Market Overview

Gartner Reports Second Quarter 2018 Financial Results

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Total Contract Value $2.9 Billion, +12% YoY FX Neutral

THREE MONTHS ENDED JUNE 30, 2018 HIGHLIGHTS

  • Revenues: $1.0 billion, +19%; adjusted revenues excluding divested
    operations: $1.0 billion, +14%.
  • Net income: $46 million; adjusted EBITDA excluding divested
    operations: $191 million, +11%.
  • Diluted EPS: $0.50; adjusted EPS: $1.03.
  • Operating cash flow: $174 million; free cash flow: $183 million.
  • Sold several non-core assets for $406 million in net cash.
  • Repurchased 0.5 million common shares for $68 million and paid down
    $554 million of debt.

2018 FULL YEAR FINANCIAL OUTLOOK

The Company updated its GAAP EPS guidance and reiterated its Non-GAAP
guidance:

  • Revenues $3.9-4.0 billion; adjusted revenues $3.9-4.0 billion.
  • Net income $104-140 million; adjusted EBITDA $710-760 million.
  • Diluted EPS $1.12-1.51; adjusted EPS $3.51-3.91.
  • Operating cash flow $425-475 million; free cash flow $416-456 million.

Gartner, Inc. (NYSE:IT), the world's leading research and advisory
company, today reported results for the second quarter 2018 and updated
its GAAP EPS guidance and reiterated its Non-GAAP guidance for full year
2018. Gene Hall, Gartner's chief executive officer, commented, "We got
off to a great start for the year and that continued through the second
quarter. The leading indicators across all parts of our business are
overwhelmingly positive, and we are well-positioned for sustained,
long-term double digit growth."

CONFERENCE CALL INFORMATION
The Company will host a webcast
call at 8:00 a.m. Eastern time on Wednesday, August 1, 2018 to discuss
the Company's financial results. The call will be available via the
Internet by accessing the Company's website at http://investor.gartner.com
or by dialing 216-562-0463 and referencing the conference code 1894032.
A replay and a transcript will be available for approximately 30 days
following the call on the Company's website.

CONSOLIDATED RESULTS HIGHLIGHTS

($ in millions, except per share data)

 

  Three Months Ended    
June 30, %
2018   2017 Change    
GAAP Metrics:
Revenues $ 1,001 $ 844 19 % (a)
Net income (loss) 46 (92 ) >100%
Diluted EPS 0.50 (1.03 ) >100%
Operating cash flow $ 174   $ 112   55 %
         
Non-GAAP Metrics:
Adjusted revenues excluding divested operations $ 1,001 $ 879 14 %
Adjusted EBITDA excluding divested operations 191 172 11 %
Adjusted EPS 1.03 0.88 17 %
Free cash flow $ 183   $ 129   42 %

(a) The foreign currency neutral percentage change in revenue was 16%.

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 15,000
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 www.gartner.com.

SEGMENT RESULTS HIGHLIGHTS
Unless indicated otherwise, our
segment results below for the three and six months ended June 30, 2017
include the operating results of CEB Inc., beginning April 5, 2017, the
date of acquisition. Additional information regarding our segment
results can be obtained in our quarterly report on Form 10-Q filed with
the SEC on August 1, 2018. Certain financial metrics contained in this
Press Release are considered non-GAAP financial measures. Definitions of
these non-GAAP financial measures are included in this Press Release
under "Non-GAAP Financial Measures" and reconciliations under
"Supplemental Information — Non-GAAP Reconciliations." In the tables
below, some totals may not add due to rounding. In addition, percentage
changes are based on the whole number and recalculation based on
millions may yield a different result. In the second quarter of 2018 the
Company divested its CEB Talent Assessment business and its CEB
Workforce Survey & Analytics business. These two businesses were
acquired in the CEB acquisition and were previously reported with the
Talent Assessment & Other segment. As a result of these divestitures,
the Company changed the segment name to Other.

