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 Gartner Reports Financial Results for Second Quarter 2017
   Tuesday, August 08, 2017 6:00:31 AM ET

--Second Quarter Revenue up 15% YOY FX Neutral Excluding CEB Acquisition

Gartner, Inc. (IT ), the world’s leading research and advisory company, today reported results for second quarter 2017. Gartner also provided a revised financial outlook for full year 2017 and announced an update to its reporting segments as a result of its recently completed CEB Inc. ("CEB") acquisition.

Acquisition of CEB and Changes In Reportable Segments

On April 5, 2017, Gartner completed its previously announced acquisition of CEB. Our consolidated operating results below for the three and six months ended June 30, 2017 include the results of CEB beginning on the acquisition date. The Company provides commentary below regarding the impact of CEB for the three and six months ended June 30, 2017. In addition, the Company has provided a slide presentation with supplemental information which is available as Exhibit 99.2 to the Company’s Current Report on Form 8-K furnished to the SEC on August 8, 2017 and on the Company’s website. References to "traditional Gartner" operating results and business measurements below refer to Gartner excluding CEB. References to "CEB" below refer to the operating results and business measurements of CEB subsequent to the acquisition.

With the CEB acquisition, Gartner is reporting four business segments reflecting the Company’s enlarged scale and breadth of advisory services. The Company’s reportable segments are as follows:

-- Research - includes our previous Gartner Research segment as well as the results of CEB’s core subscription-based best practice and decision support research activities. In addition, Research now includes our Strategic Advisory Services ("SAS") business, which was previously included in the Consulting segment.

-- Consulting - includes our previous Gartner Consulting segment except, as noted above, the results of our SAS business are now included in the Research segment.

-- Events - includes the results of our previous Gartner Events segment and the results of CEB’s former Evanta business and destination event activities.

-- Talent Assessment & Other - this is a new segment for Gartner and it includes CEB’s previously disclosed Talent Assessment business as well as certain CEB non-subscription based talent products and services.

Consolidated Results Highlights

For second quarter 2017, total revenue was $843.7 million, an increase of $233.7 million, or 38% over second quarter 2016 as reported and up 40% on a foreign exchange neutral basis. Traditional Gartner revenue increased 13% on a reported basis and 15% on a foreign exchange neutral basis. Adjusted revenue was $935.3 million in second quarter 2017. Net (loss) was $(92.3) million in second quarter 2017, while Adjusted EBITDA was $185.0 million. GAAP diluted (loss) earnings per share was $(1.03) in second quarter 2017 compared to $0.62 in second quarter 2016. Adjusted EPS was $0.88 per share in second quarter 2017 compared to $0.75 in second quarter 2016. (See "Non-GAAP Financial Measures" below for definitions of our Non-GAAP measures). For second quarter 2016, both the previously reported GAAP diluted earnings per share and Adjusted EPS have increased due to the Company’s early adoption of FASB Accounting Standards Update (ASU) No. 2016-09 in 2016 (see below for additional explanation).

For the six months ended June 30, 2017, total revenue was approximately $1.5 billion, an increase of $301.6 million compared to the same period in 2016, or 26% as reported and 27% on a foreign exchange neutral basis. Traditional Gartner revenue increased 13% as reported and 14% adjusted for the foreign exchange impact. Net (loss) was $(55.8) million in the 2017 period while Adjusted EBITDA was $291.1 million. GAAP diluted (loss) earnings per share was $(0.65) per share and $1.15 per share for the six months ended June 30, 2017 and 2016, respectively. Adjusted EPS was $1.49 per share in the 2017 period compared to $1.42 per share in the 2016 period. Both the previously reported GAAP diluted earnings per share and Adjusted EPS for 2016 have increased due to the adoption of ASU No. 2016-09.

Gene Hall, Gartner’s chief executive officer, commented, "Gartner delivered another quarter of double-digit growth in the second quarter of 2017. The integration of Gartner and CEB is going extraordinarily well and gives us a quantum leap in capability. In our first 120 days, we’ve integrated our organizations, launched new products, introduced new commercial terms, and accelerated sales force hiring. And we’re not slowing down. Our outlook for long term growth remains incredibly strong."

