ 3,975,454
Research Conferences Consulting
Other
Total
$ 1,600,847 $
210,698 $
188,022 $
92,799 $ 2,092,366
597,943
272,490
86,567
40,638
111,792
27,847
59,119
22,732
855,421
363,707
$ 2,471,280 $
337,903 $
327,661 $
174,650 $ 3,311,494
(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 from the Other segment into the Research business and, as a result, no operating activity has been recorded
in the Other segment in 2019. Note 2 — Acquisitions and Divestitures provides additional information regarding the Company's
2018 divestitures.
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)
g f
g
y
Year Ended December 31, 2019
Timing of Revenue Recognition
Transferred over time (2)
Transferred at a point in time (3)
Total revenues
Research
Conferences Consulting
Total
$
$
3,083,936 $
— $
316,042 $ 3,399,978
290,612
476,869
77,862
845,343
3,374,548 $
476,869 $
393,904 $ 4,245,321
70
Year Ended December 31, 2018
Timing of Revenue Recognition
Research
Conferences Consulting
Other
Total
Transferred over time (2)
Transferred at a point in time (3)
Total revenues
Year Ended December 31, 2017
Timing of Revenue Recognition
Transferred over time (2)
Transferred at a point in time (3)
Total revenues
$
$
$
$
2,851,176 $
254,588
3,105,764 $
— $
294,397 $
86,667 $ 3,232,240
410,461
410,461 $
59,270
353,667 $
18,895
743,214
105,562 $ 3,975,454
Research
Conferences Consulting
Other
Total
2,275,377 $
— $
269,720 $
141,331 $ 2,686,428
195,903
337,903
57,941
33,319
625,066
2,471,280 $
337,903 $
327,661 $
174,650 $ 3,311,494
(1) During 2018, the Company divested all of the non-core businesses that comprised its Other segment and moved a small
residual product from the Other segment into the Research business and, as a result, no operating activity has been recorded
in the Other segment in 2019. Note 2 — Acquisitions and Divestitures provides additional information regarding the Company's
2018 divestitures.
(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 and 2017, 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 that the contractual deliverables were provided to the customer.
Determining a measure of progress for performance obligations that are satisfied over time and when control transfers for
performance obligations that are satisfied at a point in time requires us to make judgments that affect the timing of when revenue
is recognized. A key factor in this determination is when the customer can direct the use of, and can obtain substantially all of the
benefits from, the deliverable.
For performance obligations recognized in accordance with a time-elapsed output method, the Company’s efforts are expended
consistently throughout the contractual period and the Company transfers control evenly by providing stand-ready services. For
performance obligations satisfied under our Consulting fixed fee and time and materials engagements, we believe that labor hours
are the best measure of depicting the Company’s progress because labor output corresponds directly to the value of the Company’s
performance to date as control is transferred. In our Other segment, we selected a method to assess the completion of our performance
obligations that best aligned with the specific characteristics of the individual customer contract. We believe that these methods
to measure progress are (i) reasonable and supportable and (ii) provide a faithful depiction of when we transfer products and
services to our customers.
For customer contracts that are greater than one year in duration, the aggregate amount of the transaction price allocated to
performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2019 was approximately $3.2 billion.
The Company expects to recognize $1,942.6 million, $1,028.6 million and $220.0 million of this revenue (most of which pertains
to Research) during the year ending December 31, 2020, the year ending December 31, 2021 and thereafter, respectively. The
Company applies a practical expedient allowed in ASU No. 2014-09 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 ASU No. 2014-09 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 payment terms and conditions in our customer contracts vary. In some cases, customers prepay and, in other cases, after we
conduct a credit evaluation, payment may be due in arrears. Because the timing of the delivery of our services typically differs
from the timing of customer payments, the Company recognizes either a contract asset (we perform either fully or partially under
71
the contract but a contingency remains) or a contract liability (upfront customer payments precede our performance, resulting in
deferred revenue). Amounts recorded as contract assets are reclassified to fees receivable when all of the outstanding conditions
have been resolved and our right to payment becomes unconditional. Contracts with payments due in arrears are also recognized
as fees receivable. As our contractual performance obligations are satisfied, the Company correspondingly relieves its contract
liabilities and records the associated revenue.
The table below provides information regarding certain of the Company’s balance sheet accounts that pertain to its contracts with
customers (in thousands).
Assets:
Fees receivable, gross (1)
Contract assets recorded in Prepaid expenses and other current assets (2)
Contract liabilities:
Deferred revenues (current liability) (3)
Non-current deferred revenues recorded in Other liabilities (3)
Total contract liabilities
December 31,
2019
2018
$
$
$
$
1,334,012
21,350
1,928,020
24,409
1,952,429
$
$
$
$
1,262,818
26,119
1,745,244
21,194
1,766,438
(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 $1,436.9 million and $1,287.8 million during 2019 and 2018, respectively, that was attributable
to deferred revenues that were recorded at the beginning of each such year. Those amounts primarily consisted of (i) Research
revenues and, in 2018, 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 2019 and
2018, 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.
a
Revenue Reserve
The Company maintains a revenue reserve for amounts deemed to be uncollectible for reasons other than bad debt. The revenue
reserve is classified as part of Accounts payable and accrued liabilities on the Consolidated Balance Sheet. Provisions to the
revenue reserve are recorded as adjustments to revenue.
