EXHIBIT 99.1
GARTNER, INC. REPORTS 2004 SECOND QUARTER AND FIRST HALF RESULTS
GENE HALL NAMED CHIEF EXECUTIVE OFFICER
JAMES C. SMITH NAMED NON-EXECUTIVE CHAIRMAN OF THE BOARD
STAMFORD, Conn.--(BUSINESS WIRE)--July 23, 2004--Gartner, Inc. (NYSE: IT and
ITB), the world's leading technology research and advisory firm, today reported
results for the second quarter and six months ended June 30, 2004.
Highlights of Gartner's performance for the second quarter of 2004 included the
following:
- Total revenue was $228 million, a 7% increase from the same period
of 2003. Adjusting for a shift of events into the 2004 second
quarter, revenues grew by 4% over the prior year.
- Net income was $11 million or $0.08 per diluted share on a GAAP
basis. In the same period of 2003, Gartner had net income of $13
million, or $0.13 per diluted share on a GAAP basis.
- Normalized EPS was $0.12 per share, compared with $0.10 per share a
year ago. Normalized EPS is a non-GAAP financial measure. See
"Non-GAAP Financial Measures" for a further discussion of normalized
EPS.
- Research contract value was $489 million at June 30, 2004, a 4%
increase from $469 million at June 30, 2003. Client retention
improved to 78% in the latest quarter from 75% a year ago, while
wallet retention rose to 93% from 83%.
For the first six months of 2004:
- Total revenue was $437 million, an increase of 5% versus the same
2003 period.
- Net income on a GAAP basis was $11 million, or $0.09 per diluted
share. Net income for the 2003 period was $11 million, or $0.14 per
diluted share on a GAAP basis.
- Normalized EPS for the recent six months was $0.21 per share,
compared with $0.14 per share for the year-ago period. See "Non-GAAP
Financial Measures" for a further discussion of normalized EPS.
Michael Fleisher, Gartner's chairman and chief executive officer, said, "We
delivered another quarter of strong performance including increased revenue and
earnings, year-over-year growth in Research contract value, increased Consulting
backlog and higher client retention rates. We continue to believe that the
technology sector will recover moderately throughout the remainder of 2004, and
that our efforts to align our businesses with client needs and opportunities
will position the Company well for continued future profitable growth."
"Each of Gartner's business units contributed to our strong second quarter
performance," added Maureen O'Connell, president and chief operating officer.
"We continue to invest in growth by adding talented business leaders and
refining our sales, product development and marketing processes."
MANAGEMENT AND DIRECTOR CHANGES
The Company announced that the Board of Directors has named Gene Hall as chief
executive officer. Mr. Hall will succeed Michael Fleisher, who had previously
announced his intention to depart as Gartner's chairman and CEO after a
transition period. Additionally, James C. Smith, a current Gartner Board member,
has been named non-executive chairman of the Board of Directors.
Mr. Hall, age 48, spent the past 6 years with Automatic Data Processing, Inc.,
where he was responsible for developing strategies to accelerate the growth of
two major businesses and leading technology across the company. Currently, he is
President, Employers Services Major Accounts Division, a $2 billion business
with 8000 associates. Under his leadership this business achieved accelerated
sales to new clients and achieved record client retention and quality scores. In
this same role, he also led a 1600 person software development and IT Operations
organization that introduced several new, high-growth products.
Prior to joining ADP, Mr. Hall was a senior partner with management consultant
McKinsey & Company. He was at McKinsey for 16 years and focused on developing
business strategies for technology-based companies and other companies where
technology plays a central role in their business. He is a graduate of M.I.T.
and has a MBA from the Harvard Business School.
"The Board of Directors is extremely pleased with this decision, which was made
after an extensive search and consideration of many highly qualified
candidates," said Anne Sutherland Fuchs, a director and head of the Board's
Search Committee. "In Gene Hall, we gain a CEO with a wealth of experience in
information technology, and a track record of growing businesses by providing
strategic insight and value to large and demanding clients."
Mr. Smith, 63, has served on the Gartner Board of Directors since 2002. He is
also chairman of First Health Group Corp., a premier publicly-traded national
health benefits company, and formerly served as president and chief executive
officer of First Health. Michael Fleisher noted, "I welcome Gene Hall to Gartner
and am looking forward to working with him, our president Maureen O'Connell, and
the rest of Gartner's management to ensure an effective transition. It is
rewarding to know that Gartner will be in the experienced hands of Jim Smith,
Gene Hall and this leadership team as the Company pursues a promising future."
Both appointments will become effective with Mr. Hall's official start date
sometime in the next 45 days.
Gartner also said that Zachary Morowitz, Executive Vice President of Corporate
Development, has announced his intention to leave the Company before the end of
the year to pursue other opportunities. The Company currently does not intend to
fill the vacancy.
BUSINESS SEGMENT HIGHLIGHTS
Research revenue was $119 million for the 2004 second quarter, a 1% increase
from the same period of 2003. For the first half of 2004, Research revenue
totaled $241 million, a 3% increase versus the 2003 period. Research contract
value, a leading indicator of future revenue, was $489 million at June 30, 2004,
increasing $20 million since the second quarter of 2003.
Consulting revenue was $68 million for the 2004 second quarter, a 2% increase
from the comparable 2003 period. For the first six months of this year,
Consulting revenue was $132 million, a 3% increase versus the 2003 period.
Consulting backlog was $98 million at June 30, 2004, an increase of 7% over the
prior year.
Events revenue was $37 million for the second quarter of 2004, increasing 47%
from a year ago. Part of this revenue increase was attributable to a shift in
the timing of several events that were held during the first quarter of 2003,
but were moved into the second quarter of 2004. Taking into account such timing
factors, second quarter Events revenue increased 20% over the prior year. For
the first six months of 2004, Events revenue was $55 million, up 13% versus the
2003 period.
Excluding the effect of foreign currency and the timing of events, total revenue
for the 2004 second quarter would have increased approximately 2% over the
year-ago period; cost of services and product development would have increased
approximately 3%; and selling, general and administrative expenses would have
decreased 2%. The impact of foreign currency on net income was negligible.
Research contract value would have increased approximately 1% from the second
quarter 2003, excluding the effects of foreign currency.
Gartner's cash position increased to $291 million at June 30, 2004, from $167
million a year earlier. As previously announced, on June 22, 2004, Gartner
commenced a Dutch auction self-tender offer for approximately 11.3 million
shares of its Class A Common Stock and approximately 5.5 million shares of its
Class B Common Stock, with the price for each Class to be between $12.50 to
$13.50 per share. Gartner also entered into an agreement with Silver Lake
Partners to repurchase approximately 9.2 million shares at the clearing price
established by the tender offer. In the event the tender offer is
under-subscribed, Silver Lake Partners has agreed to sell additional Class A
shares to the Company up to an aggregate maximum of 12.0 million shares. Gartner
would purchase 26 million shares at a total cost of $325 million to $351 million
in a fully subscribed tender combined with the Silver Lake Partners repurchase.
The offer is subject to the terms and conditions described in offering materials
mailed to the Company's shareholders. The tender offer will expire at 5:00 p.m.,
New York City time, on July 30, 2004, unless extended by Gartner.
Chris Lafond, chief financial officer, commented, "We are committed to creating
and enhancing shareholder value, and our use of Gartner's strong cash position
to repurchase shares through the Dutch auction self-tender is a clear example of
that commitment."
BUSINESS OUTLOOK
For the third quarter ending September 30, 2004, the Company is targeting:
- Total revenue of approximately $197 million to $205 million
- Research revenue of approximately $117 million to $119 million
- Consulting revenue of approximately $60 million to $63 million
- Events revenue of approximately $17 million to $19 million
- Other revenue of approximately $3 million to $4 million
- GAAP EPS of $0.03 to $0.05 and Normalized EPS of $0.03 to $0.05 per
share. The estimated fully diluted share count is 135 million
shares.
CONFERENCE CALL INFORMATION
The Company has scheduled a conference call at 10:00 a.m. ET on Friday, July 23,
2004, to discuss the Company's financial results. The conference call will also
be available via the Internet by accessing Gartner's web site at
www.gartner.com/investors. A replay of the webcast will be available for 30 days
following the call.
ABOUT GARTNER
Gartner, Inc. is the leading provider of research and analysis on the global
information technology industry. Gartner serves more than 10,000 clients,
including chief information officers and other senior IT executives in
corporations and government agencies, as well as technology companies and the
investment community. The Company focuses on delivering objective, in-depth
analysis and actionable advice to enable clients to make more informed
technology and business decisions. The Company's businesses consist of Gartner
Intelligence, research and events for IT professionals; Gartner Executive
Programs, membership programs and peer networking services; and Gartner
Consulting, customized engagements with a specific emphasis on outsourcing and
IT management. Founded in 1979, Gartner is headquartered in Stamford,
Connecticut, and has more than 3,500 associates, approximately 1,000 research
analysts and consultants, in more than 75 locations worldwide. For more
information, visit www.gartner.com.
NON-GAAP FINANCIAL MEASURES
Investors are cautioned that normalized EPS information contained in this press
release is not a financial measure under generally accepted accounting
principles. In addition, it should not be construed as an alternative to any
other measures of performance determined in accordance with generally accepted
accounting principles. This non-GAAP financial measure is provided to enhance
the user's overall understanding of the Company's current financial performance
and the Company's prospects for the future. We believe normalized EPS is an
important measure of our
recurring operations as it excludes items that may not be indicative of our core
operating results. Normalized EPS for 2003 also includes the effect of the
convertible debt as if it had been converted at the beginning of 2003.
Normalized EPS is based on net income (loss), excluding other charges, income
from investments, and gains from the sale of businesses. See "Supplemental
Information" at the end of this release for reconciliation of GAAP net income
and loss and EPS to normalized net income and EPS.
SAFE HARBOR STATEMENT
Statements contained in this press release regarding the Company's business
outlook, the development of the Company's services, the demand for the Company's
products and services, 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 include risks and uncertainties; consequently, actual results may
differ materially from those expressed or implied thereby. Factors that could
cause actual results to differ materially include, but are not limited to:
ability to expand or even retain the Company's customer base in light of the
adverse current economic conditions; ability to grow or even sustain revenue
from individual customers in light of the adverse impact of the current economic
conditions on overall IT spending; the duration and severity of the current
economic slowdown; ability to attract and retain professional staff of research
analysts and consultants upon whom the Company is dependent; ability to achieve
and effectively manage growth, particularly as the Company seeks to reduce its
overall workforce; ability to achieve continued customer renewals and achieve
new contract value, backlog and deferred revenue growth in light of competitive
pressures; ability to integrate operations of possible acquisitions; ability to
carry out the Company's strategic initiatives and manage associated costs;
ability to manage the Company's strategic partnerships; rapid technological
advances which may provide increased indirect competition to the Company from a
variety of sources; substantial competition from existing competitors and
potential new competitors; risks associated with intellectual property rights
important to the Company's products and services; additional risks associated
with international operations including foreign currency fluctuations; and other
risks listed from time to time in the Company's reports filed with the
Securities and Exchange Commission, including the Company's Annual Report on
Form 10-K for the year ended December 31, 2003. These filings can be found on
Gartner's web site at investors.gartner.com and the SEC's Web site at
www.sec.gov. Forward-looking statements included herein speak only as of the
date hereof and the Company 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.
ADDITIONAL LEGAL INFORMATION
This press release is for informational purposes only and is not an offer to buy
or the solicitation of an offer to sell any shares of any class of Gartner's
common stock. The solicitation of offers to buy shares of Gartner common stock
is only being made pursuant to the offer to purchase and related materials that
Gartner has distributed to
its stockholders. Stockholders should read those materials carefully because
they contain important information, including the various terms of, and
conditions to, the tender offer. Stockholders are able to obtain the offer to
purchase and related materials for free at the SEC's website at www.sec.gov or
from our information agent, Georgeson Shareholder Communications, by calling
(888) 279-4024. We urge stockholders to carefully read those materials prior to
making any decisions with respect to the tender offer.
GARTNER, INC.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
--------- --------- --------- --------
Revenues:
Research $ 118,966 $ 117,793 1% $241,208 $233,517 3%
Consulting 67,609 66,525 2% 132,235 128,304 3%
Events 37,211 25,292 47% 55,382 48,801 13%
Other 4,071 3,708 10% 7,699 6,978 10%
--------- --------- --------- --------
Total revenues 227,857 213,318 7% 436,524 417,600 5%
Costs and expenses:
Cost of services and
product development 114,386 103,440 11% 209,862 205,773 2%
Selling, general and
administrative 81,588 80,730 1% 169,222 164,234 3%
Depreciation 6,844 8,964 -24% 14,781 18,789 -21%
Amortization of
intangibles and
goodwill
impairments 190 338 -44% 1,126 743 52%
Other charges 9,063 -- U 19,576 5,426 U
--------- --------- --------- --------
Total costs and
expenses 212,071 193,472 10% 414,567 394,965 5%
--------- --------- --------- --------
Operating income 15,786 19,846 -20% 21,957 22,635 -3%
Income from U U
investments 19 5,491 39 5,522
Interest income F F
(expense), net 370 (5,542) 615 (11,154)
Other (expense) U U
income, net (323) (39) (3,436) 496
--------- --------- --------- --------
Income before income
taxes 15,852 19,756 -20% 19,175 17,499 10%
Provision for income
taxes 4,824 6,902 -30% 7,683 6,157 25%
--------- --------- --------- --------
Net income $ 11,028 $ 12,854 -14% $ 11,492 $ 11,342 1%
========= ========= ========= ========
Income per common
share:
Basic $ 0.08 $ 0.16 -50% $ 0.09 $ 0.14 -36%
Diluted $ 0.08 $ 0.13 -38% $ 0.09 $ 0.14 -36%
Weighted average shares
outstanding:
Basic 132,129 79,234 67% 131,183 79,863 64%
Diluted 135,335 127,959 6% 134,242 128,260 5%
SUPPLEMENTAL INFORMATION
- --------------------------
Normalized EPS (1) $ 0.12 $ 0.10 20% $ 0.21 $ 0.14 50%
(1) Normalized net income & EPS is based on net income, excluding other charges,
income from investments, goodwill impairments and other non-cash charges. We
believe normalized EPS is an important measure of our recurring operations. See
"Supplemental Information" at the end of this release for a reconciliation from
GAAP net income and EPS to Normalized net income and EPS and a discussion of the
reconciling items.
GARTNER, INC.
Condensed Consolidated Balance Sheets
(in thousands)
June 30, December 31,
2004 2003
----------- -----------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 290,997 $ 229,962 27%
Fees receivable, net 214,086 266,122 -20%
Deferred commissions 25,720 27,751 -7%
Prepaid expenses and other current
assets 24,845 25,642 -3%
---------- ----------
Total current assets 555,648 549,477 1%
Property, equipment and leasehold
improvements, net 61,388 66,541 -8%
Goodwill 229,555 230,387 0%
Intangible assets, net 594 985 -40%
Other assets 68,052 69,874 -3%
---------- ----------
Total Assets $ 915,237 $ 917,264 0%
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 144,141 $ 175,609 -18%
Deferred revenues 295,109 315,524 -6%
---------- ----------
Total current liabilities 439,250 491,133 -11%
Other liabilities 50,239 50,385 0%
---------- ----------
Total Liabilities 489,489 541,518 -10%
Total Stockholders' Equity 425,748 375,746 13%
---------- ----------
Total Liabilities and Stockholders'
Equity $ 915,237 $ 917,264 0%
========== ==========
GARTNER, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
Six Months Ended
June 30,
2004 2003
---------- ----------
Operating activities:
Net income $ 11,492 $ 11,342
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization, including
goodwill impairments 15,907 19,532
Non-cash compensation 1,198 511
Tax benefit associated with employees' exercise
of stock options 4,377 --
Deferred taxes 408 68
Gain from investments (39) (5,522)
Accretion of interest and amortization of debt
issue costs 602 11,781
Non-cash charges associated with South America
closings 2,943 --
Changes in assets and liabilities:
Fees receivable, net 50,141 64,051
Deferred commissions 1,896 3,345
Prepaid expenses and other current assets 523 5,089
Other assets 366 (1,543)
Deferred revenues (17,720) (26,314)
Accounts payable and accrued liabilities (30,787) (4,166)
---------- ----------
Cash provided by operating activities 41,307 78,174
---------- ----------
Investing activities:
Proceeds from insurance recovery -- 5,464
Investments -- (1,500)
Additions to property, equipment and leasehold
improvements (9,197) (9,765)
---------- ----------
Cash used in investing activities (9,197) (5,801)
---------- ----------
Financing activities:
Proceeds from stock issued for stock plans 37,852 2,575
Payments for debt issuance costs -- (220)
Purchases of treasury stock (6,113) (23,504)
---------- ----------
Cash provided by (used in) financing activities 31,739 (21,149)
---------- ----------
Net increase in cash and cash equivalents 63,849 51,224
Effects of exchange rates on cash and cash
equivalents (2,814) 5,804
Cash and cash equivalents, beginning of period 229,962 109,657
---------- ----------
Cash and cash equivalents, end of period $ 290,997 $ 166,685
========== ==========
SELECTED STATISTICAL DATA
(Dollars In thousands)
June 30, December 31, June 30,
2004 2003 2003
------------ ------------ ------------
Research contract value $ 488,669 $ 482,219 $ 468,470
Consulting backlog $ 97,706 $ 99,718 $ 90,958
Research client organizations 8,558 8,859 8,696
BUSINESS SEGMENT DATA
(Dollars in thousands)
Direct Gross Contrib.
Revenue Expense Contribution Margin
---------- ---------- ---------- --------
Three Months Ended 6/30/04
Research $ 118,966 $ 45,962 $ 73,004 61%
Consulting 67,609 42,774 24,835 37%
Events 37,211 20,353 16,858 45%
Other 4,071 457 3,614 89%
---------- ---------- ----------
TOTAL $ 227,857 $ 109,546 $ 118,311 52%
========== ========== ==========
Three Months Ended 6/30/03
Research $ 117,793 $ 42,392 $ 75,401 64%
Consulting 66,525 43,782 22,743 34%
Events 25,292 14,760 10,532 42%
Other 3,708 1,116 2,592 70%
---------- ---------- ----------
TOTAL $ 213,318 $ 102,050 $ 111,268 52%
========== ========== ==========
Six Months Ended 6/30/04
Research $ 241,208 $ 89,177 $ 152,031 63%
Consulting 132,235 82,156 50,079 38%
Events 55,382 31,417 23,965 43%
Other 7,699 928 6,771 88%
---------- ---------- ----------
TOTAL $ 436,524 $ 203,678 $ 232,846 53%
========== ========== ==========
Six Months Ended 6/30/03
Research $ 233,517 $ 84,466 $ 149,051 64%
Consulting 128,304 84,676 43,628 34%
Events 48,801 29,869 18,932 39%
Other 6,978 2,018 4,960 71%
---------- ---------- ----------
TOTAL $ 417,600 $ 201,029 $ 216,571 52%
========== ========== ==========
SUPPLEMENTAL INFORMATION
EPS Reconciliation - GAAP to Normalized
(in thousands, except per share data)
Three Months Ended June 30,
-----------------------------------------------------------------------
2004 2003
--------------------------------- ---------------------------------
After- After-
Tax Tax
Income Shares EPS Income Shares EPS
-------- -------- -------- -------- -------- --------
GAAP Basic EPS $ 11,028 132,129 $ 0.08 $ 12,854 79,234 $ 0.16
Share equivalents
from stock
compensation
shares -- 3,206 (0.00) -- 413 (0.00)
Convertible long-
term debt -- -- -- 3,323 48,312 (0.03)
-------- -------- -------- -------- -------- --------
GAAP Diluted EPS $ 11,028 135,335 $ 0.08 $ 16,177 127,959 $ 0.13
Other charges (1) 5,664 -- 0.04 -- -- --
Income from
investments (4) (13) -- (0.00) (3,296) -- (0.03)
-------- -------- -------- -------- -------- --------
Normalized net
income & EPS $ 16,679 135,335 $ 0.12 $ 12,881 127,959 $ 0.10
======== ======== ======== ======== ======== ========
Six Months Ended June 30,
-----------------------------------------------------------------------
2004 2003
--------------------------------- ---------------------------------
After- After-
Tax Tax
Income Shares EPS Income Shares EPS
-------- -------- -------- -------- -------- --------
GAAP Basic EPS $ 11,492 131,183 $ 0.09 $ 11,342 79,863 $ 0.14
Share equivalents
from stock
compensation
shares -- 3,059 (0.00) -- 440 (0.00)
Convertible long-
term debt -- -- -- 6,567 47,957 (0.00)
-------- -------- -------- -------- -------- --------
GAAP Diluted EPS $ 11,492 134,242 $ 0.09 $ 17,909 128,260 $ 0.14
Other charges (1) 13,255 -- 0.10 3,635 -- 0.03
Non-cash
charges (2) 2,943 -- 0.02 -- -- --
Goodwill
impairments (3) 739 -- 0.00 -- -- --
Income from
investments(4) (26) -- (0.00) (3,317) -- (0.03)
-------- -------- -------- -------- -------- --------
Normalized net
income & EPS $ 28,403 134,242 $ 0.21 $ 18,227 128,260 $ 0.14
======== ======== ======== ======== ======== ========
General Notes & Footnotes
- - Normalized net income & EPS is based on net income (loss), excluding other
charges, income from investments, goodwill impairments and asset write-offs.
Normalized EPS includes the effect of the convertible debt as if it had been
converted at the beginning of 2003 in order to be on a comparable basis with
2004. We believe normalized EPS is an important measure of our recurring
operations.
- - The normalized effective tax rate was 33% for 2004 and 2003.
(1) Other charges during both years were for costs associated with reductions
in workforce. Other charges during 2004 also included costs associated
with closing certain operations in South America.
(2) The non-cash charges in 2004 were associated with our closing of certain
operations in South America and were recorded in Other (expense) income,
net.
(3) The goodwill impairments in 2004 were associated with our closing of
certain operations in South America and were recorded in Amortization of
intangibles and goodwill impairments.
(4) The 2003 gain from investments includes a pre-tax $5.5 million insurance
recovery relating to previous losses incurred associated with the sale of
a business.
CONTACT: Gartner, Inc.
Investor Contact:
Heather McConnell, 203-316-6768
heather.mcconnell@gartner.com
investors.gartner.com
or
Media Contact:
Tom Hayes, 203-316-6835
tom.hayes@gartner.com
SOURCE: Gartner, Inc.