What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-16 compared with 2022-02-23 · 109 added, 122 removed, 280 unchanged (45% of the section changed)

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Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include, among others, the following:

uncertainty of the magnitude, duration, geographic reach and impact on the global economy of the COVID-19 pandemic;

the current, and uncertain future, impact of the COVID-19 pandemic and governments’ responses to it on our business, growth, reputation, projections, prospects, financial condition, operations, cash flows, and liquidity;

the adequacy or effectiveness of steps we take to respond to the crisis;

the impact of general economic conditions, including inflation (and related monetary policy by governments in response to inflation), on economic activity and our operations;

changes in macroeconomic and market conditions and market volatility, including interest rates and the effect on the credit markets and access to capital;

the impact of global economic and geopolitical conditions, including inflation, recession and the COVID-19 pandemic;

our ability to carry out our strategic initiatives and manage associated costs;

our ability to recover potential claims under our event cancellation insurance;

the timing of conferences and meetings, in particular our Gartner Symposium/Xpo series that normally occurs during the fourth quarter, as well as the timing of our return to in-person conferences and meetings and willingness of participants to attend;

the timing of conferences and meetings, in particular our Gartner Symposium/Xpo series that normally occurs during the fourth quarter;

our ability to achieve and effectively manage growth, including our ability to integrate our acquisitions and consummate and integrate future acquisitions;

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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 attract and retain a professional staff of research analysts and consultants as well as experienced sales personnel upon whom we are dependent, especially in light of increasing labor competition;

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;

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additional risks associated with international operations, including foreign currency fluctuations;

the U.K.’s exit from the European Union and its impact on our results;

the impact on our business resulting from changes in international conditions, including those resulting from the war in Ukraine and current and future sanctions imposed by governments or other authorities;

the impact of restructuring and other charges on our businesses and operations;

cybersecurity incidents;

general economic conditions;

changes in macroeconomic and market conditions and market volatility (including developments and volatility arising from the COVID-19 pandemic), including interest rates and the effect on the credit markets and access to capital;

risks associated with the creditworthiness, budget cuts, and shutdown of governments and agencies;

the impact of changes in tax policy and heightened scrutiny from various taxing authorities globally;

uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark;

our ability to meet ESG commitments;

the impact of changes in tax policy (including the recently enacted Inflation Reduction Act of 2022) and heightened scrutiny from various taxing authorities globally;

changes to laws and regulations;

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of this Annual Report on Form 10-K, which is incorporated herein by reference.

Forward-looking statements are subject to risks, estimates and uncertainties that could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements, and are currently, or in the future could be, amplified by the COVID-19 pandemic.

Factors that might cause such a difference include, but are not limited to, those listed above or described under “Risk Factors” in Item 1A of this Annual Report on Form 10-K.

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Through custom analysis and on-the-ground support we enable optimized technology investments and stronger performance on our clients’ mission critical priorities.

COVID-19 Impact

As a result of the COVID-19 pandemic, we temporarily closed Gartner offices around the world and implemented significant travel restrictions.

Although we have reopened most offices and have plans to reopen substantially all remaining offices in early 2022, health and safety permitting, reopening is subject to many factors outside of our control.

The vast majority of our employees transitioned to working from home.

In early 2022, we began to operate under a hybrid virtual-first working environment, meaning that most of our employees will have the option to work remotely at least some of the time, for the foreseeable future.

As a result, in the fourth quarter of 2021 we evaluated our real estate footprint globally, and determined that certain of our leased locations are no longer necessary for our operations.

This evaluation resulted in the impairment of right-of-use assets and other long-lived assets, net of a reduction in lease liabilities, of $49.5 million related to certain office locations we no longer intend to use.

We expect to continue to evaluate our real estate footprint globally.

If we determine there is any additional excess property, there is no assurance that we will be able to sublease any such excess properties or that we will not incur costs in connection with such exit activities, which may be material.

As of the date of this filing, we do not believe our work from home protocol has affected our internal controls over financial reporting.