When determining the amount of the revenue reserve, the Company uses an expected-value method that is based on current
estimates and a portfolio of data from its historical experience. Due to the common characteristics and similar attributes of our
customers and contracts, which provide relevant and predictive evidence about our projected future liability, an expected-value
method is reasonable and appropriate. However, the determination of the revenue reserve is inherently judgmental and requires
the use of certain estimates. Changes in estimates are recorded in the period that they are identified. As of December 31, 2019 and
2018, the revenue reserve balance was $7.8 million and $7.4 million, respectively, and adjustments to the account in both 2019
and 2018 were not significant.
Costs of Obtaining and Fulfilling a Customer Contract
When the Company concludes that a liability should be recognized for the costs of obtaining a customer contract and determines
how such liability should be measured, certain commissions are capitalized as a recoverable direct incremental cost of obtaining
the underlying contract. No other amounts are capitalized as a cost of obtaining or fulfilling a customer contract because no
expenditures have been identified that meet the requisite capitalization criteria. For Research, Consulting and Other, we amortize
deferred commissions on a systematic basis that aligns with the transfer to our customers of the services to which the commissions
relate. For Conferences, deferred commissions are expensed during the period when the related conference or meeting occurs.
72
During 2019, 2018 and 2017, deferred commission amortization expense was $369.5 million, $304.8 million and $230.5 million,
respectively, and was included in Selling, general and administrative expense in the Consolidated Statements of Operations. The
Company classifies Deferred commissions as a current asset on the Consolidated Balance Sheets at both December 31, 2019 and
2018 because those costs were, or will be, amortized over the twelve months following the respective balance sheet dates. The
Company did not record any material impairments of its deferred commissions during the three-year period ended December 31,
2019.
10 — STOCK-BASED COMPENSATION
The Company grants stock-based compensation awards as an incentive for employees and directors to contribute to the Company’s
long-term success. The Company currently awards stock-settled stock appreciation rights, service-based and performance-based
restricted stock units, and common stock equivalents. As of December 31, 2019, the Company had 4.5 million shares of its common
stock, par value $0.0005 per share, (the "Common Stock") available for stock-based compensation awards under its 2014 Long-
Term Incentive Plan. Currently, the Company issues treasury shares upon the exercise, release or settlement of stock-based
compensation awards.
Determining the appropriate fair value model and calculating the fair value of stock-based compensation awards requires the use
of certain 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 year.
Stock-Based Compensation Expense
The tables below summarize the Company's stock-based compensation expense by award type and expense category line item
during the years ended December 31 (in millions).
Award type
Stock appreciation rights
Restricted stock units
Common stock equivalents
Total (1)
Expense category line item
Cost of services and product development
Selling, general and administrative
Acquisition and integration charges (2)
Total (1)
2019
2018
2017
6.7
$
6.3
$
61.6
0.7
59.2
0.7
69.0
$
66.2
$
2019
2018
2017
$
29.1
39.4
0.5
$
28.1
36.2
1.9
69.0
$
66.2
$
5.6
72.6
0.7
78.9
25.8
35.5
17.6
78.9
$
$
$
$
(1) Includes charges of $21.5 million, $19.4 million and $22.9 million during 2019, 2018 and 2017, respectively, for awards to
retirement-eligible employees. Those awards vest on an accelerated basis.
(2) These charges are the result of (i) the acceleration of the vesting of certain restricted stock units related to the CEB acquisition
and (ii) restricted stock units granted in connection with the CEB integration process.
As of December 31, 2019, the Company had $84.9 million of total unrecognized stock-based compensation cost, which is expected
to be expensed over the remaining weighted average service period of approximately 2.3 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.
73
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.
t
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 year ended December 31, 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, 2018
1.2
$
89.45
$
Granted
Forfeited
Exercised
Outstanding at December 31, 2019 (1) (2)
Vested and exercisable at December 31, 2019 (2)
0.3
(0.1)
(0.2)
1.2
0.5
$
$
143.23
118.31
73.64
104.05
85.79
$
$
19.88
32.62
26.52
16.92
23.18
18.87
4.33
6.11
n/a
n/a
4.21
3.13
n/a = not applicable
(1) As of December 31, 2019, 0.7 million of the total SARs outstanding were unvested. The Company expects that substantially
all of those unvested awards will vest in future periods.
(2) As of December 31, 2019, the total SARs outstanding had an intrinsic value of $58.9 million. On such date, SARs vested and
exercisable had an intrinsic value of $37.1 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 for the years ended December 31:
Expected dividend yield (1)
Expected stock price volatility (2)
Risk-free interest rate (3)
Expected life in years (4)
2019
2018
2017
—%
21%
2.5%
4.59
—%
21%
2.5%
4.52
—%
22%
1.8%
4.53
(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 volatilitytt
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).
74
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 one share of Common Stock. RSU awardees do not
have any of the rights of a Gartner stockholder, including voting rights and the right to receive dividends and distributions, until
the shares are released. The fair value of an RSU award is determined on the date of grant based on the closing price of the Common
Stock as reported on the New York Stock Exchange on that date. Service-based RSUs vest ratably over four years and are expensed
on a straight-line basis over the vesting period. Performance-based RSUs are subject to the satisfaction of both performance and
service conditions, vest ratably over four years and are expensed on an accelerated basis over the vesting period.
The table below summarizes the changes in RSUs outstanding during the year ended December 31, 2019.
