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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the quarterly period ended March 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
Commission File Number 1-14443
Gartner, Inc.
(Exact name of Registrant as specified in its charter)
Delaware04-3099750
(State or other jurisdiction of(I.R.S. Employer
incorporation or organization)Identification Number)
  
P.O. Box 1021206902-7700
56 Top Gallant Road(Zip Code)
Stamford, 
Connecticut
(Address of principal executive offices) 
Registrant’s telephone number, including area code: (203) 316-1111
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $.0005 par value per shareITNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filerNon-accelerated filer
Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of May 1, 2020, 89,175,114 shares of the registrant’s common shares were outstanding.



Table of Contents


 Page
 
 
PART II. OTHER INFORMATION
 

2


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GARTNER, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited; in thousands, except share data)
 March 31,December 31,
20202019
Assets  
Current assets:  
Cash and cash equivalents$227,850  $280,836  
Fees receivable, net of allowances of $9,000 and $8,000, respectively1,148,565  1,326,012  
Deferred commissions240,177  265,867  
Prepaid expenses and other current assets156,026  146,026  
Total current assets1,772,618  2,018,741  
Property, equipment and leasehold improvements, net346,579  344,579  
Operating lease right-of-use assets678,018  702,916  
Goodwill2,927,666  2,937,726  
Intangible assets, net864,150  925,087  
Other assets211,315  222,245  
Total Assets$6,800,346  $7,151,294  
Liabilities and Stockholders’ Equity   
Current liabilities:  
Accounts payable and accrued liabilities$533,951  $788,796  
Deferred revenues1,847,384  1,928,020  
Current portion of long-term debt149,003  139,718  
Total current liabilities2,530,338  2,856,534  
Long-term debt, net of deferred financing fees 2,035,273  2,043,888  
Operating lease liabilities813,883  832,533  
Other liabilities530,577  479,746  
Total Liabilities5,910,071  6,212,701  
Stockholders’ Equity   
Preferred stock, $0.01 par value, 5,000,000 shares authorized; none issued or outstanding    
Common stock, $0.0005 par value, 250,000,000 shares authorized; 163,602,067 shares issued for both periods82  82  
Additional paid-in capital1,922,608  1,899,273  
Accumulated other comprehensive loss, net(168,972) (77,938) 
Accumulated earnings2,063,819  1,988,722  
Treasury stock, at cost, 74,308,008 and 74,444,288 common shares, respectively(2,927,262) (2,871,546) 
Total Stockholders’ Equity 890,275  938,593  
Total Liabilities and Stockholders’ Equity $6,800,346  $7,151,294  
 

See the accompanying notes to condensed consolidated financial statements.
3


GARTNER, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share data)

Three Months Ended
 March 31,
 20202019
Revenues:
Research$909,291  $825,374  
Conferences13,870  51,932  
Consulting95,730  93,138  
Total revenues1,018,891  970,444  
Costs and expenses:
Cost of services and product development341,278  346,645  
Selling, general and administrative496,639  518,770  
Depreciation22,517  19,775  
Amortization of intangibles32,179  33,683  
Acquisition and integration charges1,560  2,772  
Total costs and expenses894,173  921,645  
Operating income 124,718  48,799  
Interest expense, net(26,349) (24,847) 
Loss from divested operations  (2,075) 
Other expense, net(1,515) (824) 
Income before income taxes96,854  21,053  
Provision for income taxes21,757  258  
Net income $75,097  $20,795  
Net income per share:
Basic$0.84  $0.23  
Diluted$0.83  $0.23  
Weighted average shares outstanding:
Basic89,219  89,882  
Diluted90,066  91,004  

See the accompanying notes to condensed consolidated financial statements.
4


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

Three Months Ended
 March 31,
 20202019
Net income $75,097  $20,795  
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments(46,381) (7,236) 
Interest rate swaps – net change in deferred gain or loss(44,732) (14,505) 
Pension plans – net change in deferred actuarial loss79  42  
Other comprehensive loss, net of tax(91,034) (21,699) 
Comprehensive loss$(15,937) $(904) 