Business Segment Highlights

Research

Revenue for second quarter 2017 was $613.7 million, up 34% compared to second quarter 2016 on a reported basis and 33% on a foreign exchange neutral basis. The gross contribution margin was 65% and 70% in second quarter 2017 and 2016, respectively. Adjusting for the deferred revenue fair value adjustment related to CEB, the gross contribution margin was 68% in second quarter 2017. Traditional Gartner revenue increased 15% on a reported basis in second quarter 2017 and 16% on a foreign exchange neutral basis compared to second quarter 2016.

Traditional Gartner total contract value was approximately $2.0 billion at June 30, 2017, an increase of 14% on a reported basis and 15% on a foreign exchange neutral basis compared to June 30, 2016. CEB contract value was $578.0 million at June 30, 2017. Traditional Gartner client retention was 83% in both second quarter 2017 and 2016, while wallet retention was 105% in second quarter 2017 and 104% in second quarter 2016. CEB wallet retention was 94% and 93% in second quarter 2017 and 2016, respectively.

Consulting

Revenue for second quarter 2017 was $91.7 million compared to $86.5 million for second quarter 2016, an increase of 6% on a reported basis and 8% on a foreign exchange neutral basis. The gross contribution margin was 34% and 33% in second quarter 2017 and 2016, respectively. Second quarter 2017 utilization was 65% compared to 69% in second quarter 2016. As of June 30, 2017, billable headcount was 667 compared to 626 at June 30, 2016. Backlog was $91.0 million at June 30, 2017 compared to $93.3 million at June 30, 2016.

Events

Revenue for second quarter 2017 was $91.2 million compared to $66.8 million in the second quarter 2016, an increase of $24.4 million, or 37% on both a reported and foreign exchange neutral basis. Traditional Gartner revenue increased 13% on both a reported basis and foreign exchange neutral basis in second quarter 2017 compared to second quarter 2016. Gross contribution margin was 55% in second quarter 2017 compared to 54% in the prior year quarter. The Company held a total of 26 events in the second quarter of 2017, with the Gartner traditional events business holding 25 events with 18,064 attendees in second quarter 2017 compared to 25 events with 15,451 attendees in second quarter 2016. CEB held 1 event with 475 attendees in second quarter 2017.

Talent Assessment & Other

The Talent Assessment & Other segment is a new reporting segment for the Company resulting from the CEB acquisition. Revenue for second quarter 2017 was $47.1 million while gross contribution margin was 37%.

Cash Flow and Balance Sheet Highlights

The Company generated $82.7 million of cash from operating activities in the six months ended June 30, 2017 compared to cash generated of $161.8 million in the same period in 2016. Free Cash Flow was $106.2 million in the six months ended June 30, 2017 compared to $148.3 million in same period in 2016 (See "Non-GAAP Financial Measures" below for the definition of Free Cash Flow). During the six months ended June 30, 2017, the Company used $2.6 billion (net) in cash for acquisitions, $33.8 million to repurchase its common shares, $41.6 million for capital expenditures, and $65.1 million for acquisition and integration payments. The Company had $589.3 million of cash and cash equivalents and $675.0 million of additional borrowing capacity under its revolving credit facility as of June 30, 2017.

Impact of the Adoption of FASB ASU No. 2016-09 on our Previously Reported 2016 Numbers

In the third quarter of 2016, the Company early adopted Financial Accounting Standards Board Update 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU No. 2016-09"), which changed the accounting for stock-based compensation awards. The accounting changes required by ASU No. 2016-09 were applied to the beginning of the Company’s 2016 fiscal year, and as a result certain previously reported financial results for the three and six months ended June 30, 2016 have changed. Net income increased $3.7 million and $8.5 million for the three and six months ended June 30, 2016, respectively. GAAP basic and diluted earnings per share increased by $0.05 and $0.10 for the three and six months ended June 30, 2016, respectively. In addition, our previously reported operating cash flow for the six months June 30, 2016 increased by $8.5 million. Note 1 in the Notes to the Financial Statements in the Company’s June 30, 2017 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission provides additional information.

