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Gartner Reports Financial Results for Fourth Quarter 2017

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Heritage Gartner Total Contract Value up 16% YoY FX Neutral

Heritage Gartner Fourth Quarter Revenue up 15% YoY and 13% YoY FX
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Gartner, Inc. (NYSE:IT), the world's leading research and advisory
company, today reported results for fourth quarter and full year 2017
and provided its preliminary financial outlook for 2018. The Company
also announced today in a separate Press Release that it has reached a
definitive agreement to sell its CEB Talent Assessment business as the
outcome of its previously announced review of strategic alternatives.

Consolidated Results Highlights

Our consolidated and segment results below for the three and twelve
months ended December 31, 2017 include the results of CEB Inc. ("CEB"),
which we acquired on April 5, 2017. References to "heritage Gartner"
operating results and business measurements refer to Gartner excluding
CEB. References to CEB refer to the operating results and business
measurements of CEB subsequent to the acquisition. Our commentary below
regarding the impact of CEB is supplemented by a slide presentation
which is available as Exhibit 99.2 to the Company's Current Report on
Form 8-K furnished to the SEC on February 6, 2018, and on the Company's
website.

The Tax Cuts and Jobs Act of 2017 (the "Tax Act") was signed into law on
December 22, 2017. The Tax Act requires numerous changes and
modifications with varying effective dates. The significant changes that
impact Gartner for 2017 are the remeasurement of deferred taxes in
connection with the reduction in the corporate statutory income tax rate
from 35% to 21% and a one-time mandatory tax on previously deferred
foreign earnings. The provisional net impact of these adjustments
increased our net income for both the three and twelve months ended
December 31, 2017 by $59.6 million. There are also other provisions of
the Tax Act that could materially impact Gartner's results in future
years.

For fourth quarter 2017 total revenue was $1.0 billion, an increase of
44% over fourth quarter 2016 as reported and 42% on a foreign exchange
neutral basis. Heritage Gartner revenue increased 15% on a reported
basis and 13% on a foreign exchange neutral basis. Adjusted revenue was
$1.1 billion in fourth quarter 2017. Net income was $107.3 million in
fourth quarter 2017, while adjusted EBITDA was $220.9 million, a 52%
increase over fourth quarter 2016. GAAP diluted income per share was
$1.16 in fourth quarter 2017, which includes a favorable impact from the
Tax Act of approximately $0.65 per share, compared to $0.79 per share in
fourth quarter 2016. Adjusted EPS was $1.17 per share in fourth quarter
2017 compared to $0.97 in fourth quarter 2016. (See "Non-GAAP Financial
Measures" below for definitions of our Non-GAAP measures).

For the twelve months ended December 31, 2017, total revenue was $3.3
billion, an increase of 35% on both a reported and foreign exchange
neutral basis. Heritage Gartner revenue increased 14% both as reported
and foreign exchange neutral. Net income was $3.3 million in the 2017
period. Adjusted EBITDA was $661.0 million in the twelve months ended
December 31, 2017 compared to $457.1 million in the same period of 2016,
a 45% increase. GAAP diluted income per share was $0.04, which includes
a favorable impact from the Tax Act of approximately $0.66 per share,
for the twelve months ended December 31, 2017, compared to $2.31 per
share for the prior year. Adjusted EPS was $3.31 per share in the 2017
period compared to $2.96 per share in the 2016 period.

Gene Hall, Gartner's chief executive officer, commented, "We delivered
another great year. In 2017, we drove strong operating results, we
closed and largely integrated CEB, and we took steps to support future
growth. I continue to be excited about our business, our prospects for
growth and our strategy to drive value to our shareholders over the long
term."

Segment Results Highlights

Research

Revenue for fourth quarter 2017 was $692.8 million, up 43% compared to
fourth quarter 2016 on a reported basis and 40% on a foreign exchange
neutral basis. Heritage Gartner revenue increased 19% reported and 17%
on a foreign exchange neutral basis in fourth quarter 2017 compared to
fourth quarter 2016. The gross contribution margin was 67% and 68% in
fourth quarter 2017 and 2016, respectively. Excluding the deferred
revenue fair value adjustment related to our recent acquisitions, the
gross contribution margin was 69% in fourth quarter 2017.