See the accompanying notes to condensed consolidated financial statements.
5


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


Three Months Ended March 31, 2020
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Loss, NetAccumulated EarningsTreasury StockTotal
Balance at December 31, 2019$82  $1,899,273  $(77,938) $1,988,722  $(2,871,546) $938,593  
Net income—  —  —  75,097  —  75,097  
Other comprehensive loss—  —  (91,034) —  —  (91,034) 
Issuances under stock plans—  (1,794) —  —  7,448  5,654  
Common share repurchases—  —  —  —  (63,164) (63,164) 
Stock-based compensation expense —  25,129  —  —  —  25,129  
Balance at March 31, 2020$82  $1,922,608  $(168,972) $2,063,819  $(2,927,262) $890,275  

Three Months Ended March 31, 2019
Common StockAdditional Paid-In CapitalAccumulated Other Comprehensive Loss, NetAccumulated EarningsTreasury StockTotal
Balance at December 31, 2018$82  $1,823,710  $(39,867) $1,755,432  $(2,688,600) $850,757  
Net income—  —  —  20,795  —  20,795  
Other comprehensive loss—  —  (21,699) —  —  (21,699) 
Issuances under stock plans—  (2,911) —  —  7,973  5,062  
Common share repurchases—  —  —  —  (29,837) (29,837) 
Stock-based compensation expense —  31,819  —  —  —  31,819  
Balance at March 31, 2019$82  $1,852,618  $(61,566) $1,776,227  $(2,710,464) $856,897  

6


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

Three Months Ended
 March 31,
 20202019
Operating activities:  
Net income $75,097  $20,795  
Adjustments to reconcile net income to cash provided by operating activities:  
Depreciation and amortization 54,696  53,458  
Stock-based compensation expense25,129  31,819  
Deferred taxes25,537  (25,530) 
Loss from divested operations  2,075  
Reduction in the carrying amount of operating lease right-of-use assets22,862  20,939  
Amortization and write-off of deferred financing fees1,637  1,616  
Changes in assets and liabilities:  
     Fees receivable, net135,661  78,390  
Deferred commissions17,520  4,073  
Prepaid expenses and other current assets(12,656) 8,891  
Other assets5,961  (28,517) 
Deferred revenues(26,228) 85,740  
Accounts payable and accrued and other liabilities(269,467) (218,153) 
Cash provided by operating activities55,749  35,596  
Investing activities:  
     Additions to property, equipment and leasehold improvements(24,536) (20,060) 
Acquisitions - cash paid (net of cash acquired)  (2,295) 
Cash used in investing activities(24,536) (22,355) 
Financing activities:  
     Proceeds from employee stock purchase plan5,641  5,083  
     Proceeds from borrowings   35,000  
     Payments on borrowings(967) (18,682) 
     Purchases of treasury stock(73,164) (44,839) 
Cash used in financing activities(68,490) (23,438) 
Net decrease in cash and cash equivalents (37,277) (10,197) 
Effects of exchange rates on cash and cash equivalents (15,709) 804  
Cash and cash equivalents, beginning of period 280,836  158,663  
Cash and cash equivalents, end of period $227,850  $149,270  

See the accompanying notes to condensed consolidated financial statements.

7


GARTNER, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
 
Note 1 — Business and Basis of Presentation

Business. Gartner, Inc. (NYSE: IT) is the world’s leading research and advisory company and a member of the S&P 500. We equip business leaders with indispensable insights, advice and tools to achieve their mission–critical priorities today and build the successful organizations of tomorrow. We believe our unmatched combination of expert-led, practitioner-sourced and data-driven research steers clients toward the right decisions on the issues that matter most. We are a trusted advisor and an objective resource for more than 15,000 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. Revenues and other financial information for our segments are discussed in Note 5 — Segment Information.

Basis of presentation. The accompanying interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), as defined in Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 270 for interim financial information and with the applicable instructions of U.S. Securities and Exchange Commission (“SEC”) Rule 10-01 of Regulation S-X on Form 10-Q, and should be read in conjunction with the consolidated financial statements and related notes of the Company in its Annual Report on Form 10-K for the year ended December 31, 2019.

The fiscal year of Gartner is the twelve-month period from January 1 through December 31. In the opinion of management, all normal recurring accruals and adjustments considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented herein have been included. The results of operations for the three months ended March 31, 2020 may not be indicative of the results of operations for the remainder of 2020 or beyond. When used in these notes, the terms “Gartner,” the “Company,” “we,” “us,” or “our” refer to Gartner, Inc. and its consolidated subsidiaries.

Principles of consolidation. The accompanying interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated.