Of the three business segments in which we operate, Research and Consulting have returned to growth levels that were in line with our growth prior to the pandemic.

However, Conferences continues to be negatively impacted.

We cancelled in-person conferences scheduled for 2020 beginning in late February/early March 2020 with the remainder being cancelled after the World Health Organization’s declaration of the COVID-19 pandemic later in March 2020.

We began holding virtual conferences during the second half of 2020.

We held 39 virtual conferences during the year ended December 31, 2021 and expect to continue to deliver conferences virtually during 2022.

These virtual conferences have resulted in significantly less revenue and gross contribution than in-person conferences, but we believe they aid in client retention and engagement.

We are operationally planning to re-launch in-person destination conferences when conditions permit.

For cancelled conferences, our event cancellation insurance enables us to receive an amount up to expected revenues, plus incurred expenses minus saved expense.

Our event cancellation insurance provides up to $170 million in coverage for 2020 with the right to reinstate that amount one time if those limits are utilized.

The insurer has contested our right to reinstate limits.

Gartner also has event cancellation insurance for 2021, covering events that were planned for 2021 but cancelled, of up to $150 million with the right to reinstate up to that amount one time if the initial limits are inadequate.

The insurer has contested all coverage for events planned for 2021 but cancelled due to COVID-19.

We are in litigation with the insurer on these issues.

In 2021, we received $166.9 million of proceeds related to 2020 insurance claims, and recorded a gain of $152.3 million.

The timing of receiving the remaining proceeds from 2020 and 2021 insurance claims is uncertain so we will not record any insurance claims in excess of expenses incurred related to the remaining claims until the receipt of the insurance proceeds is deemed to be realizable.

Our insurance coverage for 2022 (and likely beyond) excludes cancellation due to communicable diseases.

In response to the pandemic’s impacts to our business, we implemented cost avoidance initiatives in the first half of 2020 including significant limitations on hiring and third-party spending, reductions to discretionary spending and elimination of non-essential travel and re-prioritization of capital expenditures.

We began to restore certain investments in the business during the second half of 2020 and accelerated these investments in 2021.

We expect these investments to increase in future periods, which may have a negative impact on operating margins.

Recent Events

The invasion of Ukraine by Russia and the sanctions and other measures being imposed in response to this conflict have increased the level of economic and political uncertainty.

In March 2022, we began winding down our business in Russia.

Russia has not composed a material portion of our consolidated revenues, net income, net assets or workforce.

We do not have a business in Ukraine.

Other impacts due to this evolving situation are currently unknown and could subject our business to materially adverse consequences should the situation escalate or cause an expansion of economic disruption beyond its current scope to the rest of Europe, where a material portion of our business is carried out.

A prolonged disruption may adversely affect our business operations, financial performance and results of operations.

Inflation rates, particularly in North America and Europe, have increased significantly in the past year.

Inflation has not had a material effect on our business operations, financial performance and results of operations, other than its impact on the general economy.

However, if our costs, in particular personnel-related costs, were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases in future periods.

Our inability or failure to realize these offsets could adversely affect our business operations, financial performance and results of operations.

On August 16, 2022, the Inflation Reduction Act of 2022 was enacted into law in the United States.

The statute includes a 15% corporate alternative minimum tax on U.S.

corporations with adjusted financial statement income in excess of $1.0 billion which is effective for taxable years beginning after December 31, 2022.

The statute also includes a 1% excise tax on publicly traded U.S.

corporations for the value of any of its stock that is repurchased by the corporation, excluding certain excepted repurchases.

We do not expect it will have a material impact on our future U.S.

tax expense, cash taxes and effective tax rate.

We also do not expect it to have a material impact on the amount of potential future share repurchases.

In November 2022, we entered into a definitive agreement to sell our TalentNeuron business.

As of December 31, 2022, the assets and liabilities of TalentNeuron were considered held for sale, resulting in $49.0 million of assets held for sale and $30.8 million of liabilities held for sale on the Consolidated Balance Sheet.