Financial Outlook for 2017

The Company also provided an update to its financial outlook for full year 2017, to include CEB:

($ in millions, except per share data) (1)
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   
                                                                                                                          2017 Projected Range
                                                                       ---------------------------------------------------------------------------------------------------------------------------
Revenue (GAAP):                                                                                                         
Research                                                                 $ 2,421                                           --                           $  2,470
Consulting                                                                   319                                           --                                334
Events                                                                       321                                           --                                340
Talent Assessment & Other                                                $   164                        --                           $    176  
                                                                       --- ----- --------------------                                                          ------ ------ --------------------
Total Revenue (GAAP)                                                     $ 3,225                                           --                           $  3,320
Deferred Revenue Fair Value Adjustment (Non-GAAP)                            203                        --                                203  
                                                                       ------------------------------                                                          ----------------------------------
Total Adjusted Revenue (Non-GAAP)                                        $ 3,428                        --                           $  3,523  
                                                                       === ===== ====================                                                          ====== ====== ====================
                                                                                                                                                                
Operating (loss) income (GAAP)                                           $    (6 )                                                                                  $     29
                                                                                                                                                                
Diluted EPS (GAAP)                                                       $ (1.00 )                                                                                  $  (0.71 )
                                                                                                                                                                
Adjusted EBITDA (Non-GAAP)                                               $   685                                           --                           $    720
                                                                                                                                                                
Adjusted EPS (Non-GAAP)                                                  $  3.32                                                                                    $   3.49
                                                                                                                                                                
Operating Cash Flow (GAAP)                                               $   315                                                                                    $    335
Acquisition and Integration Payments                                         115                                                                                         125
Capital Expenditures                                                         (95 )                                                                                      (105 )
                                                                       ------------------------------                                                          ----------------------------------
Free Cash Flow (Non-GAAP)                                                $   335                                                                 $    355  
-------------------------------------------------                      === ===== ====================                                                          ====== ====== ====================

(1) See "Non-GAAP Financial Measures" below for definitions of our Non-GAAP metrics.

Conference Call Information

Gartner has scheduled a conference call at 8:00 a.m. eastern time on Tuesday, August 8, 2017 to discuss the Company’s financial results for second quarter 2017. The conference call will be available via the Internet by accessing the Company’s website at http://investor.gartner.com or by dial-in. The U.S. dial-in number is 888-713-4217 and the international dial-in number is 617-213-4869. The participant passcode is 93772956#. The question and answer session of the conference call will be open to investors and analysts only. A replay of the webcast will be available for approximately 30 days following the call on the Company’s website. In addition, a transcript of the call will also be available on the Company’s website shortly after the conclusion of the call.

About Gartner

Gartner, Inc. (IT ) is the world’s leading research and advisory company. The Company helps business leaders across all major functions in every industry and enterprise size with the objective insights they need to make the right decisions. Gartner’s comprehensive suite of services delivers strategic advice and proven best practices to help clients succeed in their mission-critical priorities. Gartner is headquartered in Stamford, Connecticut, U.S.A., and has more than 13,000 associates serving clients in over 11,000 enterprises in approximately 100 countries. For more information, visit www.gartner.com.

Non-GAAP Financial Measures

Certain financial measures used in this Press Release are not defined by generally accepted accounting principles ("GAAP") and as such are considered non-GAAP financial measures. We provide these measures to enhance the user’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future. Investors are cautioned that these Non-GAAP financial measures are not defined in the same manner by other companies and as a result may not be comparable to other similarly titled measures used by other companies. Also, these Non-GAAP financial measures should not be construed as alternatives to other measures determined in accordance with GAAP.

The Company’s Non-GAAP financial measures are as follows:

Adjusted Revenue: Represents GAAP revenue plus non-cash fair value adjustments on pre-acquisition deferred revenues. The majority of the pre-acquisition deferred revenue is recognized ratably over the remaining period of the underlying revenue contract. We believe Adjusted Revenue is an important measure of our recurring operations as it provides a more accurate period-over-period comparison of trends in revenues.

Adjusted EBITDA: Represents GAAP operating (loss) income excluding stock-based compensation expense; depreciation, amortization, and accretion on obligations related to excess facilities; amortization of pre-acquisition deferred revenues; acquisition and integration charges; and other non-recurring items. We believe Adjusted EBITDA is an important measure of our recurring operations as it excludes items not representative of our core operating results.

Adjusted Net Income: Represents GAAP net (loss) income adjusted for the impact of certain items directly related to acquisitions and other non-recurring items. These adjustments include the amortization of identifiable intangibles from acquisitions; incremental and directly-related acquisition and integration charges related to the achievement of certain performance targets and employment conditions, as well as legal, consulting, severance, and other costs; fair value adjustments on pre-acquisition deferred revenues; and other non-recurring items. We believe Adjusted Net Income is an important measure of our recurring operations as it excludes items not indicative of our core operating results.

