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8-K - GARTNER INCc65547_8-k.htm

Exhibit 99.1

 

 

(GARTNER LOGO)

(PRESS RELEASE LOGO)

CONTACT:
Brian Shipman
Group Vice President, Investor Relations
+1 203 316 3659
brian.shipman@gartner.com

Gartner Reports Financial Results for First Quarter 2011

Contract Value Increased 14% YoY to $983.5 million

Revenue Increased 11% YoY to $329.6 million

Diluted Earnings Per Share Increased 53% YoY

STAMFORD, Conn., May 5, 2011 — Gartner, Inc. (NYSE: IT), the leading provider of research and analysis on the global information technology industry, today reported results for first quarter 2011 and reiterated its outlook for 2011 revenues, EPS, and cash flows.

For first quarter 2011, total revenue was $329.6 million, up 11% compared to first quarter 2010 as reported and 10% excluding the impact of foreign exchange. First quarter 2011 net income was $29.2 million, an increase of 50%, and Normalized EBITDA was $63.9 million, an increase of 21%. (See “Non-GAAP Financial Measures” for a discussion of Normalized EBITDA). Diluted earnings per share was $0.29 in the first quarter of 2011 compared to $0.19 per share in the prior year quarter. In the first quarter of 2011 the Company incurred acquisition related charges, net of tax, of $0.02 per share, as compared with $0.05 per share in the prior year quarter.

Gene Hall, Gartner’s chief executive officer, commented, “The momentum we saw in our business during 2010 has continued into 2011. Revenue, contract value, Normalized EBITDA, and EPS all grew at double-digit rates during the first quarter putting us in a great position to deliver on our aggressive full-year growth targets. We remain committed to delivering long-term double-digit growth to both revenue and earnings.”

Business Segment Highlights

Research
Revenue for first quarter of 2011 was $243.4 million, up 16% compared to the first quarter of 2010 or 14% excluding the impact of foreign exchange. The gross contribution margin was 68%. Contract value was $983.5 million at March 31, 2011, up 14% from March 31, 2010. Contract value also increased 14% excluding the impact of foreign exchange. Client and wallet retention rates for first quarter 2011 were 82% and 99%, respectively, up from 80% and 89% in the prior year quarter.

Consulting
Revenue for first quarter of 2011 was $70.6 million, a decrease of 1% as reported and 3% excluding the impact of foreign exchange. The gross contribution margin was 36%. First quarter 2011 utilization was 67% and billable headcount was 482. Backlog was $87.1 million at March 31, 2011.

Events
Revenue for first quarter of 2011 was $15.5 million, up 15% from the first quarter of 2010 and 13% excluding the impact of foreign exchange. The gross contribution margin was 37%. During first quarter 2011 the Company held 11 events with 4,337 attendees, compared to 9 events and 3,374 attendees in the first quarter of 2010.

-more-


Cash Flow and Balance Sheet Highlights

Cash used by operating activities was $24.7 million during first quarter 2011 compared to $8.0 million of cash used in the first quarter 2010. Additions to property, equipment and leasehold improvements (“Capital Expenditures”) totaled $3.7 million in first quarter 2011 and $3.4 million in first quarter 2010. The Company had cash of $109.0 million at March 31, 2011. During first quarter 2011, $51.9 million in cash was used to repurchase 1.4 million common shares.

Financial Outlook for 2011

Gartner also reiterated its previously disclosed full year 2011 projections for revenues, EPS, and cash flow:

Projected Revenue

 

 

 

 

 

 

 

 

($ in millions)

 

2011 Projected

 

% Change

 






 

Research

 

$

990 – 1,010

 

 

14% – 17

%

Consulting

 

 

310 –    330

 

 

3% –   9

%

Events

 

 

130 –    140

 

 

7% – 15

%

 

 



 



 

Total Revenue

 

$

1,430 – 1,480

 

 

11% – 15

%

Projected EPS and Cash Flow

 

 

 

 

 

 

 

 

($ in millions, except per share data)

 

2011 Projected

 

% Change

 






 

Diluted earnings per share (1)

 

$

1.29 – 1.41

 

 

34% – 47

%

Normalized EBITDA (2)

 

$

270 –  290

 

 

17% – 26

%

 

 

 

 

 

 

 

 

Operating cash flow (3)

 

$

250 –  270

 

 

22% – 31

%

Capital Expenditures (3)

 

 

(39) –  (41

)

 

 

 

 

 



 

 

 

 

Free Cash Flow (2)

 

$

211 –  229

 

 

10% – 19

%


 

 

(1)

Includes a projected $(0.04) per share impact from acquisition related charges. In 2010, these charges were $(0.14) per share.

