2007 Revenue increased 12% to $1.189 Billion
2007 GAAP EPS Increased 36% to $0.68
2007 Operating Cash Flow Increased 40% to $148.3 Million
Gartner Repurchased $169.1 Million of Stock During 2007
STAMFORD, Conn.--(BUSINESS WIRE)--Feb. 7, 2008--Gartner, Inc.
(NYSE: IT), the leading provider of research and analysis on the
global information technology industry, today reported results for
fourth quarter and full year 2007, and provided its preliminary
financial outlook for 2008. In addition, the Company announced an
increased share repurchase authorization, a change in the leadership
of its Consulting business, and a non-binding letter of intent to sell
its non-core Vision Events business.
Fourth Quarter 2007 Results
Contract value, a key leading indicator for Gartner's Research
segment, increased 18% year-over-year to a record level of $752.5
million, reflecting the successful execution of the Company's strategy
to accelerate research growth. Total revenue for fourth quarter 2007
grew 15% year-over-year to $348.4 million, driven by strong,
double-digit growth in the Company's Research and Consulting
businesses and modest growth in its Events business. Excluding the
impact of foreign exchange, research contract value and total revenue
increased 14% and 10%, respectively.
For fourth quarter 2007, GAAP EPS increased 85% year-over-year to
$0.37, net income increased 72% year-over-year to $38.8 million and
Normalized EBITDA increased 53% year-over-year to $80.0 million. See
"Non-GAAP Financial Measures" for a discussion of Normalized EBITDA.
Full Year 2007 Results
Total revenue for full year 2007 grew 12% to $1.189 billion,
driven by growth in all three of Gartner's business segments.
Excluding the impact of foreign exchange, total revenue increased 9%.
Full year 2007 GAAP EPS increased 36% year-over-year to $0.68, net
income increased 26% year-over-year to $73.6 million and Normalized
EBITDA increased 25% year-over-year to $194.1 million. Net income and
GAAP EPS include charges and non-operating items totaling ($7.2)
million, pretax, or ($0.04) per share, net of tax, which were
previously reported in the Company's second quarter 2007 financial
results.
Gene Hall, Gartner's chief executive officer, commented, "Our 2007
results reflect the continued successful execution of our growth
strategy. With our vast, untapped market opportunity and products that
are crucial to the efficient operation of our clients' IT programs, we
are well positioned to continue double-digit revenue and earnings
growth, even in a slower economic environment."
Business Segment Highlights
Research - Revenue for the fourth quarter increased 19%
year-over-year to $180.6 million and gross contribution margin
improved approximately 6 percentage points to 64%. For the full year,
revenue increased 18% to $673.3 million and gross contribution margin
improved approximately 4 percentage points to 64%. At December 31,
2007, research contract value was a record $752.5 million, up 18%
year-over-year. Client and wallet retention rates for fourth quarter
2007 increased to 82% and 101%, respectively, versus 81% and 96%,
respectively, for fourth quarter 2006.
Consulting - Revenue for the fourth quarter increased 20%
year-over-year to $91.4 million and gross contribution margin improved
approximately 10 percentage points to 42%. For the full year, revenue
increased 6% to $325.0 million and gross contribution margin was 39%.
Fourth quarter utilization increased 12 percentage points
year-over-year to 73% and backlog increased 11% year-over-year to
$121.4 million at December 31, 2007. Billable headcount was 472 as of
December 31, 2007, versus 518 last year, reflecting the exiting of
consulting operations in Asia Pacific.
Events - Revenue for the fourth quarter increased 3%
year-over-year to $74.1 million and gross contribution margin was 56%.
During the fourth quarter, attendees grew 2% to 16,675, despite the
Company holding only 17 events versus 18 events in the same period
last year. For the full year, revenue increased 7% to $180.8 million
and gross contribution margin was 49%. During 2007, attendees grew 8%
to 44,216 and the Company held 78 events as compared to 74 events
during 2006.
Cash Flow and Balance Sheet Highlights
Gartner generated cash from operations of $65.8 million during
fourth quarter 2007 and $148.3 million during full year 2007, up 109%
and 40%, respectively, year-over-year. Capital expenditures were $5.6
million for the quarter and $24.2 million for the full year.