Adjusted EPS: Represents Adjusted Net Income divided by the number of Non-GAAP diluted shares. We believe Adjusted EPS is an important measure of our recurring operations as it excludes items that may not be indicative of our core operating results.

Free Cash Flow: Represents GAAP cash provided by operating activities plus cash acquisition and integration payments less payments for capital expenditures. We believe that Free Cash Flow is an important measure of the recurring cash generated by the Company’s core operations that may be available to be used to repay debt obligations, repurchase our stock, invest in future growth through new business development activities, or make acquisitions.

Tables provided in this Press Release provide reconciliations of these Non-GAAP financial measures with the most directly comparable GAAP measure.

Safe Harbor Statement

Statements contained in this press release regarding the Company’s growth and prospects, projected financial results and all other statements in this release other than recitation of historical facts are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different.

Such factors include, but are not limited to, the following: our ability to achieve and effectively manage growth, including our ability to integrate our recent CEB acquisition and other acquisitions, as well as consummate and integrate future acquisitions; our ability to pay our debt, which has increased substantially with the recent CEB acquisition; our ability to maintain and expand our products and services; our ability to expand or retain our customer base; our ability to grow or sustain revenue from individual customers; our ability to attract and retain a professional staff of research analysts and consultants as well as experienced sales personnel upon whom we are dependent; our ability to achieve continued customer renewals and achieve new contract value, backlog and deferred revenue growth in light of competitive pressures; our ability to carry out our strategic initiatives and manage associated costs; our ability to successfully compete with existing competitors and potential new competitors; our ability to enforce or protect our intellectual property rights; additional risks associated with international operations including foreign currency fluctuations; the impact of restructuring and other charges on our businesses and operations; general economic conditions; risks associated with the creditworthiness and budget cuts of governments and agencies; and other factors described under "Risk Factors" contained in our Annual Report on Form 10-K for the year ended December 31, 2016, and our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, both of which can be found on Gartner’s website at www.investor.gartner.com and the SEC’s website at www.sec.gov.

Forward-looking statements included herein speak only as of the date hereof and Gartner disclaims any obligation to revise or update such statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or circumstances.

 
                                                                                                                                                                      GARTNER, INC.
 
                                                                                                                                                     Condensed Consolidated Statements of Operations
 
                                                                                                                                                   (Unaudited; in thousands, except per share amounts)
 
                                                                                     Three Months Ended                                                                                       Six Months Ended                                        
                                                                                                             June 30,                                                                                                                                      June 30,
                                                                                2017 (a)                               2016                                                                                2017 (a)                                2016
                                                                   ----------------------------------                     -------------------------------------                                                 ------------------------------------                     -------------------------------------
Revenues:
  Research (b)                                                        $ 613,732                                                 $ 456,690                                            34 %                          $ 1,125,038                                                 $ 904,280                                                   24 %
  Consulting (b)                                                         91,693                                                    86,548                                             6 %                              170,287                                                   164,169                                                    4 %
  Events                                                                 91,205                                                    66,760                                            37 %                              126,474                                                    98,815                                                   28 %
  Talent Assessment & Other                                              47,101                         --                        100 %                               47,101                         --                               100 %
                                                                   ---------------------------------                      ------------------------------------                                                  -----------------------------------                      ------------------------------------
Total revenues                                                          843,731                                                   609,998                                            38 %                            1,468,900                                                 1,167,264                                                   26 %
  Costs and expenses:
  Cost of services and product development                              352,004                                                   231,422                                            52 %                              589,613                                                   443,463                                                   33 %
  Selling, general and administrative expense                           408,226                                                   272,009                                            50 %                              712,470                                                   529,420                                                   35 %
  Depreciation                                                           18,057                                                     9,025                                           100 %                               28,297                                                    17,859                                                   58 %
  Amortization of intangibles                                            65,500                                                     6,210                                            >100%                              71,790                                                    12,393                                                          >100%
  Acquisition and integration charges                                    98,332                                  8,033                         >100%                             111,604                                 16,401                                       >100%
                                                                   ---------------------------------                      ------------------------------------                                                  -----------------------------------                      ------------------------------------
Total costs and expenses                                                942,119                                526,699                         79 %                            1,513,774                              1,019,536                                48 %
                                                                   ---------------------------------                      ------------------------------------                                                  -----------------------------------                      ------------------------------------
  Operating (loss) income                                               (98,388 )                                                  83,299                                            >100%                             (44,874 )                                                 147,728                                                          >100%
Interest expense, net                                                   (43,956 )                                                  (7,356 )                                          >100%                             (49,862 )                                                 (13,362 )                                                        >100%
Other (expense) income, net                                                (407 )                                                   1,248                         >100%                                 482                                  3,132                               (85 )%
                                                                   ---------------------------------                      ------------------------------------                                                  -----------------------------------                      ------------------------------------
(Loss) income before income taxes                                      (142,751 )                                                  77,191                                            >100%                             (94,254 )                                                 137,498                                                          >100%
(Benefit) provision for income taxes                                    (50,470 )                                                  25,565                         >100%                             (38,406 )                                                  40,884                                       >100%
                                                                   ---------------------------------                      ------------------------------------                                                  -----------------------------------                      ------------------------------------
  Net (loss) income                                                   $ (92,281 )                                               $  51,626                         >100%                         $   (55,848 )                                               $  96,614                                       >100%
                                                                   ==== ======= ====================                      ======= ======= ====================                                                  ==== ========= ====================                      ======= ======= ====================
                                                                                                                                                                                                                                                                                                                                    