(2)

See “Non-GAAP Financial Measures” below for a discussion of Normalized EBITDA and Free Cash Flow.

(3)

Includes $15.0 million of estimated payments for the renovation of our Stamford headquarters facility. The accounting impact of these renovation payments increases both cash flow from operations and capital expenditures (investing activities) by the same amount and as a result has no net impact on Free Cash Flow. These expenditures are contractually reimbursable by the landlord.

Conference Call Information

Gartner has scheduled a conference call at 8:30 a.m. eastern time on Thursday, May 5, 2011, to discuss the Company’s financial results. The conference call will be available via the Internet by accessing the Company’s website at http://investor.gartner.com. A replay of the webcast will be available for approximately 90 days following the call.

Annual Meeting of Stockholders

Gartner will hold its 2011 Annual Meeting of Stockholders at 10:00 a.m. eastern time on Thursday, June 2, 2011, at the Company’s offices in Stamford, Connecticut.

About Gartner

Gartner, Inc. (NYSE: IT) is the world’s leading information technology research and advisory company. Gartner delivers the technology-related insight necessary for its 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, Gartner is a valuable partner to clients in over 11,500 distinct organizations. Through the resources of Gartner

 

 


Gartner, Inc.

page 2



Research, Gartner Consulting and Gartner Events, Gartner works 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 4,500 associates, including over 1,250 research analysts and consultants, and clients in 85 countries. For more information, visit www.gartner.com.

Non-GAAP Financial Measures

Normalized EBITDA: Represents operating income excluding depreciation, accretion on obligations related to excess facilities, amortization, stock-based compensation expense, acquisition related charges, 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. Investors are cautioned that Normalized EBITDA is not a financial measure defined under generally accepted accounting principles and as a result is considered a non-GAAP financial measure. We provide this measure to enhance the user’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future. It should not be construed as an alternative to any other measure of performance determined in accordance with generally accepted accounting principles.

Free Cash Flow: Represents cash provided by operating activities 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 Company’s 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.

Safe Harbor Statement

Statements contained in this press release regarding the Company’s growth and prospects, projected 2011 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 involve known and unknown risks, 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 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 upon whom we are dependent; our ability to achieve and effectively manage growth, including our ability to integrate acquisitions and consummate future acquisitions; our ability to pay our debt; 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; and other factors described under “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2010 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.

# # #r

 

 


Gartner, Inc.

page 3



GARTNER, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

 

 

 

 

2011

 

2010

 

 

 

 

 


 


 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

Research

 

$

243,435

 

$

210,673

 

 

16

%

Consulting

 

 

70,630

 

 

71,639

 

 

-1

%

Events

 

 

15,502

 

 

13,521

 

 

15

%

 

 



 



 

 

 

 

Total revenues

 

 

329,567

 

 

295,833

 

 

11

%

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

Cost of services and product development

 

 

133,316

 

 

123,046

 

 

8

%

Selling, general and administrative

 

 

141,672

 

 

130,568

 

 

9

%

Depreciation

 

 

6,271

 

 

6,584

 

 

-5

%

Amortization of intangibles

 

 

2,527

 

 

2,926

 

 

-14

%

Acquisition and integration charges

 

 

 

 

3,511

 

 

-100

%

 

 



 



 

 

 

 

Total costs and expenses

 

 

283,786

 

 

266,635

 

 

6

%

 

 



 



 

 

 

 

Operating income

 

 

45,781

 

 

29,198

 

 

57

%

Interest expense, net

 

 

(2,784

)

 