The Company deployed its cash principally to repurchase its common
stock. During fourth quarter 2007, Gartner repurchased 5.5 million
shares of its common stock at a cost of $103.3 million. During the
full year 2007, it repurchased a total of 8.4 million shares at an
aggregate cost of $169.1 million.
As of December 31, 2007, the Company had total debt of $394.0
million and cash of $109.9 million.
Increased Share Repurchase Authorization
Gartner also announced that its board of directors has authorized
the use of up to $250 million for the repurchase of it common stock.
This program will supplement the existing $200 million share
repurchase program, which had approximately $23 million remaining as
of January 31, 2008. Repurchases are subject to the availability of
stock, prevailing market conditions, the trading price of the stock,
the Company's financial performance and other conditions. The program
will be funded from cash flow from operations and possible borrowings.
Per Anders Warn to Lead Consulting
Separately, Gartner announced that Per Anders Warn has been
promoted to senior vice president and will lead Gartner's global
Consulting business. Mr. Warn will replace Bob Patton, who will leave
Gartner in February to return to a senior leadership position at his
previous employer, Ernst & Young.
Since joining Gartner Consulting in 1998, Warn has held a number
of senior leadership positions in both Europe and the United States.
Most recently, he has led Gartner's global core Consulting team.
Company to Divest Its Non-Core Vision Events Business
Gartner announced that it has entered into negotiations to sell
its non-core Vision Events business. The sale is subject to the
successful completion of due diligence and the negotiation and
execution of a definitive purchase agreement, and is expected to close
during the first quarter of 2008.
Gene Hall, Gartner's chief executive officer, said, "The proposed
divestiture of Vision Events is consistent with our strategy to focus
on content driven event formats where we have a greater competitive
advantage."
In 2007, Vision Events generated revenue of approximately $21
million, Normalized EBITDA of approximately $4 million and EPS of
approximately $0.02. It employs 44 associates and hosted 16 events
worldwide in 2007. Gartner expects to account for Vision Events as a
discontinued operation beginning in first quarter 2008.
Preliminary Financial Outlook for 2008
Gartner also provided its preliminary outlook for 2008. For the
full year, the Company is targeting total revenue of $1.300 to $1.325
billion, an increase of 9% to 11% versus 2007. By segment, the Company
is targeting Research revenue of $770 to $780 million, an increase of
14% to 16% versus 2007, Consulting revenue of $335 to $345 million, an
increase of 3% to 6% versus 2007, Events revenue of $190 to $194
million, an increase of 5% to 7% versus 2007, and other revenue of $5
to $6 million.
Based on the above revenue outlook, the Company is targeting
Normalized EBITDA for the full year 2008 of $213 to $223 million, an
increase of 10% to 15% versus 2007, GAAP EPS of $0.90 to $1.00, an
increase of 32% to 47% versus 2007, cash flow from operations of $155
to $170 million and capital expenditures of $25 to $27 million.
Normalized EBITDA excludes a projected $26 to $28 million of pre-tax
expense related to SFAS 123(R).
Gartner's current 2008 outlook does not reflect the impact of the
planned divestiture of its Vision Events business. Assuming the
divestiture is completed, Gartner's projections for full year 2008
revenue, Normalized EBITDA, EPS and cash flow from operations would be
reduced by approximately $21 million, $4 million, $0.02 and $2
million, respectively. These amounts do not include any potential
gain-on-sale or related accounting adjustments resulting from the
divestiture.
Conference Call and Investor Day Information
Gartner has scheduled a conference call at 10:00 a.m. ET today,
Thursday, February 7, 2008, to discuss the Company's financial
results. The conference call will be available via the Internet by
accessing the Company's web site at http://investor.gartner.com. A
replay of the webcast will be available for 90 days following the
call.