Use of estimates. The preparation of the accompanying interim condensed consolidated financial statements requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of fees receivable, goodwill, intangible assets and other long-lived assets, as well as tax accruals and other liabilities. In addition, estimates are used in revenue recognition, income tax expense or benefit, performance-based compensation charges, depreciation and amortization. Management believes its use of estimates in these interim condensed consolidated financial statements to be reasonable.

Management continually evaluates and revises its estimates using historical experience and other factors, including the general economic environment and actions it may take in the future. Management adjusts these estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time. As a result, differences between our estimates and actual results could be material and would be reflected in the Company’s consolidated financial statements in future periods.

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

8


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

Acquisition and divestiture activities. The Company recognized $1.6 million and $2.8 million of Acquisition and integration charges during the three months ended March 31, 2020 and 2019, respectively. Acquisition and integration charges reflect additional costs and expenses resulting from our acquisitions and include, among other items, professional fees, severance and stock-based compensation charges. Although the Company did not complete any business acquisitions during the three months ended March 31, 2020 or 2019, it paid $2.3 million of restricted cash in 2019 for deferred consideration from a 2017 acquisition.

During the three months ended March 31, 2019, the Company recorded a pretax Loss from divested operations of $2.1 million, primarily due to adjustments of certain working capital balances related to divestitures that were completed in 2018. There were no divestitures completed during the three months ended March 31, 2019 and 2020.

Adoption of new accounting standards. The Company adopted the accounting standards described below during the three months ended March 31, 2020.

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

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

Goodwill Impairment — In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other - Simplifying the Test for Goodwill Impairment ("ASU No. 2017-04"). ASU No. 2017-04 simplifies the determination of the amount of goodwill to be potentially charged off by eliminating Step 2 of the goodwill impairment test under current U.S. GAAP. Gartner adopted ASU No. 2017-04 on January 1, 2020. The adoption of ASU No. 2017-04 did not have a material impact on the Company's condensed consolidated financial statements.

Financial Instrument Credit Losses — In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses ("ASU No. 2016-13"). ASU No. 2016-13 amends the current financial instrument impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. Gartner adopted ASU No. 2016-13 on January 1, 2020 with no cumulative effect adjustment to the Company's opening retained earnings. The Company applied the expected credit loss model to its fees receivable balance on January 1, 2020 using a historical loss rate method. The Company’s trade receivables are collected fairly quickly and its credit losses have historically been low. The adoption of ASU No. 2016-13 did not have a material impact on the Company's condensed consolidated financial statements.

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

Accounting standard effective immediately upon voluntary election by Gartner

9


Reference Rate Reform — In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform—Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU No. 2020-04"). ASU No. 2020-04 provides that an entity can elect not to apply certain required modification accounting in U.S. GAAP to contracts where all changes to the critical terms relate to reference rate reform (e.g., the expected discontinuance of LIBOR and the transition to an alternative reference interest rate, etc.). In addition, the rule provides optional expedients and exceptions that enable entities to continue to apply hedge accounting for hedging relationships where one or more of the critical terms change due to reference rate reform. The rule became effective for all entities as of March 12, 2020 and will generally no longer be available to apply after December 31, 2022. The Company is currently evaluating the potential impact of ASU No. 2020-04 on its consolidated financial statements, including the rule’s potential impact on any debt modifications or other contractual changes in the future that may result from reference rate reform.

Accounting standard effective in the fourth quarter of 2020

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

Accounting standard effective in 2021

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

Note 2 — Revenue and Related Matters

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

By Primary Geographic Market (1)

Three Months Ended March 31, 2020
Primary Geographic MarketResearchConferencesConsultingTotal
United States and Canada$590,156  $5,980  $54,163  $650,299  
Europe, Middle East and Africa205,939  2,147  30,082  238,168  
Other International113,196  5,743  11,485  130,424  
Total revenues $909,291  $13,870  $95,730  $1,018,891  


Three Months Ended March 31, 2019
Primary Geographic MarketResearchConferencesConsultingTotal
United States and Canada$527,233  $29,007  $55,093  $611,333  
Europe, Middle East and Africa193,955  17,197  29,934  241,086  
Other International104,186  5,728  8,111  118,025  
Total revenues $825,374  $51,932  $93,138  $970,444  


10



(1)Revenue is reported based on where the sale is fulfilled.