Outstanding at December 31, 2018
Granted (1)
Vested and released
Forfeited
Outstanding at December 31, 2019 (2) (3)
Restricted
Stock Units
("RSUs")
(in millions)
Per Share
Weighted
Average
Grant Date
Fair Value
1.4
$
0.5
(0.5)
(0.1)
1.3
$
101.75
139.86
97.33
116.79
118.89
(1) The 0.5 million of RSUs granted during 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 2019 that is tied to an increase in Gartner’s total contract value for such year. The number
of performance-based RSUs for 2019 that could have been earned ranged from 0% to 200% of the target amount. The actual
increase in Gartner’s total contract value for 2019 as measured on December 31, 2019 yielded approximately 142% of the
target amount. The incremental awards based on the actual achievement under the 2019 grant will be issued in 2020.
(2) The Company expects that substantially all of the RSUs outstanding will vest in future periods.
(3) As of December 31, 2019, the weighted average remaining contractual term of the RSUs outstanding was approximately 1.1
years.
Common Stock Equivalents
Common stock equivalents ("CSEs") are convertible into Common Stock. Each CSE entitles the holder to one 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 year ended December 31, 2019.
Outstanding at December 31, 2018
Granted
Converted to shares of Common Stock upon grant
Outstanding at December 31, 2019
Common Stock
Equivalents
("CSEs")
Per Share
Weighted Average
Grant Date
Fair Value
109,780
$
4,521
(2,960)
111,341
$
24.96
153.43
144.88
26.99
75
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 December 31, 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 $17.6 million, $14.7 million and
$11.7 million in cash from employee share purchases under the ESP Plan during 2019, 2018 and 2017, respectively.
11 — 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 stock 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 years ended December 31 (in thousands,
except per share data).
Numerator:
Net income used for calculating basic and diluted income per common share
Denominator:
Weighted average common shares used in the calculation of basic income per share
Common stock equivalents associated with stock-based compensation plans
Shares used in the calculation of diluted income per share
Income per share (1):
Basic
Diluted
2019
2018
2017
$
233,290
$
122,456
$
3,279
89,817
1,154
90,971
90,827
1,295
92,122
88,466
1,324
89,790
$
$
2.60
2.56
$
$
1.35
1.33
$
$
0.04
0.04
(1) Both basic and diluted income per share for 2019 included a tax benefit of approximately $0.42 per share related to an
intercompany sale of certain intellectual property. Additionally, both basic and diluted income per share for 2017 included a
tax benefit of approximately $0.66 per share related to the U.S. Tax Cuts and Jobs Act of 2017. Note 12 — Income Taxes
provides information about the Company's income taxes.
The table below presents the number of common stock equivalents that were not included in the computations of diluted income
per share in the above table because the effect would have been anti-dilutive. During years with net income, the common stock
equivalents were anti-dilutive because their exercise prices were greater than the average market price of a share of Common
Stock during such year.
Anti-dilutive common stock equivalents (in millions) (a)
0.2
—
0.3
Average market price per share of Common Stock during the year
$
148.38
$
135.60
$
116.09
Year Ended December 31,
2019
2018
2017
(a) The number of anti-dilutive common stock equivalents for 2018 were minimal.
76
12 — INCOME TAXES
Below is a summary of the components of the Company's income (loss) before income taxes for the years ended December 31
(in thousands).
U.S.
Non-U.S.
Income (loss) before income taxes
2019
2018
$
$
115,543
160,196
275,739
$
$
34,159
146,962
181,121
$
$
2017
(135,757)
7,940
(127,817)
The components of the expense (benefit) for income taxes on the above income (loss) are summarized in the table below (in
thousands).
Current tax expense:
U.S. federal
State and local
Foreign
Total current
Deferred tax (benefit) expense:
U.S. federal
State and local
Foreign
Total deferred
Total current and deferred
Benefit (expense) relating to interest rate swaps used to increase
(decrease) equity
Benefit from stock transactions with employees used to increase equity
Benefit relating to defined-benefit pension adjustments used to increase
equity
2019
2018
2017
$
30,208
$
2,817
$
48,339
11,630
53,105
94,943
(16,389)
(6,897)
(48,186)
(71,472)
23,471
17,666
54
1,258
6,969
45,042
54,828
12,462
1,258
(13,795)
(75)
54,753
3,840
58
14
434
38,602
87,375
(176,046)
(14,363)
(25,898)
(216,307)
(128,932)
(2,477)
46
267
(131,096)
Total tax expense (benefit)
$
42,449
$
58,665
$
The components of long-term deferred tax assets (liabilities) are summarized in the table below (in thousands).
Accrued liabilities
Operating leases
Loss and credit carryforwards
Assets relating to equity compensation
Other assets
Gross deferred tax assets
Property, equipment and leasehold improvements
Intangible assets
Prepaid expenses
Other liabilities
Gross deferred tax liabilities
Valuation allowance
Net deferred tax liabilities
77
December 31,
2019
2018
$
67,577
$
96,292
54,860
14,372
16,842
20,364
174,015
(15,137)
(212,498)
(49,221)
(5,799)
(282,655)
(1,556)
(110,196) $
—
14,830
19,653
14,092
144,867
(3,421)
(263,548)
(41,926)
(12,100)
(320,995)
(4,066)
(180,194)
$
Net deferred tax assets and net deferred tax liabilities were $79.6 million and $189.8 million as of December 31, 2019, respectively,
and $34.5 million and $214.7 million as of December 31, 2018, respectively. These amounts are reported in Other assets and Other
liabilities in the Consolidated Balance Sheets. Management has concluded it is more likely than not that the reversal of deferred
tax liabilities and results of future operations will generate sufficient taxable income to realize the deferred tax assets, net of the
valuation allowance at December 31, 2019.
rr
The valuation allowances of $1.6 million and $4.1 million as of December 31, 2019 and 2018, respectively, primarily related to
state credit carryovers and net operating losses that are not likely to be realized.
