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Press release from Business Wire

Gartner Reports Financial Results for Fourth Quarter and Full Year 2011

<p class='bwalignc'> <i><b>Contract Value $1,116 Million, Highest in Gartner's History, Up 14% YoY</b></i> </p> <p class='bwalignc'> <i><b>Full Year 2011 Diluted Earnings per Share $1.39, Up 45% YoY</b></i> </p> <p class='bwalignc'> <i><b>Full Year 2011 Free Cash Flow $213.6 Million, Up 11% YoY</b></i> </p>

Tuesday, February 07, 2012

Gartner Reports Financial Results for Fourth Quarter and Full Year 201107:00 EST Tuesday, February 07, 2012 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 fourth quarter and full year 2011, and provided its preliminary financial outlook for full year 2012. For fourth quarter 2011, total revenue was $427.7 million, up 12% year-over-year. Foreign exchange had only a negligible impact. Net income increased 23% while Normalized EBITDA increased 17% to $84.8 million (see "Non-GAAP Financial Measures" for a discussion of Normalized EBITDA). Diluted earnings per share was $0.46 in fourth quarter 2011 compared to $0.37 for fourth quarter 2010. Diluted earnings for fourth quarter 2010 included acquisition related charges, net of tax, of $(0.02) per share compared to zero in the fourth quarter of 2011. For full year 2011, total revenue was $1,468.6 million, an increase of 14%, and net income was $136.9 million. Total revenue increased 11% year-over-year excluding the foreign exchange impact. Normalized EBITDA was $279.4 million, an increase of 21% over 2010. Diluted earnings per share was $1.39 compared to $0.96 in 2010. Diluted earnings per share for 2011 included acquisition-related charges, net of tax, of $(0.04) per share compared to $(0.14) in 2010. Free Cash Flow was $213.6 million in 2011, an increase of 11% over 2010 (see "Non-GAAP Financial Measures" for a discussion of Free Cash Flow). Gene Hall, Gartner's chief executive officer, commented, “We achieved record levels of new business and contract value, maintained strong client and wallet retention, and many of our other key business metrics continued their strong performance during the fourth quarter. We delivered double-digit revenue, Normalized EBITDA, EPS, and operating cash flow growth for the full year 2011. As we look ahead to 2012, we are excited about the opportunity we see in the market, and we expect to deliver another year of double-digit growth as measured by our key business metrics.” Business Segment HighlightsResearch Revenue for fourth quarter 2011 was $262.6 million, up 14% over the fourth quarter of 2010 excluding the impact of foreign exchange. Gross contribution margin improved 2 percentage points to 67%. For full year 2011, revenue was $1,012.1 million, up 14% year-over-year excluding the impact of foreign exchange. Gross contribution margin increased 2 points year-over-year, to 67%. Contract value was $1,116 million at December 31, 2011, up 14% compared to December 31, 2010 and the highest reported contract value in Gartner's history. Foreign exchange had a negligible impact on contract value. Client and wallet retention rates for fourth quarter 2011 were 82% and 99%, respectively, compared to 83% and 98% in fourth quarter 2010. Consulting Revenue for fourth quarter 2011 was $88.6 million, a decline of 1% over fourth quarter 2010 excluding the impact of foreign exchange. Gross contribution margin was 41%. For full year 2011, revenue was $308.0 million, a decline of 1% year-over-year excluding the impact of foreign exchange. Gross contribution margin for full year 2011 was 37%. Fourth quarter 2011 utilization was 68% and billable headcount was 481. Backlog was $100.6 million at December 31, 2011. Events Revenue for fourth quarter 2011 was $76.4 million, up 23% compared to fourth quarter 2010 excluding the impact of foreign exchange. Gross contribution margin was 49%. For full year 2011, revenue was $148.5 million, up 21% compared to 2010 excluding the impact of foreign exchange. Gross contribution margin for full year 2011 was 45%. During fourth quarter 2011, the Company held 12 events with 20,500 attendees. During full year 2011, the Company held 60 events with 42,748 attendees. Cash Flow and Balance Sheet Highlights Gartner generated operating cash of $79.1 million during fourth quarter 2011 and $255.6 million for full year 2011. Additions to property, equipment and