The Company’s revenue is generated primarily through direct sales to clients by domestic and international sales forces and a network of independent international sales agents. Most of the Company’s products and services are provided on an integrated worldwide basis and, because of this integrated delivery approach, it is not practical to precisely separate our revenue by geographic location. Accordingly, revenue information presented in the above tables is based on internal allocations, which involve certain management estimates and judgments.

By Timing of Revenue Recognition

Three Months Ended March 31, 2020
Timing of Revenue RecognitionResearchConferencesConsultingTotal
Transferred over time (1)$829,212  $  $81,408  $910,620  
Transferred at a point in time (2)80,079  13,870  14,322  108,271  
Total revenues $909,291  $13,870  $95,730  $1,018,891  



Three Months Ended March 31, 2019
Timing of Revenue RecognitionResearchConferencesConsultingTotal
Transferred over time (1)$752,798  $  $78,957  $831,755  
Transferred at a point in time (2)72,576  51,932  14,181  138,689  
Total revenues 825,374  $51,932  $93,138  $970,444  



(1)Research revenues were recognized in connection with performance obligations that were satisfied over time using a time-elapsed output method to measure progress. Consulting revenues were recognized over time using labor hours as an input measurement basis.
(2)The revenues in this category were recognized in connection with performance obligations that were satisfied at the point in time that the contractual deliverables were provided to the customer.

Performance Obligations — For customer contracts that are greater than one year in duration, the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2020 was approximately $3.1 billion. The Company expects to recognize $1,526.7 million, $1,220.0 million and $311.6 million of this revenue (most of which pertains to Research) during the remainder of 2020, the year ending December 31, 2021 and thereafter, respectively. The Company applies a practical expedient that is permitted under ASC Topic 606 and, accordingly, it does not disclose such performance obligation information for customer contracts that have original durations of one year or less. Our performance obligations for contracts meeting this ASC Topic 606 disclosure exclusion primarily include: (i) stand-ready services under Research subscription contracts; (ii) holding conferences and meetings where attendees and exhibitors can participate; and (iii) providing customized Consulting solutions for clients under fixed fee and time and materials engagements. The remaining duration of these performance obligations is generally less than one year, which aligns with the period that the parties have enforceable rights and obligations under the affected contracts.

Customer Contract Assets and Liabilities — The timing of the recognition of revenue and the amount and timing of our billings and cash collections, including upfront customer payments, result in the recognition of both assets and liabilities on our consolidated balance sheet. The table below provides information regarding certain of the Company’s balance sheet accounts that pertain to its contracts with customers (in thousands).

11


March 31,December 31,
20202019
Assets:
Fees receivable, gross (1)$1,157,565  $1,334,012  
Contract assets recorded in Prepaid expenses and other current assets (2)$19,558  $21,350  
Contract liabilities:
Deferred revenues (current liability) (3)$1,847,384  $1,928,020  
Non-current deferred revenues recorded in Other liabilities (3)17,231  24,409  
Total contract liabilities$1,864,615  $1,952,429  

(1)Fees receivable represent an unconditional right of payment from our customers and include both billed and unbilled amounts.
(2)Contract assets represent recognized revenue for which we do not have an unconditional right to payment as of the balance sheet date because the project may be subject to a progress billing milestone or some other billing restriction.
(3)Deferred revenues represent amounts (i) for which the Company has received an upfront customer payment or (ii) that pertain to recognized fees receivable. Both situations occur before the completion of our performance obligation(s).

The Company recognized revenue of $658.4 million and $650.1 million during the three months ended March 31, 2020 and 2019, respectively, that was attributable to deferred revenues that were recorded at the beginning of each such period. Those amounts primarily consisted of (i) Research revenues that were recognized ratably as control of the goods or services passed to the customer and (ii) Conferences revenue pertaining to conferences and meetings that occurred during the reporting periods. During each of the three months ended March 31, 2020 and 2019, the Company did not record any material impairments related to its contract assets. The Company does not typically recognize revenue from performance obligations satisfied in prior periods.

Note 3 — Computation of Earnings Per Share

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted average number of shares of Common Stock outstanding during the period. Diluted EPS reflects the potential dilution of securities that could share in earnings. When the impact of common share equivalents is anti-dilutive, they are excluded from the calculation.

