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8-K - FORM 8-K - GARTNER INC | y84362e8vk.htm |
EX-3.1 - EX-3.1 - GARTNER INC | y84362exv3w1.htm |
Exhibit 99.1
Press Realease |
CONTACT:
Henry A. Diamond
Group Vice President
Investor Relations and Corporate Finance
+1 203 316 3399
henry.diamond@gartner.com
Henry A. Diamond
Group Vice President
Investor Relations and Corporate Finance
+1 203 316 3399
henry.diamond@gartner.com
Gartner Reports Financial Results for First Quarter 2010
Research Contract Value Increased 14% Year-Over-Year to $864.4 Million
Revenue Increased 8% Year-Over-Year to $295.8 Million
Diluted Income Per Share Was $0.19 Versus $0.21 for First Quarter 2009
Diluted Income Per Share Excluding Acquisition Adjustments
Increased 14% Year-Over-Year to $0.24
Increased 14% Year-Over-Year to $0.24
Company Raised Its Outlook for Full Year 2010 Earnings and Cash Flow
STAMFORD, Conn., May 5, 2010 Gartner, Inc. (NYSE: IT), the leading provider of research and
analysis on the global information technology industry, today reported results for first quarter
2010; increased its outlook for full year 2010 earnings and cash flow; and reiterated its outlook
for full year 2010 revenue.
For first quarter 2010, total revenue was $295.8 million. Year-over-year, total revenue was up 8%
as reported and 4% excluding the impact of foreign exchange. Net income was $19.4 million versus
$20.0 million for first quarter 2009 and diluted income per share was $0.19 versus $0.21 for first
quarter 2009. Net income and diluted income per share were negatively impacted by Acquisition
Adjustments totaling $4.5 million or $0.05 per share. Diluted Income Per Share Excluding
Acquisition Adjustments was $0.24, up 14% year-over-year, and Normalized EBITDA was $53.0 million,
up 10% year-over-year. See Non-GAAP Financial Measures for a discussion of Normalized EBITDA and
Income Per Share Excluding Acquisition Adjustments.
Gene Hall, Gartners chief executive officer, commented, 2010 is off to a great start for Gartner.
The positive momentum in our business trends that began in the second half of 2009 has continued
this year and we have returned to solid year-over-year growth. During the first quarter, we
generated double-digit revenue and contract value growth in our Research segment and exceeded our
earnings expectations. We are on track to deliver double-digit revenue and contract value growth
for the full year.
Business Segment Highlights
Research
Revenue for first quarter 2010 was $210.7 million. Year-over-year, revenue was up 12% as reported
and 8% excluding the impact of foreign exchange. Gross contribution margin was 66%, unchanged
versus first quarter 2009.
-more-
Contract value was $864.4 million at March 31, 2010. Year-over-year, contract value was up 14% as
reported and 10% excluding the impact of foreign exchange.
Client and wallet retention rates for first quarter 2010 were 80% and 89%, respectively, up from
78% and 87%, respectively, for fourth quarter 2009. Wallet retention excludes the impact of
foreign exchange.
Consulting
Revenue for first quarter 2010 was $71.6 million. Year-over-year, revenue was up 2% as reported
and down 2% excluding the impact of foreign exchange. Gross contribution margin increased 2
percentage points year-over-year to 40%.
First quarter 2010 utilization was 72%, unchanged versus first quarter 2009. Billable headcount
was 444 at March 31, 2010 versus 470 at March 31, 2009. Backlog at March 31, 2010 was $89.1
million, up 3% year-over-year.
Events
Revenue for first quarter 2010 was $13.5 million. Year-over-year, revenue was down 13% as reported
and 17% excluding the impact of foreign exchange. Gross contribution margin increased 8 percentage
points year-over-year to 39%.
As expected and previously communicated, year-over-year revenue comparisons were impacted by the
timing of events. During first quarter 2010, the Company held 9 events with 3,374 attendees as
compared to 12 events with 3,883 attendees during first quarter 2009.
