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 | |||||
| OR | |||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. | |||||
Commission File Number 1-14443
(Exact name of Registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | ||||||||||
| incorporation or organization) | Identification Number) | ||||||||||
| (Zip Code) | |||||||||||
| (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 class | Trading Symbol | Name of each exchange on which registered | ||||||
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.
| ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | |||||||||||||||||||
| Smaller reporting company | Emerging growth company | ||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ | |||||||||||||||||||||||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of April 30, 2021, 86,076,529 shares of the registrant’s common shares were outstanding.
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Table of Contents
| Page | |||||
PART II. OTHER INFORMATION | |||||
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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, | ||||||||||
| 2021 | 2020 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Fees receivable, net of allowances of $ | |||||||||||
| 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, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive loss, net | ( | ( | |||||||||
| Accumulated earnings | |||||||||||
Treasury stock, at cost, | ( | ( | |||||||||
| Total Stockholders’ Equity | |||||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | |||||||||
See the accompanying notes to Condensed Consolidated Financial Statements.
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GARTNER, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share data)
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Revenues: | |||||||||||
| Research | $ | $ | |||||||||
| Conferences | |||||||||||
| Consulting | |||||||||||
| 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 | |||||||||||
| Interest expense, net | ( | ( | |||||||||
| Other income (expense), net | ( | ||||||||||
| Income before income taxes | |||||||||||
| Provision for income taxes | |||||||||||
| Net income | $ | $ | |||||||||
| Net income per share: | |||||||||||
| Basic | $ | $ | |||||||||
| Diluted | $ | $ | |||||||||
| Weighted average shares outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
See the accompanying notes to Condensed Consolidated Financial Statements.
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GARTNER, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited; in thousands)
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income (loss), 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 income (loss), net of tax | ( | ||||||||||
| Comprehensive income (loss) | $ | $ | ( | ||||||||
See the accompanying notes to Condensed Consolidated Financial Statements.
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GARTNER, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited; in thousands)
Three Months Ended March 31, 2021
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss, Net | Accumulated Earnings | Treasury Stock | Total | |||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||
| Net income | — | — | — | — | ||||||||||||||||
| Other comprehensive income | — | — | — | — | ||||||||||||||||
| Issuances under stock plans | — | ( | — | — | ||||||||||||||||
| Common share repurchases | — | — | — | — | ( | ( | ||||||||||||||
| Stock-based compensation expense | — | — | — | — | ||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||
Three Months Ended March 31, 2020
| Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss, Net | Accumulated Earnings | Treasury Stock | Total | |||||||||||||||
| Balance at December 31, 2019 | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||
| Net income | — | — | — | — | ||||||||||||||||
| Other comprehensive loss | — | — | ( | — | — | ( | ||||||||||||||
| Issuances under stock plans | — | ( | — | — | ||||||||||||||||
| Common share repurchases | — | — | — | — | ( | ( | ||||||||||||||
| Stock-based compensation expense | — | — | — | — | ||||||||||||||||
| Balance at March 31, 2020 | $ | $ | $ | ( | $ | $ | ( | $ | ||||||||||||
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GARTNER, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited; in thousands)
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Stock-based compensation expense | |||||||||||
| Deferred taxes | |||||||||||
| Reduction in the carrying amount of operating lease right-of-use assets | |||||||||||
| Amortization and write-off of deferred financing fees | |||||||||||
| Gain on de-designated swaps | ( | ||||||||||
| Changes in assets and liabilities: | |||||||||||
| 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 | ( | ( | |||||||||
| Cash used in investing activities | ( | ( | |||||||||
| Financing activities: | |||||||||||
| Proceeds from employee stock purchase plan | |||||||||||
| Proceeds from revolving credit facility | |||||||||||
| Payments on revolving credit facility | ( | ||||||||||
| Payments on borrowings | ( | ( | |||||||||
| Purchases of treasury stock | ( | ( | |||||||||
| Cash used in financing activities | ( | ( | |||||||||
| Net decrease in cash and cash equivalents | ( | ( | |||||||||
| Effects of exchange rates on cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
See the accompanying notes to Condensed Consolidated Financial Statements.