Research

($ in millions)

  Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017   % Change   FX Neutral 2018   2017   % Change
GAAP Metrics:
Revenues $ 770 $ 614 25 % 23 % $ 1,534 $ 1,125 36 % (a)
Direct expense 237   213   11 % 10 % 470   373   26 %
Gross contribution $ 533   $ 401   33 % 29 % $ 1,064   $ 752   42 %
Contribution margin 69 % 65 % 4 points 69 % 67 % 2 points
 
Non-GAAP Metrics:
Adjusted revenues $ 771 $ 675 14 % 12 % $ 1,541 $ 1,330 16 %
Adjusted contribution 534 462 16 % 13 % 1,071 915 17 %
Adjusted contribution margin 69 % 68 % 1 point 70 % 69 % 1 point
 
Business Measurements:
Total contract value (b) $ 2,940 $ 2,632 12 %
 
For GTS (c) :
Contract value (b) $ 2,329 $ 2,045 14 %
Client retention 82 % 83 % (1) point
Wallet retention 105 % 104 % 1 point
Client enterprises 12,375 11,696 6 %
 
For GBS (c) :
Contract value (b) $ 611 $ 587 4 %
Client retention 83 % 79 % 4 points
Wallet retention 97 % 97 %
Client enterprises 5,659   5,619     1 %      

(a) The foreign currency neutral percentage change in revenues was 33%
for the six months.

(b) Contract value dollar amounts and percentages are foreign currency
neutral.

(c) GTS includes sales to users and providers of technology. GBS
includes sales to all other functional leaders.

Events

($ in millions)

  Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017   % Change   FX Neutral 2018   2017   % Change
GAAP Metrics:
Revenues $ 111 $ 91 22 % 21 % $ 157 $ 126 24 % (a)
Direct expense 48   41   15 % 14 % 77   63   23 %
Gross contribution $ 63   $ 50   28 % 27 % $ 80   $ 63   26 %
Contribution margin 57 % 55 % 2 points 51 % 50 % 1 point
 
Non-GAAP Metrics:
Adjusted revenues $ 111 $ 95 17 % 16 % $ 157 $ 131 20 %
Adjusted contribution 63 54 18 % 18 % 80 67 19 %
Adjusted contribution margin 57 % 57 % 51 % 51 %
 
Business Measurements (b) :
Number of destination events held 24 26 (8 )%
Number of destination events attendees 20,896   18,539   13 %          

(a) The foreign currency neutral percentage change in revenues was 22%
for the six months.

(b) Single day, local events are excluded.

Consulting

($ in millions, except for Revenue per billable headcount, which is in
thousands)

  Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017   % Change   FX Neutral 2018   2017   % Change
GAAP Metrics:
Revenues $ 96 $ 92 5 % 2 % $ 179 $ 170 5 % (a)
Direct expense 62   61   4 % 1 % 121   115   5 %
Gross contribution $ 34   $ 31   7 % 5 % $ 58   $ 55   4 %
Contribution margin 35 % 34 % 1 point 32 % 33 % (1) point
 
Non-GAAP Metrics:
Adjusted revenues $ 96 $ 92 5 % 2 % $ 179 $ 170 5 %
Adjusted contribution 34 31 7 % 5 % 58 55 5 %
Adjusted contribution margin 35 % 34 % 1 point 32 % 32 %
 
Business Measurements:
Backlog $ 106 $ 91 16 %
Quarterly utilization 67 % 65 % 2 points
Quarterly billable headcount 710 667 6 %
Revenue per billable headcount (b) $ 397   $ 378   5 %          

(a) The foreign currency neutral percentage change in revenues was 2%
for the six months.

(b) Calculated on an average annualized basis. Dollar amounts are in
thousands.

Other (previously called Talent Assessment & Other)

This segment was created concurrent with the CEB acquisition on April 5,
2017. The segment consisted of three primary businesses: the CEB Talent
Assessment business, which was the largest business in the segment; the
CEB Workforce Survey & Analytics business; and the CEB Challenger sales
training business. The Company divested the CEB Talent Assessment and
CEB Workforce Survey & Analytics businesses in second quarter 2018. As a
result of the divestitures, the Company changed the name of the segment
to Other.

