EXHIBIT 99.1
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CONTACT: |
Brian Shipman
Group Vice President, Investor Relations |
+1 203 316 3659 |
brian.shipman@gartner.com |
Gartner Reports Financial Results for Third Quarter 2011
Total Revenue Increased 17% YoY to $345.8 million
Diluted Earnings per Share Increased 55% YoY
STAMFORD, Conn., November 1, 2011 — Gartner, Inc. (NYSE: IT), the leading provider of research and analysis on the global information technology industry, today reported results for third quarter 2011 and updated its outlook for full year 2011 revenues, Normalized EBITDA, and EPS.
For third quarter 2011, total revenue was $345.8 million, up 17% compared to third quarter 2010 as reported and 12% excluding the impact of foreign exchange. Third quarter 2011 net income was $30.5 million, an increase of 52%, and Normalized EBITDA was $62.4 million, an increase of 22%. (See “Non-GAAP Financial Measures” for a discussion of Normalized EBITDA). Diluted earnings per share was $0.31 in the third quarter of 2011 compared to $0.20 per share in the prior year quarter. Diluted earnings per share for third quarter 2010 included acquisition related charges, net of tax, of $0.02 per share compared to zero in the current year quarter. Contract value at September 30, 2011 was $1,035.9 million, the highest ever reported, up 14% from September 30, 2010 and 15% excluding the foreign exchange impact.
Gene Hall, Gartner’s chief executive officer, commented, “Our third quarter results continued our trend of delivering consistent double-digit growth. Revenue, contract value, Normalized EBITDA and EPS again grew at double-digit rates, consistent with our long-term expectations. The increases in our revenue and contract value, as well as the expansion of key operating metrics such as wallet retention, illustrate both the value we provide to our clients and the market opportunity for our services.”
Business Segment Highlights
Research
Revenue for third quarter of 2011 was $256.0 million, an increase of 19% compared to the third quarter of 2010 or 15% excluding the impact of foreign exchange. The gross contribution margin was 68% for the third quarter of 2011. Contract value was $1,035.9 million at September 30, 2011, up 14% from September 30, 2010. Contract value increased 15% excluding the impact of foreign exchange. Client and wallet retention rates for third quarter 2011 were 82% and 100%, respectively, compared to 82% and 95% in the prior year quarter.
Consulting
Revenue for third quarter of 2011 was $70.8 million, an increase of 8% as reported and 4% excluding the impact of foreign exchange. The gross contribution margin was 35%. Third quarter 2011 utilization was 61% and billable headcount was 482. Backlog was $92.9 million at September 30, 2011.
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Events
Revenue for third quarter of 2011 was $19.0 million, up 18% from the third quarter of 2010 and 12% excluding the impact of foreign exchange. The gross contribution margin was 29%. During the third quarter of 2011 the Company held 16 events with 6,676 attendees, compared to 14 events and 5,954 attendees in the third quarter of 2010.
Cash Flow and Balance Sheet Highlights
Cash provided by operating activities was $112.6 million during third quarter 2011 compared to $64.8 million in the third quarter of 2010, an increase of 74%. Additions to property, equipment and leasehold improvements (“Capital Expenditures”) totaled $14.3 million in third quarter 2011. The Company had cash of $157.0 million at September 30, 2011. During third quarter 2011, $53.4 million in cash was used to repurchase approximately 1.5 million common shares pursuant to the Company’s share repurchase program.
Financial Outlook for 2011
The Company raised the low end of projected Research revenues by $5.0 million, lowered both the low and high end of projected Consulting revenues by $5.0 million, and raised both the low and high end of projected Events revenues by $5.0 million. The Company also raised the low end of total projected revenues by $5.0 million. Projected diluted earnings per share, Normalized EBITDA, and cash flow guidance remain unchanged. As revised, the Company’s full year 2011 guidance is as follows:
Projected Revenue
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($ in millions) | | 2011 Projected | | % Change | |
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Research | | $ | 1,000 – 1,015 | | | 16% – 17 | % |
Consulting | | | 305 – 320 | | | 1% – 6 | % |
Events | | | 140 – 150 | | | 15% – 24 | % |
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Total Revenue | | $ | 1,445 – 1,485 | | | 12% – 15 | % |
Projected EPS and Cash Flow
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($ in millions, except per share data) | | 2011 Projected | | % Change | |
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Diluted earnings per share(1) | | $ | 1.29 – 1.41 | | | 34% – 47 | % |
Normalized EBITDA(2) | | $ | 270 – 290 | | | 17% – 26 | % |
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Operating cash flow(3) | | $ | 250 – 270 | | | 22% – 31 | % |
Capital expenditures(3) | | | (39) – (41 | ) | | | |
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Free cash flow(2) | | $ | 211 – 229 | | | 10% – 19 | % |
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| (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 $12.0 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 Tuesday, November 1, 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 or by dial-in. The U.S. dial-in number is 888-713-4214 and the international dial-in number is 617-213-4866 and the participant passcode is 12714264. 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.