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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 14,000 enterprises in more than 100 countries — across all major functions, in every industry and enterprise size.
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 estimates and actual results could be material and would be reflected in the Company’s consolidated financial statements in future periods.
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Adoption of new accounting standards. The Company adopted the accounting standard described below during the three months ended March 31, 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. Gartner adopted ASU No. 2019-12 on January 1, 2021. The adoption of ASU No. 2019-12 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
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.
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, 2021
| Primary Geographic Market | Research | Conferences | Consulting | Total | ||||||||||
| United States and Canada | $ | $ | $ | $ | ||||||||||
| Europe, Middle East and Africa | ||||||||||||||
| Other International | ||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||
Three Months Ended March 31, 2020
| Primary Geographic Market | Research | Conferences | Consulting | Total | ||||||||||
| United States and Canada | $ | $ | $ | $ | ||||||||||
| Europe, Middle East and Africa | ||||||||||||||
| Other International | ||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||
(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 the Company's
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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, 2021
| Timing of Revenue Recognition | Research | Conferences | Consulting | Total | ||||||||||
| Transferred over time (1) | $ | $ | $ | $ | ||||||||||
| Transferred at a point in time (2) | ||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||
Three Months Ended March 31, 2020
| Timing of Revenue Recognition | Research | Conferences | Consulting | Total | ||||||||||
| Transferred over time (1) | $ | $ | $ | $ | ||||||||||
| Transferred at a point in time (2) | ||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||
(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, 2021 was approximately $3.6 billion. The Company expects to recognize $1,705.5 million, $1,443.1 million and $424.5 million of this revenue (most of which pertains to Research) during the remainder of 2021, the year ending December 31, 2022 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. The Company’s 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 the Company’s billings and cash collections, including upfront customer payments, result in the recognition of both assets and liabilities on the Company’s 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).
| March 31, | December 31, | ||||||||||
| 2021 | 2020 | ||||||||||
| 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 | $ | $ | |||||||||
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(1)Fees receivable represent an unconditional right to payment from the Company’s customers and include both billed and unbilled amounts.
(2)Contract assets represent recognized revenue for which the Company does not have an unconditional right to payment as of the balance sheet date because the project may be subject to a progress billing milestone or some other billing restriction.
(3)Deferred revenues represent amounts (i) for which the Company has received an upfront customer payment or (ii) that pertain to recognized fees receivable. Both situations occur before the completion of the Company’s performance obligation(s).
The Company recognized revenue of $726.7 million and $658.4 million during the three months ended March 31, 2021 and 2020, 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, 2021 and 2020, 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. Potential shares of common stock are excluded from the computation of diluted earnings per share when their effect would be anti-dilutive.
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, | |||||||||||
| 2021 | 2020 | ||||||||||
| Numerator: | |||||||||||
| Net income used for calculating basic and diluted income per share | $ | $ | |||||||||
| Denominator: | |||||||||||
| Weighted average common shares used in the calculation of basic income per share | |||||||||||
| Dilutive effect of outstanding awards associated with stock-based compensation plans (1) | |||||||||||
| Shares used in the calculation of diluted income per share | |||||||||||
| Basic income per share | $ | $ | |||||||||
| Diluted income per share | $ | $ | |||||||||
(1)Certain potential shares of common stock were not included in the computation of diluted income per share because the effect would have been anti-dilutive. These potential shares of common stock totaled approximately 0.4 million and 0.7 million for the three months ended March 31, 2021, and 2020, respectively.
Note 4 — Stock-Based Compensation
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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 type | 2021 | 2020 | ||||||||||||
| Stock appreciation rights | $ | $ | ||||||||||||
| Restricted stock units (2) | ||||||||||||||
| Common stock equivalents | ||||||||||||||
| Total (1) | $ | $ | ||||||||||||
| Three Months Ended | ||||||||||||||
| March 31, | ||||||||||||||
| Expense category line item | 2021 | 2020 | ||||||||||||
| Cost of services and product development | $ | $ | ||||||||||||
| Selling, general and administrative | ||||||||||||||
| Total (1) (2) | $ | $ | ||||||||||||
(1) Includes charges of $21.5 million and $11.6 million during the three months ended March 31, 2021 and 2020, respectively, for awards to retirement-eligible employees. Those awards vest on an accelerated basis.