($ in millions)

  Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017   % Change   FX Neutral 2018   2017   % Change
GAAP Metrics:
Revenues $ 23 $ 47 (51 )% (51 )% $ 94 $ 47 100 % (a)
Direct expense 8   30   (73 )% (73 )% 36   30   20 %
Gross contribution $ 15   $ 17   (13 )% (10 )% $ 58   $ 17   >100%
Contribution margin 65 % 37 % 28 points 62 % 37 % 25 points
 
Non-GAAP Metrics:
Adjusted revenues $ 23 $ 74 (69 )% (69 )% $ 97 $ 143 (32 )%
Adjusted contribution 15 44 (66 )% (66 )% 61 81 (25 )%
Adjusted contribution margin 65 % 59 % 6 points 63 % 57 % 6 points
Adjusted revenues excluding divested operations $ 22 $ 17 29 % 41 % $ 42 $ 35 20 %
Adjusted contribution excluding divested operations $ 15 $ 9 67 % 84 % $ 27 $ 17 59 %
Adjusted contribution margin excluding divested operations 68 % 53 % 15 points   64 % 49 % 15 points

(a) The foreign currency neutral percentage change in revenues was 98%
for the six months.

FINANCIAL OUTLOOK FOR FULL YEAR 2018

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

($ in millions, except per share data)  
 
2018 Projected Range
Revenues:    
Research $ 3,093 $ 3,143
Events 380 400
Consulting 340 355
Other 107   127  
Total revenue 3,920 4,025
Deferred revenue fair value adjustment 10   10  
Total adjusted revenue (Non-GAAP) (a) $ 3,930   $ 4,035  
 
Adjusted Segment Revenues:
Research $ 3,100 $ 3,150
Events 380 400
Consulting 340 355
Other $ 110   $ 130  
 
Income:
Net income $ 104 $ 140
Adjusted EBITDA (Non-GAAP) (a), (b) 710 760
Diluted EPS 1.12 1.51
Adjusted EPS (Non-GAAP) (a), (b) $ 3.51   $ 3.91  
 
Expense:
Stock-based compensation expense $ 71 $ 71
Depreciation 80 80
Amortization of intangibles 185 185
Deferred revenue fair value adjustment 11 11
Acquisition and integration charges and other non-recurring items 111 111
Gain on divestitures $ (25 ) $ (25 )
 
Interest expense $ 116 $ 116
Amortization of deferred financing fees 14   14  
Total interest expense $ 130   $ 130  
 
Cash Flow:
Operating cash flow $ 425 $ 475
Acquisition, integration, and other non-recurring payments 126 126
Capital expenditures (135 ) (145 )
Free cash flow (Non-GAAP) (a) $ 416   $ 456  

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

(b) See below for reconciliations under "Supplemental Information -
Non-GAAP Reconciliations."

FORWARD LOOKING STATEMENTS

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 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 Cuts and Jobs Act of
2017; and other factors described under "Risk Factors" contained in our
most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,
and Current Reports on Form 8-K, 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,
except as required by applicable law.

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: (i) revenue for
pre-acquisition period(s) from CEB, as applicable; (ii) the amortization
of non-cash fair value adjustments on pre-acquisition deferred revenues.
The majority of the non-cash fair value adjustments on pre-acquisition
deferred revenues 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, on both a
consolidated and segment results basis.

Adjusted Contribution and Adjusted Contribution Margin: Adjusted
Contribution represents GAAP contribution plus: (i) the contribution for
pre-acquisition period(s) from CEB, as applicable; (ii) the amortization
of non-cash fair value adjustments on pre-acquisition deferred revenues.
Adjusted contribution for the consolidated Company also reflects a
reduction for unallocated bonus and fringe costs. The Adjusted
Contribution Margin represents the contribution margin on Adjusted
revenue. We believe Adjusted Contribution and Adjusted Contribution
Margin are important measures of our recurring operations as they
provide a more accurate and consistent period-over-period comparison of
our segment results.

Adjusted Revenue, Adjusted Contribution, and Adjusted Contribution
Margin
- Excluding Divested Operations:

Represent the non-GAAP metrics defined above less results of divested
operations. We believe these adjustments are important measures of our
recurring operations as they provide a more accurate and consistent
period-over-period comparison of our segment results.

