# Gartner Inc: Form 10-Q for the period ended Mar 31, 2023

- Company: [Gartner Inc](/companies/it.md) (CIK 749251)
- Form: 10-Q
- Filed: 2023-05-02
- Accepted by EDGAR: May 2, 2023, 06:06 ET
- Period: 2023-03-31
- Accession: 0000749251-23-000021
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/749251/000074925123000021/it-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/749251/000074925123000021/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $1.41bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $435.1m | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2023-01-01 to 2023-03-31 | $657.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | $408.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $27.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $85.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | $295.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | $3.68 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | $3.72 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 80,282,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $164.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Share repurchases | 3 months, 2023-01-01 to 2023-03-31 | $106.8m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-03-31 | $893.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $2.90bn | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $7.38bn | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $3.45bn | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $6.91bn | us-gaap:Liabilities |
| Long-term debt | at 2023-03-31 | $2.45bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-03-31 | $8.4m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-03-31 | $472.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 34,386 characters.

The purpose of this Management’s Discussion and Analysis (“MD&A”) is to facilitate an understanding of significant factors influencing the quarterly operating results, financial condition and cash flows of Gartner, Inc. Additionally, the MD&A conveys our expectations of the potential impact of known trends, events or uncertainties that may impact future results. You should read this discussion in conjunction with our Condensed Consolidated Financial Statements and related notes included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”). Historical results and percentage relationships are not necessarily indicative of operating results for future periods. References to “Gartner,” the “Company,” “we,” “our” and “us” in this MD&A are to Gartner, Inc. and its consolidated subsidiaries.

### FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are any statements other than statements of historical fact, including statements regarding our expectations, beliefs, hopes, intentions, projections or strategies regarding the future. In some cases, forward-looking statements can be identified by the use of words such as “may,” “will,” “expect,” “should,” “could,” “believe,” “plan,” “anticipate,” “estimate,” “predict,” “potential,” “continue” or other words of similar meaning.

We operate in a very competitive and rapidly changing environment that involves numerous known and unknown risks and uncertainties, some of which are beyond our control. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future quarterly and annual revenues, operating income, results of operations and cash flows, as well as any forward-looking statement, are subject to change and to inherent risks and uncertainties, such as those disclosed or incorporated by reference in our filings with the Securities and Exchange Commission. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include, among others, the following: the 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; our ability to achieve and effectively manage growth, including our ability to integrate our acquisitions and consummate and integrate future acquisitions; our ability to pay our debt obligations; 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, 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 successfully compete with existing competitors and potential new competitors; our ability to enforce and protect our intellectual property rights; additional risks associated with international operations, including foreign currency fluctuations; 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; risks associated with the creditworthiness, budget cuts, and shutdown of governments and agencies; 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; and other risks and uncertainties. The potential fluctuations in our operating income could cause period-to-period comparisons of operating results not to be meaningful and could provide an unreliable indication of future operating results A description of the risk factors associated with our business is included under “Risk Factors” in Item 1A. of the 2022 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. 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 the 2022 Form 10-K. Readers should not place undue reliance on these forward-looking statements, which reflect management’s opinion only as of the date on which they were made. Forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date hereof, and forward-looking statements in documents attached that are incorporated by reference speak only as of the date of those documents. Except as required by law, we disclaim any obligation to review or update these forward-looking statements to reflect events or circumstances as they occur.

### BUSINESS OVERVIEW

Gartner, Inc. (NYSE: IT) delivers actionable, objective insight to executives and their teams. Our expert guidance and tools enable faster, smarter decisions and stronger performance on an organization’s mission-critical priorities.

We deliver our products and services globally through three business segments – Research, Conferences and Consulting, as described below.