Heritage Gartner total contract value was $2.2 billion at December 31,
2017, an increase of 15% on a reported basis and 16% on a foreign
exchange neutral basis compared to December 31, 2016. CEB contract value
was $557.0 million at December 31, 2017. Heritage Gartner client
retention was 84% in both fourth quarter 2017 and 2016, while wallet
retention was 106% in fourth quarter 2017 and 104% in fourth quarter
2016. CEB wallet retention was 96% in fourth quarter 2017.

Consulting

Revenue for fourth quarter 2017 was $85.3 million compared to $81.1
million for fourth quarter 2016, an increase of 5% on a reported basis
and 3% on a foreign exchange neutral basis. The gross contribution
margin was 26% in fourth quarter 2017 and 23% in fourth quarter 2016.
Fourth quarter 2017 utilization was 64% compared to 65% in fourth
quarter 2016. As of December 31, 2017, billable headcount was 682
compared to 628 at December 31, 2016. Backlog was $95.2 million at
December 31, 2017 compared to $88.6 million at December 31, 2016.

Events

Revenue for fourth quarter 2017 was $166.5 million compared to $136.3
million in fourth quarter 2016, an increase of 22% on a reported basis
and 20% on a foreign exchange neutral basis. Heritage Gartner revenue
increased 7% on a reported basis and 5% on a foreign exchange neutral
basis in fourth quarter 2017 compared to fourth quarter 2016. Gross
contribution margin was 51% in fourth quarter 2017 compared to 54% in
the prior year quarter. The Company held a total of 15 events in the
fourth quarter of 2017, with the heritage Gartner events business
holding 13 events with 26,649 attendees in fourth quarter 2017 compared
to 14 events with 24,080 attendees in fourth quarter 2016. CEB held 2
events with 2,538 attendees in fourth quarter 2017.

Talent Assessment & Other

Revenue for fourth quarter 2017 was $70.0 million while gross
contribution margin was 60%.

Cash Flow and Balance Sheet Highlights

The Company generated $254.5 million of cash from operating activities
in the twelve months ended December 31, 2017 compared to $365.6 million
in the same period in 2016. Free Cash Flow was $264.6 million in the
twelve months ended December 31, 2017 compared to $347.2 million in the
same period in 2016 (See "Non-GAAP Financial Measures" below for the
definition of Free Cash Flow). During 2017, the Company used $2.6
billion (net) in cash for acquisitions, $41.3 million to repurchase its
common shares, $110.8 million for capital expenditures, and $120.9
million for acquisition, integration, and other non-recurring items. The
Company had $538.9 million of cash and cash equivalents and $558.0
million of additional borrowing capacity under its revolving credit
facility as of December 31, 2017.

Financial Outlook for 2018

The table below provides the Company's preliminary financial outlook for
full year 2018:

 
($ in millions, except per share data) (1)
   
2018 Projected Range (2)
Revenue:    
Research $ 3,095 $ 3,145
Consulting 340 355
Events 380 400
Talent Assessment & Other 280   300  
Total Revenue (GAAP) 4,095 4,200
Deferred revenue fair value adjustment 10   10  
Total Adjusted Revenue (Non-GAAP) $ 4,105   $ 4,210  
 
Operating income (GAAP) $ 301 $ 351
 
Adjusted EBITDA (Non-GAAP) 750 800
 
Diluted EPS (GAAP) 1.26 1.66
 
Adjusted EPS (Non-GAAP) 3.71 4.11
 
Operating Cash Flow (GAAP) $ 460 $ 510
Acquisition, integration, and other non-recurring payments 126 126
Capital Expenditures (135 ) (145 )
Free Cash Flow (Non-GAAP) $ 451   $ 491  
(1) See "Non-GAAP Financial Measures" below for definitions of our
Non-GAAP metrics.
(2) Includes the Talent Assessment business.
 

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 may not
be 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, or superior, 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
income (loss) excluding stock-based compensation expense; depreciation,
amortization, and accretion on excess facilities obligations;
amortization of adjustments to 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
income adjusted for the impact of certain items directly related to
acquisitions and other non-recurring items. These adjustments include
the amortization of acquired intangibles; 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; the amortization
of fair value adjustments on pre-acquisition deferred revenues; the
non-recurring impact from the enactment of the Tax Cuts and Jobs Act of
2017; 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 weighted average diluted shares outstanding.
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 cash provided by
operating activities determined in accordance with GAAP plus payments
for acquisition and integration items directly-related to our
acquisitions and certain non-recurring items; 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.