Cash Flow and Balance Sheet Highlights
Cash (used) provided by operating activities was ($8.0) million during first quarter 2010. The use
of cash during the quarter resulted principally from increased commission and incentive payments,
due to higher sales, and increased payables, which was timing related. In addition, cash (used)
provided by operating activities was negatively impacted by approximately $3.5 million in Cash
Acquisition and Integration Charges. Additions to property, equipment and leasehold improvements
(Capital Expenditures) were $3.4 million. See Non-GAAP Financial Measures for a discussion of
Cash Acquisition and Integration Charges.
During first quarter 2010, the Company deployed its cash principally to repurchase 1.5 million
shares of its common stock for a total cost of $35.2 million and to fund the remaining purchase
price of the acquisition of Burton Group. As of March 31, 2010, the Company had total debt of
$367.0 million and cash of $105.9 million.
Financial Outlook for 2010
Gartner increased its outlook for full year 2010 diluted income per share, diluted Income Per Share
Excluding Acquisition Adjustments, Normalized EBITDA, cash provided by operating activities and
Free Cash Flow, and reiterated its outlook for revenue.
Gartner, Inc. | page 2 |
Projected Revenue
For revenue, the year-over-year change is presented both as reported and excluding the impact of
foreign exchange (FX Neutral):
($ in millions) | 2010 Projected | % Change FX Neutral | % Change Reported | |||||||||
Research |
$ | 845865 | 10%13 | % | 12%15 | % | ||||||
Consulting |
300315 | 3%8 | % | 5%10 | % | |||||||
Events |
104109 | 2%7 | % | 4%9 | % | |||||||
Total Revenue (1) |
$ | 1,2491,289 | 8%11 | % | 10%13 | % |
(1) | Includes $58 62 million in projected revenue from the acquisitions of AMR Research and Burton Group, net of fair value adjustments on pre-acquisition deferred revenue totaling $4 million. |
Projected Earnings and Cash Flow
% Change | % Change | |||||||||||
($ in millions, except per share data) | 2010 Projected | Reported | Adjusted (2) | |||||||||
Diluted Income Per Share (1) |
$ | 0.81$0.93 | (5%)9 | % | 1%16 | % | ||||||
Acquisition Adjustments (3) |
$ | 0.15$0.15 | ||||||||||
Income Per Share, Excluding Acquisition
Adjustments (1) (3) |
$ | 0.96$1.08 | 10%24 | % | 17%32 | % | ||||||
Normalized EBITDA (3) (4) |
$ | 215230 | 12%20 | % | ||||||||
Cash provided by operating activities $ |
167187 | 3%16 | % | |||||||||
Cash Acquisition and Integration Charges (3) |
88 | |||||||||||
Capital Expenditures |
(15) | (20) | ||||||||||
Free Cash Flow (3) |
$ | 160175 | 9%19 | % |
(1) | Includes $0.00 $0.02 per share in projected income from the acquisitions of AMR Research and Burton Group. | |
(2) | Reflects year-over-year comparisons excluding the impact of the $0.05 per share in tax benefits recorded in 2009 that are not expected to recur. | |
(3) | See Non-GAAP Financial Measures for a discussion of Normalized EBITDA, Acquisition Adjustments, Income Per Share Excluding Acquisition Adjustments, Cash Acquisition and Integration Charges, and Free Cash Flow. | |
(4) | Includes $2 4 million in projected Normalized EBITDA from the acquisitions of AMR Research and Burton Group and excludes a projected $29 30 million in pre-tax stock based compensation expense. |
Diane Julian to Lead Strategy and David Godfrey to Lead Global Sales
Separately, Gartner announced that Diane Julian, formerly Gartners Senior Vice President, Global
Sales, will take on the newly-created role of Senior Vice President, Strategy. During her 20 year
career with Gartner, Julian has served as a research analyst and has held successive sales
positions of increasing scope and responsibility, most recently as the leader of the Global Sales
organization.