- ***Research*** equips executives and their teams from every function and across all industries with actionable, objective insight, guidance and tools. Our experienced experts deliver all this value informed by an unmatched combination of practitioner-sourced and data-driven research to help our clients address their mission critical priorities.
- ***Conferences*** provides executives and teams across an organization the opportunity to learn, share and network. From our Gartner Symposium/Xpo series, to industry-leading conferences focused on specific business roles and topics, to peer-driven sessions, our offerings enable attendees to experience the best of Gartner insight and guidance.
- ***Consulting*** serves senior executives leading technology-driven strategic initiatives leveraging the power of Gartner’s actionable, objective insight. Through custom analysis and on-the-ground support we enable optimized technology investments and stronger performance on our clients’ mission critical priorities.

As of March 31, 2023 we had approximately 19,830 employees globally, an increase of 15.1% from March 31, 2022.

### 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 2022, we exited 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 February 2023, we completed the sale of a non-core business, TalentNeuron, for approximately $164.2 million and realized $158.7 million in cash from the sale, which was net of certain closing expenses. The sale is subject to certain post-closing adjustments. TalentNeuron was included in our Research segment. The Company recorded a pre-tax gain of $139.3 million on the sale of TalentNeuron, which is included in Gain from sale of divested operation in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2023.

### BUSINESS MEASUREMENTS

We believe that the following business measurements are important performance indicators for our business segments:

| BUSINESS SEGMENT | BUSINESS MEASUREMENT |
| --- | --- |
| 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. 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 contract value consists of Global Technology Sales contract value, which includes sales to users and providers of technology, and Global Business Sales contract value, which includes sales to all other functional leaders. |
|  | Client retention rate represents a measure of client satisfaction and renewed business relationships at a specific point in time. Client retention is calculated on a percentage basis by dividing our current clients, who were also clients a year ago, by all clients from a year ago. Client retention is calculated at an enterprise level, which represents a single company or customer. |
|  | Wallet retention rate represents a measure of the amount of contract value we have retained with clients over a twelve-month period. Wallet retention is calculated on a percentage basis by dividing the contract value of our current clients, who were also clients a year ago, by the contract value from a year ago, excluding the impact of foreign currency exchange. When wallet retention exceeds client retention, it is an indication of retention of higher-spending clients, or increased spending by retained clients, or both. Wallet retention is calculated at an enterprise level, which represents a single company or customer. |
| Conferences | Number of destination conferences represents the total number of hosted virtual or in-person conferences completed during the period. Single day, local meetings are excluded. |
|  | Number of destination conferences attendees represents the total number of people who attend virtual or in-person conferences. Single day, local meetings are excluded. |
| 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. Utilization rates are calculated for billable headcount on a percentage basis by dividing total hours billed by total hours available to bill. |

26

### EXECUTIVE SUMMARY OF OPERATIONS AND FINANCIAL POSITION

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 $1.4 billion during the first quarter of 2023, an increase of 12% compared to the first quarter of 2022. During the first quarter of 2023, revenues for Research increased by 7%, Conferences revenue increased by 524%, and Consulting revenues increased by 10%, compared to the first quarter of 2022. For a more complete discussion of our results by segment, see Segment Results below.

For the first quarter of 2023 and 2022, we had net income of $295.8 million and $172.5 million, respectively, and diluted income per share of $3.68 and $2.08, respectively. Cash provided by operating activities was $164.7 million and $167.8 million during the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, we had $893.5 million of cash and cash equivalents and approximately $1.0 billion of available borrowing capacity on our revolving credit facility. For a more complete discussion of our cash flows and financial position, see the Liquidity and Capital Resources section below.

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES

For information regarding our critical accounting policies and estimates, please refer to Part II, Item 7, “Critical Accounting Policies and Estimates” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There have been no material changes to the critical accounting policies previously disclosed in that report.

### RECENTLY ISSUED ACCOUNTING STANDARDS

The FASB has issued accounting standards that have not yet become effective and that may impact the Company’s consolidated financial statements or its disclosures in future periods. Note 1 — Business and Basis of Presentation in the Notes to Condensed Consolidated Financial Statements provides information regarding those accounting standards.