The majority of the held for sale assets were goodwill, intangible assets, net and accounts receivable, with carrying amounts of $16.0 million, $9.5 million and $15.9 million, respectively, while the majority of the held for sale liabilities was deferred revenues, with a carrying amount of $27.1 million.

TalentNeuron is included in our Research segment.

On February 2, 2023, we completed the sale of TalentNeuron for approximately $164.0 million, prior to final working capital adjustments.

BUSINESS MEASUREMENTS

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BUSINESS SEGMENT BUSINESS MEASUREMENT

Research Total contract value represents the dollar value attributable to all of our subscription-related contracts.

Research Contract value represents the dollar value attributable to all of our subscription-related contracts.

It is calculated as the annualized value of all contracts in effect at a specific point in time, without regard to the duration of the contract.

Total contract value primarily includes Research deliverables for which revenue is recognized on a ratable basis, as well as other deliverables (primarily Conferences tickets) for which revenue is recognized when the deliverable is utilized.

Contract value primarily includes Research deliverables for which revenue is recognized on a ratable basis, as well as other deliverables (primarily Conferences tickets) for which revenue is recognized when the deliverable is utilized.

Comparing contract value year-over-year not only measures the short-term growth of our business, but also signals the long-term health of our Research subscription business since it measures revenue that is highly likely to recur over a multi-year period.

Our total contract value consists of Global Technology Sales contract value , which includes sales to users and providers of technology, and Global Business Sales contract value , which includes sales to all other functional leaders.

Our contract value consists of Global Technology Sales contract value , which includes sales to users and providers of technology, and Global Business Sales contract value , which includes sales to all other functional leaders.

Client retention rate represents a measure of client satisfaction and renewed business relationships at a specific point in time.

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Wallet retention rate represents a measure of the amount of contract value we have retained with clients over a twelve-month period.

Wallet retention is calculated on a percentage basis by dividing the contract value of our current clients, who were also clients a year ago, by the total contract value from a year ago, excluding the impact of foreign currency exchange.

Wallet retention is calculated on a percentage basis by dividing the contract value of our current clients, who were also clients a year ago, by the contract value from a year ago, excluding the impact of foreign currency exchange.

When wallet retention exceeds client retention, it is an indication of retention of higher-spending clients, or increased spending by retained clients, or both.

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Single day, local meetings are excluded.

Consulting Consulting backlog represents future revenue to be derived from in-process consulting and measurement engagements.

Consulting Consulting backlog represents future revenue to be derived from in-process consulting and benchmark analytics engagements.

Utilization rate represents a measure of productivity of our consultants.

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EXECUTIVE SUMMARY OF OPERATIONS AND FINANCIAL POSITION

We have executed a strategy since 2005 to drive revenue and earnings growth.

The fundamentals of our strategy include a focus on creating actionable, objective insight for executive leaders and their teams, delivering innovative and highly differentiated product offerings, building a strong sales capability, providing world class client service with a focus on client engagement and retention, and continuously improving our operational effectiveness.

The fundamentals of our strategy include a focus on creating actionable insights for executive leaders and their teams, delivering innovative and highly differentiated product offerings, building a strong sales capability, providing world class client service with a focus on client engagement and retention, and continuously improving our operational effectiveness.

We had total revenues of $5.5 billion in 2022, an increase of 16% compared to 2021 on a reported basis and 20% excluding the foreign currency impact.

Net income increased to $793.6 million in 2021 from $266.7 million in 2020 and, as a result, diluted earnings per share was $9.21 in 2021 compared to $2.96 in 2020.

Net income increased to $807.8 million in 2022 from $793.6 million in 2021 and diluted earnings per share was $9.96 in 2022 compared to $9.21 in 2021.

Research revenues increased to $4.6 billion in 2022, an increase of 12% compared to 2021 on a reported basis and 16% excluding the foreign currency impact.

The Research gross contribution margin was 74% and 72% in 2021 and 2020, respectively.

Total contract value was $4.2 billion at December 31, 2021, an increase of 16% compared to December 31, 2020 on a foreign currency neutral basis.