David Godfrey, formerly Group Vice President, Sales, has been promoted to Senior Vice President and
will succeed Julian as the leader of Global Sales. Since joining Gartner in 1999, Godfrey has held
a series of roles with increasing responsibility, including leading the EMEA and Americas inside
sales organizations, field sales in EMEA and, most recently, field sales in the Americas.
Gartner, Inc. | page 3 |
Conference Call Information
Gartner has scheduled a conference call at 10:00 a.m. eastern time today, Wednesday, May 5, 2010,
to discuss the Companys financial results. The conference call will be available via the Internet
by accessing the Companys web site at http://investor.gartner.com. A replay of the webcast will
be available for 90 days following the call.
About Gartner
Gartner, Inc. (NYSE: IT) is the worlds leading information technology research and advisory
company. We deliver the technology-related insight necessary for our clients to make the right
decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to
business leaders in high-tech and telecom enterprises and professional services firms, to
technology investors, we are the valuable partner to approximately 60,000 clients in 10,000
distinct organizations. Through the resources of Gartner Research, Gartner Executive Programs,
Gartner Consulting and Gartner Events, we work with every client to research, analyze and interpret
the business of IT within the context of their individual role. Founded in 1979, Gartner is
headquartered in Stamford, Connecticut, U.S.A., and has approximately 4,300 associates, including
approximately 1,200 research analysts and consultants, and clients in 80 countries. For more
information, visit www.gartner.com.
Non-GAAP Financial Measures
Investors are cautioned that Income Per Share Excluding Acquisition Adjustments, Normalized EBITDA
and Free Cash Flow are not financial measures under generally accepted accounting principles. In
addition, they should not be construed as alternatives to any other measures of performance
determined in accordance with generally accepted accounting principles. These non-GAAP financial
measures are provided to enhance the users overall understanding of the Companys current
financial performance and the Companys prospects for the future.
Income Per Share Excluding Acquisition Adjustments: Represents diluted income per share
excluding charges related to the acquisitions of AMR Research and Burton Group, which primarily
consist of amortization for identifiable intangibles, fair value adjustments on pre-acquisition
deferred revenue and certain non-recurring costs such as legal, consulting, severance and other
exit costs (Acquisition Adjustments). We believe Income Per Share Excluding Acquisition
Adjustments is an important measure of our recurring operations as it excludes items that may not
be indicative of our core operating results.
Normalized EBITDA: Represents operating income excluding depreciation, accretion on
obligations related to excess facilities, amortization, stock based compensation expense,
Acquisition Adjustments, and Other charges. We believe Normalized EBITDA 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 excluding cash charges
related to the acquisitions of AMR Research and Burton Group, which primarily consist of certain
non-recurring costs such as severance and other exit costs (Cash Acquisition and Integration
Charges), less additions to property, equipment and leasehold improvements (Capital
Expenditures). We believe that Free Cash Flow is an important measure of the recurring cash
generated by the Companys core operations that is available to be used to repurchase stock, repay
debt obligations and invest in future growth through new business development activities or
acquisitions.