As of December 31, 2019, the Company had state and local tax net operating loss carryforwards of $26.3 million, of which $0.1
million expires within one to five years, $0.3 million expires within six to fifteen years and $25.9 million expires within sixteen
to twenty years. The Company also had state tax credits of $5.3 million, a majority of which will expire in five to six years. As of
December 31, 2019, the Company had non-U.S. net operating loss carryforwards of $27.6 million, of which $0.4 million expires
over the next 20 years and $27.2 million can be carried forward indefinitely. These amounts have been reduced for associated
unrecognized tax benefits, consistent with ASU No. 2013-11, "Income Taxes—Presentation of an Unrecognized Tax Benefit When
a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists."
The items comprising the differences between the U.S. federal statutory income tax rate and the Company’s effective tax rate on
income before income taxes for the years ended December 31 are summarized in the table below.
2019
2018
2017
Statutory tax rate
State income taxes, net of federal benefit
Effect of non-U.S. operations
Intercompany sale of intellectual property
Change in the reserve for tax contingencies
Law changes
Stock-based compensation expense
Nondeductible acquisition costs
Nondeductible meals and entertainment costs
Gains/Losses on divested operations and held-for-sale assets
Limitation on executive compensation
Global intangible low-taxed income, net of foreign tax credits
Foreign-derived intangible income
Change in the valuation allowance
Goodwill
Other items, net
Effective tax rate
21.0%
1.5
2.7
(13.8)
4.7
—
(3.9)
—
1.7
—
2.4
1.9
(1.0)
(0.9)
—
(0.9)
15.4%
21.0%
—
(10.7)
—
15.7
(1.3)
(5.3)
0.9
2.7
12.2
2.7
0.1
(2.0)
0.5
(3.8)
(0.3)
32.4%
35.0%
3.6
5.9
—
(2.8)
41.8
11.0
(7.9)
(3.5)
13.1
(0.1)
—
—
3.0
—
3.5
102.6%
In April 2019, we completed an intercompany sale of certain intellectual property. As a result, the Company recorded a net tax
benefit of approximately $38.1 million in 2019, which represents the benefits of future tax deductions for amortization of the
assets in the acquiring jurisdiction. Our tax planning related to our intellectual property is ongoing and may result in tax rate
volatility in the future.
In connection with the Company’s adoption of ASU No. 2016-02 on January 1, 2019, operating leases were recorded on the
Consolidated Balance Sheet as of December 31, 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 Significant Accounting Policies and Note 7 — Leases provide additional information
regarding the Company's leases and the adoption of ASU No. 2016-02.
The U.S. Tax Cuts and Jobs Act of 2017 (the "Act”) was enacted on December 22, 2017. Among other things, the Act reduced the
U.S. federal corporation tax rate from 35% to 21%, required companies to pay a one-time transition tax on accumulated deferred
foreign income (“ADFI”) of foreign subsidiaries that were previously tax deferred and created a new tax on global intangible low-
taxed income (“GILTI”) attributable to foreign subsidiaries.
78
We remeasured U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which
is generally 21%. We reduced our income tax expense by $13.8 million and $123.2 million in 2018 and 2017, respectively, for
this item.
The tax on ADFI is based on our total post-1986 earnings and profits ("E&P") of our foreign subsidiaries that were previously
deferred from U.S. income taxes. We increased income tax expense by $5.5 million, $8.4 million and $63.6 million in 2019, 2018
and 2017, respectively, for this one-time transition tax liability. The Company utilized significant foreign tax credits and net
operating loss carryovers to reduce the transition tax liability and the remaining tax balance was paid in full during 2019.
The Act also created a new tax on GILTI attributable to foreign subsidiaries. Companies have the option to account for the GILTI
tax as a period cost in the period incurred, or to recognize deferred taxes for temporary differences, including outside basis
differences expected to reverse as a result of the GILTI provisions. The Company has elected to account for the GILTI tax as a
period cost in the period incurred.
As of December 31, 2019 and 2018, the Company had gross unrecognized tax benefits of $102.8 million and $90.3 million,
respectively. The increase is primarily due to positions taken with respect to intercompany transactions. The gross unrecognized
tax benefits at December 31, 2019 related primarily to transfer pricing on intercompany transactions, calculations of taxable E&P
and related foreign tax credits, the exclusion of stock-based compensation expense from the Company’s cost sharing agreement,
and the ability to realize certain refund claims. It is reasonably possible that gross unrecognized tax benefits will decrease by
approximately $9.7 million within the next twelve months due to the anticipated closure of audits and the expiration of certain
statutes of limitation.
Included in the balance of gross unrecognized tax benefits at December 31, 2019 are potential benefits of $97.5 million that, if
recognized, would reduce our effective tax rate on income from continuing operations. Also included in the balance of gross
unrecognized tax benefits at December 31, 2019 are potential benefits of $5.3 million that, if recognized, would result in adjustments
to other tax accounts, primarily deferred taxes.
The table below is a reconciliation of the beginning and ending amounts of gross unrecognized tax benefits, excluding interest
and penalties, for the years ended December 31 (in thousands).