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.
•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 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
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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, 2021 | Research | Conferences | Consulting | Consolidated | ||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||||||||||||
| Gross contribution | ||||||||||||||||||||||||||
| Corporate and other expenses | ( | |||||||||||||||||||||||||
| Operating income | $ | |||||||||||||||||||||||||
| Three Months Ended March 31, 2020 | Research | Conferences | Consulting | Consolidated | ||||||||||||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||||||||||||
| Gross contribution | ( | |||||||||||||||||||||||||
| Corporate and other expenses | ( | |||||||||||||||||||||||||
| Operating income | $ | |||||||||||||||||||||||||
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, | |||||||||||
| 2021 | 2020 | ||||||||||
| 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 | |||||||||||
| Interest expense and other, net | ( | ( | |||||||||
| Less: Provision for income taxes | |||||||||||
| Net income | $ | $ | |||||||||
(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
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 the annual assessment of the recoverability of goodwill, the Company initially performs 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 the Company’s reporting units is less than the related carrying amount. If the Company does not believe that it is more likely than not that the fair value of any of the Company’s reporting units is less than the related carrying amount, then no quantitative impairment test is performed. However, if the results of the qualitative assessment indicate that it is more likely than not that the fair value of a reporting unit is less than its respective carrying amount, then a quantitative impairment
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test is performed. Evaluating the recoverability of goodwill requires judgments and assumptions regarding future trends and events. As a result, both the precision and reliability of the estimates are subject to uncertainty.
The Company’s most recent annual impairment test of goodwill was a qualitative analysis conducted during the quarter ended September 30, 2020 that indicated no impairment. Subsequent to completing the 2020 annual impairment test, there were no events or changes in circumstances noted that required an interim impairment test.
The table below presents changes to the carrying amount of goodwill by segment during the three months ended March 31, 2021 (in thousands).
| Research | Conferences | Consulting | Total | |||||||||||||||||||||||
| Balance at December 31, 2020 (1) | $ | $ | $ | $ | ||||||||||||||||||||||
| Foreign currency translation impact | ( | ( | ( | ( | ||||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | $ | ||||||||||||||||||||||
(1)The Company does no t 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, 2021 | Customer Relationships | Software | Content | Other | Total | |||||||||||||||||||||||||||
| Gross cost at December 31, 2020 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Foreign currency translation impact | ||||||||||||||||||||||||||||||||
| Gross cost | ||||||||||||||||||||||||||||||||
| Accumulated amortization (1) | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| December 31, 2020 | Customer Relationships | Software | Content | Other | Total | |||||||||||||||||||||||||||
| Gross cost | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Accumulated amortization (1) | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
(1) Finite-lived intangible assets are amortized using the straight-line method over the following periods: Customer relationships—6 to 13 years; Software—3 to 7 years; Content—2 to 3 years; and Other—2 to 11 years.
Amortization expense related to finite-lived intangible assets was $30.5 million and $32.2 million during the three months ended March 31, 2021 and 2020, respectively. The estimated future amortization expense by year for finite-lived intangible assets is presented in the table below (in thousands).
| 2021 (remaining nine months) | $ | ||||
| 2022 | |||||
| 2023 | |||||
| 2024 | |||||
| 2025 | |||||
| Thereafter | |||||
| $ | |||||
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Note 7 — Debt
The Company’s total outstanding borrowings are summarized in the table below (in thousands).
| March 31, | December 31, | |||||||||||||
| Description | 2021 | 2020 | ||||||||||||
| 2020 Credit Agreement - Term loan facility (1) | $ | $ | ||||||||||||
| 2020 Credit Agreement - Revolving credit facility (1), (2) | ||||||||||||||
| 2028 Notes (3) | ||||||||||||||
| 2030 Notes (4) | ||||||||||||||
| Other (5) | ||||||||||||||
| Principal amount outstanding (6) | ||||||||||||||
| Less: deferred financing fees (7) | ( | ( | ||||||||||||
| Net balance sheet carrying amount | $ | $ | ||||||||||||
(1)The contractual annualized interest rate as of March 31, 2021 on the 2020 Credit Agreement Term loan facility and the revolving credit facility was 1.50 %, which consisted of a floating Eurodollar base rate of 0.125 % plus a margin of 1.375 %. However, the Company has interest rate swap contracts that effectively convert the floating Eurodollar base rates on outstanding amounts to a fixed base rate.