leasehold improvements (“Capital Expenditures”) were $18.2 million in fourth quarter 2011 and $42.0 million for full year 2011. Free Cash Flow for full year 2011 was $213.6 million, an increase of 11% over 2010. (See "Non-GAAP Financial Measures" for a discussion of Free Cash Flow). The Company had $142.7 million of cash at December 31, 2011 and almost $377.0 million of borrowing capacity on its revolving credit arrangement. During 2011, the Company deployed its free cash flow principally to repurchase 5.9 million of its common shares. The Company's remaining share repurchase authorization is $293.0 million as of December 31, 2011. As of December 31, 2011, the Company had total debt of $200.0 million compared to $220.2 million at year-end 2010. Preliminary Financial Outlook for 2012 Gartner also provided its preliminary financial outlook for 2012: Projected Revenue     ($ in millions)   2012 Projected   % Change Research $1,130 – 1,150 12% – 14% Consulting 310 – 330 1% – 7% Events 160 – 170 8% – 14% Total Revenue $1,600 – 1,650 9% – 12%   Projected Earnings and Cash Flow ($ in millions, except per share data)   2012 Projected   % Change Diluted Earnings Per Share $1.63 – $1.79 17% – 29% Normalized EBITDA (1) $315 – $335 13% – 20%   Operating Cash Flow (2) $285 – 305 12% – 19% Capital Expenditures (2) (46) – (48) Free Cash Flow (1) $239 – 257 12% – 20% (1) See “Non-GAAP Financial Measures” below for a discussion of Normalized EBITDA and Free Cash Flow. (2) Capital expenditures includes $16.0 million of estimated payments we will make for the renovation of our Stamford headquarters facility, which are contractually reimbursable from the landlord. 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. Conference Call and Investor Day Information Gartner has scheduled a conference call at 8:30 a.m. eastern time on Tuesday, February 7, 2012 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 or by dial-in. The U.S. dial-in number is 888-680-0878 and the international dial-in number is 617-213-4855 and the participant passcode is 67418089. The question and answer session of the conference call will be open to investors and analysts only. A replay of the webcast will be available for approximately 90 days following the call. The Company will also host an Investor Day for institutional investors and sell-side analysts beginning at 8:00 a.m. eastern time on Thursday, February 16, 2012 in New York City. The Investor Day is by invitation and registration is required. Analysts and investors interested in attending should contact our Investors Relations department prior to February 16. It will also be webcast live via the Internet on the Company's web site at http://investor.gartner.com and a replay will be available following the event. Annual Meeting of Stockholders Gartner will hold its 2012 Annual Meeting of Stockholders at 10:00 a.m. eastern time on Thursday, June 7, 2012, 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 12,400 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 4,975 associates, including 1,295 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, and acquisition-related 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 plus cash acquisition and integration payments 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 as well as experienced sales personnel 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 Twelve Months Ended December 31, December 31, 2011 2010 2011 2010 Revenues: Research $ 262,633 $ 230,552 14% $1,012,062 $ 865,000 17% Consulting 88,640 89,321 -1% 308,047 302,117 2% Events 76,421 62,431 22% 148,479 121,337 22% Total revenues 427,694 382,304 12% 1,468,588 1,288,454 14% Costs and expenses: Cost of services and product development 180,282 164,959 9% 608,755 552,238 10% Selling, general and administrative 170,816 154,796 10% 613,707 543,174 13% Depreciation 6,396 6,131 4% 25,539 25,349 1% Amortization of intangibles 737 2,531 -71% 6,525 10,525 -38% Acquisition and integration charges - 813 -100% - 7,903 -100% Total costs and expenses 358,231 329,230 9% 1,254,526 1,139,189 10% Operating income 69,463 53,074 31% 214,062 149,265 43% Interest expense, net (2,104) (6,047) >-100% (9,967) (15,616) -36% Other (expense) income, net (417) (300) 39% (1,911) 436 >100% Income before income taxes 66,942 46,727 43% 202,184 134,085 51% Provision for income taxes 21,918 10,033 >100% 65,282 37,800 73% Net income $ 