Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, and recession; 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 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 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 that drives 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 September 30, 2023 we had approximately 20,253 employees globally, an increase of 6.4% from September 30, 2022.

Recent Events

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

In February 2023, we completed the sale of a non-core business, TalentNeuron, for approximately $161.1 million after considerations of post-close adjustments. TalentNeuron was included in the Company’s Research segment. $156.1 million cash was received from the sale during the nine months ended September 30, 2023. We recognized a pre-tax gain of $135.4 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 nine months ended September 30, 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.

EXECUTIVE SUMMARY OF OPERATIONS AND FINANCIAL POSITION

The fundamentals of our strategy include a focus on creating actionable insight for executives 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 third quarter of 2023, an increase of 6% compared to the third quarter of 2022. During the third quarter of 2023, revenues for Research increased by 6%, Conferences revenue decreased by 26%, and Consulting revenues increased by 24%, compared to the third quarter of 2022. For a more complete discussion of our results by segment, see Segment Results below.

For the third quarter of 2023 and 2022, we had net income of $180.0 million and $173.5 million, respectively, and diluted income per share of $2.26 and $2.17, respectively. Cash provided by operating activities was $931.4 million and $898.3 million during the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, we had $1.2 billion 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 September 30, 2023						Three Months Ended September 30, 2022						Increase (Decrease)						Increase (Decrease) %
Total revenues			$	1,408,784					$	1,331,868					$	76,916					6		%
Costs and expenses:
Cost of services and product development			450,841						416,837						34,004						8
Selling, general and administrative			660,527						613,031						47,496						8
Depreciation			24,547						22,882						1,665						7
Amortization of intangibles			23,989						24,369						(380)						(2)
Acquisition and integration charges			4,463						1,331						3,132						235
Operating income			244,417						253,418						(9,001)						(4)
Interest expense, net			(21,820)						(30,286)						(8,466)						(28)
Other income, net			1,877						8,930						(7,053)						(79)
Less: Provision for income taxes			44,465						58,517						(14,052)						(24)
Net income			$	180,009					$	173,545					$	6,464					4		%

			Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022						Increase (Decrease)						Increase (Decrease) %
Total revenues			$	4,320,838					$	3,971,129					$	349,709					9		%
Costs and expenses:
Cost of services and product development			1,373,398						1,218,405						154,993						13
Selling, general and administrative			1,997,785						1,835,846						161,939						9
Depreciation			72,155						68,993						3,162						5
Amortization of intangibles			69,625						74,271						(4,646)						(6)
Acquisition and integration charges			7,804						5,827						1,977						34
Gain from sale of divested operation			(135,410)						—						(135,410)						nm
Operating income			935,481						767,787						167,694						22
Interest expense, net			(73,769)						(91,399)						(17,630)						(19)
Gain on event cancellation insurance claims			3,077						—						3,077						nm
Other income, net			5,086						46,684						(41,598)						(89)
Less: Provision for income taxes			196,040						172,087						23,953						14
Net income			$	673,835					$	550,985					$	122,850					22		%
nm = not meaningful.

Total revenues for the three months ended September 30, 2023 were $1.4 billion, an increase of $76.9 million, or 6% compared to the same period in 2022 on a reported basis and 5% excluding the foreign currency impact. Total revenues for the nine months ended September 30, 2023 were $4.3 billion, an increase of $349.7 million, or 9% compared to the same period in 2022

on a reported basis and 10% 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 $450.8 million during the three months ended September 30, 2023, an increase of $34.0 million compared to the same period in 2022, or 8% on a reported basis and 7% 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. Cost of services and product development as a percent of revenues was 32% and 31% for the three months ended September 30, 2023 and 2022, respectively. Cost of services and product development was $1.4 billion during the nine months ended September 30, 2023, an increase of $155.0 million compared to the same period in 2022, or 13% both on a reported basis and excluding the foreign currency impact. The increase in Cost of services and product development for the nine months ended September 30, 2023 was primarily due to increased compensation costs as a result of higher headcount, as well as 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 32% and 31% for the nine months ended September 30, 2023 and 2022, respectively.