### RESULTS OF OPERATIONS

### Consolidated Results

In addition to GAAP results, we provide foreign currency neutral dollar amounts and percentages for our revenues, certain expenses, contract values and other metrics. These foreign currency neutral dollar amounts and percentages eliminate the effects of exchange rate fluctuations and thus provide a more accurate and meaningful trend in the underlying business performance being measured. We calculate foreign currency neutral dollar amounts by converting the underlying amounts in local currency for different periods into U.S. dollars by applying the same foreign exchange rates to all periods presented.

The table below presents an analysis of selected line items and period-over-period changes in our interim Condensed Consolidated Statements of Operations for the periods indicated (in thousands).

|  | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Increase (Decrease) | Increase (Decrease) % |
| --- | ---: | ---: | ---: | ---: |
| Total revenues | $1,408,869 | $1,262,740 | $146,129 | 12% |
| Costs and expenses: |  |  |  |  |
| Cost of services and product development | 435,139 | 377,033 | 58,106 | 15 |
| Selling, general and administrative | 657,090 | 617,904 | 39,186 | 6 |
| Depreciation | 23,896 | 23,201 | 695 | 3 |
| Amortization of intangibles | 22,735 | 25,148 | (2,413) | (10) |
| Acquisition and integration charges | 1,368 | 2,207 | (839) | (38) |
| Gain from sale of divested operation | (139,316) | — | (139,316) | nm |
| Operating income | 407,957 | 217,247 | 190,710 | 88 |
| Interest expense, net | (27,391) | (31,394) | (4,003) | (13) |
| Gain on event cancellation insurance claims | 3,077 | — | 3,077 | nm |
| Other (expense) income, net | (2,366) | 29,206 | (31,572) | nm |
| Less: Provision for income taxes | 85,494 | 42,544 | 42,950 | 101 |
| Net income | $295,783 | $172,515 | $123,268 | 71% |

nm = not meaningful.

Total revenues for the three months ended March 31, 2023 were $1.4 billion, an increase of $146.1 million, or 12% compared to the same period in 2022 on a reported basis and 14% excluding the foreign currency impact. Refer to the section of this MD&A below entitled “Segment Results” for a discussion of revenues and results by segment.

Cost of services and product development was $435.1 million during the three months ended March 31, 2023, an increase of $58.1 million compared to the same period in 2022, or 15% on a reported basis and 17% excluding the foreign currency impact. The increase in Cost of services and product development was primarily due to increased compensation costs as a result of higher headcount, and increased conference related expenses, due to the return to in-person destination conferences. Cost of services and product development as a percent of revenues was 31% and 30% for the three months ended March 31, 2023 and 2022, respectively.

Selling, general and administrative (“SG&A”) expense was $657.1 million during the three months ended March 31, 2023, an increase of $39.2 million compared to the same period in 2022, or 6% on a reported basis and 9% excluding the foreign currency impact. The increase in SG&A expense during the three months ended March 31, 2023 was primarily as a result of higher personnel expenses due to increased headcount. This increase was partially offset by lower charges associated with the impairment of right-of-use assets and other long-lived assets of $8.7 million, compared to $23.9 million in the prior year. The number of quota-bearing sales associates in Global Technology Sales increased by 22% to 3,666 and in Global Business Sales, adjusted for the sale of our TalentNeuron business, increased by 18% to 1,141 compared to March 31, 2022. On a combined basis, the total number of quota-bearing sales associates increased by 21% when compared to March 31, 2022. SG&A expense as a percent of revenues was 47% and 49% during the three months ended March 31, 2023 and 2022, respectively.

Depreciation increased by 3% during the three months ended March 31, 2023, compared to the same period in 2022. The increase for the three months ended March 31, 2023 was primarily due to increased computer equipment and software additions in 2022, partially offset by a reduction in leasehold improvements depreciation as a result of the impairment losses recorded during calendar year 2022.

Amortization of intangibles decreased by 10% during the three months ended March 31, 2023 compared to the same period in 2022 primarily due to intangible assets divested as part of the sale of our TalentNeuron business.