Net (loss) income per share:
  Basic                                                               $   (1.03 )                                               $    0.63                                            >100%                         $     (0.65 )                                               $    1.17                                                          >100%
  Diluted                                                             $   (1.03 )                                               $    0.62                                            >100%                         $     (0.65 )                                               $    1.15                                                          >100%
Weighted average shares outstanding:
  Basic                                                                  89,297                                                    82,559                                             8 %                               86,066                                                    82,505                                                    4 %
  Diluted                                                                89,297                                 83,711                          7 %                               86,066                                 83,708                                 3 %
                                                                   ---------------------------------                      ------------------------------------                                                  -----------------------------------                      ------------------------------------
(a)   Includes the results of CEB beginning on April 5, 2017, the date of
                         acquisition. The Company’s Research segment includes the results of
                         CEB’s core subscription-based best practice and decision support
                         research activities. Events includes the results of CEB’s former
                         Evanta business and destination event activities, while the Talent
                         Assessment & Other segment, which is a new segment, includes the
                         results of CEB’s previously disclosed Talent Assessment business as
                         well as certain CEB non-subscription based talent products and
                         services.
(b)                      Effective June 30, 2017, the Company is reporting the results of its
                         strategic advisory services ("SAS") business in the Research segment
                         whereas previously the SAS business was reported with Consulting.
                         The impact of the reclassification was not significant, however
                         prior periods have been updated to conform to the current period
                         presentation.
                          
 
BUSINESS SEGMENT DATA
(Unaudited; in thousands)
 
                                                      Revenue                                 Direct                                  Gross                      Contribution
                                                                                                                                    Expense                                                Contribution                                         Margin
                                                         ------------------------------------                        ----------------------------------                        ----------------------------------                        --------------------
Three Months Ended 6/30/17 (a), (b)
Research (c)                                                   $   613,732                                                 $ 213,161                                                 $ 400,571                                                    65%
Consulting                                                          91,693                                                    60,260                                                    31,433                                                    34%
Events                                                              91,205                                                    41,470                                                    49,735                                                    55%
Talent Assessment & Other                                           47,101                                 29,804                                 17,297                                 37%
                                                         --------------------------------------                      ------------------------------------                      ------------------------------------
TOTAL                                                          $   843,731                              $ 344,695                              $ 499,036                                 59%
                                                         ======= ========= ====================                      ======= ======= ====================                      ======= ======= ====================
                                                                                                                                                                                                                                          
Three Months Ended 6/30/16 (b)
Research                                                       $   456,690                                                 $ 138,069                                                 $ 318,621                                                    70%
Consulting                                                          86,548                                                    58,207                                                    28,341                                                    33%
Events                                                              66,760                                                    30,698                                                    36,062                                                    54%
Talent Assessment & Other                                   --                         --                         --                           --%
                                                         --------------------------------------                      ------------------------------------                      ------------------------------------
TOTAL                                                          $   609,998                              $ 226,974                              $ 383,024                                 63%
                                                         ======= ========= ====================                      ======= ======= ====================                      ======= ======= ====================
                                                                                                                                                                                                                                          