Conferences revenues increased to $214.4 million in 2021, an increase of 78% compared to 2020 both on a reported basis and excluding the foreign currency impact.

The Research gross contribution margin was 74% in both 2022 and 2021.

Contract value was $4.7 billion at December 31, 2022, an increase of 12% compared to December 31, 2021 on a foreign currency neutral basis.

Conferences revenues increased to $389.3 million in 2022, an increase of 82% compared to 2021 on a reported basis and 90% excluding the foreign currency impact.

The Conferences gross contribution margin was 54% and 62% in 2022 and 2021, respectively.

We held 39 virtual conferences in 2021, and 5 in-person and 15 virtual conferences in 2020.

We held 25 in-person and 16 virtual conferences in 2022, and 39 virtual conferences in 2021.

Consulting revenues increased to $481.8 million in 2022, an increase of 15% compared to 2021 on a reported basis and 22% excluding the foreign currency impact.

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Backlog was $139.7 million at December 31, 2022.

Cash provided by operating activities was $1.3 billion and $903.3 million during 2021 and 2020, respectively.

Cash provided by operating activities was $1.1 billion and $1.3 billion during 2022 and 2021, respectively.

As of December 31, 2022, we had $698.0 million of cash and cash equivalents and approximately $1.0 billion of available borrowing capacity on our revolving credit facility.

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Gain on event cancellation insurance claims — 152,310 (152,310) nm

Loss on extinguishment of debt — (44,814) 44,814 nm

Other income (expense), net 18,429 (5,654) 24,083 >(100)

Other income, net 48,412 18,429 29,983 163

Provision for income taxes 219,396 176,310 43,086 24

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The tables below present (i) revenues by geographic region (based on where the sale is fulfilled) and (ii) revenues by segment for the years indicated (in thousands).

Primary Geographic Market Year Ended December 31, 2021 Year Ended December 31, 2020 Increase (Decrease) Percentage Increase

Primary Geographic Market Year Ended December 31, 2022 Year Ended December 31, 2021 Increase Percentage Increase

United States and Canada $ 3,619,382 $ 3,048,902 $ 570,480 19 %

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Total revenues $ 5,475,846 $ 4,733,962 $ 741,884 16 %

Segment Year Ended December 31, 2021 Year Ended December 31, 2020 Increase (Decrease) Percentage Increase

Segment Year Ended December 31, 2022 Year Ended December 31, 2021 Increase Percentage Increase

Research $ 4,604,791 $ 4,101,392 $ 503,399 12 %

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Cost of services and product development was $1.7 billion in 2022, an increase of $249.7 million compared to 2021, or 17% on a reported basis and 21% excluding the foreign currency impact.

The increase was primarily due to increased compensation costs, conference expenses and program expenses, partially offset by reduced travel and entertainment costs.

Cost of services and product development as a percent of revenues was 31% and 33% during 2021 and 2020, respectively.

The increase in Cost of services and product development was primarily due to:

(i) increased compensation costs as a result of higher headcount, (ii) increased conference related expenses, due to the return to in-person destination conferences and (iii) increased research program expenses.

Cost of services and product development as a percent of revenues was 31% for both 2022 and 2021, respectively.

Selling, general and administrative (“SG&A”) expense was $2.5 billion in 2022, an increase of $325.3 million compared to 2021, or 15% on a reported basis and 19% excluding the foreign currency impact.

The increase in SG&A during the year ended December 31, 2021, as compared to the prior fiscal year, was primarily due to charges associated with the impairment of right-of-use assets and other long-lived assets, net of a reduction in lease liabilities, of $49.5 million related to certain office locations we no longer intend to use.

Additionally, conference-related expenses increased due to expenses on cancelled conferences.

SG&A expense also increased due to higher personnel costs in the current year, partially offset by reduced severance costs.

There was a slight decrease in the number of quota-bearing sales associates in Global Technology Sales and an increase in Global Business Sales to 3,072 and 934, respectively, at December 31, 2021.

The increase in SG&A during the year ended December 31, 2022, as compared to the prior fiscal year, was primarily due to higher personnel costs in the current year, including higher salary expense due to increased headcount, as well as higher commission expense, following strong contract value growth in 2021, which is amortized as the related revenue is recognized.