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 11,700 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 4,900 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.
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GARTNER, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
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| | Three Months Ended
September 30, | | | | | Nine Months Ended
September 30, | | | | |
| | 2011 | | 2010 | | | | | 2011 | | 2010 | | | | |
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Revenues: | | | | | | | | | | | | | | | | | | | |
Research | | $ | 255,979 | | $ | 214,680 | | | 19 | % | $ | 749,429 | | $ | 634,448 | | | 18 | % |
Consulting | | | 70,815 | | | 65,397 | | | 8 | % | | 219,407 | | | 212,796 | | | 3 | % |
Events | | | 18,990 | | | 16,045 | | | 18 | % | | 72,058 | | | 58,906 | | | 22 | % |
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Total revenues | | | 345,784 | | | 296,122 | | | 17 | % | | 1,040,894 | | | 906,150 | | | 15 | % |
Costs and expenses: | | | | | | | | | | | | | | | | | | | |
Cost of services and product development | | | 142,696 | | | 125,897 | | | 13 | % | | 428,473 | | | 387,279 | | | 11 | % |
Selling, general and administrative | | | 148,461 | | | 127,488 | | | 16 | % | | 442,891 | | | 388,378 | | | 14 | % |
Depreciation | | | 6,638 | | | 6,194 | | | 7 | % | | 19,143 | | | 19,218 | | | 0 | % |
Amortization of intangibles | | | 739 | | | 2,531 | | | -71 | % | | 5,788 | | | 7,994 | | | -28 | % |
Acquisition and integration charges | | | — | | | 1,249 | | | -100 | % | | — | | | 7,090 | | | -100 | % |
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Total costs and expenses | | | 298,534 | | | 263,359 | | | 13 | % | | 896,295 | | | 809,959 | | | 11 | % |
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Operating income | | | 47,250 | | | 32,763 | | | 44 | % | | 144,599 | | | 96,191 | | | 50 | % |
Interest expense, net | | | (2,282 | ) | | (3,005 | ) | | -24 | % | | (7,863 | ) | | (9,569 | ) | | -18 | % |
Other (expense) income, net | | | (541 | ) | | (373 | ) | | 45 | % | | (1,494 | ) | | 736 | | | >-100 | % |
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Income before income taxes | | | 44,427 | | | 29,385 | | | 51 | % | | 135,242 | | | 87,358 | | | 55 | % |
Provision for income taxes | | | 13,963 | | | 9,310 | | | 50 | % | | 43,364 | | | 27,767 | | | 56 | % |
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Net income | | $ | 30,464 | | $ | 20,075 | | | 52 | % | $ | 91,878 | | $ | 59,591 | | | 54 | % |
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Income per common share: | | | | | | | | | | | | | | | | | | | |
Basic: | | $ | 0.32 | | $ | 0.21 | | | 52 | % | $ | 0.95 | | $ | 0.62 | | | 53 | % |
Diluted: | | $ | 0.31 | | $ | 0.20 | | | 55 | % | $ | 0.92 | | $ | 0.60 | | | 53 | % |
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Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | | |
Basic | | | 96,057 | | | 95,473 | | | 1 | % | | 96,462 | | | 95,698 | | | 1 | % |
Diluted | | | 98,259 | | | 98,797 | | | -1 | % | | 99,467 | | | 99,584 | | | 0 | % |
BUSINESS SEGMENT DATA
(Dollars in thousands)
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| | Revenue | | Direct
Expense | | Gross
Contribution | | Contribution
Margin | |
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Three Months Ended 9/30/11 | | | | | | | | | | | | | |
Research | | $ | 255,979 | | $ | 82,364 | | $ | 173,615 | | 68 | % | |
Consulting | | | 70,815 | | | 46,357 | | | 24,458 | | 35 | % | |
Events | | | 18,990 | | | 13,437 | | | 5,553 | | 29 | % | |
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TOTAL | | $ | 345,784 | | $ | 142,158 | | $ | 203,626 | | 59 | % | |
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Three Months Ended 9/30/10 | | | | | | | | | | | | | |
Research | | $ | 214,680 | | $ | 74,075 | | $ | 140,605 | | 65 | % | |
Consulting | | | 65,397 | | | 41,416 | | | 23,981 | | 37 | % | |
Events | | | 16,045 | | | 10,071 | | | 5,974 | | 37 | % | |