Six Months Ended 06/30/17 (a), (b)
Research                                                       $ 1,125,038                                                 $ 373,354                                                 $ 751,684                                                    67%
Consulting                                                         170,287                                                   114,917                                                    55,370                                                    33%
Events                                                             126,474                                                    63,172                                                    63,302                                                    50%
Talent Assessment & Other                                           47,101                                 29,804                                 17,297                                 37%
                                                         --------------------------------------                      ------------------------------------                      ------------------------------------
TOTAL                                                          $ 1,468,900                              $ 581,247                              $ 887,653                                 60%
                                                         ======= ========= ====================                      ======= ======= ====================                      ======= ======= ====================
                                                                                                                                                                                                                                          
Six Months Ended 06/30/16 (b)
Research                                                       $   904,280                                                 $ 272,650                                                 $ 631,630                                                    70%
Consulting                                                         164,169                                                   111,274                                                    52,895                                                    32%
Events                                                              98,815                                                    49,770                                                    49,045                                                    50%
Talent Assessment & Other                                   --                         --                         --                           --%
                                                         --------------------------------------                      ------------------------------------                      ------------------------------------
TOTAL                                                          $ 1,167,264                              $ 433,694                              $ 733,570                                 63%
-----------------------------------                      ======= ========= ====================                      ======= ======= ====================                      ======= ======= ====================
(a)   Includes the results of CEB beginning on April 5, 2017, the date of
                         acquisition. The Company’s Research segment includes the results of
                         CEB’s core subscription-based best practice and decision support
                         research activities. Events includes the results of CEB’s former
                         Evanta business and destination event activities, while the Talent
                         Assessment & Other segment, which is a new segment, includes the
                         results of CEB’s previously disclosed Talent Assessment business as
                         well as certain CEB non-subscription based talent products and
                         services.
(b)                      Effective June 30, 2017, the Company is reporting the results of its
                         strategic advisory services ("SAS") business in the Research segment
                         whereas previously the SAS business was reported with Consulting.
                         The impact of the reclassification was not significant, however
                         prior periods have been updated to conform to the current period
                         presentation.
(c)                      The Research gross contribution margin was 68% in second quarter
                         2017 when adjusted for the deferred revenue fair value adjustment
                         resulting from the CEB acquisition.
                          
 
SELECTED STATISTICAL DATA (unaudited)
 
                                                                                            Traditional Gartner                                                                       CEB
                                                                           ----------------------------------------------------------------------------------                              -------------------------------------------------------------
                                                                              June 30,            June 30,                         June 30,                 June 30,
                                                                                2017                                                                         2016                             2017                                        2016
                                                                           -----------                                                                  -----------                        -------   -------------------- ----------------------------------
Research                                                                                                                                                                                              
Total contract value (a), (b)                                                $  1,996                                                                     $  1,754                          $ 578                               $     574
Client retention                                                                   83 %                                                                         83 %                           na                                      na
Wallet retention                                                                  105 %                                                                        104 %                           94 %                                    93 %
Client enterprises                                                             11,164                                                                       10,477                             na                                      na
                                                                                                                                                                                                                                           
Consulting
Backlog (c), (d)                                                             $ 91,000                                                                     $ 93,300                             na                                      na
Quarterly utilization                                                              65 %                                                                         69 %                           na                                      na
Billable headcount                                                                667                                                                          626                             na                                      na
Average annualized revenue per billable headcount (c)                        $    378                                                                     $    408                             na                                      na
                                                                                                                                                                                                                                           
Events
Number of events for the quarter (e), (f)                                          25                                                                           25                              1                          --
Number of attendees for the quarter (e), (f)                                   18,064                                                                       15,451                            475                          --
(a)            In millions.
(b)                               The $574.0 million of CEB contract value as of June 30, 2016 was
                                  calculated based on Gartner’s 2017 foreign exchange rates.
(c)                               In thousands.
(d)                               The June 30, 2016 traditional Gartner $93.3 million backlog amount
                                  has been restated to reflect the reclassification of the SAS
                                  business.
(e)                               Excludes single day, local events.
(f)                               CEB did not hold any destination events during the quarter ended
                                  June 30, 2016.
na - not applicable or not available.
 