(3,384

)

 

-18

%

Other (expense) income, net

 

 

(382

)

 

1,752

 

 

>-100

%

 

 



 



 

 

 

 

Income before income taxes

 

 

42,615

 

 

27,566

 

 

55

%

Provision for income taxes

 

 

13,424

 

 

8,163

 

 

64

%

 

 



 



 

 

 

 

Net income

 

$

29,191

 

$

19,403

 

 

50

%

 

 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income per common share:

 

 

 

 

 

 

 

 

 

 

Basic:

 

$

0.30

 

$

0.20

 

 

50

%

Diluted:

 

$

0.29

 

$

0.19

 

 

53

%

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

96,442

 

 

95,963

 

 

0

%

Diluted

 

 

99,451

 

 

99,649

 

 

0

%



BUSINESS SEGMENT DATA
(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

Direct
Expense

 

Gross
Contribution

 

Contribution
Margin

 

 

 


 


 


 


 

Three Months Ended 3/31/11

 

 

 

 

 

 

 

 

 

 

 

 

 

Research

 

$

243,435

 

$

78,934

 

$

164,501

 

 

68

%

Consulting

 

 

70,630

 

 

45,141

 

 

25,489

 

 

36

%

Events

 

 

15,502

 

 

9,837

 

 

5,665

 

 

37

%

 

 



 



 



 

 

 

 

TOTAL

 

$

329,567

 

$

133,912

 

$

195,655

 

 

59

%

 

 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended 3/31/10

 

 

 

 

 

 

 

 

 

 

 

 

 

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

%

 

 



 



 



 

 

 

 



SELECTED STATISTICAL DATA

 

 

 

 

 

 

 

 

 

 

March 31,
2011

 

March 31,
2010

 

 

 


 


 

Research contract value

 

$

983,450

 (a)

$

864,428

 (a)

Research client retention

 

 

82

%

 

80

%

Research wallet retention

 

 

99

%

 

89

%

Research client organizations

 

 

11,574

 

 

10,784

 

Consulting backlog

 

$

87,100

 (a)

$

89,091

 (a)

Consulting—quarterly utilization

 

 

67

%

 

72

%

Consulting billable headcount

 

 

482

 

 

444

 

Consulting—average annualized revenue per billable headcount

 

$

425

 (a)

$

441

 (a)

Events—number of events for the quarter

 

 

11

 

 

9

 

Events—attendees for the quarter

 

 

4,337

 

 

3,374

 


 


(a) Dollars in thousands.



SUPPLEMENTAL INFORMATION (in thousands, except per share amounts)

Reconciliation - Operating income to Normalized EBITDA
(a):

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

 

 


 


 

 

 

2011

 

2010

 

 

 


 


 

Net income

 

$

29,191

 

$

19,403

 

Interest expense, net

 

 

2,784

 

 

3,384

 

Other expense (income), net

 

 

382

 

 

(1,752

)

Tax provision

 

 

13,424

 

 

8,163

 

 

 



 



 

Operating income

 

$

45,781

 

$

29,198

 

 

 

 

 

 

 

 

 

Normalizing adjustments:

 

 

 

 

 

 

 

Stock-based compensation expense (b)

 

 

9,162

 

 

9,159

 

Depreciation, accretion, and amortization (c)

 

 

8,887

 

 

9,672

 

Pre-acquisition deferred revenue (d)

 

 

64

 

 

1,480

 

Acquisition and integration charges (e)

 

 

 

 

3,511

 

 

 



 



 

Normalized EBITDA

 

$

63,894

 

$

53,020

 

 

 



 



 


 

 

(a)

Normalized EBITDA is based on GAAP operating income adjusted for certain normalizing adjustments.

 

 

(b)

Consists of charges for stock-based compensation awards.

 

 

(c)

Includes acquisition related amortization of intangibles related to AMR Research and Burton Group of $2.5 million and $2.9 million for the three months ended March 31, 2011 and 2010, respectively.

 

 

(d)

Consists of non-cash fair value adjustments on pre-acquisition AMR Research and Burton Group deferred revenue. These amounts were 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.