45,024 $ 36,694 23% $ 136,902 $ 96,285 42%   Income per common share: Basic: $ 0.48 $ 0.38 26% $ 1.43 $ 1.01 42% Diluted: $ 0.46 $ 0.37 24% $ 1.39 $ 0.96 45%   Weighted average shares outstanding: Basic 94,691 95,895 -1% 96,019 95,747 0% Diluted 97,037 99,567 -3% 98,846 99,834 -1% BUSINESS SEGMENT DATA         (Dollars in thousands) Direct Gross Contribution Revenue Expense Contribution Margin   Three Months Ended 12/31/11 Research $ 262,633 $ 86,917 $ 175,716 67% Consulting 88,640 52,623 36,017 41% Events 76,421 38,689 37,732 49% TOTAL $ 427,694 $ 178,229 $ 249,465 58%   Three Months Ended 12/31/10 Research $ 230,552 $ 81,333 $ 149,219 65% Consulting 89,321 51,658 37,663 42% Events 62,431 29,234 33,197 53% TOTAL $ 382,304 $ 162,225 $ 220,079 58%   Twelve Months Ended 12/31/11 Research $ 1,012,062 $ 329,926 $ 682,136 67% Consulting 308,047 193,209 114,838 37% Events 148,479 82,214 66,265 45% TOTAL $ 1,468,588 $ 605,349 $ 863,239 59%   Twelve Months Ended 12/31/10 Research $ 865,000 $ 300,473 $ 564,527 65% Consulting 302,117 180,232 121,885 40% Events 121,337 65,453 55,884 46% TOTAL $ 1,288,454 $ 546,158 $ 742,296 58% SELECTED STATISTICAL DATA       December 31, December 31, 2011 2010 Research contract value $ 1,115,801 (a) $ 977,710 (a) Research client retention 82% 83% Research wallet retention 99% 98% Research client organizations 12,427 11,601 Consulting backlog $ 100,564 (a) $ 100,839 (a) Consulting--quarterly utilization 68% 66% Consulting billable headcount 481 473 Consulting--average annualized revenue per billable headcount $ 454 (a) $ 419 (a) Events--number of events for the quarter 12 12 Events--attendees for the quarter 20,500 18,194   (a) Dollars in thousands. SUPPLEMENTAL INFORMATION (in thousands, except per share amounts)         Reconciliation - Operating income to Normalized EBITDA (a):   Three Months EndedTwelve Months EndedDecember 31,December 31,2011201020112010 Net income $ 45,024 $ 36,694 $ 136,902 $ 96,285 Interest expense, net 2,104 6,047 9,967 15,616 Other expense (income), net 417 300 1,911 (436) Tax provision   21,918   10,033   65,282   37,800 Operating income $ 69,463 $ 53,074 $ 214,062 $ 149,265   Normalizing adjustments: Stock-based compensation expense (b) 8,114 9,336 32,864 32,634 Depreciation, accretion, and amortization (c) 7,193 8,777 32,329 36,475 Pre-acquisition deferred revenue (d) 42 522 193 4,095 Acquisition and integration charges (e)   -   813   -   7,903 Normalized EBITDA $ 84,812 $ 72,522 $ 279,448 $ 230,372   (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 charges for amortization of intangibles related to AMR Research and Burton Group of $0.7 million and $2.5 million for the three months ended December 31, 2011 and 2010, respectively, and $6.5 million and $10.1 million for the twelve months ended December 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. SUPPLEMENTAL INFORMATION continued (in thousands)     Selected Balance Sheet Data (unaudited and preliminary)   December 31,20112010   Cash and cash equivalents $ 142,739 $ 120,181 Fees receivable, net 421,033 364,818 Total assets 1,379,872 1,285,658 Deferred revenues 611,647 523,263 Total current and long-term debt 200,000 220,156 Total liabilities 1,198,088 1,098,602 Total stockholders' equity 181,784 187,056               Selected Cash Flow Data (unaudited and preliminary)   Twelve Months EndedDecember 31,20112010   Cash provided by operating activities $ 255,566 $ 205,499 Cash paid for capital expenditures 41,954 (a) 21,694 Cash paid for treasury stock 211,986 99,820 Cash payments on debt, net 20,156 113,627   (a) 2011 includes $9.5 million of expenditures related to the renovation of our Stamford headquarters facility. These amounts are reimbursable by our landlord.               Reconciliation - Cash Provided by Operating Activities to Free Cash Flow (a): (unaudited and preliminary) Twelve Months EndedDecember 31,20112010 Cash provided by operating activities $ 255,566 $ 205,499   Adjustments: Cash acquisition and integration payments - 8,003 Cash paid for capital expenditures   (41,954)   (21,694) Free Cash Flow $ 213,612 $ 191,808   (a) Free cash flow is based on cash provided by operating activities determined in accordance with GAAP plus cash acquisition and integration payments less additions to capital expenditures. Gartner, Inc.Brian Shipman, +1 203-316-3659Group Vice President, Investor Relationsbrian.shipman@gartner.com