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Press release from Business Wire

Gartner Reports Financial Results for First Quarter 2012

<p class='bwalignc'> <i><b>Contract Value Increased 13% YoY to $1,111 Million</b></i> </p> <p class='bwalignc'> <i><b>Revenue Increased 12% YoY to $369.2 million</b></i> </p> <p class='bwalignc'> <i><b>Diluted Earnings per Share Increased 24% YoY</b></i> </p>

Thursday, May 03, 2012

Gartner Reports Financial Results for First Quarter 201207:00 EDT Thursday, May 03, 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 first quarter 2012 and reiterated its financial outlook for 2012 revenues, EPS, and cash flows. For first quarter 2012, total revenue was $369.2 million, up 12% compared to first quarter 2011 and 13% excluding the impact of foreign exchange. First quarter 2012 net income was $34.2 million, an increase of 17%, and Normalized EBITDA was $71.2 million, an increase of 11% (see “Non-GAAP Financial Measures" below for a discussion of Normalized EBITDA). Diluted earnings per share was $0.36 in first quarter 2012 compared to $0.29 in first quarter 2011. Gene Hall, Gartner's chief executive officer, commented, "We continue to consistently deliver double-digit growth in revenue, contract value, Normalized EBITDA and EPS, which puts us in an excellent position to deliver on our full-year growth targets.” Business Segment HighlightsResearch Revenue for first quarter 2012 was $274.6 million, up 13% compared to first quarter 2011. The impact of foreign exchange on Research revenue was not significant. Gross contribution margin improved 1 percentage point, to 69%. Contract value was $1,111 million at March 31, 2012, up 14% compared to March 31, 2011 excluding the impact of foreign exchange. Client and wallet retention rates for first quarter 2012 were 82% and 99%, respectively, the same as first quarter 2011. Consulting Revenue for first quarter 2012 was $74.6 million, an increase of 6% compared to first quarter 2011. The impact of foreign exchange on revenue was not significant. Gross contribution margin for first quarter 2012 was 37%, an increase of 1 point over 2011. First quarter 2012 utilization was 70%, an increase of 3 points over first quarter 2011, and billable headcount was 476 as of March 31, 2012. Backlog was $95.5 million at March 31, 2012, an increase of 10% compared to March 31, 2011. Events Revenue for first quarter 2012 was $20.0 million, up 29% compared to first quarter 2011. Excluding the impact of foreign exchange, revenues increased 31%. Gross contribution margin was 39%, up 2 points compared to first quarter of 2011. During first quarter 2012, the Company held 13 events with 5,707 attendees, compared to 11 events and 4,337 attendees in first quarter 2011. Cash Flow and Balance Sheet Highlights Gartner generated positive operating cash flow of $18.7 million during first quarter 2012 compared to $(24.7) million of cash used in operating activities in the prior year quarter. Additions to property, equipment and leasehold improvements (“Capital Expenditures”) totaled $7.1 million in first quarter 2012. The Company had $139.0 million of cash at March 31, 2012. During the first quarter of 2012 the Company deployed its free cash flow principally to repurchase 2.0 million of its common shares. Financial Outlook for 2012 Gartner also reiterated its previously disclosed full year 2012 projections for revenues, EPS, and cash flow: Projected Revenue     ($ 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 Information Gartner has scheduled a conference call at 8:30 a.m. eastern time on Thursday, May 3, 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 888-713-4218 and the international dial-in number is 617-213-4870 and the participant passcode is 43172288. 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. 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 12,300 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 5,056 associates, including nearly 1,300 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 2012 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, 2011 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, 2012 2011 Revenues: Research $ 274,620 $ 243,435 13 % Consulting 74,563 70,630 6 % Events   19,988     15,502   29 % Total revenues 369,171 329,567 12 % Costs and expenses: Cost of services and product development 146,463 133,316 10 % Selling, general and administrative 162,518 141,672 15 % Depreciation 5,895 6,271 -6 % Amortization of intangibles   739     2,527   -71 % Total costs and expenses   315,615     283,786   11 % Operating income 53,556 45,781 17 % Interest expense, net (2,195 ) (2,784 ) -21 % Other expense, net   (978 )   (382 ) >100% Income before income taxes 50,383 42,615 18 % Provision for income taxes   16,162     13,424   20 % Net income $ 34,221   $ 29,191   17 %   Income per common share: Basic $ 0.37 $ 0.30 23 % Diluted $ 0.36 $ 0.29 24 %   Weighted average shares outstanding: Basic 93,416 96,442 -3 % Diluted 96,199 99,451 -3 %   BUSINESS SEGMENT DATA         (Dollars in thousands)   Direct Gross Contribution Revenue Expense Contribution Margin Three Months Ended 3/31/12 Research $ 274,620 $ 86,018 $ 188,602 69% Consulting 74,563 46,963 27,600 37% Events   19,988   12,093   7,895 39% TOTAL $ 369,171 $ 145,074 $ 224,097 61%   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%   SELECTED STATISTICAL DATA                 March 31, March 31, 2012 2011 Research contract value $ 1,110,928 (a) $ 983,450 (a) Research client retention 82 % 82 % Research wallet retention 99 % 99 % Research client organizations 12,303 11,574 Consulting backlog $ 95,533 (a) $ 87,100 (a) Consulting--quarterly utilization 70 % 67 % Consulting billable headcount 476 482 Consulting--average annualized revenue per billable headcount $ 437 (a) $ 425 (a) Events--number of events for the quarter 13 11 Events--attendees for the quarter 5,707 4,337     (a) Dollars in thousands.   SUPPLEMENTAL INFORMATION (in thousands, except per share amounts)     Reconciliation - Operating income to Normalized EBITDA (a):   Three Months Ended March 31, 2012 2011 Net income $ 34,221 $ 29,191 Interest expense, net 2,195 2,784 Other expense, net 978 382 Tax provision   16,162   13,424 Operating income $ 53,556 $ 45,781   Normalizing adjustments: Stock-based compensation expense (b) 10,939 9,162 Depreciation, accretion, and amortization (c)   6,690   8,951 Normalized EBITDA $ 71,185 $ 63,894   (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 depreciation expense, accretion on excess facilities accruals, and amortization of intangibles.   Gartner, Inc.Brian Shipman, 203-316-3659Group Vice President, Investor Relationsbrian.shipman@gartner.com