(2)The Company had approximately $1.0 billion of available borrowing capacity on the 2020 Credit Agreement revolver (not including the expansion feature) as of March 31, 2021.
(3)Consists of $800.0 million principal amount of 2028 Notes outstanding. The 2028 Notes bear interest at a fixed rate of 4.50 % and mature on July 1, 2028.
(4)Consists of $800.0 million principal amount of 2030 Notes outstanding. The 2030 Notes bear interest at a fixed rate of 3.75 % and mature on October 1, 2030.
(5)Consists of two State of Connecticut economic development loans. One of the loans originated in 2012, has a 10 -year maturity and the outstanding balance of $0.9 million as of March 31, 2021 bears interest at a fixed rate of 3.00 %. The second loan, originated in 2019, has a 10 -year maturity and bears interest at a fixed rate of 1.75 %. Both of these loans may be repaid at any time by the Company without penalty.
(6)The weighted average annual effective rate on the Company’s outstanding debt for the three months ended March 31, 2021, including the effects of its interest rate swaps discussed below, was 5.02 %.
(7)Deferred financing fees are being amortized to Interest expense, net over the term of the related debt obligation.
2030 Notes
On September 28, 2020, the Company issued $800.0 million aggregate principal amount of 3.75 % Senior Notes due 2030 (the “2030 Notes”). The 2030 Notes were issued pursuant to an indenture, dated as of September 28, 2020 (the “2030 Note Indenture”), among the Company, the guarantors party thereto and U.S. Bank National Association, as trustee.
The 2030 Notes were issued at an issue price of 100.0 % and bear interest at a rate of 3.75 % per annum. Interest on the 2030 Notes is payable on April 1 and October 1 of each year, beginning on April 1, 2021. The 2030 Notes will mature on October 1, 2030.
The Company may redeem some or all of the 2030 Notes at any time on or after October 1, 2025 for cash at the redemption prices set forth in the 2030 Note Indenture, plus accrued and unpaid interest to, but excluding, the redemption date. Prior to October 1, 2025, the Company may redeem up to 40 % of the aggregate principal amount of the 2030 Notes in connection with certain equity offerings, or some or all of the 2030 Notes with a “make-whole” premium, in each case subject to the terms set forth in the 2030 Indenture.
2028 Notes
On June 22, 2020, the Company issued $800.0 million aggregate principal amount of 4.50 % Senior Notes due 2028 (the “2028 Notes”). The 2028 Notes were issued pursuant to an indenture, dated as of June 22, 2020 (the “2028 Note Indenture”), among the Company, the guarantors party thereto and U.S. Bank National Association, as trustee.
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The 2028 Notes were issued at an issue price of 100.0 % and bear interest at a rate of 4.50 % per annum. Interest on the 2028 Notes is payable on January 1 and July 1 of each year, beginning on January 1, 2021. The Notes will mature on July 1, 2028.
The Company may redeem some or all of the 2028 Notes at any time on or after July 1, 2023 for cash at the redemption prices set forth in the 2028 Note Indenture, plus accrued and unpaid interest to, but excluding, the redemption date. Prior to July 1, 2023, the Company may redeem up to 40 % of the aggregate principal amount of the 2028 Notes in connection with certain equity offerings, or some or all of the 2028 Notes with a “make-whole” premium, in each case subject to the terms set forth in the 2028 Indenture.
2020 Credit Agreement
On September 28, 2020, the Company entered into an agreement among the Company, as borrower, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent,” and such agreement, the “2020 Credit Agreement”), which amended and restated the Company’s existing credit facility, dated as of June 17, 2016 (as amended, supplemented or otherwise modified from time to time, the “2016 Credit Agreement”).