Acquisition and integration charges decreased by $0.8 million during the three months ended March 31, 2023, compared to the same period in 2022.

Gain from sale of divested operation of $139.3 million was attributable to the sale of our TalentNeuron business in February 2023.

Operating income was $408.0 million and $217.2 million during the three months ended March 31, 2023 and 2022, respectively. The increase in operating income for the three months ended March 31, 2023 as compared to the prior year period was primarily due to the gain from sale of divested operation, as well as increased revenue, partially offset by an increase in cost of services and product development and selling, general and administrative expenses.

Interest expense, net decreased by $4.0 million during the three months ended March 31, 2023, compared to the same period in 2022, resulting from increased interest income and lower interest expense due to the maturation of $700.0 million in fixed-for-floating interest rate swap contracts in March 2022, partially offset by higher interest rate on our term loan.

Gain on event cancellation insurance claims of $3.1 million during the three months ended March 31, 2023 reflected proceeds related to 2020 conference cancellation insurance claims.

Other (expense) income, net for the periods presented herein included the net impact of foreign currency gains and losses from our hedging activities. Other (expense) income, net for the three months ended March 31, 2023 and March 31, 2022 also included losses (gains) of $1.4 million and $(29.9) million, respectively, on de-designated interest rate swaps.

The provision for income taxes was $85.5 million and $42.5 million for the three months ended March 31, 2023 and 2022, respectively. The effective income tax rate was 22.4% and 19.8% for the three months ended March 31, 2023 and 2022, respectively. The year-over-year increase in the effective income tax rate was primarily due to the sale of our TalentNeuron business.

Net income for the three months ended March 31, 2023 and 2022 was $295.8 million and $172.5 million, respectively. Our diluted net income per share during the three months ended March 31, 2023 increased by $1.60 compared to the same period in 2022. The increase in net income during the three months ended March 31, 2023 was primarily the result of the gain from sale of divested operations, as well as increased revenue, partially offset by increased operating expenses, a lower gain from de-designated interest rate swaps and higher income tax expense.

### SEGMENT RESULTS

We evaluate reportable segment performance and allocate resources based on gross contribution margin. Gross contribution is defined as operating income or loss excluding certain Cost of services and product development expenses, SG&A expenses, Depreciation, Amortization of intangibles, Acquisition and integration charges and Gain from sale of divested operation. Gross contribution margin is defined as gross contribution as a percent of revenues.

#### Reportable Segments

The sections below present the results of the Company’s three reportable business segments: Research, Conferences and Consulting.

#### Research

| Financial Measurements: | As Of And For The Three Months Ended March 31, 2023 | As Of And For The Three Months Ended March 31, 2022 | Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | --- | ---: |
| Revenues (1) | $1,217,191 | $1,136,380 | $80,811 | 7% |
| Gross contribution (1) | $899,514 | $849,379 | $50,135 | 6% |
| Gross contribution margin | 74% | 75% | (1) point | — |
| Business Measurements: |  |  |  |  |
| Global Technology Sales (2): |  |  |  |  |
| Contract value (1), (3) | $3,534,000 | $3,246,000 | $288,000 | 9% |
| Client retention | 85% | 86% | (1) point | — |
| Wallet retention | 104% | 107% | (3) points | — |
| Global Business Sales (2): |  |  |  |  |
| Contract value (1), (3), (4) | $983,000 | $845,000 | $138,000 | 16% |
| Client retention | 89% | 87% | 2 points | — |
| Wallet retention | 110% | 115% | (5) points | — |

(1) Dollars in thousands.

(2) Global Technology Sales includes sales to users and providers of technology. Global Business Sales includes sales to all other functional leaders.

(3) Contract values are on a foreign exchange neutral basis. Contract values as of March 31, 2022 have been calculated using the same foreign currency rates as 2023.

(4) Contract value as of March 31, 2022 excludes the TalentNeuron business sold in February 2023.