Beginning balance
Additions based on tax positions related to the current year
Additions for tax positions of prior years
Reductions for tax positions of prior years
Reductions for expiration of statutes
Settlements
Change in foreign currency exchange rates
Ending balance
2019
2018
$
90,349
$
32,072
8,564
(16,942)
(7,481)
(3,867)
75
102,770
$
$
60,269
27,371
14,691
(3,939)
(6,293)
(472)
(1,278)
90,349
The Company accrues interest and penalties related to gross unrecognized tax benefits in its income tax provision. As of
December 31, 2019 and 2018, the Company had $8.3 million and $6.7 million, respectively, of accrued interest and penalties
related to gross unrecognized tax benefits. These amounts are in addition to the gross unrecognized tax benefits disclosed above.
The total amount of interest and penalties recognized in the income tax provision during 2019 and 2018 was $1.7 million and $0.7
million, respectively.
The number of years with open statutes of limitation varies depending on the tax jurisdiction. The Company’s statutes are open
with respect to the U.S. federal jurisdiction for 2016 and forward, and India for 2003 and forward. For other major taxing
jurisdictions, including U.S. states, the United Kingdom, Canada, Japan, France and Ireland, the Company's statutes vary and are
open as far back as 2010.
Under U.S. GAAP, no provision for income taxes that may result from the remittance of earnings held overseas is required if the
Company has the ability and intent to indefinitely reinvest such funds overseas. The Company continues to assert its intention to
reinvest all accumulated undistributed foreign earnings in its non-U.S. operations, except in instances where the repatriation of
those earnings would result in minimal additional tax. Consequently, the Company has not recognized income tax expense that
would result from the remittance of those earnings. The accumulated undistributed earnings of non-U.S. subsidiaries were
79
approximately $142.0 million as of December 31, 2019. As a result of the Act, the income tax that would be payable if such
earnings were not indefinitely invested is estimated to be minimal.
13 — 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).
December 31, 2019
Derivative Contract Type
Interest rate swaps (1)
Foreign currency forwards (2)
Total
Number of
Contracts
4
176
180
Notional
Amounts
$ 1,400,000
604,858
$ 2,004,858
December 31, 2018
Derivative Contract Type
Interest rate swaps (1)
Foreign currency forwards (2)
Total
Number of
Contracts
7
135
142
Notional
Amounts
$ 2,100,000
927,375
$ 3,027,375
Fair Value
Asset
(Liability),
Net (3)
(64,831)
59
(64,772)
Fair Value
Asset
(Liability),
Net (3)
(10,681)
(1,942)
(12,623)
$
$
$
$
Balance Sheet
Line Item
Other liabilities
Other current assets
Unrealized
Loss Recorded
in AOCI/L
$
$
(47,164)
—
(47,164)
Balance Sheet
Line Item
Other liabilities
Accrued liabilities
Unrealized
Loss Recorded
in AOCI/L
$
$
(7,770)
—
(7,770)
(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 regarding the Company's interest rate swap contracts.
(2) The Company has foreign exchange transaction risk because it typically enters into transactions in the normal course of
business that are denominated in foreign currencies that differ from the local functional currency. The Company enters into
short-term foreign currency forward exchange contracts to mitigate the cash flow risk associated with changes in foreign
currency rates on forecasted foreign currency transactions. These contracts are accounted for at fair value with realized and
unrealized gains and losses recognized in Other income, net because the Company does not designate these contracts as hedges
for accounting purposes. All of the outstanding foreign currency forward exchange contracts at December 31, 2019 matured
before January 31, 2020.
(3) See Note 14 — Fair Value Disclosures for the determination of the fair values of these instruments.
At December 31, 2019, 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 Consolidated Statements
of Operations for derivative contracts for the years ended December 31 (in thousands).
Amount Recorded In
Interest (income) expense, net (1)
Other expense (income), net (2)
Total (income) expense, net
2019
2018
2017
$
$
(3,361) $
2,488
(873) $
(1,920) $
10,365
8,445
$
7,870
(801)
7,069
(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.
80
14 — FAIR VALUE DISCLOSURES
The Company’s financial instruments include cash equivalents, fees receivable from customers, accounts payable and 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 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 goodwill. Information regarding the periodic assessment of the Company’s goodwill
is included in Note 1 — Business and Significant Accounting Policies. The Company does not typically transfer assets or liabilities
between different levels of the valuation hierarchy.
t
The table below presents the fair value of certain financial assets and liabilities (in thousands).
Description
Assets:
Values based on Level 1 inputs:
Deferred compensation plan assets (1)
Total Level 1 inputs
Values based on Level 2 inputs:
Deferred compensation plan assets (1)
Foreign currency forward contracts (2)
Total Level 2 inputs
Total Assets
Liabilities:
Values based on Level 2 inputs:
Deferred compensation plan liabilities (1)
Foreign currency forward contracts (2)
Interest rate swap contracts (3)
Senior Notes due 2025 (4)
Total Level 2 inputs
Total Liabilities
December 31,
2019
2018
$
$
$
2,277
$
2,277
73,419
1,558
(cid:26)(cid:23)(cid:15)(cid:28)(cid:26)(cid:26)
77,254
$
79,556
$
1,499
64,831
835,384
981,270
$
981,270
$
8,956
(cid:27)(cid:15)(cid:28)(cid:24)(cid:25)
57,690
1,318
(cid:24)(cid:28)(cid:15)(cid:19)(cid:19)(cid:27)
67,964
68,570
3,260
10,681
776,160
(cid:27)(cid:24)(cid:27)(cid:15)(cid:25)(cid:26)(cid:20)
858,671
(1) The Company has a deferred compensation plan for the benefit of certain highly compensated officers, managers and other
key employees (see Note 15 — Employee Benefits). The assets consist of investments in money market funds, mutual funds
and company-owned life insurance contracts. The money market funds consist of cash equivalents while the mutual fund
investments consist of publicly-traded and quoted equity shares. The Company considers the fair values of these assets to be
based on Level 1 inputs, and such assets had fair values of $2.3 million and $9.0 million as of December 31, 2019 and 2018,
respectively. The carrying amounts of the life insurance contracts equal their cash surrender values. Cash surrender value
represents the estimated amount that the Company would receive upon termination of a contract, which approximates fair
81
value. The Company considers life insurance contracts to be valued based on Level 2 inputs, and such assets had fair values
of $73.4 million and $57.7 million at December 31, 2019 and 2018, respectively. The related deferred compensation plan
liabilities are recorded at fair value, or the estimated amount needed to settle the liability, which the Company considers to
be a Level 2 input.