Selling, general and administrative (“SG&A”) expense was $660.5 million during the three months ended September 30, 2023, an increase of $47.5 million compared to the same period in 2022, or 8% on a reported basis and 7% excluding the foreign currency impact. The increase in SG&A expense during the three months ended September 30, 2023 was primarily a result of higher personnel expenses due to increased headcount. SG&A expense was $2.0 billion during the nine months ended September 30, 2023, an increase of $161.9 million compared to the same period in 2022, or 9% on a reported basis and 10% excluding the foreign currency impact. The increase was primarily due to the same factor that caused the year-over-year quarterly increase. The number of quota-bearing sales associates in Global Technology Sales increased by 5% to 3,630 and in Global Business Sales, adjusted for the sale of our TalentNeuron business, increased by 10% to 1,149 compared to September 30, 2022. On a combined basis, the total number of quota-bearing sales associates increased by 6% when compared to September 30, 2022. SG&A expense as a percent of revenues was 47% and 46% during the three months ended September 30, 2023 and 2022, respectively. SG&A expense as a percent of revenues was 46% for both of the nine months ended September 30, 2023 and 2022.

Depreciation increased by 7% and 5% during the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022. The increase for the three and nine months ended September 30, 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 2% and 6% during the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022, primarily due to intangible assets divested as part of the sale of our TalentNeuron business.

Acquisition and integration charges increased by $3.1 million and $2.0 million during the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022.

Gain from sale of divested operation was attributable to the sale of our TalentNeuron business in February 2023. We recognized a pre-tax gain of $135.4 million for the nine months ended September 30, 2023.

Operating income was $244.4 million and $253.4 million during the three months ended September 30, 2023 and 2022, respectively. Operating income was $935.5 million and $767.8 million during the nine months ended September 30, 2023 and 2022, respectively. The decrease in operating income for the three months ended September 30, 2023 as compared to the prior year period was primarily due to an increase in cost of services and product development and selling, general and administrative expenses, partially offset by increased revenue. The increase in operating income for the nine months ended September 30, 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 $8.5 million and $17.6 million during the three and nine months ended September 30, 2023, respectively, compared to the same periods in 2022. The decrease for the three months ended September 30, 2023 was due to increased interest income, partially offset by higher interest expense on our term loan. The decrease for the nine months ended September 30, 2023 was primarily due to the same factors that caused the year-over-year quarterly increase, as well as lower interest expense due to the maturation of $700.0 million in fixed-for-floating interest rate swap contracts in March 2022.

Gain on event cancellation insurance claims of $3.1 million during the nine months ended September 30, 2023 reflected proceeds related to 2020 conference cancellation insurance claims.

Other income, net for the periods presented herein included the net impact of foreign currency gains and losses from our hedging activities. Other income, net for the three and nine months ended September 30, 2023 also included gains of $2.5 million and $7.7 million, respectively, on de-designated interest rate swaps. Other income, net for the three and nine months ended September 30, 2022 also included gains of $11.2 million and $51.7 million, respectively, on de-designated interest rate swaps.

The provision for income taxes was $44.5 million and $58.5 million for the three months ended September 30, 2023 and 2022, respectively, and $196.0 million and $172.1 million for the nine months ended September 30, 2023 and 2022, respectively.

The effective income tax rate was 19.8% and 25.2% for the three months ended September 30, 2023 and 2022, respectively. The decrease in the effective income tax rate was primarily due to the favorable impact of a foreign tax credit notice issued by the IRS as well as the expiration of statutes for uncertain tax positions in the three months ended September 30, 2023 as compared to the same period in 2022. The effective income tax rate was 22.5% and 23.8% for the nine months ended September 30, 2023 and 2022, respectively. The decrease in the year to date effective income tax rate in 2023 was primarily due to the impact of valuation allowance releases and the expiration of statutes for uncertain tax positions in the nine months ended September 30, 2023 as compared to the same period in 2022. The 2023 decrease was partially offset by an increase in the effective income tax rate for the sale of the TalentNeuron business.

Net income for the three months ended September 30, 2023 and 2022 was $180.0 million and $173.5 million, respectively, while net income for the nine months ended September 30, 2023 and 2022 was $673.8 million and $551.0 million, respectively. Our diluted net income per share during the three months ended September 30, 2023 increased by $0.09, while it increased by $1.67 for the nine months ended September 30, 2023, compared to the same period in 2022. The increase in net income during the three months ended September 30, 2023 as compared to the prior year period was primarily due to an increase in revenue and lower income tax expense, partially offset by an increase in operating expenses. The increase in net income during the nine months ended September 30, 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