Research revenues increased by $80.8 million during the three months ended March 31, 2023 compared to the same period in 2022, or 7% on a reported basis and 9% excluding the foreign currency impact. The segment gross contribution margin was 74% and 75% for the three months ended March 31, 2023 and 2022, respectively. The increase in revenues during 2023 was primarily due to strong Research contract value growth in 2022.

Contract value increased to $4.5 billion at March 31, 2023, or 10% compared to March 31, 2022 excluding the foreign currency impact. Global Technology Sales (“GTS”) contract value increased by 9% at March 31, 2023 when compared to March 31, 2022. The increase in GTS contract value was primarily due to new business from new and existing clients. GTS contract value increased by at least high single-digits for all enterprise sizes and all sectors but Healthcare and Tech and Telecom. Global Business Sales (“GBS”) contract value increased by 16% year-over-year, also primarily driven by new business from new and existing clients. The majority of our GBS practices achieved double-digit growth rates, with all enterprise sizes and nearly all sectors growing double-digits year-over-year.

GTS client retention was 85% and 86% as of March 31, 2023 and 2022, respectively, while wallet retention was 104% and 107%, respectively. GBS client retention was 89% and 87% as of March 31, 2023 and 2022, respectively, while wallet retention was 110% and 115%, respectively. The decrease in GTS and GBS wallet retention was largely due to lower levels of incremental spending by existing clients.

#### Conferences

| Financial Measurements: | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Revenues (1) | $64,642 | $10,354 | $54,288 | 524% |
| Gross contribution (1) | $26,788 | $(2,876) | $29,664 | nm |
| Gross contribution margin | 41% | (28)% | 69 points | — |
| **Business Measurements:** |  |  |  |  |
| Number of destination conferences (2) | 10 | 5 | 5 | 100% |
| Number of destination conferences attendees (2) | 11,125 | 3,904 | 7,221 | 185% |

nm = not meaningful.

(1) Dollars in thousands.

(2) Includes both virtual and in-person conferences. Single day, local meetings are excluded.

Conferences revenues increased by $54.3 million during the three months ended March 31, 2023 compared to the same period in 2022. The increase in revenues for the three months ended March 31, 2023 was primarily due to the return to in-person destination conferences, beginning in the second quarter of 2022. We held 10 in-person destination conferences during the three months ended March 31, 2023, compared to 5 virtual conferences during the three months ended March 31, 2022. Gross contribution increased to $26.8 million during the three months ended March 31, 2023 compared to negative $2.9 million in the same period last year. The increase in gross contribution was primarily the result of the return to in-person destination conferences noted above.

#### Consulting

| Financial Measurements: | As Of And For The Three Months Ended March 31, 2023 | As Of And For The Three Months Ended March 31, 2022 | Increase (Decrease) | Percentage Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Revenues (1) | $127,036 | $116,006 | $11,030 | 10% |
| Gross contribution (1) | $50,808 | $51,012 | $(204) | —% |
| Gross contribution margin | 40% | 44% | (4) points | — |
| **Business Measurements:** |  |  |  |  |
| Backlog (1), (2) | $160,600 | $140,800 | $19,800 | 14% |
| Billable headcount | 904 | 780 | 124 | 16% |
| Consultant utilization | 67% | 72% | (5) points | — |

(1) Dollars in thousands.

(2) Backlog is on a foreign exchange neutral basis. Backlog as of March 31, 2022 has been calculated using the same foreign currency rates as 2023.

Consulting revenues increased by 10% during the three months ended March 31, 2023 compared to the same period in 2022 on a reported basis and 14% excluding the foreign currency impact, with an increase in labor-based consulting revenue of 1% and an increase in contract optimization revenue of 53%, each on a reported basis. Contract optimization revenue may vary significantly and, as such, revenues for the first quarter of 2023 may not be indicative of results for the remainder of 2023 or beyond. The segment gross contribution margin was 40% and 44% for the three months ended March 31, 2023 and 2022, respectively. The decrease in gross contribution margin during the first quarter of 2023 was primarily due to increased personnel expense related to higher headcount.

Backlog increased by $19.8 million, or 14%, from March 31, 2022 to March 31, 2023 excluding the foreign currency impact.

### LIQUIDITY AND CAPITAL RESOURCES

We finance our operations through cash generated from our operating activities and, to a lesser extent, borrowings. Note 8 — Debt in the Notes to Condensed Consolidated Financial Statements provides additional information regarding the Company’s outstanding debt obligations. At March 31, 2023, we had $893.5 million of cash and cash equivalents and approximately $1.0 billion of available borrowing capacity on the revolving credit facility under our 2020 Credit Agreement. We believe that the Company has adequate liquidity to meet its currently anticipated needs for both the next twelve months and the foreseeable future.

We have historically generated significant cash flows from our operating activities, benefiting from the favorable working capital dynamics of our subscription-based business model in our Research segment, which is our largest business segment and historically has constituted a significant portion of our total revenues. The majority of our Research customer contracts are paid in advance and, combined with a strong customer retention rate and high incremental margins, our subscription-based business model has resulted in continuously strong operating cash flow. Cash flow generation has also benefited from our ongoing efforts to improve the operating efficiencies of our businesses as well as a focus on the optimal management of our working capital as we increase sales.

Our cash and cash equivalents are held in numerous locations throughout the world with 47% held outside the U.S. at March 31, 2023. We intend to reinvest substantially all of its accumulated undistributed foreign earnings, except in instances where repatriation would result in minimal additional tax.

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

|  | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Increase (Decrease) |
| --- | ---: | ---: | ---: |
| Cash provided by operating activities | $164,679 | $167,785 | $(3,106) |
| Cash provided by (used in) investing activities | 137,611 | (17,293) | 154,904 |
| Cash used in financing activities | (101,292) | (445,452) | 344,160 |
| Net increase (decrease) in cash and cash equivalents and restricted cash | 200,998 | (294,960) | 495,958 |
| Effects of exchange rates | (5,485) | (5,358) | (127) |
| Beginning cash and cash equivalents and restricted cash | 698,599 | 760,602 | (62,003) |
| Ending cash and cash equivalents and restricted cash | $894,112 | $460,284 | $433,828 |

#### Operating

Cash provided by operating activities was $164.7 million and $167.8 million during the three months ended March 31, 2023 and 2022, respectively. The year-over-year decrease was primarily due to lower contribution from deferred revenue growth partially offset by increased operating income.

#### Investing

Cash provided by (used in) investing activities was $137.6 million and $(17.3) million during the three months ended March 31, 2023 and 2022, respectively. The increase from 2022 to 2023 was the result of the proceeds received from the sale of our TalentNeuron business in February 2023, partially offset by increased capital expenditures primarily due to higher capitalized software and computer equipment additions.

#### Financing

Cash used in financing activities was $101.3 million and $445.5 million during the three months ended March 31, 2023 and 2022, respectively. During the 2023 period, we used $106.9 million of cash for share repurchases and paid a net $1.8 million in debt principal repayments. During the 2022 period, we used $451.1 million of cash for share repurchases and repaid a net $1.3 million in debt principal repayments.

#### Debt

As of March 31, 2023, the Company had $2.5 billion of principal amount of debt outstanding, of which $6.0 million is to be repaid in the remainder of fiscal year 2023. Note 8 — Debt in the Notes to Condensed Consolidated Financial Statements provides additional information regarding the Company’s outstanding debt obligations. From time to time, the Company may seek to retire or repurchase its outstanding debt through various methods including open market repurchases, negotiated block transactions, or otherwise, all or some of which may be effected through Rule 10b5-1 plans. Such transactions, if any, depend on prevailing market conditions, our liquidity and capital requirements, contractual restrictions, and other factors, and may involve material amounts.