The 2020 Credit Agreement provides for a $400.0 million senior secured five-year term loan facility and a $1.0 billion senior secured five-year revolving facility. The term and revolving facilities may be increased, at the Company’s option and under certain conditions, by up to an additional $1.0 billion in the aggregate plus additional amounts subject to the satisfaction of certain conditions, including a maximum secured leverage ratio. The term loan will be repaid in consecutive quarterly installments commencing December 31, 2020, plus a final payment due on September 28, 2025, and may be prepaid at any time without penalty or premium (other than applicable breakage costs) at the option of the Company. The revolving credit facility may be used for loans, and up to $75.0 million may be used for letters of credit. The revolving loans may be borrowed, repaid and re-borrowed until September 28, 2025, at which time all amounts borrowed must be repaid.
On September 28, 2020, the Company drew down $400.0 million in term loans. The initial drawdown was used to refinance the outstanding amounts under the 2016 Credit Agreement. Additional amounts drawn down under the 2020 Credit Agreement will be used for general corporate purposes, including the funding of acquisitions, payment of capital expenditures and the repurchase of shares.
The Company’s obligations under the 2020 Credit Agreement are guaranteed, on a secured basis, by certain existing and future direct and indirect U.S. subsidiaries. The Company’s obligations under the 2020 Credit Agreement and the guarantees of the subsidiary guarantors are secured by first priority security interests in substantially all of the assets of the Company and the subsidiary guarantors. The security and pledges are subject to certain exceptions.
Loans under the 2020 Credit Agreement bear interest at a rate equal to, at the Company’s option, either (i) the greatest of: (x) the Wall Street Journal prime rate; (y) the average rate on Federal Reserve Board of New York rate plus 1/2 of 1%; and (z) and the adjusted LIBO rate (adjusted for statutory reserves) for a one-month interest period plus 1 %, in each case plus a margin equal to between 0.125 % and 1.25 % depending on the Company’s consolidated leverage ratio as of the end of the four consecutive fiscal quarters most recently ended, or (ii) the adjusted LIBO rate (adjusted for statutory reserves) plus a margin equal to between 1.125 % and 2.25 %, depending on the Company’s leverage ratio as of the end of the four consecutive fiscal quarters most recently ended. The commitment fee payable on the unused portion of the revolving credit facility is equal to between 0.175 % and 0.40 % based on utilization of the revolving credit facility. The Company has also agreed to pay customary letter of credit fees.
Interest Rate Swaps
As of March 31, 2021, the Company had four fixed-for-floating interest rate swap contracts with a total notional value of $1.4 billion that mature through 2025. 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.
As a result of the payment under the then outstanding 2016 Credit Agreement term loan and revolving credit facility, the Company de-designated all of its interest rate swaps effective June 30, 2020. Accordingly, hedge accounting is not applicable, and subsequent changes to the fair value of the interest rate swaps are recorded in Other income (expense), net. The amounts previously recorded in Accumulated other comprehensive loss are amortized into Interest expense, net over the terms of the hedged forecasted interest payments. As of March 31, 2021, $97.0 million is remaining in Accumulated other comprehensive loss, net. The interest rate swaps had negative unrealized fair values (liabilities) of $84.8 million and $109.2 million as of March 31, 2021 and December 31, 2020, respectively, of which $72.8 million and $78.1 million were recorded in Accumulated other comprehensive loss, net of tax effect, as of March 31, 2021 and December 31, 2020, respectively. See Note 11 — Fair Value Disclosures for the determination of the fair values of Company’s interest rate swaps.
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Note 8 — Equity
Share Repurchase Authorization
In 2015, the Company’s Board of Directors (the “Board”) authorized a share repurchase program to repurchase up to $1.2 billion of the Company’s common stock. On February 4, 2021, the Board authorized incremental share repurchases of up to an additional $300 million of the Company’s common stock. $0.5 billion remained available under the share repurchase program as of March 31, 2021. 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. See Note 14 — Subsequent Event for a discussion regarding an increase in the Company’s share repurchase authorization.
The Company’s share repurchase activity is presented in the table below for the periods indicated.