			As Of And For The Three Months Ended September 30, 2023						As Of And For The Three Months Ended September 30, 2022						Increase (Decrease)						Percentage Increase (Decrease)						As Of And For The Nine Months Ended September 30, 2023						As Of And For The Nine Months Ended September 30, 2022						Increase (Decrease)						Percentage Increase (Decrease)
Financial Measurements:
Revenues (1)			$	1,218,739					$	1,147,823					$	70,916					6		%				$	3,643,815					$	3,426,532					$	217,283					6		%
Gross contribution (1)			$	894,149					$	848,438					$	45,711					5		%				$	2,678,945					$	2,541,782					$	137,163					5		%
Gross contribution margin			73		%				74		%				(1) point						—						74		%				74		%				0 point						—
Business Measurements:
Global Technology Sales (2):
Contract value (1), (3)			$	3,613,000					$	3,391,000					$	222,000					7		%
Client retention			83		%				86		%				(3) points						—
Wallet retention			102		%				107		%				(5) points						—
Global Business Sales (2):
Contract value (1), (3), (4)			$	1,046,000					$	917,000					$	129,000					14		%
Client retention			88		%				89		%				(1) point						—
Wallet retention			108		%				114		%				(6) 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 September 30, 2022 have been calculated using the same foreign currency rates as 2023.

(4)Contract value as of September 30, 2022 excludes the TalentNeuron business sold in February 2023.

Research revenues increased by $70.9 million during the three months ended September 30, 2023 compared to the same period in 2022, or 6% on a reported basis and 5% excluding the foreign currency impact. For the nine months ended September 30, 2023, research revenue increased by $217.3 million compared to the same period in 2022 or 6% on a reported basis and 7% excluding the foreign currency impact. The increase in revenues during 2023 was primarily due to strong Research contract value growth in 2022. The segment gross contribution margin was 73% and 74% for the three months ended September 30, 2023 and 2022, respectively, and 74% for both the nine months ended September 30, 2023 and 2022. The decrease in gross contribution margin was primarily due to an increase in personnel expenses to support future growth, partially offset by an increase in revenue.

Contract value increased to $4.7 billion at September 30, 2023, or 8% compared to September 30, 2022 excluding the foreign currency impact. Global Technology Sales (“GTS”) contract value increased by 7% at September 30, 2023 when compared to September 30, 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 the majority of enterprise sizes and sectors. Global Business Sales (“GBS”) contract value increased by 14% 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 nearly all enterprise sizes and sectors growing double-digits year-over-year.

GTS client retention was 83% and 86% as of September 30, 2023 and 2022, respectively, while wallet retention was 102% and 107%, respectively. GBS client retention was 88% and 89% for September 30, 2023 and 2022, respectively, while wallet retention was 108% and 114%, respectively. The decrease in GTS and GBS wallet retention was largely due to lower levels of incremental spending by existing clients compared to the same period in 2022.

Conferences

			Three Months Ended September 30, 2023						Three Months Ended September 30, 2022						Increase (Decrease)						Percentage Increase (Decrease)						Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022						Increase (Decrease)						Percentage Increase (Decrease)
Financial Measurements:
Revenues (1)			$	57,200					$	77,031					$	(19,831)					(26)		%				$	290,739					$	200,910					$	89,829					45		%
Gross contribution (1)			$	20,449					$	40,318					$	(19,869)					(49)		%				$	145,687					$	110,968					$	34,719					31		%
Gross contribution margin			36		%				52		%				(16) points						—						50		%				55		%				(5) points						—
Business Measurements:
Number of destination conferences (2)			9						13						(4)						(31)		%				36						32						4						13		%
Number of destination conferences attendees (2)			9,808						14,619						(4,811)						(33)		%				45,453						32,990						12,463						38		%

(1)Dollars in thousands.

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

Conferences revenues decreased by $19.8 million during the three months ended September 30, 2023 compared to the same period in 2022. Conferences revenues increased by $89.8 million during the nine months ended September 30, 2023 compared to the same period in 2022. The decrease in revenue for the three months ended September 30, 2023 was primarily due to holding fewer in-person destination conferences than in the third quarter of 2022, as a result of several conferences that were held in the third quarter of 2022 being held earlier in 2023. The increase in revenues for the nine months ended September 30, 2023 was primarily due to the return to in-person destination conferences, beginning in the second quarter of 2022. We held 9 and 36 in-person destination conferences during the three and nine months ended September 30, 2023, respectively. We held 10 and 16 in-person destination conferences during the three and nine months ended September 30, 2022, respectively, and 3 and 16 virtual conferences during the three and nine months ended September 30, 2022, respectively. Gross contribution decreased to $20.4 million during the three months ended September 30, 2023 compared to $40.3 million in the same period last year. The decrease in gross contribution during the three months ended September 30, 2023 was primarily due to the decrease in revenue. Gross contribution increased to $145.7 million during the nine months ended September 30, 2023 compared to $111.0 million in the same period last year. The increase in gross contribution during the nine months ended September 30, 2023 was primarily the result of the return to in-person destination conferences noted above.