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TOTAL | | $ | 296,122 | | $ | 125,562 | | $ | 170,560 | | 58 | % | |
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Nine Months Ended 9/30/11 | | | | | | | | | | | | | |
Research | | $ | 749,429 | | $ | 243,009 | | $ | 506,420 | | 68 | % | |
Consulting | | | 219,407 | | | 140,587 | | | 78,820 | | 36 | % | |
Events | | | 72,058 | | | 43,525 | | | 28,533 | | 40 | % | |
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TOTAL | | $ | 1,040,894 | | $ | 427,121 | | $ | 613,773 | | 59 | % | |
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Nine Months Ended 9/30/10 | | | | | | | | | | | | | |
Research | | $ | 634,448 | | $ | 219,137 | | $ | 415,311 | | 65 | % | |
Consulting | | | 212,796 | | | 128,574 | | | 84,222 | | 40 | % | |
Events | | | 58,906 | | | 36,218 | | | 22,688 | | 39 | % | |
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TOTAL | | $ | 906,150 | | $ | 383,929 | | $ | 522,221 | | 58 | % | |
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SELECTED STATISTICAL DATA
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| | September 30,
2011 | | September 30,
2010 | |
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Research contract value | | $ | 1,035,926 | (a) | $ | 905,506 | (a) |
Research client retention | | | 82 | % | | 82 | % |
Research wallet retention | | | 100 | % | | 95 | % |
Research client organizations | | | 11,770 | | | 11,053 | |
Consulting backlog | | $ | 92,887 | (a) | $ | 93,991 | (a) |
Consulting--quarterly utilization | | | 61 | % | | 65 | % |
Consulting billable headcount | | | 482 | | | 453 | |
Consulting--average annualized revenue per billable headcount | | $ | 404 | (a) | $ | 408 | (a) |
Events--number of events for the quarter | | | 16 | | | 14 | |
Events--attendees for the quarter | | | 6,676 | | | 5,954 | |
(a) Dollars in thousands.
SUPPLEMENTAL INFORMATION (in thousands, except per share amounts)
Reconciliation - Operating income to Normalized EBITDA(a):
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| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
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| | 2011 | | 2010 | | 2011 | | 2010 | |
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Net income | | $ | 30,464 | | $ | 20,075 | | $ | 91,878 | | $ | 59,591 | |
Interest expense, net | | | 2,282 | | | 3,005 | | | 7,863 | | | 9,569 | |
Other expense (income), net | | | 541 | | | 373 | | | 1,494 | | | (736 | ) |
Tax provision | | | 13,963 | | | 9,310 | | | 43,364 | | | 27,767 | |
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Operating income | | $ | 47,250 | | $ | 32,763 | | $ | 144,599 | | $ | 96,191 | |
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Normalizing adjustments: | | | | | | | | | | | | | |
Stock-based compensation expense (b) | | | 7,757 | | | 7,264 | | | 24,750 | | | 23,298 | |
Depreciation, accretion, and amortization (c) | | | 7,425 | | | 8,870 | | | 25,136 | | | 27,698 | |
Pre-acquisition deferred revenue (d) | | | 17 | | | 947 | | | 151 | | | 3,573 | |
Acquisition and integration charges (e) | | | — | | | 1,249 | | | — | | | 7,090 | |
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Normalized EBITDA | | $ | 62,449 | | $ | 51,093 | | $ | 194,636 | | $ | 157,850 | |
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(a) | Normalized EBITDA is based on GAAP operating income adjusted for certain normalizing adjustments. |
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(b) | Consists of charges for stock-based compensation awards. |
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(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 September 30, 2011 and 2010, respectively, and $5.8 million and $7.5 million for the nine months ended September 30, 2011 and 2010, respectively. |
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(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. |
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(e) | Included 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. |