Gartner, Inc. | page 4 |
Safe Harbor Statement
Statements contained in this press release regarding the growth and prospects of the business, the
Companys projected 2010 financial results and all other statements in this release other than
recitation of historical facts are forward-looking statements (as defined in the Private Securities
Litigation Reform Act of 1995). Such forward-looking statements include risks and uncertainties;
consequently, actual results may differ materially from those expressed or implied thereby. Factors
that could cause actual results to differ materially include, but are not limited to, the ability
to expand or retain Gartners customer base; the ability to grow or sustain revenue from individual
customers; the ability to retain the professional staff of research analysts and consultants upon
whom Gartner is dependent; the ability to achieve and effectively manage growth; the ability to pay
Gartners debt obligations; the ability to achieve continued customer renewals and achieve new
contract value, backlog and deferred revenue growth in light of competitive pressures; the ability
to carry out Gartners strategic initiatives and manage associated costs; the ability to
effectively integrate the businesses of AMR Research and Burton Group; substantial competition from
existing competitors and potential new competitors; additional risks associated with international
operations including foreign currency fluctuations; the impact of restructuring and other charges
on Gartners businesses and operations; general economic conditions; and other risks listed from
time to time in Gartners reports filed with the Securities and Exchange Commission, including
Gartners most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. These filings
can be found on Gartners Web site at www.gartner.com/investors and the SECs Web site 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. | page 5 |
GARTNER, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
Three Months Ended | ||||||||||||
March 31, | ||||||||||||
2010 (a) | 2009 | |||||||||||
Revenues: |
||||||||||||
Research |
$ | 210,673 | $ | 187,688 | 12 | % | ||||||
Consulting |
71,639 | 70,319 | 2 | % | ||||||||
Events |
13,521 | 15,526 | -13 | % | ||||||||
Total revenues |
295,833 | 273,533 | 8 | % | ||||||||
Costs and expenses: |
||||||||||||
Cost of services and product development |
123,046 | 116,644 | 5 | % | ||||||||
Selling, general and administrative |
130,568 | 115,564 | 13 | % | ||||||||
Depreciation |
6,584 | 6,475 | 2 | % | ||||||||
Amortization of intangibles |
2,926 | 399 | >100 | % | ||||||||
Acquisition and integration charges |
3,511 | | 100 | % | ||||||||
Total costs and expenses |
266,635 | 239,082 | 12 | % | ||||||||
Operating income |
29,198 | 34,451 | -15 | % | ||||||||
Interest expense, net |
(3,384 | ) | (4,180 | ) | -19 | % | ||||||
Other income (expense), net |
1,752 | (1,246 | ) | >100 | % | |||||||
Income before income taxes |
27,566 | 29,025 | -5 | % | ||||||||
Provision for income taxes |
8,163 | 9,029 | -10 | % | ||||||||
Net income |
$ | 19,403 | $ | 19,996 | -3 | % | ||||||
Income per common share: |
||||||||||||
Basic: |
$ | 0.20 | $ | 0.21 | -5 | % | ||||||
Diluted: |
$ | 0.19 | $ | 0.21 | -10 | % | ||||||
Weighted average shares outstanding: |
||||||||||||
Basic |
95,963 | 93,898 | 2 | % | ||||||||
Diluted |
99,649 | 95,763 | 4 | % |
(a) | Includes the results of AMR Research, Inc. and Burton Group, Inc., which were acquired in December 2009. |
BUSINESS SEGMENT DATA
(Dollars in thousands)
(Dollars in thousands)
Direct | Gross | Contribution | ||||||||||||||
Revenue | Expense | Contribution | Margin | |||||||||||||
Three Months Ended 3/31/10 (a) |
||||||||||||||||
Research |
$ | 210,673 | $ | 71,938 | $ | 138,735 | 66 | % | ||||||||
Consulting |
71,639 | 43,217 | 28,422 | 40 | % | |||||||||||
Events |
13,521 | 8,306 | 5,215 | 39 | % | |||||||||||
TOTAL |
$ | 295,833 | $ | 123,461 | $ | 172,372 | 58 | % | ||||||||
Three Months Ended 3/31/09 |
||||||||||||||||
Research |
$ | 187,688 | $ | 62,957 | $ | 124,731 | 66 | % | ||||||||
Consulting |
70,319 | 43,299 | 27,020 | 38 | % | |||||||||||
Events |