Adjusted EBITDA: Represents GAAP net income (loss): (i) plus
stock-based compensation expense; depreciation, amortization, and
accretion on excess facilities obligations; the amortization of non-cash
fair adjustments on pre-acquisition deferred revenues; acquisition and
integration charges and certain other non-recurring items; (ii) plus the
Adjusted EBITDA related to pre-acquisition periods for CEB, as
applicable; and (iii) less gain on divestitures. We believe Adjusted
EBITDA is an important measure of our recurring operations as it
excludes items not representative of our core operating results.

Adjusted EBITDA Excluding Divested Operations: Represents
Adjusted EBITDA as defined above less EBITDA from divested operations.
We believe these adjustments are important measures of our recurring
operations as they provide a more accurate and consistent
period-over-period comparison of our segment results.

Adjusted Net Income: Represents GAAP net income (loss) adjusted
for the impact of certain items directly related to acquisitions and
other non-recurring items. These adjustments include (i) the
amortization of acquired intangibles; (ii) acquisition and integration
charges and certain other non-recurring items; (iii) the amortization of
non-cash fair value adjustments on pre-acquisition deferred revenues;
(iv) the non-recurring impact from the enactment of the Tax Cuts and
Jobs Act of 2017; (v) gain on divestitures; and (vi) certain 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: (i) plus payments for acquisition
and integration items directly-related to our acquisitions and certain
other non-recurring items; (ii) 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.

Foreign Currency Neutral (FX Neutral): We provide foreign
currency neutral dollar amounts and percentages for our contract values,
revenues, certain expenses, 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 data 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.

SUPPLEMENTAL INFORMATION - NON-GAAP RECONCILIATIONS

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, Adjusted
Contribution, and Adjusted Contribution Margin
(Unaudited; in
millions. Some totals may not add due to rounding.):

For the three months ended June 30, 2018:

  Research   Events   Consulting   Other   Unallocated   Total
GAAP revenue $ 770 $ 111 $ 96 $ 23 $ $ 1,001
Add: Amortization of deferred revenue fair value adjustment (a) 1           1  
Adjusted revenue 771 111 96 23 1,002
Less: divested operations       (1 )   (1 )
Adjusted revenue excluding divested operations $ 771   $ 111   $ 96   $ 22   $   $ 1,001  
 
GAAP contribution $ 533 $ 63 $ 34 $ 15 $ $ 645
Add: Amortization of deferred revenue fair value adjustment (a) 1 1
Less: Unallocated expense (b)         (11 ) (11 )
Adjusted contribution 534 63 34 15 (11 ) 635
Less: divested operations            
Adjusted contribution excluding divested operations $ 534   $ 63   $ 34   $ 15   $ (11 ) $ 635  
Adjusted contribution margin excluding divested operations 69 % 57 % 35 % 68 %   63 %

For the six months ended June 30, 2018:

  Research   Events   Consulting   Other   Unallocated   Total
GAAP revenue $ 1,534 $ 157 $ 179 $ 94 $ $ 1,965
Add: Amortization of deferred revenue fair value adjustment (a) 7       3     10  
Adjusted revenue 1,541 157 179 97 1,975
Less: divested operations       (55 )   (55 )
Adjusted revenue excluding divested operations $ 1,541   $ 157   $ 179   $ 42   $   $ 1,920  
 
GAAP contribution $ 1,064 $ 80 $ 58 $ 58 $ $ 1,260
Add: Amortization of deferred revenue fair value adjustment (a) 7 3 10
Less: Unallocated expense (b)         (20 ) (20 )
Adjusted contribution 1,071 80 58 61 (20 ) 1,250
Less: divested operations       (34 )   (34 )
Adjusted contribution excluding divested operations $ 1,071   $ 80   $ 58   $ 27   $ (20 ) $ 1,216  
Adjusted contribution margin excluding divested operations 70 % 51 % 32 % 64 %   63 %

(a) 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.

(b) Consists of certain unallocated costs.