The Company will also host an Investor Day for institutional
investors and sell-side analysts on Thursday, March 6, 2008 in New
York City. The event will begin at 8:30 a.m. ET and will conclude at
approximately 1:00 p.m. ET. The Investor Day is by invitation only and
registration is required. It will also be webcast live via the
Internet on the Company's web site at http://investor.gartner.com and
a replay will be available following the event. Please contact
Germaine Scott at 203-316-3411 for further information.
Annual Meeting of Stockholders
Gartner also announced that its 2008 Annual Meeting of
Stockholders will be held at 10:00 a.m. ET on Thursday, June 5, 2008,
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 the indispensable partner to 60,000 clients in 10,000
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 3,900
associates, including 1,200 research analysts and consultants in 75
countries. For more information, visit www.gartner.com.
Non-GAAP Financial Measures
Investors are cautioned that normalized EBITDA 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 EBITDA is an
important measure of our recurring operations as it excludes items
that may not be indicative of our core operating results. Normalized
EBITDA is based on operating income, excluding depreciation, accretion
on obligations related to excess facilities, amortization, META
integration charges, SFAS 123 (R), goodwill impairments, and other
charges.
Safe Harbor Statement
Statements contained in this press release regarding the growth
and prospects of the business, the Company's 2006 and 2007 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 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; ability to grow or even
sustain revenue from individual customers; 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; ability to pay the Company's debt obligations; ability
to achieve continued customer renewals and achieve new contract value,
backlog and deferred revenue growth in light of competitive pressures;
ability to carry out the Company's strategic initiatives and manage
associated costs; substantial competition from existing competitors
and potential new competitors; additional risks associated with
international operations including foreign currency fluctuations; the
impact of restructuring and other charges on the Company's businesses
and operations; and other risks listed from time to time in the
Company's reports filed with the Securities and Exchange Commission.
These filings can be found on Gartner's Web site at
www.gartner.com/investors 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.
GARTNER, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
2007 2006 2007 2006
--------- --------- ----------- -----------
Revenues:
Research $180,564 $151,678 19% $ 673,335 $ 571,217 18%
Consulting 91,370 76,173 20% 325,030 305,231 6%
Events 74,143 72,229 3% 180,788 169,434 7%
Other 2,314 3,859 -40% 10,045 14,439 -30%
--------- --------- ----------- -----------
Total revenues 348,391 303,939 15% 1,189,198 1,060,321 12%
Costs and
expenses:
Cost of
services and
product
development 150,140 146,439 3% 545,275 505,330 8%
Selling,
general and
administrative 123,495 110,112 12% 475,328 416,094 14%
Depreciation 6,296 5,846 8% 24,298 23,444 4%
Amortization of F
intangibles 457 470 -3% 2,091 10,753
META F
integration
charges - - 0% - 1,450
Other charges - - 0% 9,084 - U
--------- --------- ----------- -----------
Total costs and
expenses 280,388 262,867 7% 1,056,076 957,071 10%
--------- --------- ----------- -----------
Operating income 68,003 41,072 66% 133,122 103,250 29%
Interest expense,
net (5,270) (3,891) -35% (22,154) (16,581) -34%
Other income F F
(expense), net 1,114 265 3,193 (797)
--------- --------- ----------- -----------
Income before
income taxes 63,847 37,446 71% 114,161 85,872 33%
Provision for
income taxes 25,028 14,876 68% 40,608 27,680 47%
--------- --------- ----------- -----------
Net income $ 38,819 $ 22,570 72% $ 73,553 $ 58,192 26%
========= ========= =========== ===========
Income per common
share:
Basic $ 0.38 $ 0.20 90% $ 0.71 $ 0.51 39%
Diluted $ 0.37 $ 0.20 85% $ 0.68 $ 0.50 36%
Weighted average
shares
outstanding:
Basic 101,709 111,498 -9% 103,613 113,071 -8%
Diluted 105,915 115,693 -8% 108,328 116,203 -7%
U/F =
Unfavorable/
Favorable
BUSINESS SEGMENT DATA
(Dollars in thousands)
Direct Gross Contrib.
Revenue Expense Contribution Margin
---------- -------- ------------ --------
Three Months Ended 12/31/07
Research $ 180,564 $ 64,171 $ 116,393 64%
Consulting 91,370 53,319 38,051 42%
Events 74,143 32,257 41,886 56%
Other 2,314 440 1,874 81%
---------- -------- ------------
TOTAL $ 348,391 $150,187 $ 198,204 57%
========== ======== ============
Three Months Ended 12/31/06
Research $ 151,678 $ 64,392 $ 87,286 58%
Consulting 76,173 52,015 24,158 32%
Events 72,229 31,001 41,228 57%
Other 3,859 719 3,140 81%
---------- -------- ------------
TOTAL $ 303,939 $148,127 $ 155,812 51%
========== ======== ============
Twelve Months Ended 12/31/07
Research $ 673,335 $244,271 $ 429,064 64%
Consulting 325,030 196,815 128,215 39%
Events 180,788 92,624 88,164 49%
Other 10,045 2,307 7,738 77%
---------- -------- ------------
TOTAL $1,189,198 $536,017 $ 653,181 55%
========== ======== ============
Twelve Months Ended 12/31/06
Research $ 571,217 $225,696 $ 345,521 60%
Consulting 305,231 184,571 120,660 40%
Events 169,434 85,745 83,689 49%
Other 14,439 2,714 11,725 81%
---------- -------- ------------
TOTAL $1,060,321 $498,726 $ 561,595 53%
========== ======== ============
SELECTED STATISTICAL DATA
December 31, December 31,
2007 2006
------------ ------------
Research contract value $ 752,533 (1) $640,294
Research client retention 82% 81%
Research wallet retention 101% 96%
Research client organizations 10,189 9,470
Consulting backlog $ 121,400 (1) $109,600
Consulting--quarterly utilization 73% 61%
Consulting billable headcount 472 518
Consulting--average annualized revenue
per billable headcount $ 471 (1) $ 370
Events--number of events for the quarter 17 18
Events--attendees for the quarter 16,675 16,375
(1) Dollars in thousands.
SUPPLEMENTAL INFORMATION
GAAP to Normalized EBITDA Reconciliation
(in thousands)
Reconciliation - GAAP to Normalized EBITDA (1):
Three Months Twelve Months
Ended Ended
December 31, December 31,
----------------- ------------------
2007 2006 2007 2006
-------- -------- --------- --------
Net income $38,819 $22,570 $ 73,553 $ 58,192
Interest expense, net 5,270 3,891 22,154 16,581
Other (income) expense, net (1,114) (265) (3,193) 797
Tax provision 25,028 14,876 40,608 27,680
-------- -------- --------- --------
Operating income $68,003 $41,072 $133,122 $103,250
Normalizing adjustments:
Depreciation, accretion, and
amortization 7,030 6,316 27,604 34,197
Other charges (2) - - 9,084 -
META integration charges (3) - - - 1,450
SFAS No. 123(R) stock
compensation expense (4) 5,016 4,930 24,241 16,670
-------- -------- --------- --------
Normalized EBITDA $80,049 $52,318 $194,051 $155,567
======== ======== ========= ========
Footnotes
---------------------------------
(1) Normalized EBITDA is based on operating income excluding
depreciation, accretion on obligations related to excess
facilities, amortization, META integration charges, SFAS No.
123(R) expense, goodwill impairments, and Other charges.
(2) Other charges for the twelve months ended December 31,
2007 included $8.7 million related to a litigation settlement
and a restructuring charge of $2.7 million. These charges
were somewhat offset by a credit of $2.3 million resulting
from the reversal of an accrual on an excess facility that
was returned to service.
(3) META integration charges were related to our acquisition
of the META Group, Inc. These costs were primarily for
severance, and for consulting, accounting, and tax services.
(4) Stock compensation expense represents the cost of stock-
based compensation awarded by the Company to its employees
under Statement of Financial Accounting Standards No.
123(R), "Share-Based Payments" ("SFAS No. 123(R)").
CONTACT: Gartner, Inc.
Henry A. Diamond, 1-203-316-3399
Group Vice President
Investor Relations and Corporate Finance
henry.diamond@gartner.com
SOURCE: Gartner, Inc.