These increases were partially offset by a reduction in facilities expense, related to a reduction of our real estate footprint.

We expect to continue to evaluate our real estate footprint globally.

During 2022, we incurred charges associated with the impairment of right-of-use assets and other long-lived assets, related to certain office locations we no longer intend to use, of $54.0 million, compared to $49.5 million in 2021.

The year ended December 31, 2021 also included expenses related to cancelled conferences.

The number of quota-bearing sales associates in Global Technology Sales increased by 18% to 3,630 and in Global Business Sales increased by 22% to 1,144, compared to December 31, 2021.

On a combined basis, the total number of quota-bearing sales associates increased by 19% when compared to December 31, 2021.

SG&A expense as a percent of revenues was 45% and 46% during 2022 and 2021, respectively.

Depreciation increased by 9% during 2021 compared to 2020.

This increase was due to additional investments, including new leasehold improvements as additional office space went into service, and capitalized software.

Amortization of intangibles decreased by 12% during 2021 compared to 2020 due to certain intangible assets that became fully amortized in 2021 and 2020.

Operating income was $915.8 million and $490.2 million during 2021 and 2020, respectively.

The increase in operating income was primarily due to increased revenue.

Depreciation decreased by 9% during 2022 compared to 2021.

The decrease for the year ended December 31, 2022 was primarily due to a reduction in leasehold improvements depreciation as a result of the impairment losses recorded in the fourth quarter of 2021 and the year ended December 31, 2022.

Amortization of intangibles decreased by 10% during 2022 compared to 2021 due to certain intangible assets that became fully amortized in 2021.

Acquisition and integration charges increased by $3.0 million during the year ended December 31, 2022, compared to the same period in 2021.

The increase is primarily due to expenses related to the pending divestiture of our TalentNeuron business.

Operating income was $1.1 billion and $915.8 million during 2022 and 2021, respectively.

The increase in operating income was due to increased revenue, partially offset by an increase in cost of services and product development and selling, general and administrative expenses.

Interest expense, net increased by $4.7 million during 2022 compared to 2021.

The increase in interest expense, net was primarily due to an increase in debt, partially offset by a reduction in the amortization of debt issuance costs.

The increase in interest expense, net was primarily due to an increase in debt as a result of the issuance of the 2029 Notes in June 2021 and higher interest rates on our term loan, partially offset by increased interest income, as well as lower interest expense due to the maturation of $700.0 million in fixed-for-floating interest rate swap contracts in March 2022.

Gain on event cancellation insurance claims of $152.3 million during the year ended December 31, 2021 reflected proceeds, net of expense recoveries, related to the 2020 conference cancellation insurance claims.

Loss on extinguishment of debt during the year ended December 31, 2020 was related to the early redemption premium and write-off of deferred financing fees on our redemption of the 2025 Notes on September 28, 2020.

Other income (expense), net for the years presented herein included the net impact of foreign currency gains and losses from our hedging activities, as well as sales of certain state tax credits and the recognition of other tax incentives.

During 2021 and 2020, Other income (expense), net included a $20.2 million and a 2.2 million gain on de-designated interest rate swaps, respectively.

Other income (expense), net for the year ended December 31, 2020 also included the release of $10.3 million from Accumulated other comprehensive loss, net related to forecasted interest payments that were no longer probable as a result of the payment under the then outstanding 2016 Credit Agreement term loan and revolving credit facility on June 30, 2020.

Provision for income taxes was $176.3 million and $59.4 million during 2021 and 2020, respectively, with an effective income tax rate of 18.2% for both 2021 and 2020.

The Company completed intercompany sales of certain intellectual property in both 2021 and 2020.

As a result, the Company recorded net tax benefits of approximately $54.1 million and $28.3 million during 2021 and 2020, respectively.

These benefits represent the value of future tax deductions for amortization of the assets in the acquiring jurisdiction, net of any tax recognized in the selling jurisdiction.