 
SUPPLEMENTAL INFORMATION
 
 
Reconciliation - GAAP Revenue to Adjusted Revenue (a) (Unaudited;
in thousands):
 
                                                                              Three Months Ended                                                                    Six Months Ended
                                                                                                      June 30,                                                                                                June 30,
                                                            -------------------------------------------------------------------------------------       -------------------- ---------------------------------------------------------------------
                                                                           2017                                 2016                                   2017                         2016
                                                            ----------------------------------                     --------------------------------------------------------- -------------------------------------------------------- ------------------
Total Revenue (GAAP)                                           $ 843,731                                                 $ 609,998                           $ 1,468,900                              $ 1,167,264
Deferred Revenue Fair Value Adjustment                            91,542                         --                                91,685                           --
                                                            ---------------------------------                      ------------------------------------                      -----------------------------------                      ------------------
  Adjusted Revenue                                             $ 935,273                              $ 609,998        $ 1,560,585           $ 1,167,264
--------------------------------------                      ==== ======= ====================                      ======= ======= ==================== ==================== ==== ========= ==================== ==================== ======= =========
(a)   Adjusted Revenue represents GAAP revenue plus non-cash fair value
                         adjustments on pre-acquisition deferred revenues. The majority of
                         the pre-acquisition deferred revenue is recognized ratably over the
                         remaining period of the underlying revenue contract.
                          
 
Reconciliation - Operating (Loss) Income to Adjusted EBITDA (Unaudited;
in thousands):
 
                                                                                                          Three Months Ended                                                                             Six Months Ended
                                                                                                                                  June 30,                                                                                                         June 30,
                                                                                        -------------------------------------------------------------------------------------                            -------------------------------------------------------------------------------------
                                                                                                       2017                                 2016                                                     2017                                 2016
                                                                                        ----------------------------------                     -------------------------------------                     ----------------------------------                     -------------------------------------
GAAP net (loss) income                                                                     $ (92,281 )                                               $  51,626                                              $ (55,848 )                                               $  96,614
Interest expense, net                                                                         43,956                                                     7,356                                                 49,862                                                    13,362
Other expense (income), net                                                                      407                                                    (1,248 )                                                 (482 )                                                  (3,132 )
Tax (benefit) provision                                                                      (50,470 )                                                  25,565                             (38,406 )                                                  40,884  
                                                                                        ---------------------------------                      ------------------------------------                      ---------------------------------                      ------------------------------------
Operating (loss) income                                                                    $ (98,388 )                                               $  83,299                                              $ (44,874 )                                               $ 147,728
 Adjustments:
Stock-based compensation expense (a)                                                          16,557                                                    11,112                                                 39,133                                                    26,607
Depreciation, accretion, and amortization (b)                                                 83,585                                                    15,258                                                100,138                                                    30,296
Amortization of pre-acquisition deferred revenues (c)                                         91,542                                            --                                                 91,685                                            --
Acquisition & integration charges and other nonrecurring items (d)                            91,712                                  8,033                             104,984                                 16,401  
                                                                                        ---------------------------------                      ------------------------------------                      ---------------------------------                      ------------------------------------
  Adjusted EBITDA                                                                          $ 185,008                              $ 117,702                           $ 291,066                              $ 221,032  
------------------------------------------------------------------                      ==== ======= ====================                      ======= ======= ====================                      ==== ======= ====================                      ======= ======= ====================
(a)   Consists of charges for stock-based compensation awards.
(b)                      Includes depreciation expense, accretion on excess facilities
                         accruals, and amortization of intangibles.
(c)                      Consists of the amortization of non-cash fair value adjustments on
                         pre-acquisition deferred revenues. The majority of the
                         pre-acquisition deferred revenue is recognized ratably over the
                         remaining period of the underlying customer contract.
(d)                      Consists of incremental and directly-related charges related to
                         acquisitions and other non-recurring items.
                          