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Number of shares repurchased (1) | |||||||||||
| Cash paid for repurchased shares (in thousands) (2) | $ | $ | |||||||||
(1) The average purchase price for repurchased shares was $180.44 and $151.22 for the three months ended March 31, 2021 and 2020, respectively. The repurchased shares during the three months ended March 31, 2021 and 2020 included purchases for both stock-based compensation awards and open market purchases.
(2) The cash paid for repurchased shares during the three months ended March 31, 2021 included $8.0 million of open market purchases with trade dates in December 2020 that settled in January 2021. There were $20.0 million of open market purchases with trade dates in March 2021 that settled in April 2021. The cash paid for repurchased shares during the three months ended March 31, 2020 included open market purchases with trade dates in December 2019 that settled in January 2020.
Accumulated Other Comprehensive Income (Loss), net (“AOCI/L”)
The tables below provide information about the changes in AOCI/L by component and the related amounts reclassified out of AOCI/L to income during the periods indicated (net of tax, in thousands) (1).
Three Months Ended March 31, 2021
| Interest Rate Swaps | Defined Benefit Pension Plans | Foreign Currency Translation Adjustments | Total | ||||||||||||||||||||
| Balance – December 31, 2020 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss) activity during the period: | |||||||||||||||||||||||
| Change in AOCI/L before reclassifications to income | |||||||||||||||||||||||
| Reclassifications from AOCI/L to income (2), (3) | |||||||||||||||||||||||
| Other comprehensive income (loss) for the period | |||||||||||||||||||||||
| Balance – March 31, 2021 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Three Months Ended March 31, 2020
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| Interest Rate Swaps | Defined Benefit Pension Plans | Foreign Currency Translation Adjustments | Total | ||||||||||||||||||||
| Balance – December 31, 2019 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss) activity during the period: | |||||||||||||||||||||||
| Change in AOCI/L before reclassifications to income | ( | ( | ( | ||||||||||||||||||||
| Reclassifications from AOCI/L to income (2), (3) | |||||||||||||||||||||||
| Other comprehensive income (loss) for the period | ( | ( | ( | ||||||||||||||||||||
| Balance – March 31, 2020 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(1)Amounts in parentheses represent debits (deferred losses).
(2)$7.0 million and $3.2 million of the reclassifications related to interest rate swaps (cash flow hedges) were recorded in Interest expense, net, for the three months ended March 31, 2021 and 2020, respectively. See Note 7 — Debt and Note 10 — Derivatives and Hedging for information regarding the cash flow hedges.
Note 9 — Income Taxes
The provision for income taxes for the three months ended March 31, 2021 and 2020 was an expense of $50.7 million and $21.8 million, respectively. The effective income tax rate was 23.6 % and of 22.5 % for the three months ended March 31, 2021 and 2020, respectively. The quarter-over-quarter increase in the effective income tax rate was primarily due to the shifts in estimated geographical mix of earnings as well as the relative impact of tax benefits from stock-based compensation.
The Company had gross unrecognized tax benefits of $125.0 million on March 31, 2021 and $127.1 million on December 31, 2020. It is reasonably possible that gross unrecognized tax benefits will decrease by approximately $8.9 million within the next twelve months due to the anticipated closure of audits and the expiration of certain statutes of limitation.
Note 10 — 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).
| March 31, 2021 | ||||||||||||||||||||||||||||||||
| Derivative Contract Type | Number of Contracts | Notional Amounts | Fair Value Asset (Liability), Net (3) | Balance Sheet Line Item | Unrealized Loss Recorded in AOCI/L, net of tax | |||||||||||||||||||||||||||
| Interest rate swaps (1) | $ | $ | ( | Other liabilities | $ | ( | ||||||||||||||||||||||||||
| ( | Accrued liabilities | |||||||||||||||||||||||||||||||
| Foreign currency forwards (2) | ( | Accrued liabilities | ||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||
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| December 31, 2020 | ||||||||||||||||||||||||||||||||
| Derivative Contract Type | Number of Contracts | Notional Amounts | Fair Value Asset (Liability), Net (3) | Balance Sheet Line Item | Unrealized Loss Recorded in AOCI/L, net of tax | |||||||||||||||||||||||||||
| Interest rate swaps (1) | $ | $ | ( | Other liabilities | $ | ( | ||||||||||||||||||||||||||