Conference Call Information

Gartner has scheduled a conference call at 8:00 a.m. Eastern time on
Tuesday, February 6, 2018 to discuss the Company's financial results for
fourth quarter and full year 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 888-679-8033 and the
international dial-in number is 617-213-4846. The participant passcode
is 16094527#. 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. (NYSE:IT), is the world's leading research and advisory
company and a member of the S&P 500. We equip business leaders with
indispensable insights, advice and tools to achieve their
mission-critical priorities and build the successful organizations of
tomorrow. Our unmatched combination of expert-led, practitioner-sourced
and data-driven research steers clients toward the right decisions on
the issues that matter most. We're trusted as an objective resource and
critical partner by more than 12,000 organizations in more than 100
countries — across all major functions, in every industry and enterprise
size. To learn more about how we help decision makers fuel the future of
business, visit gartner.com.

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 within the meaning of Section 27A of the
Securities Exchange Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking
statements involve known and unknown risks, estimates, 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 acquisitions and consummate and integrate future
acquisitions; our ability to pay our debt; 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; the impact of the Tax Cut and Jobs Act of
2017; 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 September
30, 2017, copies 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
December 31,
    Twelve Months Ended
December 31,
 
2017 (a)   2016 2017 (a)   2016
Revenues:
Research (b) $ 692,799 $ 485,844 43 % $ 2,471,280 $ 1,857,001 33 %
Consulting (b) 85,257 81,058 5 % 327,661 318,934 3 %
Events 166,476 136,315 22 % 337,903 268,605 26 %
Talent Assessment & Other 69,977     100 % 174,650     100 %
Total revenues 1,014,509 703,217 44 % 3,311,494 2,444,540 35 %
Costs and expenses:
Cost of services and product development 398,378 279,063 43 % 1,320,198 945,648 40 %
Selling, general and administrative expense 465,371 289,862 61 % 1,599,004 1,089,184 47 %
Depreciation 18,260 9,782 87 % 63,897 37,172 72 %
Amortization of intangibles 53,260 6,183 >100% 176,274 24,797 >100%
Acquisition and integration charges 16,346   9,640   70 % 158,450   42,598   >100%
Total costs and expenses 951,615   594,530   60 % 3,317,823   2,139,399   55 %
Operating income (loss) 62,894 108,687 (42 )% (6,329 ) 305,141 >(100)%
Interest (expense), net (36,312 ) (5,822 ) >(100)% (124,936 ) (25,116 ) >(100)%
Other income, net 1,795   3,320   (46 )% 3,448   8,406   (59 )%
Income (loss) before income taxes 28,377 106,185 (73 )% (127,817 ) 288,431 >(100)%
(Benefit) provision for income taxes (78,930 ) 39,700   >(100)% (131,096 ) 94,849   >(100)%
Net income (c) $ 107,307   $ 66,485   61 % $ 3,279   $ 193,582   >(98)%
 
Net income per share: (c)
Basic $ 1.18 $ 0.80 48 % $ 0.04 $ 2.34 (98 )%
Diluted $ 1.16 $ 0.79 47 % $ 0.04 $ 2.31 (98 )%
Weighted average shares outstanding:
Basic 90,785 82,637 10 % 88,466 82,571 7 %
Diluted 92,152   83,939   10 % 89,790   83,820   7 %
(a)   Includes CEB results beginning on April 5, 2017, the date of
acquisition. The 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 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 began 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) Net income for both the three and twelve months ended December 31,
2017 includes a favorable impact of approximately $59.6 million due
to the Tax Act. As a result, both basic and diluted earnings per
share increased by approximately $0.65 for the three months ended
December 31, 2017, and for the twelve months ended December 31,
2017, both basic and diluted increased by approximately $0.66 per
share.
 