For the three months ended June 30, 2017:

  Research   Events   Consulting   Other   Unallocated   Total
GAAP revenue $ 614 $ 91 $ 92 $ 47 $ $ 844
Add: Amortization of deferred revenue fair value adjustment (a) 61   4     27     92  
Adjusted revenue 675 95 92 74 936
Less: divested operations       (57 )   (57 )
Adjusted revenue excluding divested operations $ 675   $ 95   $ 92   $ 17   $   $ 879  
 
GAAP contribution $ 401 $ 50 $ 31 $ 17 $ $ 499
Add: Amortization of deferred revenue fair value adjustment (a) 61 4 27 92
Less: Unallocated expense (b)         (7 ) (7 )
Adjusted contribution 462 54 31 44 (7 ) 584
Less: divested operations       (35 )   (35 )
Adjusted contribution excluding divested operations $ 462   $ 54   $ 31   $ 9   $ (7 ) $ 549  
Adjusted contribution margin excluding divested operations 68 % 57 % 34 % 53 %   62 %

For the six months ended June 30, 2017:

  Research   Events   Consulting   Other   Unallocated   Total
GAAP revenue $ 1,125 $ 126 $ 170 $ 47 $ $ 1,469
Add: Pre-acquisition revenue 144 1 69 214
Add: Amortization of deferred revenue fair value adjustment (a) 61   4     27     92  
Adjusted revenue 1,330 131 170 143 1,775
Less: divested operations       (108 )   (108 )
Adjusted revenue excluding divested operations $ 1,330   $ 131   $ 170   $ 35   $   $ 1,667  
 
GAAP contribution $ 752 $ 63 $ 55 $ 17 $ $ 888
Add: Pre-acquisition contribution 102 37 139
Add: Amortization of deferred revenue fair value adjustment (a) 61 4 27 92
Less: Unallocated expense (b)         (8 ) (8 )
Adjusted contribution 915 67 55 81 (8 ) 1,111
Less: divested operations       (64 )   (64 )
Adjusted contribution excluding divested operations $ 915   $ 67   $ 55   $ 17   $ (8 ) $ 1,047  
Adjusted contribution margin excluding divested operations 69 % 51 % 32 % 49 % % 63 %

(a) 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.

(b) Consists of certain unallocated costs.

Reconciliation - GAAP Net Income (Loss) to Adjusted EBITDA
(Unaudited; in millions):

  Three Months Ended
June 30,
  Six Months Ended
June 30,
2018   2017 2018   2017
GAAP net income (loss) $ 46 $ (92 ) $ 26 $ (56 )
Interest expense, net 37 44 72 50
Gain on divestitures (25 ) (25 )
Other (income) expense, net (1 ) (2 ) (1 )
Tax (benefit) provision 29   (50 ) 6   (38 )
Operating income (loss) 86 (98 ) 77 (45 )
Adjustments:
Stock-based compensation expense (a) 14 16 44 39
Depreciation, accretion, and amortization (b) 67 84 136 100
Amortization of deferred revenue fair value adjustment (c) 1 91 10 92
Acquisition and integration charges and other non-recurring items (d) 23   92   85   105  
Subtotal 191 185 352 291
Plus: CEB pre-acquisition EBITDA (e)       36  
Adjusted EBITDA 191 185 352 327
Less: Divested operations EBITDA (f)       (13 )   (8 )   (19 )
Adjusted EBITDA excluding divested operations $ 191   $ 172   $ 344   $ 308  

(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.

(e) Consists of CEB Adjusted EBITDA for the period prior to the
acquisition. The Company compiled the EBITDA amounts from unaudited
financial data provided by CEB in accordance with Gartner's EBITDA
definition.

(f) Consists of Adjusted EBITDA from divested operations.