(2) The Company enters into foreign currency forward exchange contracts to hedge the effects of adverse fluctuations in foreign
currency exchange rates (see Note 13 — 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 by using 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. The carrying amount of the Senior Notes was $785.0 million as of December 31,
2019.
15 — EMPLOYEE BENEFITS
Defined contribution plans. The Company has savings and investment plans (the “401(k) Plans”) covering substantially all U.S.
employees. Company contributions are based on the level of employee contributions, up to a maximum of 4% of an employee’s
eligible salary, subject to an annual maximum. For 2019, the maximum Company match was $7,200. Amounts expensed in
connection with the 401(k) Plans totaled $44.1 million, $36.7 million and $29.8 million in 2019, 2018 and 2017, respectively.
Deferred compensation plans. The Company has supplemental deferred compensation plans for the benefit of certain highly
compensated officers, managers and other key employees. The plans' investment assets are recorded at fair value in Other assets
on the Consolidated Balance Sheets. The value of those assets was $75.7 million and $66.6 million at December 31, 2019 and
2018, respectively (see Note 14 — Fair Value Disclosures for fair value information). The related deferred compensation plan
liabilities, which were $79.6 million and $68.6 million at December 31, 2019 and 2018, respectively, are carried at fair value and
are adjusted with a corresponding charge or credit to compensation expense to reflect the fair value of the amount owed to the
employees. Deferred compensation plan liabilities are recorded in Other liabilities on the Consolidated Balance Sheets.
Compensation expense recognized for all of the Company's deferred compensation plans was $0.6 million, $1.7 million and $0.4
million in 2019, 2018 and 2017, respectively.
Defined benefit pension plans. The Company has defined benefit pension plans at several of its international locations. Benefits
earned and paid under those plans are generally based on years of service and level of employee compensation. The Company's
vested benefit obligation is the actuarial present value of the vested benefits to which an employee is entitled based on the employee's
expected date of separation or retirement. The Company's defined benefit pension plans are accounted for in accordance with
FASB ASC Topics 715 and 960. The table below presents the components of the Company's defined benefit pension plan expense
for the years ended December 31 (in thousands).
Service cost
Interest cost
Expected return on plan assets
Recognition of actuarial loss
Total defined benefit pension plan expense
2019
2018
2017
$
$
3,659
851
(517)
237
4,230
$
$
3,145
840
(475)
340
3,850
$
$
2,820
765
(360)
350
3,575
The table below presents the key assumptions used in the computation of pension expense for the years ended December 31.
Weighted average discount rate (1)
Expected return on plan assets
Average compensation increase
2019
2018
2017
1.28%
(cid:21)(cid:17)(cid:24)(cid:23)(cid:8)
2.58%
1.81%
(cid:21)(cid:17)(cid:23)(cid:24)(cid:8)
2.58%
1.78%
(cid:21)(cid:17)(cid:21)(cid:21)(cid:8)
2.66%
(1) Discount rates are typically determined by using the yields on long-term corporate or government bonds in the relevant country
with a duration consistent with the expected term of the underlying pension obligations.
82
The table below provides information regarding changes in the projected benefit obligation of the Company's defined benefit
pension plans for the years ended December 31 (in thousands).
2019
2018
2017
Projected benefit obligation at beginning of year
$
44,890
$
45,450
$
Service cost
Interest cost
Actuarial loss (gain) due to assumption changes and plan experience (1)
Contractual termination benefits
Benefits payments (2)
Foreign currency impact
Projected benefit obligation at end of year (3)
$
3,659
851
4,524
—
(830)
(591)
52,503
$
3,145
840
(430)
(950)
(1,400)
(1,765)
44,890
$
38,400
2,820
765
690
—
(1,780)
4,555
45,450
(1) The actuarial loss in 2019 was primarily due to a reduction in our weighted average discount rate assumption.
(2) The Company projects benefit payments will be made in future years directly to plan participants as follows: $1.6 million in
2020; $1.7 million in 2021; $1.7 million in 2022; $2.2 million in 2023; $2.2 million in 2024; and $13.6 million in total in the
five years thereafter.
(3) Measured as of December 31.
The tables below provide information regarding the funded status of the Company's defined benefit pension plans and the related
amounts recorded in the Consolidated Balance Sheets as of December 31(in thousands).
Funded status of the plans
Projected benefit obligation
Pension plan assets at fair value (1)
Funded status – shortfall (2)
Amounts recorded in the Consolidated Balance Sheets for the plans
Other liabilities – accrued pension obligation (2)
Stockholders’ equity – deferred actuarial loss (3)
2019
2018
2017
52,503
(23,444)
29,059
$
$
44,890
(19,460)
25,430
$
$
45,450
(18,475)
26,975
29,059
$
(8,584) $
25,430
$
(5,738) $
26,975
(5,861)
$
$
$
$
(1) The pension plan assets are held by third-party trustees and are invested in a diversified portfolio of equities, high-quality
government and corporate bonds, and other investments. The assets are primarily valued based on Level 1 and Level 2 inputs
under the fair value hierarchy in FASB ASC Topic 820, with the majority of the invested assets considered to be of low-to-
medium investment risk. The Company projects a future long-term rate of return on these plan assets of 2.04%, which it
believes is reasonable based on the composition of the assets and both current and projected market conditions. Additional
information regarding pension plan asset activity is provided below.