 

BUSINESS SEGMENT DATA

(Unaudited; in thousands)

 
    Revenue  

Direct
Expense

 

Gross
Contribution

 

Contribution
Margin

Three Months Ended 12/31/17 (a), (b)
Research (c) $ 692,799 $ 227,690 $ 465,109 67%
Consulting 85,257 63,172 22,085 26%
Events 166,476 82,309 84,167 51%
Talent Assessment & Other 69,977   28,240   41,737   60%
TOTAL $ 1,014,509   $ 401,411   $ 613,098   60%
 
Three Months Ended 12/31/16 (b)
Research $ 485,844 $ 154,509 $ 331,335 68%
Consulting 81,058 62,433 18,625 23%
Events 136,315 63,234 73,081 54%
Talent Assessment & Other      
TOTAL $ 703,217   $ 280,176   $ 423,041   60%
 
Twelve Months Ended 12/31/17 (a), (b)
Research (c) $ 2,471,280 $ 818,266 $ 1,653,014 67%
Consulting 327,661 234,018 93,643 29%
Events 337,903 174,423 163,480 48%
Talent Assessment & Other 174,650   84,401   90,249   52%
TOTAL $ 3,311,494     $ 1,311,108     $ 2,000,386     60%
 
Twelve Months Ended 12/31/16 (b)
Research $ 1,857,001 $ 571,390 $ 1,285,611 69%
Consulting 318,934 229,200 89,734 28%
Events 268,605 131,950 136,655 51%
Talent Assessment & Other      
TOTAL $ 2,444,540   $ 932,540   $ 1,512,000   62%
(a)   Includes CEB results beginning on April 5, 2017, the date of
acquisition. The 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 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 began 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 69% for both the three
and twelve months ended December 31, 2017 excluding the deferred
revenue fair value adjustment resulting from our recent acquisitions.
 
 

SELECTED STATISTICAL DATA (unaudited)

 
    Heritage Gartner   CEB

December
31, 2017

 

December
31, 2016

December
31, 2017

 

December
31, 2016

Research
Total contract value (a), (b) $ 2,213 $ 1,930 $ 557 $ 549
Client retention 84 % 84 % na na
Wallet retention 106 % 104 % 96 % 90 %
Client enterprises 11,904 11,122 na na
 
Consulting
Backlog (c), (d) $ 95,200 $ 88,600 na na
Quarterly utilization 64 % 65 % na na
Quarterly billable headcount 682 628 na na
Average annualized revenue per billable headcount (c) $ 371 $ 372 na na
 
Events
Number of events for the quarter (e) 13 14 2 2
Number of attendees for the quarter (e) 26,649   24,080   2,538   1,635  
(a)   In millions.
(b) The 2016 CEB contract value was calculated based on Gartner's 2017
foreign exchange rates.
(c) In thousands.
(d) The December 31, 2016 heritage Gartner consulting backlog was
restated to reflect the reclassification of the SAS business.
(e) Excludes single day, local events.

na - not applicable or not available.

 
 

Selected Balance Sheet Data (Unaudited; in thousands):

 
    December 31,
2017 (a)   2016
Cash and cash equivalents $ 538,908 $ 474,233
Fees receivable, net 1,176,843 643,013
Total assets 7,283,173 2,367,335
Deferred revenues 1,630,198 989,478
Total current and long-term debt (b) 3,278,845 694,391
Total liabilities 6,299,708 2,306,457
Total stockholders' equity $ 983,465   $ 60,878
(a)   Certain accounts exclude held-for-sale balances.
(b) Net of deferred financing fees.
 
 

Selected Cash Flow Data (Unaudited; in thousands):

 
   

Twelve Months Ended
December 31,

2017   2016
Cash provided by operating activities $ 254,517 $ 365,632
Cash paid for capital expenditures (110,765 ) (49,863 )
Cash paid for treasury stock (41,273 ) (58,961 )
Cash paid for acquisitions, net (2,634,809 ) (34,186 )
Cash paid for acquisition, integration, and other non-recurring items (120,874 ) (31,431 )
Cash receipts (payments) on debt and debt fees, net $ 2,569,391   $ (124,975 )
 

SUPPLEMENTAL INFORMATION

The following tables provide reconciliations of certain Non-GAAP
financial measures used in this Press Release with the most directly
comparable GAAP measure. See "Non-GAAP Financial Measures" above for
definitions of these Non-GAAP financial measures.