Other income, net for the years presented herein included the net impact of foreign currency gains and losses from our hedging activities, as well as sales of certain state tax credits and the recognition of other tax incentives.

During 2022 and 2021, Other income, net included a $52.3 million and a $20.2 million gain on de-designated interest rate swaps, respectively.

Provision for income taxes was $219.4 million and $176.3 million during 2022 and 2021, respectively, with an effective income tax rate of 21.4% and 18.2% for 2022 and 2021, respectively.

The 2021 effective tax rate includes a benefit of approximately $54.1 million from intercompany sales of certain intellectual property, while no such benefit occurred in 2022.

This benefit represents the value of future tax deductions for amortization of the assets in the acquiring jurisdiction, net of any tax recognized in the selling jurisdiction.

The Company’s intellectual property footprint continues to evolve and may result in tax rate volatility in the future.

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Additionally, our diluted net income per share increased by $0.75 in 2022 compared to 2021.

These year-over-year changes reflect:

(i) the increase in our 2021 operating income;

(ii) the gain on event cancellation insurance claims;

(iii) the prior year loss on extinguishment of debt;

and (iv) higher Other income (expense), net, partially offset by increased income tax expense due to higher pre-tax income in 2021 compared to 2020.

These year-over-year changes reflect the increase in our 2022 operating income and higher Other income, net, partially offset by the gain on event cancellation insurance claims recognized in 2021 and increased income tax expense in 2022 compared to 2021.

SEGMENT RESULTS

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Research, Conferences and Consulting.

As Of And For The Year Ended December 31, 2021 As Of And For The Year Ended December 31, 2020 Increase

The Year Ended December 31, 2022 The Year Ended December 31, 2021 Increase

(Decrease) Percentage

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Gross contribution (1) $ 3,414,574 $ 3,036,925 $ 377,649 12 %

Gross contribution margin 74 % 72 % 2 points —

Gross contribution margin 74 % 74 % — point —

Business Measurements:

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Contract value (1), (3) $ 3,632,200 $ 3,300,600 $ 331,600 10 %

Client retention 86 % 83 % 3 points —

Wallet retention 106 % 98 % 8 points —

Client retention 86 % 86 % — point —

Wallet retention 105 % 106 % (1) point —

Global Business Sales (2):

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Research revenues increased by $503.4 million during 2022 compared to 2021, or 12% on a reported basis and 16% excluding the foreign currency impact.

The gross contribution margin was 74% in 2021 compared to 72% in 2020.

The increase in revenues during 2021 was primarily due to the same factors driving the trend in our Research contract value, which are discussed below.

The improvement in margin was primarily due to the growth in revenue.

Total contract value increased to $4.2 billion at December 31, 2021, or 16% compared to December 31, 2020 on a foreign currency neutral basis.

Total contract value growth was led by the manufacturing, services, and technology sectors.

The gross contribution margin was 74% in both 2022 and 2021.

The increase in revenues during 2022 was primarily due to strong Research contract value growth in 2021 and 2022.

Contract value increased to $4.7 billion at December 31, 2022, or 12% compared to December 31, 2021 on a foreign currency neutral basis.

All industry sectors grew at double-digit rates, other than technology and media, which grew at high single digit rates.

The fastest growth was in the transportation, retail and manufacturing sectors.

Global Technology Sales (“GTS”) contract value increased by 10% at December 31, 2022 when compared to December 31, 2021.

The increase in GTS contract value was primarily due to new business from new and existing clients, as well as improved client retention.

GTS contract value increased by double-digits for all enterprise sizes and over half of all sectors.

Global Business Sales (“GBS”) contract value increased by 24% year-over-year, also primarily driven by new business from new and existing clients, and improved client retention.

All of our GBS practices achieved double-digit growth rates, with the majority growing more than 20% year-over-year.

GTS client retention was 86% and 83% as of December 31, 2021 and 2020, respectively, while wallet retention was 106% and 98%, respectively.

The increase in GTS contract value was primarily due to new business from new and existing clients.

GTS contract value increased by double-digits for the majority of sectors.