Consulting

			As Of And For The Three Months Ended September 30, 2023						As Of And For The Three Months Ended September 30, 2022						Increase (Decrease)						Percentage Increase (Decrease)						As Of And For The Nine Months Ended September 30, 2023						As Of And For The Nine Months Ended September 30, 2022						Increase (Decrease)						Percentage Increase (Decrease)
Financial Measurements:
Revenues (1)			$	132,845					$	107,014					$	25,831					24		%				$	386,284					$	343,687					$	42,597					12		%
Gross contribution (1)			$	48,551					$	37,213					$	11,338					30		%				$	146,680					$	138,448					$	8,232					6		%
Gross contribution margin			37		%				35		%				2 points						—						38		%				40		%				(2) points						—
Business Measurements:
Backlog (1), (2)			$	180,400					$	156,300					$	24,100					15		%
Billable headcount			946						852						94						11		%
Consultant utilization			64		%				66		%				(2) points						—						65		%				70		%				(5) points						—

(1)Dollars in thousands.

(2)Backlog is on a foreign exchange neutral basis. Backlog as of September 30, 2022 has been calculated using the same foreign currency rates as 2023.

Consulting revenues increased by 24% during the three months ended September 30, 2023 compared to the same period in 2022 on a reported basis and 23% excluding the foreign currency impact, with an increase in labor-based consulting revenue of 10% and an increase in contract optimization revenue of 98%, each on a reported basis. Contract optimization revenue may vary significantly and, as such, revenues for the third quarter of 2023 may not be indicative of results for the remainder of 2023 or beyond. The segment gross contribution margin was 37% and 35% for the three months ended September 30, 2023 and 2022, respectively. The increase in gross contribution margin during the third quarter of 2023 was primarily due to the increase in revenue, partially offset by increased personnel expense related to higher headcount.

For the nine months ended September 30, 2023, Consulting revenues increased 12% 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 7% and an increase in contract optimization revenue of 39%, each on a reported basis. The segment gross contribution margin for the nine months ended September 30, 2023 decreased by 2 points compared to the same period in 2022. The decrease in gross contribution margin for the nine months ended September 30, 2023 was also primarily due to increased personnel expense related to higher headcount, partially offset by the increase in revenue.

Backlog increased by $24.1 million, or 15%, from September 30, 2022 to September 30, 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 September 30, 2023, we had $1.2 billion 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 52% held outside the U.S. at September 30, 2023. We intend to reinvest substantially all of our accumulated undistributed foreign earnings, except in instances where repatriation would result in minimal additional tax.

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

			Nine Months Ended September 30, 2023						Nine Months Ended September 30, 2022						Increase (Decrease)
Cash provided by operating activities			$	931,407					$	898,313					$	33,094
Cash provided by (used in) investing activities			77,112						(74,570)						151,682
Cash used in financing activities			(434,024)						(1,013,430)						579,406
Net increase (decrease) in cash and cash equivalents and restricted cash			574,495						(189,687)						764,182
Effects of exchange rates			(23,139)						(42,228)						19,089
Beginning cash and cash equivalents and restricted cash			698,599						760,602						(62,003)
Ending cash and cash equivalents and restricted cash			$	1,249,955					$	528,687					$	721,268

Operating

Cash provided by operating activities was $931.4 million and $898.3 million during the nine months ended September 30, 2023 and 2022, respectively. The year-over-year increase was primarily due to increased operating income, excluding the gain from sale of divested operation and strong collections, partially offset by increased income tax payments, in part as a result of the gain on sale of divested operation in 2023.

Investing

Cash provided by (used in) investing activities was $77.1 million and $(74.6) million during the nine months ended September 30, 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 IT infrastructure additions.

Financing

Cash used in financing activities was $434.0 million and $1.0 billion during the nine months ended September 30, 2023 and 2022, respectively. During the 2023 period, we used $447.7 million of cash for share repurchases and paid a net $5.4 million in debt principal repayments. During the 2022 period, we used $1.0 billion of cash for share repurchases and repaid a net $4.0 million in debt principal repayments.

Debt

As of September 30, 2023, the Company had $2.5 billion of principal amount of debt outstanding, of which $2.4 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 September 30, 2023, the Company has not entered into any material off-balance sheet arrangements or transactions with unconsolidated entities or other persons.