(2) Funded status – shortfall represents the amount of the projected benefit obligation that the Company has not funded with a
third-party trustee. These liabilities of the Company are recorded in Other liabilities on the Consolidated Balance Sheets.
(3) The deferred actuarial loss as of December 31, 2019 is recorded in AOCI/L and will be reclassified out of AOCI/L and
recognized as pension expense over approximately 14 years, subject to certain limitations set forth in FASB ASC Topic 715.
The impact thereof on pension expense is projected to be approximately $0.5 million of additional expense in 2020. The
amortization of deferred actuarial losses from AOCI/L to pension expense in each of the years ended December 31, 2019,
2018 and 2017 was immaterial.
83
The table below provides a rollforward of the Company's defined benefit pension plans assets for the years ended December 31
(in thousands).
2019
2018
2017
(cid:51)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:72)(cid:74)(cid:76)(cid:81)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)
$
19,460
$
18,475
$
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
(cid:37)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:3)(cid:83)(cid:68)(cid:92)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)
(cid:36)(cid:70)(cid:87)(cid:88)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)
(cid:38)(cid:82)(cid:81)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:88)(cid:68)(cid:79)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:86)
(cid:41)(cid:82)(cid:85)(cid:72)(cid:76)(cid:74)(cid:81)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:70)(cid:92)(cid:3)(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)
(cid:51)(cid:72)(cid:81)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:81)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)
$
4,405
(830)
714
—
(305)
23,444
$
4,478
(1,400)
(164)
(950)
(979)
19,460
$
14,465
3,438
(1,780)
547
—
1,805
18,475
The Company also has a reinsurance asset arrangement with a large international insurance company that is intended to fund
benefit payments for one of its plans. The reinsurance asset is not a pension plan asset but is an asset of the Company. At December
31, 2019 and 2018, the reinsurance asset was recorded at its cash surrender value of $8.9 million and $9.0 million, respectively,
and recorded in Other assets on the Consolidated Balance Sheets. The Company believes that cash surrender value approximates
fair value and is equivalent to a Level 2 input under the FASB’s fair value hierarchy in FASB ASC Topic 820.
16 — SEGMENT INFORMATION
Our products and services are 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 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 live.
g
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.
The Company evaluates segment performance and allocates resources based on gross contribution margin. Gross contribution, as
presented in the table below, is defined as operating income or loss excluding certain Cost of services and product development
expenses, Selling, general and administrative expenses, Depreciation, Amortization of intangibles, and Acquisition and integration
charges. Certain bonus and fringe benefit costs included in consolidated Cost of services and product development are not allocated
to segment expense. The accounting policies used by the reportable segments are the same as those used by the Company. There
are no intersegment revenues. The Company does not identify or allocate 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 Company earns revenue from clients in many countries. Other than the United States, there is no individual country where
revenues from external clients represent 10% or more of the Company’s consolidated revenues. Additionally, no single client
accounted for 10% or more of the Company’s consolidated revenues and the loss of a single client, in management’s opinion,
would not have a material adverse effect on revenues.
84
The tables below present information about the Company’s reportable segments for the years ended December 31 (in thousands).
2019
Revenues
Gross contribution
Corporate and other expenses
Operating income
Research
Conferences Consulting
Consolidated
$ 3,374,548
$
476,869
$
393,904
$
4,245,321
2,351,720
241,757
118,450
2,711,927
(2,341,840)
370,087
$
2018
Revenues
Gross contribution
Corporate and other expenses
Operating income
2017
Revenues
Gross contribution
Corporate and other expenses
Operating loss
Research
Conferences Consulting
Other (1)
Consolidated
$ 3,105,764
$
410,461
$
353,667
$
105,562
$
3,975,454
2,144,097
207,260
102,541
65,075
2,518,973
(2,259,258)
259,715
$
Research
Conferences Consulting
Other (1)
Consolidated
$ 2,471,280
$
337,903
$
327,661
$
174,650
$
3,311,494
1,653,014
163,480
93,643
90,249
2,000,386
(2,006,715)
(6,329)
$
(1) During 2018, the Company divested all of the non-core businesses that comprised its Other segment and moved a small
residual product from the Other segment into the Research business and, as a result, no operating activity has been recorded
in the Other segment in 2019. Note 2 — Acquisitions and Divestitures provides additional information regarding the Company's
2018 divestitures.
The table below provides a reconciliation of total segment gross contribution to net income for the years ended December 31 (in
thousands).
Total segment gross contribution
Costs and expenses:
Cost of services and product development - unallocated (1)
Selling, general and administrative
Depreciation and amortization
Acquisition and integration charges
Operating income (loss)
Interest expense and other, net
(Loss) gain from divested operations
Provision (benefit) for income taxes
Net income
2019
2,711,927
$
2018
2,518,973
2017
$ 2,000,386
$
17,174
12,319
9,090
2,103,424
1,884,141
1,599,004
211,779
9,463
370,087
(92,273)
(2,075)
42,449
255,601
107,197
259,715
(124,041)
45,447
58,665
$
233,290
$
122,456
$
240,171
158,450
(6,329)
(121,488)
—
(131,096)
3,279
(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.