Global Business Sales (“GBS”) contract value increased by 19% year-over-year, also primarily driven by new business from new and existing clients.

Nearly all of our GBS practices achieved double-digit growth rates, with the majority of enterprise size and sectors growing more than 15% year-over-year.

GTS client retention was 86% as of both December 31, 2022 and 2021, while wallet retention was 105% and 106%, as of December 31, 2022 and 2021, respectively.

GBS client retention was 89% and 87% as of December 31, 2022 and 2021, respectively, while wallet retention was 112% and 115% as of December 31, 2022 and 2021, respectively.

The number of GTS client enterprises and GBS client enterprises increased by 9% and 5%, respectively, at December 31, 2021 when compared to December 31, 2020.

As Of And For The Year Ended December 31, 2021 As Of And For The Year Ended December 31, 2020 Increase

The Year Ended December 31, 2022 The Year Ended December 31, 2021 Increase

(Decrease) Percentage

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Single day, local meetings are excluded.

In response to the COVID-19 pandemic, we cancelled all in-person conferences from March 2020 through December 2021, and pivoted to producing virtual conferences with a focus on maximizing the value we deliver to our clients.

Conferences revenues increased by $174.8 million during 2022 compared to 2021, or 82% on a reported basis and 90% excluding the foreign currency impact.

We re-launched in-person destination conferences during the second quarter of 2022 and expect to hold in-person destination conferences in future periods as conditions permit.

We held 25 in-person destination conferences and 16 virtual conferences during the year ended December 31, 2022.

We held 39 virtual conferences during the year ended December 31, 2021.

During 2020, we successfully held 5 in-person conferences prior to the COVID-19 pandemic and 15 virtual conferences during the second half of the year.

We expect to continue to deliver conferences virtually during 2022, but are operationally planning to re-launch in-person destination conferences when conditions permit.

Conferences revenues increased by $94.3 million during 2021 compared to 2020, or 78%, on both a reported basis and excluding the foreign currency impact.

The increase in revenues for the year ended December 31, 2021 was due to the virtual conferences held during the period, as well as the use of ticket entitlements which we extended from 2020 due to the pandemic.

The increase in revenues for the year ended December 31, 2022 was primarily due the return to in-person destination conferences.

The segment gross contribution margin was 54% and 62% in 2022 and 2021, respectively.

The higher gross contribution margin during 2021 was primarily due to increased revenues.

The lower gross contribution margin during 2022 was primarily due to the return to in-person destination conferences.

We expect Conferences gross contribution margin to decrease from 2021 and 2022 levels as the mix of in-person destination conferences increases.

As Of And For The Year Ended December 31, 2022 As Of And For The Year Ended December 31, 2021 Increase

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Gross contribution (1) $ 189,834 $ 158,843 $ 30,991 20 %

Gross contribution margin 38 % 31 % 7 points —

Gross contribution margin 39 % 38 % 1 point —

Business Measurements:

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Consultant utilization 70 % 68 % 2 points —

Average annualized revenue per billable headcount (1) $ 429 $ 368 $ 61 17 %

(1) Dollars in thousands.

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Backlog as of December 31, 2021 has been calculated using the same foreign currency rates as 2022.

We changed our method of calculating backlog beginning in 2022 to include multi-year contracts.

Consulting revenues increased 15% during 2022 compared to 2021 on a reported basis and 22% excluding the foreign currency impact.

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Backlog increased by $26.7 million, or 24%, from December 31, 2021 to December 31, 2022.

The change in our method of calculating backlog noted above contributed approximately 13 percentage points to the backlog growth rate.

LIQUIDITY AND CAPITAL RESOURCES

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The Company intends to reinvest substantially all of its accumulated undistributed foreign earnings, except in instances where repatriation would result in minimal additional tax.

As a result of the U.S.

Tax Cuts and Jobs Act of 2017, we believe that the income tax impact if such earnings were repatriated would be minimal.

The table below summarizes the changes in the Company’s cash balances for the years indicated (in thousands).