15,526 | 10,743 | 4,783 | 31 | % | |||||||||||
TOTAL |
$ | 273,533 | $ | 116,999 | $ | 156,534 | 57 | % | ||||||||
(a) | Includes the results of AMR Research, Inc. and Burton Group, Inc., which were acquired in December 2009. |
SELECTED STATISTICAL DATA
March 31, | March 31, | |||||||
2010 (a) | 2009 | |||||||
Research contract value |
$ | 864,428 | (b) | $ | 760,704 | (b) | ||
Research client retention |
80 | % | 80 | % | ||||
Research wallet retention |
89 | % | 90 | % | ||||
Research client organizations |
10,784 | 10,195 | ||||||
Consulting backlog |
$ | 89,091 | (b) | $ | 86,657 | (b) | ||
Consultingquarterly utilization |
72 | % | 72 | % | ||||
Consulting billable headcount |
444 | 470 | ||||||
Consultingaverage annualized revenue
per billable headcount |
$ | 441 | (b) | $ | 413 | (b) | ||
Eventsnumber of events for the quarter |
9 | 12 | ||||||
Eventsattendees for the quarter |
3,374 | 3,883 |
(a) | Includes AMR Research, Inc. and Burton Group, Inc., which were acquired in December 2009. | |
(b) | Dollars in thousands. |
SUPPLEMENTAL INFORMATION (in thousands)
Reconciliation Operating income to Normalized EBITDA (a):
Three Months Ended | ||||||||
March 31, | ||||||||
2010 | 2009 | |||||||
Net income |
$ | 19,403 | $ | 19,996 | ||||
Interest expense, net |
3,384 | 4,180 | ||||||
Other (income) expense, net |
(1,752 | ) | 1,246 | |||||
Tax provision |
8,163 | 9,029 | ||||||
Operating income |
$ | 29,198 | $ | 34,451 | ||||
Normalizing adjustments: |
||||||||
Depreciation, accretion, and amortization (b) |
9,672 | 7,072 | ||||||
Stock-based compensation expense (c) |
9,159 | 6,792 | ||||||
Pre-acquisition deferred revenue (d) |
1,480 | | ||||||
Acquisition and integration charges (e) |
3,511 | | ||||||
Normalized EBITDA |
$ | 53,020 | $ | 48,315 | ||||
(a) | Normalized EBITDA is based on GAAP operating income adjusted for certain normalizing adjustments. | |
(b) | Consists of depreciation, accretion on obligations related to excess facilities, and amortization of intangibles. | |
(c) | Consists of charges for stock-based compensation awards determined in accordance with FASB ASC Topic 718. | |
(d) | Consists of non-cash fair value adjustments on pre-acquisition AMR Research and Burton Group deferred revene. These amounts are amortized ratably over the life of the underlying contract. | |
(e) | Includes non-recurring cash charges incurred to acquire and integrate the acquisitions of AMR Research and Burton Group, such as legal, consulting, severance, and other costs. |
Reconciliation Diluted income per share to Diluted Income Per Share Excluding
Acquisition Adjustments (a):
Acquisition Adjustments (a):
Three Months Ended March 31, | ||||||||||||||||
2010 | 2009 | |||||||||||||||
After-tax | After-tax | |||||||||||||||
Amount | EPS | Amount | EPS | |||||||||||||
Diluted income per share |
$ | 19,403 | $ | 0.19 | $ | 19,996 | $ | 0.21 | ||||||||
Acquisition adjustments, net of tax effect (b): |
||||||||||||||||
Amortization of intangibles (c) |
1,519 | 0.02 | | | ||||||||||||
Pre-acquisition deferred revenue (d) |
895 | 0.01 | | | ||||||||||||
Acquisition and integration charges (e) |
2,124 | 0.02 | | | ||||||||||||
Diluted Income Per Share Excluding Acquisition
Adjustments (f) |
$ | 23,941 | $ | 0.24 | $ | 19,996 | $ | 0.21 | ||||||||
(a) | Diluted Income Per Share Excluding Acquisition Adjustments is based on GAAP diluted income per share adjusted for the per share impact of certain AMR Research and Burton Group acquisition adjustments, net of tax effect. | |
(b) | Acquisition adjustments reflect an effective tax rate of 39.5% in 2010. | |
(c) | Consists of non-cash amortization charges related to AMR Research and Burton Group intangibles. | |
(d) | Consists of non-cash fair value adjustments on pre-acquisition AMR Research and Burton Group deferred revenue. These amounts are amortized ratably over the life of the underlying contract. | |
(e) | Includes non-recurring cash charges incurred to acquire and integrate the acquisitions of AMR Research and Burton Group, such as legal, consulting, severance, and other costs. | |
(f) | Per share amounts are based on fully diluted shares of 99.6 million in 2010 and 95.8 million in 2009. |