85
Disaggregated revenue information by reportable segment for the three years ended December 31, 2019 is presented in Note 9 —
Revenue and Related Matters. Long-lived asset information by geographic location as of December 31 is summarized in the table
below (in thousands).
Long-lived assets (1):
United States and Canada
Europe, Middle East and Africa
Other International
Total long-lived assets
2019
2018
2017
$
867,974
$
305,928
$
288,735
242,729
159,037
67,306
50,800
84,840
41,674
$
1,269,740
$
424,034
$
415,249
(1) Excludes goodwill and intangible assets for all dates and, as of December 31, 2017, held-for-sale assets. Additionally, long-
lived assets as of December 31, 2019 included $702.9 million of operating lease right-of-use assets. Note 1 — Business and
Significant Accounting Policies and Note 7 — Leases provide additional information regarding the Company's leases and
certain changes in lease accounting effective January 1, 2019.
17 — 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 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 December 31, 2019, the Company did not have any material payment obligations under any such indemnification
agreements.
18 — VALUATION AND QUALIFYING ACCOUNTS
The Company maintains an allowance for losses that is comprised of a bad debt allowance and, through December 31, 2017, a
revenue reserve. Provisions are recorded as either an increase in bad debt expense or, prior to 2018, a reduction in revenues.
The table below summarizes the activity in the Company’s allowance for losses for the years ended December 31 (in thousands).
Balance at
Beginning
of Year
Additions
Charged
to
Expense
Additions
Charged
Against
Revenues
Deductions
from the
Reserve
Reclassification
to Accounts
Payable and
Accrued
Liabilities (1)
Balance
at End
of Year
2019:
Bad debt allowance
2018:
Bad debt allowance
2017:
$
7,700
$ 14,000
$ 12,700
$ 12,500
Bad debt allowance and revenue reserve
$
7,400
$ 16,600
$
$
$
— $ (13,700) $
— $
8,000
— $ (11,300) $
(6,200) $
7,700
5,500
$ (16,800) $
— $
12,700
(1) The allowance for losses at December 31, 2017 included $6.2 million that was attributable to the Company's revenue reserve.
As a result of the Company's adoption of ASU No. 2014-09 on January 1, 2018, the revenue reserve balance is now included
in Accounts payable and accrued liabilities on the Consolidated Balance Sheets. Note 9 — Revenue and Related Matters
provides additional information regarding the Company's adoption of ASU No. 2014-09.
86
ITEM 16. FORM 10-K SUMMARY.
None.
87
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this Report on Form 10-K to be
signed on its behalf by the undersigned, duly authorized, in Stamford, Connecticut, on February 19, 2020.
Date: February 19, 2020
POWER OF ATTORNEY
Gartner, Inc.
By:
/s/ Eugene A. Hall
Eugene A. Hall
Chief Executive Officer
Each person whose signature appears below appoints Eugene A. Hall and Craig W. Safian and each of them, acting individually,
as his or her attorney-in-fact, each with full power of substitution, for him or her in all capacities, to sign all amendments to this
Report on Form 10-K, and to file the same, with appropriate exhibits and other related documents, with the Securities and Exchange
Commission. Each of the undersigned ratifies and confirms his or her signatures as they may be signed by his or her attorney-in-
fact to any amendments to this Report. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been
signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
a
Name
Title
/s/ Eugene A. Hall
Director and Chief Executive Officer
Eugene A. Hall
(Principal Executive Officer)
Date
February 19, 2020
/s/ Craig W. Safian
Executive Vice President and Chief Financial Officer
February 19, 2020
Craig W. Safian
(Principal Financial and Accounting Officer)
/s/ Peter E. Bisson
Director
Peter E. Bisson
/s/ Richard J. Bressler
Director
Richard J. Bressler
/s/ Raul E. Cesan
Raul E. Cesan
Director
/s/ Karen E. Dykstra
Director
Karen E. Dykstra
/s/ Anne Sutherland Fuchs Director
Anne Sutherland Fuchs
/s/ William O. Grabe
Director
William O. Grabe
/s/ Stephen G. Pagliuca
Director
Stephen G. Pagliuca
/s/ Eileen M. Serra
Director
Eileen M. Serra
/s/ James C. Smith
Director
James C. Smith
88
February 19, 2020
February 19, 2020
February 19, 2020
February 19, 2020
February 19, 2020
February 19, 2020
February 19, 2020
February 19, 2020
February 19, 2020
(cid:40)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:22)(cid:20)(cid:17)(cid:20)
(cid:38)(cid:40)(cid:53)(cid:55)(cid:44)(cid:41)(cid:44)(cid:38)(cid:36)(cid:55)(cid:44)(cid:50)(cid:49)
(cid:44)(cid:15)(cid:3)(cid:40)(cid:88)(cid:74)(cid:72)(cid:81)(cid:72)(cid:3)(cid:36)(cid:17)(cid:3)(cid:43)(cid:68)(cid:79)(cid:79)(cid:15)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:92)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:29)
(cid:11)(cid:20)(cid:12)
(cid:11)(cid:21)(cid:12)
(cid:11)(cid:22)(cid:12)
(cid:11)(cid:23)(cid:12)
(cid:44)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)(cid:16)(cid:46)(cid:3)(cid:82)(cid:73)(cid:3)(cid:42)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:15) (cid:44)(cid:81)(cid:70)(cid:17)(cid:30)
(cid:87)
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