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Cash used in financing activities (1,027,442) (1,157,609) 130,167

Net increase in cash and cash equivalents and restricted cash 74,394 403,166 (328,772)

Net (decrease) increase in cash and cash equivalents and restricted cash (43,578) 74,394 (117,972)

Effects of exchange rates (18,425) (26,375) 7,950

Beginning cash and cash equivalents 712,583 280,836 431,747

Beginning cash and cash equivalents and restricted cash 760,602 712,583 48,019

Ending cash and cash equivalents and restricted cash $ 698,599 $ 760,602 $ (62,003)

Cash provided by operating activities was $1,312.5 million and $903.3 million in 2021 and 2020, respectively.

The year-over-year increase was primarily due to higher pre-tax income in the 2021 period, in part due to a $152.3 million gain on event cancellation insurance claims, and an increase in deferred revenues resulting from increased bookings in Research, partially offset by higher income tax payments and deferred commissions.

Cash provided by operating activities was $1.1 billion and $1.3 billion in 2022 and 2021, respectively.

The year-over-year decrease was primarily due to $166.9 million of insurance proceeds received in the 2021 period related to 2020 event cancellation claims, as well as higher commission and interest payments in 2022, partially offset by reduced income tax payments.

Cash used in investing activities was $117.6 million and $80.5 million in 2022 and 2021, respectively.

The cash used in 2021 was for capital expenditures and the acquisition of Pulse Q&A Inc.

The slight decrease from 2020 to 2021 was the result of reduced capital spending in response to the COVID-19 pandemic, partially offset by the 2021 acquisition of Pulse Q&A Inc.

Cash used in financing activities was $1.2 billion and $416.2 million in 2021 and 2020, respectively.

The increase from 2021 to 2022 was the result of increased capital expenditures primarily due to higher capitalized software and computer equipment additions, partially offset by lower spending on acquisitions.

Cash used in financing activities was $1.0 billion and $1.2 billion in 2022 and 2021, respectively.

During the 2022 period, we used $1.0 billion of cash for share repurchases and paid a net $5.9 million in debt principal repayments.

During the 2021 period, we issued $600.0 million of 3.625% Senior Notes due 2029, and repaid $100.0 million on our term loan facility under the 2020 Credit Agreement with a portion of the proceeds from the issuance of the 2029 Notes.

During 2021, we used $1.7 billion of cash for share repurchases.

During 2020, the Company repaid a net $148.0 million on our revolving credit facility under the 2016 Credit Agreement, paid a net $58.5 million in debt principal repayments, borrowed $5.0 million under the 2020 Credit Agreement and used $176.3 million for share repurchases.

Additionally, we paid $25.8 million in deferred financing fees related to our financing activities and $30.8 million in early redemption premium payments related to the repayment of our

See Note 6 — Debt in the Notes to Consolidated Financial Statements provides additional information regarding the Company’s financing activities in 2021 and 2020.

During 2021, we used $1.7 billion for share repurchases.

Additionally during 2021, we paid $7.3 million in deferred financing fees related to our financing activities.

See Note 6 — Debt in the Notes to Consolidated Financial Statements provides additional information regarding the Company’s financing activities in 2021.

OBLIGATIONS AND COMMITMENTS

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(1) Principal repayments of the Company’s debt obligations were classified in the above table based on the contractual repayment dates.

Interest payments were based on the effective interest rates as of December 31, 2021, including the effects of the Company’s interest rate swap contracts.

Interest payments were based on the effective interest rates as of December 31, 2022.

Commitment fees were based on unused balances and commitment rates as of December 31, 2022.

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(4) Other includes:

(i) contractual commitments (a) for software, telecom and other services and (b) to secure sites for our Conferences business (c) deferred consideration held in escrow in connection with business acquisitions (see Note 1 — Business and Significant Accounting Policies and Note 2 — Acquisitions in in the Notes to Consolidated Financial Statements);

(i) contractual commitments (a) for software, telecom and other services and (b) to secure sites for our Conferences business;

and (ii) projected cash contributions to the Company’s defined benefit pension plans.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis