Total Contract Value
FIRST QUARTER 2018 HIGHLIGHTS
- Revenues:
$964 million , +54%; adjusted revenues:$974 million , +16%. - Net loss:
$(20) million ; adjusted EBITDA:$161 million , +14%. - Diluted EPS:
$(0.22) ; adjusted EPS:$0.72 . - Operating cash flow:
$3 million ; free cash flow:$27 million . - Paid down
$305 million of debt during the quarter and another$450 million in April.
2018 FULL YEAR FINANCIAL OUTLOOK
The Company updated guidance to reflect divestitures completed in
- Revenues
$3.9-4.0 billion ; adjusted revenues$3.9-4.0 billion . - Net income
$101-137 million ; adjusted EBITDA$710-760 million . - Diluted EPS
$1.08-1.47 ; adjusted EPS$3.51-3.91 . - Operating cash flow
$425-475 million ; free cash flow$416-456 million .
CONFERENCE CALL INFORMATION
A conference call will be held at
CONSOLIDATED RESULTS HIGHLIGHTS
($ in millions, except per share data)
Three Months Ended | |||||||||||||||||||||
March 31, | |||||||||||||||||||||
2018 | 2017 | % Change | |||||||||||||||||||
GAAP Metrics (a) : | |||||||||||||||||||||
Revenues |
$ |
964 | $ | 625 | 54% (b) | ||||||||||||||||
Net (loss) income | (20 | ) | 36 | nm | |||||||||||||||||
Diluted EPS | (0.22 | ) | 0.43 | nm | |||||||||||||||||
Operating cash flow | $ | 3 | $ | (30 | ) | nm | |||||||||||||||
Non-GAAP Metrics (c) : | |||||||||||||||||||||
Adjusted revenues (e) | $ | 974 | $ | 839 | 16 | % | |||||||||||||||
Adjusted EBITDA (e) | 161 | 142 | 14% (d) | ||||||||||||||||||
Adjusted EPS (f) | 0.72 | 0.60 | 20 | % | |||||||||||||||||
Free cash flow (f) | $ | 27 | $ | (23 | ) | nm | |||||||||||||||
Non-GAAP Metrics Excluding Held-For-Sale Operations (c) : | |||||||||||||||||||||
Adjusted revenues excluding held-for-sale operations | $ | 920 | $ | 787 | 17 | % | |||||||||||||||
Adjusted EBITDA excluding held-for-sale operations | $ | 153 | $ | 136 | 13 | % | |||||||||||||||
(a) Includes the results of CEB in the three months ended
(b) The foreign currency neutral percentage change was 49%.
(c) See below for definitions of our Non-GAAP metrics under "Non-GAAP Financial Measures" and reconciliations under "Supplemental Information — Non-GAAP Reconciliations."
(d) The percentage increase rounds up to 14% based on the underlying whole numbers.
(e) Includes the results of CEB for the three months ended
(f) Excludes the results of CEB for the three months ended
nm - not meaningful.
Additional information regarding our consolidated results can be obtained in our quarterly report on Form 10-Q filed with the
SEGMENT RESULTS HIGHLIGHTS
Unless indicated otherwise, our results for the first quarter of 2018 include the activities of CEB. Additional information regarding our segment results can be obtained in our quarterly report on Form 10-Q filed with the
Adjusted revenue, Adjusted contribution, and Adjusted contribution margin presented in the tables below are non-GAAP financial measures. See below for definitions of our Non-GAAP metrics under "Non-GAAP Financial Measures" and reconciliations under "Supplemental Information — Non-GAAP Reconciliations."
Research
($ in millions)
Three Months Ended | |||||||||||||||||||||
March 31, | |||||||||||||||||||||
2018 | 2017 | % Change | |||||||||||||||||||
GAAP Metrics (a) : | |||||||||||||||||||||
Revenues | $ | 764 | $ | 511 | 49% (b) | ||||||||||||||||
Direct expense | 233 | 160 | 45% (c) | ||||||||||||||||||
Gross contribution | $ | 531 | $ | 351 | 51 | % | |||||||||||||||
Contribution margin | 70 | % | 69 | % | 1 point | ||||||||||||||||
Non-GAAP Metrics: | |||||||||||||||||||||
Adjusted revenues | $ | 770 | $ | 655 | 17 | % | |||||||||||||||
Adjusted contribution | $ | 537 | $ | 454 | 18 | % | |||||||||||||||
Adjusted contribution margin | 70 | % | 69 | % | 1 point | ||||||||||||||||
Business Measurements (d): | |||||||||||||||||||||
Global Technology Sales (e) (GTS) contract value | $ | 2,270 | $ | 2,004 | 13% (f) | ||||||||||||||||
Global Business Sales (e) (GBS) contract value | 612 | 574 | 7% (f) | ||||||||||||||||||
Total contract value (g) | $ | 2,883 | $ | 2,578 | 12% (f) | ||||||||||||||||
Client retention - GTS | 83 | % | 82 | % | 1 point | ||||||||||||||||
Wallet retention - GTS | 104 | % | 103 | % | 1 point | ||||||||||||||||
Client retention - GBS | 82 | % | 78 | % | 4 points | ||||||||||||||||
Wallet retention - GBS | 99 | % | 97 | % | 2 points | ||||||||||||||||
Client enterprises - GTS (h) | 12,363 | 11,595 | 7 | % | |||||||||||||||||
Client enterprises - GBS (h) | 5,697 | 5,625 | 1 | % | |||||||||||||||||
(a) Includes the results of CEB in the three months ended
(b) The foreign currency neutral percentage change was 45%.
(c) The foreign currency neutral percentage change was 41%.
(d) CEB is included for both periods.
(e) GTS includes sales to users and providers of technology. GBS includes sales to all other functional leaders
(f) Contract value dollar amounts and percentages are foreign currency neutral.
(g) Totals may not foot due to rounding.
(h) GTS and GBS client enterprises are not presented in total due to overlap
Events
($ in millions)
Three Months Ended | |||||||||||||||||||||
March 31, | |||||||||||||||||||||
2018 | 2017 | % Change | |||||||||||||||||||
GAAP Metrics (a) : | |||||||||||||||||||||
Revenues | $ | 46 | $ | 35 | 31% (b) | ||||||||||||||||
Direct expense | 30 | 22 | 36 | % | |||||||||||||||||
Gross contribution | $ | 16 | $ | 13 | 23 | % | |||||||||||||||
Contribution margin | 35 | % | 38 | % | (3) points | ||||||||||||||||
Non-GAAP Metrics: | |||||||||||||||||||||
Adjusted revenues | $ | 46 | $ | 36 | 28 | % | |||||||||||||||
Adjusted contribution | $ | 16 | $ | 11 | 45 | % | |||||||||||||||
Adjusted contribution margin | 35 | % | 31 | % | 4 points | ||||||||||||||||
Business Measurements (c): | |||||||||||||||||||||
Number of destination events held | 14 | 11 | 27 | % | |||||||||||||||||
Number of destination events attendees | 11,643 | 9,035 | 29 | % | |||||||||||||||||
(a) Includes the results of CEB in the three months ended
(b) The foreign currency neutral percentage was 24%.
(c) Single day, local events are excluded. There were no CEB destination events held in the three months ended
Consulting
($ in millions, except for Average annualized revenue per billable headcount, which is in thousands)
Three Months Ended | |||||||||||||||||||||
March 31, | |||||||||||||||||||||
2018 | 2017 | % Change | |||||||||||||||||||
GAAP Metrics: | |||||||||||||||||||||
Revenues | $ | 83 | $ | 79 | 5%(a) | ||||||||||||||||
Direct expense | 59 | 55 | 7 | % | |||||||||||||||||
Gross contribution | $ | 24 | $ | 24 | — | % | |||||||||||||||
Contribution margin | 29 | % | 30 | % | (1) point | ||||||||||||||||
Non-GAAP Metrics: | |||||||||||||||||||||
Adjusted revenues | $ | 83 | $ | 79 | 5%(a) | ||||||||||||||||
Adjusted contribution | $ | 24 | $ | 24 | — | % | |||||||||||||||
Adjusted contribution margin | 29 | % | 30 | % | (1) point | ||||||||||||||||
Business Measurements: | |||||||||||||||||||||
Backlog | $ | 104 | $ | 89 | 17 | % | |||||||||||||||
Quarterly utilization | 65 | % | 65 | % | — | ||||||||||||||||
Quarterly billable headcount | 694 | 650 | 7 | % | |||||||||||||||||
Average annualized revenue per billable headcount | $ | 387 | $ | 359 | 8 | % | |||||||||||||||
(a) The foreign currency neutral percentage was 1%.
Talent Assessment & Other
($ in millions; na--not applicable)
Three Months Ended | |||||||||||||||||||||
March 31, | |||||||||||||||||||||
2018 | 2017 | % Change | |||||||||||||||||||
GAAP Metrics: | |||||||||||||||||||||
Revenues | $ | 70 | na | na | |||||||||||||||||
Direct expense | 27 | na | na | ||||||||||||||||||
Gross contribution | $ | 43 | na | na | |||||||||||||||||
Contribution margin | 61 | % | na | na | |||||||||||||||||
Non-GAAP Metrics: | |||||||||||||||||||||
Including held-for-sale operations (a): | |||||||||||||||||||||
Adjusted revenues | $ | 74 | $ | 69 | 8 | % | |||||||||||||||
Adjusted contribution | $ | 47 | $ | 37 | 27 | % | |||||||||||||||
Adjusted contribution margin | 63 | % | 54 | % | 9 points | ||||||||||||||||
Excluding held-for-sale operations (a): | |||||||||||||||||||||
Adjusted revenues | $ | 21 | $ | 17 | 24 | % | |||||||||||||||
Adjusted contribution | $ | 13 | $ | 8 | 63 | % | |||||||||||||||
Adjusted contribution margin | 62 | % | 47 | % | 15 points | ||||||||||||||||
(a) Held-for-sale operations refers to the Company's CEB Talent Assessment business and
FINANCIAL OUTLOOK FOR FULL YEAR 2018
The table below provides the Company's updated financial outlook for full year 2018. The Company updated its financial outlook to reflect divestitures completed in
($ in millions, except per share data) | |||||||||||||||||||
2018 Projected Range | |||||||||||||||||||
Revenues: |
|||||||||||||||||||
Research | $ | 3,093 | — | $ | 3,143 | ||||||||||||||
Consulting | 340 | — | 355 | ||||||||||||||||
Events | 380 | — | 400 | ||||||||||||||||
Talent Assessment & Other | 107 | — | 127 | ||||||||||||||||
Total revenue | 3,920 | — | 4,025 | ||||||||||||||||
Deferred revenue fair value adjustment | 10 | — | 10 | ||||||||||||||||
Total adjusted revenue (Non-GAAP) (a) | $ | 3,930 | — | $ | 4,035 | ||||||||||||||
Adjusted Segment Revenues: | |||||||||||||||||||
Research | $ | 3,100 | — | $ | 3,150 | ||||||||||||||
Consulting | 340 | — | 355 | ||||||||||||||||
Events | 380 | — | 400 | ||||||||||||||||
Talent Assessment & Other | $ | 110 | — |
$ |
130 |
||||||||||||||
Income: |
|||||||||||||||||||
Net income | $ | 101 | — | $ | 137 | ||||||||||||||
Adjusted EBITDA (Non-GAAP) (a), (b) | 710 | — | 760 | ||||||||||||||||
Diluted EPS | 1.08 | — | 1.47 | ||||||||||||||||
Adjusted EPS (Non-GAAP) (a), (b) | $ | 3.51 | — | $ | 3.91 | ||||||||||||||
Expense: |
|||||||||||||||||||
Stock-based compensation expense | $ | 71 | — | $ | 71 | ||||||||||||||
Depreciation | 80 | — | 80 | ||||||||||||||||
Amortization of intangibles | 189 | 189 | |||||||||||||||||
Deferred revenue fair value adjustment | 10 | — | 10 | ||||||||||||||||
Acquisition and integration charges and other non-recurring items | 103 | — | 103 | ||||||||||||||||
Interest expense | 116 | — | 116 | ||||||||||||||||
Cash Flow: |
|||||||||||||||||||
Operating Cash Flow | $ | 425 | — | $ | 475 | ||||||||||||||
Acquisition, integration, and other non-recurring payments | 126 | — | 126 | ||||||||||||||||
Capital Expenditures | (135 | ) | — | (145 | ) | ||||||||||||||
Free Cash Flow (Non-GAAP) (a) | $ | 416 | — | $ | 456 | ||||||||||||||
(a) See below for definitions of our Non-GAAP metrics under "Non-GAAP Financial Measures".
(b) See below for reconciliations under "Supplemental Information - Non-GAAP Reconciliations."
ABOUT
FORWARD LOOKING STATEMENTS
Statements contained in this press release regarding the Company’s growth and prospects, projected financial results and all other statements in this release other than recitation of historical facts are forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, estimates, 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 achieve and effectively manage growth, including our ability to integrate our recent acquisitions and consummate and integrate future acquisitions; our ability to pay our debt; 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 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; the impact of the Tax Cuts and Jobs Act of 2017; and other factors described under “Risk Factors” contained in our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, 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
NON-GAAP FINANCIAL MEASURES
Certain financial measures used in this Press Release are not defined by generally accepted accounting principles ("GAAP") and as such are considered non-GAAP financial measures. We provide these measures to enhance the user’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future. Investors are cautioned that these non-GAAP financial measures may not be defined in the same manner by other companies and as a result may not be comparable to other similarly titled measures used by other companies. Also, these non-GAAP financial measures should not be construed as alternatives, or superior, to other measures determined in accordance with GAAP.
The Company's non-GAAP financial measures are as follows:
Adjusted Revenue: Represents GAAP revenue plus, as applicable (i) revenue for pre-acquisition period(s) from CEB, as applicable; and (ii) the amortization of non-cash fair value adjustments on pre-acquisition deferred revenues. The majority of the non-cash fair value adjustments on pre-acquisition deferred revenues is recognized ratably over the remaining period of the underlying revenue contract. We believe Adjusted Revenue is an important measure of our recurring operations as it provides a more accurate period-over-period comparison of trends in revenues, on both a consolidated and segment results basis.
Adjusted Contribution and Adjusted Contribution Margin: Adjusted Contribution represents GAAP contribution plus (i) the contribution for pre-acquisition period(s) from CEB, as applicable; and (ii) the amortization of non-cash fair value adjustments on pre-acquisition deferred revenues. The Adjusted Contribution Margin represents the contribution margin on Adjusted revenue. We believe Adjusted Contribution and Adjusted Contribution Margin are important measures of our recurring operations as they provide a more accurate and consistent period-over-period comparison of our segment results.
Adjusted EBITDA: Represents GAAP net (loss) income plus (i) stock-based compensation expense; depreciation, amortization, and accretion on excess facilities obligations; the amortization of non-cash fair adjustments on pre-acquisition deferred revenues; acquisition and integration charges and certain other non-recurring items; (ii) the Adjusted EBITDA related to pre-acquisition periods for CEB, as applicable. We believe Adjusted EBITDA is an important measure of our recurring operations as it excludes items not representative of our core operating results.
Adjusted Net Income: Represents GAAP net (loss) income adjusted for the impact of certain items directly related to acquisitions and other non-recurring items. These adjustments include (i) the amortization of acquired intangibles; (ii) acquisition and integration charges and certain other non-recurring items; (iii) the amortization of non-cash fair value adjustments on pre-acquisition deferred revenues; (iv) the non-recurring impact from the enactment of the Tax Cuts and Jobs Act of 2017; and (v) certain other non-recurring items. We believe Adjusted Net Income is an important measure of our recurring operations as it excludes items not indicative of our core operating results.
Adjusted EPS: Represents Adjusted Net Income divided by the weighted-average diluted shares outstanding. We believe Adjusted EPS is an important measure of our recurring operations as it excludes items that may not be indicative of our core operating results.
Free Cash Flow: Represents cash provided by operating activities determined in accordance with GAAP as follows: (i) plus payments for acquisition and integration items directly-related to our acquisitions and certain other non-recurring items; (ii) less payments for capital expenditures. We believe that Free Cash Flow is an important measure of the recurring cash generated by the Company’s core operations that may be available to be used to repay debt obligations, repurchase our stock, invest in future growth through new business development activities, or make acquisitions.
Non-GAAP Metrics excluding Held-for-Sale Operations: Represents the non-GAAP metrics defined above excluding the results of our operations that are classified as held-for-sale, which are provided for Adjusted revenue, Adjusted contribution, Adjusted contribution margin, and Adjusted EBITDA.
Foreign Currency Neutral (FX Neutral): We provide foreign currency neutral dollar amounts and percentages for our contract values and revenues and certain expenses. These foreign currency neutral dollar amounts and percentages eliminate the effects of exchange rate fluctuations and thus provide a more accurate and meaningful trend in the underlying data being measured. We calculate foreign currency neutral dollar amounts by converting the underlying amounts in local currency for different periods into U.S. dollars by applying the same foreign exchange rates.
SUPPLEMENTAL INFORMATION - NON-GAAP RECONCILIATIONS
The following tables provide reconciliations of certain Non-GAAP financial measures used in this Press Release with the most directly comparable GAAP measure. See "Non-GAAP Financial Measures" above for definitions of these Non-GAAP financial measures.
Reconciliation - GAAP Revenue to Adjusted Revenue, Adjusted Contribution, and Adjusted Contribution Margin (Unaudited; in millions. Some totals may not add due to rounding.) :
For the three months ended
Research | Events | Consulting | TA & Other | Total | ||||||||||||||||||||||||||||||||||
GAAP revenue | $ | 764 | $ | 46 | $ | 83 | $ | 70 | $ | 964 | ||||||||||||||||||||||||||||
Pre-acquisition period revenue(a) | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Amortization of deferred revenue fair value |
6 | — | — | 4 | 10 | |||||||||||||||||||||||||||||||||
Adjusted revenue including held-for-sale |
770 | 46 | 83 | 74 | 974 | |||||||||||||||||||||||||||||||||
Less: Held-for-sale operations revenue(c) | — | — | — | (53 | ) | (54 | ) | |||||||||||||||||||||||||||||||
Adjusted revenue excluding held-for-sale |
$ | 770 | $ | 46 | $ | 83 | $ | 21 | $ | 920 | ||||||||||||||||||||||||||||
GAAP contribution | $ | 531 | $ | 16 | $ | 24 | $ | 43 | $ | 614 | ||||||||||||||||||||||||||||
Add: Amortization of deferred revenue fair value adjustment (b) | 6 | — | — | 4 | 10 | |||||||||||||||||||||||||||||||||
Adjusted contribution | 537 | 16 | 24 | 47 | 624 | |||||||||||||||||||||||||||||||||
Adjusted contribution margin | 70 | % | 35 | % | 29 | % | 63 | % | 64 | % | ||||||||||||||||||||||||||||
Adjusted contribution and Adjusted contribution |
||||||||||||||||||||||||||||||||||||||
Adjusted contribution from above |
$ | 537 | $ | 16 | $ | 24 | $ | 47 | $ | 624 | ||||||||||||||||||||||||||||
Held-for-sale operations revenue(c) | — | — | — | 54 | 54 | |||||||||||||||||||||||||||||||||
Held-for-sale operations direct expense | — | — | — | (20 | ) | (20 | ) | |||||||||||||||||||||||||||||||
Contribution from held-for-sale operations | — | — | — | 34 | 34 | |||||||||||||||||||||||||||||||||
Adjusted contribution excluding held-for-sale operations | $ | 537 | $ | 16 | $ | 24 | $ | 13 | $ | 590 | ||||||||||||||||||||||||||||
Adjusted contribution margin excluding held-for-sale |
70 | % | 35 | % | 29 | % | 62 | % | 64 | % | ||||||||||||||||||||||||||||
(a) Consists of pre-acquisition CEB revenue.
(b) Consists of the amortization of non-cash fair value adjustments on pre-acquisition deferred revenues. The majority of the pre-acquisition deferred revenue is recognized ratably over the remaining period of the underlying revenue contract.
(c) Consists of revenue related to held-for-sale operations. Held-for-sale operations refers to the Company's CEB Talent Assessment business and
For the three months ended
Research | Events | Consulting | TA & Other | Total | ||||||||||||||||||||||||||||||||||
GAAP revenue | $ | 511 | $ | 35 | $ | 79 | $ | — | $ | 625 | ||||||||||||||||||||||||||||
Pre-acquisition period revenue(a) | 144 | 1 | — | 69 | 214 | |||||||||||||||||||||||||||||||||
Amortization of deferred revenue fair value |
— | — | — | — | — | |||||||||||||||||||||||||||||||||
Adjusted revenue including held-for-sale |
655 | 36 | 79 | 69 | 839 | |||||||||||||||||||||||||||||||||
Less: Held-for-sale operations revenue(c) | — | — | — | (52 | ) | (52 | ) | |||||||||||||||||||||||||||||||
Adjusted revenue excluding held-for-sale |
$ | 655 | $ | 36 | $ | 79 | $ | 17 | $ | 787 | ||||||||||||||||||||||||||||
GAAP contribution | $ | 351 | $ | 13 | $ | 24 | $ | — | $ | 388 | ||||||||||||||||||||||||||||
Add: Amortization of deferred revenue fair value |
— | — | — | — | — | |||||||||||||||||||||||||||||||||
Add: Contribution from pre-acquisition period: | ||||||||||||||||||||||||||||||||||||||
Pre-acquisition period revenue (a) | 144 | 1 | — | 69 | 214 | |||||||||||||||||||||||||||||||||
Direct expense (a) | (41 | ) | (3 | ) | — | (32 | ) | (76 | ) | |||||||||||||||||||||||||||||
Contribution from pre-acquisition period | $ | 103 | $ | (2 | ) | $ | — | $ | 37 | $ | 138 | |||||||||||||||||||||||||||
Adjusted contribution | $ | 454 | $ | 11 | $ | 24 | $ | 37 | $ | 526 | ||||||||||||||||||||||||||||
Adjusted contribution margin | 69 | % | 31 | % | 30 | % | 54 | % | 63 | % | ||||||||||||||||||||||||||||
Adjusted contribution and Adjusted contribution |
||||||||||||||||||||||||||||||||||||||
Adjusted contribution from above | $ | 454 | $ | 11 | $ | 24 | $ | 37 | $ | 526 | ||||||||||||||||||||||||||||
Held-for-sale operations revenue (c) | — | — | — | 52 | 52 | |||||||||||||||||||||||||||||||||
Held-for-sale operations direct expense (c) | — | — | — | (23 | ) | (23 | ) | |||||||||||||||||||||||||||||||
Contribution from held-for-sale operations | — | — | — | 29 | 29 | |||||||||||||||||||||||||||||||||
Adjusted contribution excluding held-for-sale operations | 454 | 11 | 24 | 8 | 497 | |||||||||||||||||||||||||||||||||
Adjusted contribution margin excluding held-for-sale operations | 69 | % | 31 | % | 30 | % | 47 | % | 63 | % | ||||||||||||||||||||||||||||
(a) Consists of pre-acquisition CEB revenue and direct expense. The Company compiled these amounts from unaudited financial data provided by CEB.
(b) Consists of the amortization of non-cash fair value adjustments on pre-acquisition deferred revenues. The majority of the pre-acquisition deferred revenue is recognized ratably over the remaining period of the underlying revenue contract.
(c) Consists of revenue and direct expense related to held-for-sale operations, which the Company compiled from unaudited financial data provided by CEB. Held-for-sale operations refers to the Company's CEB Talent Assessment business and
Reconciliation - GAAP Net (Loss) Income to Adjusted EBITDA(a) (Unaudited; in millions):
Three Months Ended March 31, |
|||||||||||||||||
2018 | 2017 | ||||||||||||||||
GAAP net (loss) income | $ | (20 | ) | $ | 36 | ||||||||||||
Interest expense, net | 35 | 6 | |||||||||||||||
Other (income) expense, net | (1 | ) | (1 | ) | |||||||||||||
Tax (benefit) provision | (23 | ) | 12 | ||||||||||||||
Operating (loss) income | (9 | ) | 53 | ||||||||||||||
Adjustments: | |||||||||||||||||
Stock-based compensation expense(a) | 30 | 23 | |||||||||||||||
Depreciation, accretion, and amortization(b) | 68 | 17 | |||||||||||||||
Amortization of deferred revenue fair value adjustment(c) | 10 | — | |||||||||||||||
Acquisition and integration charges and other non-recurring items(d) | 62 | 13 | |||||||||||||||
Subtotal | 161 | 106 | |||||||||||||||
Plus: CEB pre-acquisition EBITDA(e) | — | 36 | |||||||||||||||
Adjusted EBITDA | 161 | 142 | |||||||||||||||
Less: Held-for-sale operations EBITDA(f) | (8 | ) | (6 | ) | |||||||||||||
Adjusted EBITDA excluding held-for-sale operations | $ | 153 | $ | 136 | |||||||||||||
(a) Consists of charges for stock-based compensation awards.
(b) Includes depreciation expense, accretion on excess facilities obligations, and amortization of intangibles.
(c) Consists of the amortization of non-cash fair value adjustments on pre-acquisition deferred revenues. The majority of the pre-acquisition deferred revenue is recognized ratably over the remaining period of the underlying revenue contract.
(d) Consists of incremental and directly-related charges from acquisitions and other non-recurring items.
(e) Consists of CEB Adjusted EBITDA for the three months ended
(f) Consists of Adjusted EBITDA from held-for-sale operations. The EBITDA amounts were compiled from unaudited financial data provided by CEB in accordance with
Reconciliation - GAAP Net (Loss) Income to Adjusted Net Income and Adjusted EPS (Unaudited; in millions, except per share amounts):
Three Months Ended March 31, |
|||||||||||||||||||||||||||||
2018 | 2017 | ||||||||||||||||||||||||||||
Amount | Per share | Amount | Per share | ||||||||||||||||||||||||||
GAAP net (loss) income (a) | $ | (20 | ) | $ | (0.22 | ) | $ | 36 | $ | 0.43 | |||||||||||||||||||
Acquisition and other adjustments: | |||||||||||||||||||||||||||||
Amortization of acquired intangibles (b) | 52 | 0.56 | 6 | 0.07 | |||||||||||||||||||||||||
Amortization of deferred revenue fair value adjustment (c) | 10 | 0.11 | — | — | |||||||||||||||||||||||||
Acquisition & integration charges and other non-recurring items (d), (e) | 65 | 0.70 | 13 | 0.16 | |||||||||||||||||||||||||
Tax impact of adjustments (f) | (41 | ) | (0.44 | ) | (4 | ) | (0.06 | ) | |||||||||||||||||||||
Rounding | — | 0.01 | — | — | |||||||||||||||||||||||||
Adjusted net income (a), (g) | $ | 66 | $ | 0.72 | $ | 51 | $ | 0.60 | |||||||||||||||||||||
(a) Excludes the results of CEB for the three months ended
(b) Consists of non-cash amortization charges from acquired intangibles.
(c) Consists of the amortization of non-cash fair value adjustments on pre-acquisition deferred revenues. The majority of the pre-acquisition deferred revenue is recognized ratably over the remaining period of the underlying revenue contract.
(d) Consists of incremental and directly-related charges related to acquisitions and other non-recurring items.
(e) Includes the amortization and write-off of deferred financing fees for the three months ended
(f) The effective tax rates on the adjustments were 32% and 28% for the three months ended
(g) Adjusted net income was calculated based on approximately 92.3 million and 84.1 million diluted shares for the three months ended
Reconciliation - GAAP Cash Provided (Used) by Operating Activities to Free Cash Flow (Unaudited; in millions):
Three Months Ended |
|||||||||||||||||
2018 | 2017 | ||||||||||||||||
GAAP cash provided (used) by operating activities (a) | $ | 3 | $ | (30 | ) | ||||||||||||
Adjustments: | |||||||||||||||||
Plus: cash paid for acquisition, integration, and other non-recurring items | 42 | 18 | |||||||||||||||
Less: cash paid for capital expenditures | (18 | ) | (11 | ) | |||||||||||||
Free Cash Flow (a) | $ | 27 | $ | (23 | ) | ||||||||||||
For informational purposes only: | |||||||||||||||||
GAAP cash used by investing activities | $ | (17 | ) | $ | (122 | ) | |||||||||||
GAAP cash (used) provided by financing activities | $ | (329 | ) | $ | 917 | ||||||||||||
(a) Excludes the results of CEB for the three months ended
Financial Outlook Reconciliation - GAAP Net Income to Adjusted EPS (Unaudited; in millions):
2018 Full Year |
||||||||||||||||
Low | High | |||||||||||||||
Net income | $ | 101 | $ | 137 | ||||||||||||
Interest expense, net (a) | 124 | 124 | ||||||||||||||
Other (income) expense, net | 1 | 2 | ||||||||||||||
Tax provision | 38 | 51 | ||||||||||||||
Operating income | $ | 264 | $ | 314 | ||||||||||||
Normalizing adjustments: | ||||||||||||||||
Stock-based compensation expense | $ | 71 | $ | 71 | ||||||||||||
Depreciation, accretion, and amortization | 270 | 270 | ||||||||||||||
Deferred revenue fair value adjustment | 10 | 10 | ||||||||||||||
Acquisition and integration charges and other nonrecurring items | 95 | 95 | ||||||||||||||
Adjusted EBITDA | $ | 710 | $ | 760 | ||||||||||||
(a) Approximately
Financial Outlook Reconciliation - GAAP EPS to Adjusted EPS (Unaudited):
2018 Full Year |
||||||||||||||||
Low | High | |||||||||||||||
GAAP EPS | $ | 1.08 | $ | 1.47 | ||||||||||||
Normalizing adjustments: | ||||||||||||||||
Amortization of acquired Intangibles | 1.52 | 1.52 | ||||||||||||||
Acquisition and integration charges and other nonrecurring items | 0.82 | 0.82 | ||||||||||||||
Deferred revenue fair value adjustment | 0.09 | 0.09 | ||||||||||||||
Rounding | — | 0.01 | ||||||||||||||
Adjusted EPS | $ | 3.51 | $ | 3.91 | ||||||||||||
Condensed Consolidated Balance Sheets
(Unaudited; in thousands)
March 31, | December 31, | ||||||||||||||||
2018 | 2017 | ||||||||||||||||
Assets | |||||||||||||||||
Current assets: | |||||||||||||||||
Cash and cash equivalents | $ | 189,979 | $ | 538,908 | |||||||||||||
Fees receivable | 1,134,964 | 1,176,843 | |||||||||||||||
Deferred commissions | 207,161 | 205,260 | |||||||||||||||
Prepaid expenses and other current assets | 175,204 | 124,632 | |||||||||||||||
Assets held-for-sale | 603,354 | 542,965 | |||||||||||||||
Total current assets | 2,310,662 | 2,588,608 | |||||||||||||||
Property, equipment and leasehold improvements, net | 223,086 | 221,507 | |||||||||||||||
Goodwill | 2,956,642 | 2,987,294 | |||||||||||||||
Intangible assets, net | 1,247,771 | 1,292,022 | |||||||||||||||
Other assets | 176,867 | 193,742 | |||||||||||||||
Total Assets | $ | 6,915,028 | $ | 7,283,173 | |||||||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||
Current liabilities: | |||||||||||||||||
Accounts payable and accrued liabilities | $ | 532,538 | $ | 666,821 | |||||||||||||
Deferred revenues | 1,719,637 | 1,630,198 | |||||||||||||||
Current portion of long-term debt | 789,724 | 379,721 | |||||||||||||||
Liabilities held-for-sale | 143,957 | 145,845 | |||||||||||||||
Total current liabilities | 3,185,856 | 2,822,585 | |||||||||||||||
Long-term debt, net of deferred financing fees | 2,186,061 | 2,899,124 | |||||||||||||||
Other liabilities | 555,540 | 577,999 | |||||||||||||||
Total Liabilities | 5,927,457 | 6,299,708 | |||||||||||||||
Stockholders’ Equity | |||||||||||||||||
Preferred stock | — | — | |||||||||||||||
Common stock | 82 | 82 | |||||||||||||||
Additional paid-in capital | 1,788,045 | 1,761,383 | |||||||||||||||
Accumulated other comprehensive income, net | 32,225 | 1,508 | |||||||||||||||
Accumulated earnings | 1,613,980 | 1,647,284 | |||||||||||||||
Treasury stock | (2,446,761 | ) | (2,426,792 | ) | |||||||||||||
Total Stockholders’ Equity | 987,571 | 983,465 | |||||||||||||||
Total Liabilities and Stockholders’ Equity | $ | 6,915,028 | $ | 7,283,173 | |||||||||||||
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share data)
Three Months Ended | |||||||||||||||||
March 31, | |||||||||||||||||
2018 | 2017 | ||||||||||||||||
Revenues: | |||||||||||||||||
Research | $ | 763,924 | $ | 511,306 | |||||||||||||
Events | 46,087 | 35,269 | |||||||||||||||
Consulting | 82,896 | 78,594 | |||||||||||||||
Talent Assessment & Other | 70,658 | — | |||||||||||||||
Total revenues | 963,565 | 625,169 | |||||||||||||||
Costs and expenses: | |||||||||||||||||
Cost of services and product development | 357,209 | 237,609 | |||||||||||||||
Selling, general and administrative | 487,745 | 304,244 | |||||||||||||||
Depreciation | 16,410 | 10,240 | |||||||||||||||
Amortization of intangibles | 51,646 | 6,290 | |||||||||||||||
Acquisition and integration charges | 59,266 | 13,272 | |||||||||||||||
Total costs and expenses | 972,276 | 571,655 | |||||||||||||||
Operating (loss) income | (8,711 | ) | 53,514 | ||||||||||||||
Interest expense, net | (35,059 | ) | (5,906 | ) | |||||||||||||
Other income, net | 899 | 889 | |||||||||||||||
(Loss) income before income taxes | (42,871 | ) | 48,497 | ||||||||||||||
(Benefit) provision for income taxes | (23,284 | ) | 12,064 | ||||||||||||||
Net (loss) income | $ | (19,587 | ) | $ | 36,433 | ||||||||||||
Net (loss) income per share: | |||||||||||||||||
Basic | $ | (0.22 | ) | $ | 0.44 | ||||||||||||
Diluted | $ | (0.22 | ) | $ | 0.43 | ||||||||||||
Weighted average shares outstanding: | |||||||||||||||||
Basic | 91,005 | 82,835 | |||||||||||||||
Diluted | 91,005 | 84,095 | |||||||||||||||
Condensed Consolidated Statements of Cash Flows
(Unaudited; in thousands)
Three Months Ended | |||||||||||||||||
March 31, | |||||||||||||||||
2018 | 2017 | ||||||||||||||||
Operating activities: | |||||||||||||||||
Net (loss) income | $ | (19,587 | ) | $ | 36,433 | ||||||||||||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||||||||||||
Depreciation and amortization | 68,056 | 16,530 | |||||||||||||||
Stock-based compensation expense | 30,958 | 22,576 | |||||||||||||||
Deferred taxes | (39,175 | ) | (11,998 | ) | |||||||||||||
Amortization and write-off of deferred financing fees | 1,868 | 468 | |||||||||||||||
Changes in assets and liabilities, net of acquisitions | (39,396 | ) | (93,614 | ) | |||||||||||||
Cash provided by (used in) operating activities | 2,724 | (29,605 | ) | ||||||||||||||
Investing activities: | |||||||||||||||||
Additions to property, equipment and leasehold improvements | (17,679 | ) | (10,700 | ) | |||||||||||||
Acquisitions - cash paid (net of cash acquired) | — | (111,165 | ) | ||||||||||||||
Other | 1,000 | — | |||||||||||||||
Cash used in investing activities | (16,679 | ) | (121,865 | ) | |||||||||||||
Financing activities: | |||||||||||||||||
Proceeds from employee stock purchase plan | 4,124 | 3,022 | |||||||||||||||
Proceeds from borrowings | — | 955,000 | |||||||||||||||
Payments for deferred financing fees | — | (18,773 | ) | ||||||||||||||
Payments on borrowings | (304,813 | ) | — | ||||||||||||||
Purchases of treasury stock | (28,394 | ) | (21,978 | ) | |||||||||||||
Cash (used in) provided by financing activities | (329,083 | ) | 917,271 | ||||||||||||||
Net (decrease) increase in cash and cash equivalents and restricted cash | (343,038 | ) | 765,801 | ||||||||||||||
Effects of exchange rates on cash and cash equivalents and restricted cash | 3,610 | 6,007 | |||||||||||||||
Cash and cash equivalents and restricted cash, beginning of period | 567,058 | 499,354 | |||||||||||||||
Cash and cash equivalents and restricted cash, end of period | $ | 227,630 | $ | 1,271,162 | |||||||||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20180508005645/en/
Source:
Gartner
David Cohen, +1 203-316-6631
GVP, Investor Relations,
investor.relations@gartner.com
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Gartner's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.