 

Reconciliation - GAAP Revenue to Adjusted Revenue (Unaudited;
in thousands):

 
   

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2017   2016 2017   2016
GAAP total revenue $ 1,014,509 $ 703,217 $ 3,311,494 $ 2,444,540
Deferred revenue fair value adjustment (a) 50,085     205,425  
Adjusted Revenue $ 1,064,594   $ 703,217   $ 3,516,919   $ 2,444,540
(a)   The majority of the pre-acquisition deferred revenue is recognized
ratably over the remaining period of the underlying revenue contract.
 
 

Reconciliation - Operating Income (Loss) to Adjusted EBITDA (Unaudited;
in thousands):

 
    Three Months Ended
December 31,
  Twelve Months Ended
December 31,
2017   2016 2017   2016
GAAP net income $ 107,307 $ 66,485 $ 3,279 $ 193,582
Interest expense, net 36,312 5,822 124,936 25,116
Other income, net (1,795 ) (3,320 ) (3,448 ) (8,406 )
Tax (benefit) provision (78,930 ) 39,700   (131,096 ) 94,849  
Operating income (loss) 62,894 108,687 (6,329 ) 305,141
Adjustments:
Stock-based compensation expense (a) 8,972 10,533 61,303 46,661
Depreciation, accretion, and amortization (b) 71,802 15,986 240,900 62,057
Amortization of pre-acquisition deferred revenues (c) 50,085 205,425
Acquisition & integration charges and other non-recurring items (d) 27,173   9,899   159,680   43,285  
Adjusted EBITDA $ 220,926   $ 145,105   $ 660,979   $ 457,144  
(a)   Consists of charges for stock-based compensation awards.
(b) Includes depreciation expense, accretion on excess facilities
obligations, 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 revenue contract.
(d) Consists of incremental and directly-related charges from
acquisitions and other non-recurring items.
 
 

Reconciliation - GAAP Net Income to Adjusted Net Income and
Adjusted EPS
(Unaudited; in thousands, except per share
amounts):

 
   

Three Months Ended
December 31,

 

Twelve Months Ended
December 31,

2017   2016 2017   2016
GAAP net income $ 107,307 $ 66,485 $ 3,279 $ 193,582
Acquisition and other adjustments:
Amortization of acquired intangibles (a) 53,260 6,089 175,992 24,421
Amortization of pre-acquisition deferred revenues (b) 50,085 205,425
Acquisition & integration charges and other non-recurring items (c),
(d)
29,034 9,899 174,310 43,285
Impact of the Tax Cuts and Jobs Act of 2017 (e) (59,599 ) (59,599 )
Tax impact of adjustments (f) (72,044 ) (1,258 ) (201,773 ) (13,090 )
Adjusted net income $ 108,043   $ 81,215   $ 297,634   $ 248,198  
 
Diluted shares 92,152 83,939 89,790 83,820
 
Adjusted EPS (g) $ 1.17   $ 0.97   $ 3.31   $ 2.96  
(a)   Consists of non-cash amortization charges from acquired intangibles.
(b) 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 twelve months ended December 31, 2017, which
is recorded in Interest expense, net in the Consolidated Statement
of Operations and in the Adjusted EBITDA table presented above.
(e) Consists of the provisional, non-recurring net income tax benefit
from the reduction of certain deferred tax liabilities and the
repatriation tax on foreign earnings resulting from the Tax Cuts and
Jobs Act of 2017.
(f) The effective tax rate was 54% and 36% for the three and twelve
months ended December 31, 2017, respectively, and 8% and 19% for the
three and twelve months ended December 31, 2016, respectively.
(g) Calculated by dividing Adjusted net income by the weighted average
diluted shares outstanding for the respective period.
 
 

Reconciliation - GAAP Cash Provided by Operating Activities to
Free Cash Flow (a)
(Unaudited; in thousands):

 
    Three Months Ended
December 31,
  Twelve Months Ended
December 31,
2017   2016 2017   2016
GAAP cash provided by operating activities $ 22,250 $ 83,369 $ 254,517 $ 365,632
Adjustments:
Plus: cash paid for acquisition, integration, and other
non-recurring items
27,270 6,575 120,874 31,431
Less: cash paid for capital expenditures (35,146 ) (12,986 ) (110,765 ) (49,863 )
Free Cash Flow $ 14,374   $ 76,958   $ 264,626   $ 347,200  
 

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