 
Reconciliation - GAAP Net (Loss) Income to Adjusted Net Income
and Adjusted EPS (Unaudited; in thousands, except per share
amounts):
 
                                                                                                      Three Months Ended June 30,                                                                   Six Months Ended June 30,
                                                                                         -------------------------------------------------------------------------------------------                     -------------------------------------------------------------------------------------------
                                                                                                       2017                                 2016                                                    2017                                 2016
                                                                                         ---------------------------------                     -------------------------------------                     ---------------------------------                     -------------------------------------
GAAP net (loss) income                                                                     $ (92,281 )                                               $  51,626                                             $ (55,848 )                                               $  96,614
Acquisition and other adjustments:
Amortization of acquired intangibles (a)                                                      65,406                                                     6,116                                                71,602                                                    12,205
Amortization of pre-acquisition deferred revenues (b)                                         91,542                                            --                                                91,685                                            --
Acquisition & integration charges and other nonrecurring items (c),                          100,721                                                     8,033                                               113,994                                                    16,401
(d)
  Tax impact of adjustments (e)                                                              (85,951 )                                                  (2,746 )                                             (91,358 )                                                  (6,460 )
                                                                                         --------------------------------                      ------------------------------------                      --------------------------------                      ------------------------------------
Adjusted net income                                                                        $  79,437                              $  63,029                          $ 130,075                              $ 118,760  
-------------------------------------------------------------------                      === ======= ====================                      ======= ======= ====================                      === ======= ====================                      ======= ======= ====================
                                                                                                                                                                                                                                                                
GAAP basic shares                                                                             89,297                                                    82,559                                                86,066                                                    82,505
Potentially dilutive shares (f)                                                                1,313                                  1,152                              1,322                                  1,203  
                                                                                         --------------------------------                      ------------------------------------                      --------------------------------                      ------------------------------------
Non-GAAP diluted shares (f)                                                                   90,610                                 83,711                             87,388                                 83,708  
                                                                                         ================================                      ====================================                      ================================                      ====================================
Adjusted EPS                                                                               $    0.88                              $    0.75                          $    1.49                              $    1.42  
-------------------------------------------------------------------                      === ======= ====================                      ======= ======= ====================                      === ======= ====================                      ======= ======= ====================
(a)   Consists of non-cash amortization charges from acquired intangibles.
(d)                      Consists of the amortization of non-cash fair value adjustments on
                         pre-acquisition deferred revenues. The majority of the
                         pre-acquisition deferred revenue is recognized ratably over the
                         remaining period of the underlying revenue contract.
(c)                      Consists of incremental and directly-related charges related to
                         acquisitions and other non-recurring items.
(d)                      Includes the amortization and write-off of deferred financing fees
                         for both the three and six months ended June 30, 2017 which is
                         recorded in Interest Expense, net in the Consolidated Statement of
                         Operations and in the Adjusted EBITDA table presented above.
(e)                      The effective tax rate was 33% for both the three and six months
                         ended June 30, 2017, and 19% and 23% for the three and six months
                         ended June 30, 2016, respectively.
(f)                      Non-GAAP diluted shares includes basic share calculated in
                         accordance with GAAP and potentially dilutive shares related to the
                         Company’s stock-based compensation awards.
                          
 
Reconciliation - Cash Provided by Operating Activities to Free
Cash Flow (a) (Unaudited; in thousands):
 
                                                                                  Six Months Ended
                                                                                                         June 30,
                                                               --------------------------------------------------------------------------------------
                                                                               2017                                  2016
                                                               ------------------------------------                     ------------------------------------
Cash provided by operating activities                               $  82,718                                                $ 161,783
Adjustments:
Cash acquisition and integration payments                              65,100                                                   11,871
Cash paid for capital expenditures                                    (41,627 )                                                (25,337 )
                                                               -----------------------------------                      -----------------------------------
  Free Cash Flow                                                    $ 106,191                             $ 148,317  
-----------------------------------------                      ====== ======= ====================                      ====== ======= ====================
(a)   Free cash flow is defined as cash provided by operating activities
                         determined in accordance with GAAP plus cash acquisition and
                         integration payments less additions for capital expenditures.
                          

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170808005559r1&sid=cmtx6&distro=nx&

View source version on businesswire.com: http://www.businesswire.com/news/home/20170808005559/en/

SOURCE: Gartner, Inc.

Gartner, Inc. 
Sherief Bakr, +1 203-316-6537 
Group Vice President, Investor Relations 
investor.relations@gartner.com


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