The table below sets forth the calculation of basic and diluted income per share for the periods indicated (in thousands, except per share data).
Three Months Ended
 March 31,
 20202019
Numerator:  
Net income used for calculating basic and diluted income per common share$75,097  $20,795  
Denominator:  
Weighted average common shares used in the calculation of basic income per share 89,219  89,882  
Common stock equivalents associated with stock-based compensation plans (1) 847  1,122  
Shares used in the calculation of diluted income per share 90,066  91,004  
Basic income per share$0.84  $0.23  
Diluted income per share $0.83  $0.23  

(1)Certain common stock equivalents were not included in the computation of diluted income per share because the effect would have been anti-dilutive. These common share equivalents totaled 0.7 million and 0.2 million for the three months ended March 31, 2020 and 2019, respectively.

Note 4 — Stock-Based Compensation
12



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 March 31, 2020, the Company had 4.1 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.

The tables below summarize the Company's stock-based compensation expense by award type and expense category line item during the periods indicated (in millions).
Three Months Ended
 March 31,
Award type20202019
Stock appreciation rights$1.7  $3.9  
Restricted stock units23.2  27.7  
Common stock equivalents0.2  0.2  
Total (1)$25.1  $31.8  

Three Months Ended
 March 31,
Expense category line item20202019
Cost of services and product development$12.1  $11.3  
Selling, general and administrative13.0  20.4  
Acquisition and integration charges (2)  0.1  
Total (1)$25.1  $31.8  

(1) Includes charges of $11.6 million and $20.9 million during the three months ended March 31, 2020 and 2019, respectively, for awards to retirement-eligible employees. Those awards vest on an accelerated basis.
(2) Includes charges related to acquisitions and related integration efforts.


Note 5 — Segment Information

The Company's 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.

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.

13


The Company evaluates segment performance and allocates resources based on gross contribution margin. Gross contribution, as presented in the tables 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 tables below present information about the Company’s reportable segments for the periods indicated (in thousands).

Three Months Ended March 31, 2020ResearchConferencesConsultingConsolidated
Revenues$909,291  $13,870  $95,730  $1,018,891  
Gross contribution653,469  (6,060) 29,382  676,791  
Corporate and other expenses   (552,073) 
Operating income   $124,718  

Three Months Ended March 31, 2019ResearchConferencesConsultingConsolidated
Revenues $825,374  $51,932  $93,138  $970,444  
Gross contribution 575,168  18,876  28,718  622,762  
Corporate and other expenses   (573,963) 
Operating income   $48,799  


The table below provides a reconciliation of total segment gross contribution to net income for the periods indicated (in thousands).
Three Months Ended
March 31,
20202019
Total segment gross contribution$676,791  $622,762  
Costs and expenses:
Cost of services and product development - unallocated (1)(822) (1,037) 
Selling, general and administrative 496,639  518,770  
Depreciation and amortization54,696  53,458  
Acquisition and integration charges1,560  2,772  
Operating income 124,718  48,799  
Interest expense and other, net(27,864) (25,671) 
  Loss from divested operations  (2,075) 
  Less: Provision for income taxes21,757  258  
Net income $75,097  $20,795  

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

Note 6 — Goodwill and Intangible Assets

Goodwill

14


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 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. There were no events or changes in circumstances which indicate that the carrying value of goodwill may not be recoverable during the three months ended March 31, 2020.

The table below presents changes to the carrying amount of goodwill by segment during the three months ended March 31, 2020 (in thousands).

 ResearchConferencesConsultingTotal
Balance at December 31, 2019 (1)$2,651,060  $189,641  $97,025  $2,937,726  
Foreign currency translation impact (8,718) (1,278) (64) (10,060) 
Balance at March 31, 2020$2,642,342  $188,363  $96,961  $2,927,666  

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

Finite-Lived Intangible Assets

The tables below present reconciliations of the carrying amounts of the Company's finite-lived intangible assets as of the dates indicated (in thousands).

March 31, 2020Customer
Relationships
SoftwareContentOtherTotal
Gross cost at December 31, 2019$1,145,109  $111,033  $14,140  $30,838  $1,301,120  
Foreign currency translation impact (36,507) (1,171) (175) (72) (37,925) 
Gross cost1,108,602  109,862  13,965  30,766  1,263,195  
Accumulated amortization (1)(299,121) (66,478) (12,302) (21,144) (399,045) 
Balance at March 31, 2020$809,481  $43,384  $1,663  $9,622  $864,150  

December 31, 2019Customer
Relationships
SoftwareContentOther Total
Gross cost $1,145,109  $111,033  $14,140  $30,838  $1,301,120  
Accumulated amortization (1)(283,369) (