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Press release from Business Wire

Gartner Reports Financial Results for First Quarter 2011

<p class='bwalignc'> <i><b>Contract Value Increased 14% YoY to $983.5 million</b></i> </p> <p class='bwalignc'> <i><b>Revenue Increased 11% YoY to $329.6 million</b></i> </p> <p class='bwalignc'> <i><b>Diluted Earnings Per Share Increased 53% YoY</b></i> </p>

Thursday, May 05, 2011

Gartner Reports Financial Results for First Quarter 201107:00 EDT Thursday, May 05, 2011 STAMFORD, Conn. (Business Wire) -- 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 HighlightsResearch 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. 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 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 MeasuresNormalized 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. 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)   Direct Gross Contribution Revenue Expense 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, March 31, 2011 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 EndedMarch 31,20112010 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. Gartner, Inc.Brian Shipman, +1 203 316 3659Group Vice President, Investor Relationsbrian.shipman@gartner.com