### OFF BALANCE SHEET ARRANGEMENTS

From January 1, 2023 through March 31, 2023, the Company has not entered into any material off-balance sheet arrangements or transactions with unconsolidated entities or other persons.

## Market risk

As filed, 3,839 characters.

### INTEREST RATE RISK

As of March 31, 2023, the Company had $2.5 billion in total debt principal outstanding. Note 8 — Debt in the Notes to Condensed Consolidated Financial Statements provides additional information regarding the Company’s outstanding debt obligations.

Approximately $280.4 million of the Company’s total debt outstanding as of March 31, 2023 was based on a floating base rate of interest, which potentially exposes the Company to increases in interest rates. However, we reduce our overall exposure to interest rate increases through our interest rate swap contract, which effectively converts the floating base interest rates on all of our variable rate borrowings to fixed rates.

### FOREIGN CURRENCY RISK

A significant portion of our revenues are typically derived from sales outside of the United States. Among the major foreign currencies in which we conduct business are the Euro, the British Pound, the Japanese Yen, the Australian dollar and the Canadian dollar. The reporting currency of our Condensed Consolidated Financial Statements is the U.S. dollar. As the values of the foreign currencies in which we operate fluctuate over time relative to the U.S. dollar, the Company is exposed to both foreign currency translation and transaction risk.

Translation risk arises as our foreign currency assets and liabilities are translated into U.S. dollars because the functional currencies of our foreign operations are generally denominated in the local currency. Adjustments resulting from the translation of these assets and liabilities are deferred and recorded as a component of stockholders’ equity. A measure of the potential impact of foreign currency translation can be determined through a sensitivity analysis of our cash and cash equivalents. At March 31, 2023, we had $893.5 million of cash and cash equivalents, with a substantial portion denominated in foreign currencies. If the exchange rates of the foreign currencies we hold all changed in comparison to the U.S. dollar by 10%, the amount of cash and cash equivalents we would have reported on March 31, 2023 could have increased or decreased by approximately $49.3 million. The translation of our foreign currency revenues and expenses historically has not had a material impact on our consolidated earnings because movements in and among the major currencies in which we operate tend to impact our revenues and expenses fairly equally. However, our earnings could be impacted during periods of significant exchange rate volatility, or when some or all of the major currencies in which we operate move in the same direction against the U.S. dollar.

Transaction risk arises when we enter into a transaction that is denominated in a currency that may differ from the local functional currency. As these transactions are translated into the local functional currency, a gain or loss may result, which is recorded in current period earnings. We typically enter into foreign currency forward exchange contracts to mitigate the effects of some of this foreign currency transaction risk. Our outstanding foreign currency forward exchange contracts as of March 31, 2023 had an immaterial net unrealized loss.

### CREDIT RISK

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of short-term, highly liquid investments classified as cash equivalents, fees receivable, interest rate swap contracts and foreign currency forward exchange contracts. The majority of the Company’s cash and cash equivalents, interest rate swap contracts and foreign currency forward exchange contracts are with large investment grade commercial banks. Fees receivable balances deemed to be collectible from customers have limited concentration of credit risk due to our diverse customer base and geographic dispersion.

## Controls and procedures

As filed, 1,416 characters.

We have established disclosure controls and procedures that are designed to ensure that the information we are required to disclose in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and such information is accumulated and communicated to our executive management team, including our chief executive officer and our chief financial officer, to allow timely decisions regarding required disclosure.

Management conducted an evaluation, as of March 31, 2023, of the effectiveness of the design and operation of our disclosure controls and procedures, under the supervision and with the participation of our chief executive officer and chief financial officer. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that the Company’s disclosure controls and procedures are effective in alerting them in a timely manner to material Company information required to be disclosed by us in reports filed or submitted under the Exchange Act.

There have been no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 151 characters.

There were no material changes to the risk factors disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022.

Filed May 2, 2023.
Source: SEC EDGAR, the filing index for accession 0000749251-23-000021. Last ingested by Listed: Nov 4, 2026, 17:17 ET. No prices; not investment advice.