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

  Three Months Ended June 30,
2018   2017
Amount   Per share Amount   Per share
GAAP net income (loss) $ 46 $ 0.50 $ (92 ) $ (1.03 )
Acquisition and other adjustments:
Amortization of acquired intangibles (a) 50 0.54 65 0.72
Amortization of deferred revenue fair value adjustment (b) 1 0.01 91 1.01
Acquisition & integration charges and other non-recurring items (c),
(d)
31 0.34 101 1.11
Gain on divestitures (25 ) (0.28 )
Impact of Tax Cuts & Jobs Act of 2017 - provisional adjustment 1 0.01
Tax impact of adjustments (e) (9 ) (0.09 ) (86 ) (0.95 )
Rounding       0.02  
Adjusted net income and Adjusted EPS (f) $ 95   $ 1.03   $ 79   $ 0.88  
  Six Months Ended June 30,
2018   2017
Amount   Per share Amount   Per share
GAAP net income (loss) $ 26 $ 0.29 $ (56 ) $ (0.65 )
Acquisition and other adjustments:
Amortization of acquired intangibles (a) 102 1.10 72 0.82
Amortization of deferred revenue fair value adjustment (b) 10 0.11 92 1.05
Acquisition & integration charges and other non-recurring items (c),
(d)
96 1.04 114 1.30
Gain on divestitures (25 ) (0.28 )
Impact of Tax Cuts and Jobs Act of 2017 - provisional adjustment 1 0.01
Tax impact of adjustments (e) (49 ) (0.53 ) (92 ) (1.04 )
Rounding   0.01     0.01  
Adjusted net income and Adjusted EPS (f) $ 161   $ 1.75   $ 130   $ 1.49  

(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,
which is recorded in Interest expense, net in the Condensed Consolidated
Statement of Operations and in the Adjusted EBITDA table.

(e) The effective tax rates on the adjustments were 15% and 27% for the
three and six months ended June 30, 2018, respectively, and 33% for both
the three and six months ended June 30, 2017.

(f) Adjusted EPS was calculated based on 92.2 million and 90.6 million
diluted shares for the three months ended June 30, 2018 and 2017,
respectively, and 92.3 million and 87.4 million diluted shares for the
six months ended June 30, 2018 and 2017, respectively.

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

  Three Months Ended
June 30,
  Six Months Ended
June 30,
 
2018   2017 2018   2017 (a)
GAAP cash provided by operating activities $ 174 $ 112 $ 177 $ 83
Adjustments:
Plus: cash paid for acquisition, integration, and other
non-recurring items
31 48 73 65
Less: cash paid for capital expenditures (22 ) (31 ) (40 ) (42 )  
Free Cash Flow $ 183   $ 129   $ 210   $ 106    

(a) The six months ended June 30, 2017 excludes pre-acquisition CEB.

Financial Outlook Reconciliation - GAAP Net Income to Adjusted EBITDA
(
Unaudited; in millions):

  2018 Full Year Guidance
Low   High
Net income $ 104 $ 140
Interest expense, net (a) 130 130
Other (income) expense, net 2 2
Gain on divestitures (25 ) (25 )
Tax provision 41   55  
Operating income 252 302
 
Normalizing adjustments:
Stock-based compensation expense 71 71
Depreciation, accretion, and amortization 266 266
Deferred revenue fair value adjustment 10 10
Acquisition and integration charges and other nonrecurring items 111   111  
Adjusted EBITDA $ 710   $ 760  

(a) Includes $14.0 million of amortization of deferred financing fees,
which is reported in Interest expense, net.

Financial Outlook Reconciliation - GAAP EPS to Adjusted EPS (Unaudited):

  2018 Full Year Guidance
Low   High
GAAP EPS $ 1.12 $ 1.51
 
Normalizing adjustments:
Amortization of acquired intangibles 1.49 1.49
Acquisition and integration charges and other nonrecurring items 1.00 1.00
Deferred revenue fair value adjustment 0.08 0.08
Gain on divestitures (0.18 ) (0.18 )
Rounding   0.01  
Adjusted EPS $ 3.51   $ 3.91  

GARTNER, INC.

Condensed Consolidated Balance Sheets

(Unaudited; in thousands)

June 30,   December 31,
2018 2017
Assets
Current assets:
Cash and cash equivalents $ 141,805 $ 538,908
Fees receivable, net 1,083,990 1,176,843
Deferred commissions 183,481 205,260
Prepaid expenses and other current assets 199,208 124,632
Assets held-for-sale   542,965  
Total current assets 1,608,484 2,588,608
Property, equipment and leasehold improvements, net 225,901 221,507
Goodwill 2,974,513 2,987,294
Intangible assets, net 1,177,297 1,292,022
Other assets 166,742   193,742  
Total Assets $ 6,152,937   $ 7,283,173  
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 542,071 $ 666,821
Deferred revenues 1,687,724 1,630,198
Current portion of long-term debt 284,009 379,721
Liabilities held-for-sale   145,845  
Total current liabilities 2,513,804 2,822,585
Long-term debt, net of deferred financing fees 2,146,829 2,899,124
Other liabilities 570,872   577,999  
Total Liabilities 5,231,505 6,299,708
Stockholders' Equity
Preferred stock
Common stock 82 82
Additional paid-in capital 1,798,075 1,761,383
Accumulated other comprehensive (loss) income, net (24,051 ) 1,508
Accumulated earnings 1,659,658 1,647,284
Treasury stock (2,512,332 ) (2,426,792 )
Total Stockholders' Equity 921,432   983,465  
Total Liabilities and Stockholders' Equity $ 6,152,937   $ 7,283,173  

GARTNER, INC.

Condensed Consolidated Statements of Operations

(Unaudited; in thousands, except per share data)

Three Months Ended   Six Months Ended
June 30, June 30,
2018   2017 2018   2017
Revenues:
Research $ 770,314 $ 613,732 $ 1,534,238 $ 1,125,038
Events 111,253 91,205 157,340 126,474
Consulting 96,458 91,693 179,354 170,287
Other 23,311   47,101     93,969   47,101  
Total revenues 1,001,336 843,731 1,964,901 1,468,900
Costs and expenses:
Cost of services and product development 367,637 352,004 724,846 589,613
Selling, general and administrative 460,803 408,226 948,548 712,470
Depreciation 16,711 18,057 33,121 28,297
Amortization of intangibles 50,127 65,500 101,773 71,790
Acquisition and integration charges 19,962   98,332     79,228   111,604  
Total costs and expenses 915,240   942,119     1,887,516   1,513,774  
Operating income (loss) 86,096 (98,388 ) 77,385 (44,874 )
Interest expense, net (37,604 ) (43,956 ) (72,663 ) (49,862 )
Gain from divested operations 25,460 25,460
Other income (expense), net 1,120   (407 )   2,019   482  
Income (loss) before income taxes 75,072 (142,751 ) 32,201 (94,254 )
Provision (benefit) for income taxes 28,802   (50,470 )   5,518   (38,406 )
Net income (loss) $ 46,270   $ (92,281 )   $ 26,683   $ (55,848 )
 
Net income (loss) per share:
Basic $ 0.51   $ (1.03 )   $ 0.29   $ (0.65 )
Diluted $ 0.50   $ (1.03 )   $ 0.29   $ (0.65 )
Weighted average shares outstanding:
Basic 91,048   89,297     91,026   86,066  
Diluted 92,156   89,297     92,252   86,066  

GARTNER, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited; in thousands)

Six Months Ended
June 30,
2018   2017
Operating activities:
Net income (loss) $ 26,683 $ (55,848 )
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 134,894 100,087
Stock-based compensation expense 45,300 53,573
Deferred taxes (18,019 ) (78,004 )
Gain on divestitures (25,460 )
Amortization and write-off of deferred financing fees 10,601 9,475
Changes in assets and liabilities, net of acquisitions and
divestitures
2,748   53,435  
Cash provided by operating activities 176,747 82,718
Investing activities:
Additions to property, equipment and leasehold improvements (40,126 ) (41,627 )
Acquisitions - cash paid (net of cash acquired) (2,604,178 )
Divestitures - cash received 405,542
Other 1,000    
Cash provided by (used in) investing activities 366,416 (2,645,805 )
Financing activities:
Proceeds from employee stock purchase plan 7,627 5,662
Proceeds from borrowings 2,885,000
Payments for deferred financing fees (51,170 )
Payments on borrowings (858,609 ) (119,812 )
Purchases of treasury stock (96,271 ) (33,786 )
Cash (used in) provided by financing activities (947,253 ) 2,685,894  
Net (decrease) increase in cash and cash equivalents and
restricted cash
(404,090 ) 122,807
Effects of exchange rates on cash and cash equivalents and
restricted cash
(3,012 ) 10,406
Cash and cash equivalents and restricted cash, beginning of period 567,058   499,354  
Cash and cash equivalents and restricted cash, end of period $ 159,956   $ 632,567  

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