Total Contract Value up 15% YoY FX Neutral to
First Quarter Revenue Increased 13% FX Neutral to
For first quarter 2017, total revenue was
Business Segment Highlights
Research
Revenue for first quarter 2017 was
Consulting
Revenue for first quarter 2017 was
Events
Revenue for first quarter 2017 was
Cash Flow and Balance Sheet Highlights
Acquisition of CEB
On
Impact of the Adoption of FASB ASU No. 2016-09 on our Previously Reported Q1 2016 Numbers
In the third quarter of 2016 the Company early adopted Financial Accounting Standards Board Update 2016-09, Improvements to Employee Share-Based Payment Accounting ("ASU No. 2016-09"), which changed the accounting for stock-based awards. The accounting changes required by ASU No. 2016-09 were applied to the beginning of the Company's 2016 fiscal year, and as a result certain previously reported financial results for the three months ended
Financial Outlook for 2017
The Company also provided an update to its financial outlook for full year 2017, to include CEB:
($ in millions, except per share data) (1) |
|
2017 Projected Range |
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Gartner | CEB | Combined | ||||||||||||||||||||||||||||||
Revenue (GAAP): | ||||||||||||||||||||||||||||||||
Research | $ | 2,070 | — | $ | 2,105 | — | — | $ | 2,070 | — | $ | 2,105 | ||||||||||||||||||||
Consulting | 345 | — | 360 | — | — | 345 | — | 360 | ||||||||||||||||||||||||
Events | 285 | — | 300 | — | — | 285 | — | 300 | ||||||||||||||||||||||||
CEB | — | — | $ | 519 | — | $ | 549 | $ | 519 | — | $ | 549 | ||||||||||||||||||||
Total Revenue (GAAP) | $ | 2,700 | — | $ | 2,765 | $ | 519 | — | $ | 549 | $ | 3,219 | — | $ | 3,314 | |||||||||||||||||
Deferred Revenue Fair Value Adjustment | — | — | 209 | — | 209 | 209 | 209 | |||||||||||||||||||||||||
Total Adjusted Revenue (Non-GAAP) | $ |
2,700 |
$ | 2,765 | $ | 728 | $ | 758 | $ | 3,428 | $ | 3,523 | ||||||||||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 495 | — | $ | 530 | $ | 190 | — | $ | 205 | $ | 685 | — | $ | 735 | |||||||||||||||||
Operating Income (GAAP) | $ | (42 | ) | $ | 8 | |||||||||||||||||||||||||||
Diluted EPS (GAAP) | $ | (1.16 | ) | $ | (0.76 | ) | ||||||||||||||||||||||||||
Adjusted EPS (Non-GAAP) | $ | 3.32 | $ | 3.60 | ||||||||||||||||||||||||||||
Operating Cash Flow (GAAP) | $ |
315 |
$ |
345 |
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Acquisition and Integration Payments |
115 |
125 |
||||||||||||||||||||||||||||||
Capital Expenditures | (95 | ) |
(105 |
) | ||||||||||||||||||||||||||||
Free Cash Flow (Non-GAAP) | $ | 335 | $ | 365 | ||||||||||||||||||||||||||||
(1) See “Non-GAAP Financial Measures” below for definitions of Adjusted Revenue, Adjusted EBITDA, Adjusted EPS, and Free Cash Flow.
Conference Call Information
Annual Meeting of Stockholders
About
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 are not 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 to other measures determined in accordance with GAAP.
The Company's Non-GAAP financial measures are as follows:
Adjusted Revenue: Represents GAAP revenue plus 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. 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.
Adjusted EBITDA: Represents GAAP operating income excluding stock-based compensation expense, depreciation and amortization, accretion on obligations related to excess facilities, acquisition and integration adjustments, and other charges. We believe Adjusted EBITDA is an important measure of our recurring operations as it excludes items that may not be indicative of our core operating results.
Adjusted EPS:Represents GAAP diluted earnings per share adjusted for the impact of certain items directly related to acquisitions and other charges. The adjustment items consist of the amortization of identifiable intangibles; incremental acquisition and integration charges related to the achievement of certain performance targets and employment conditions, as well as legal, consulting, severance, and other costs; and non-cash fair value adjustments on pre-acquisition deferred revenues. 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 GAAP cash (used in) provided by operating activities plus cash acquisition and integration payments 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 repurchase our stock, repay debt obligations, invest in future growth through new business development activities, or make acquisitions.
Tables provided in this Press Release provide reconciliations of these Non-GAAP financial measures with the most directly comparable GAAP measure.
Safe Harbor Statement
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 (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 achieve and effectively manage growth, including our ability to integrate our recent CEB acquisition and other acquisitions, and consummate and integrate future acquisitions; our ability to pay our debt, which has increased substantially with the recent CEB acquisition; 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; and other factors described under “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2016, 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, INC. |
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Three Months Ended |
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2017 | 2016 | |||||||||||||
Revenues: | ||||||||||||||
Research | $ | 504,652 | $ | 440,271 | 15 | % | ||||||||
Consulting | 85,248 | 84,940 | — | % | ||||||||||
Events | 35,269 | 32,055 | 10 | % | ||||||||||
Total revenues | 625,169 | 557,266 | 12 | % | ||||||||||
Costs and expenses: | ||||||||||||||
Cost of services and product development | 237,609 | 212,041 | 12 | % | ||||||||||
Selling, general and administrative | 304,244 | 257,411 | 18 | % | ||||||||||
Depreciation | 10,240 | 8,834 | 16 | % | ||||||||||
Amortization of intangibles | 6,290 | 6,183 | 2 | % | ||||||||||
Acquisition and integration charges | 13,272 | 8,368 | 59 | % | ||||||||||
Total costs and expenses | 571,655 | 492,837 | 16 | % | ||||||||||
Operating income | 53,514 | 64,429 | (17 | )% | ||||||||||
Interest expense, net | (5,906 | ) | (6,006 | ) | (2 | )% | ||||||||
Other income, net | 889 | 1,884 | (53 | )% | ||||||||||
Income before income taxes | 48,497 | 60,307 | (20 | )% | ||||||||||
Provision for income taxes | 12,064 | 15,320 | (21 | )% | ||||||||||
Net income | $ | 36,433 | $ | 44,987 | (19 | )% | ||||||||
Income per common share: | ||||||||||||||
Basic | $ | 0.44 | $ | 0.55 | (20 | )% | ||||||||
Diluted | $ | 0.43 | $ | 0.54 | (20 | )% | ||||||||
Weighted average shares outstanding: | ||||||||||||||
Basic | 82,835 | 82,451 | — | % | ||||||||||
Diluted | 84,095 | 83,464 | 1 | % | ||||||||||
BUSINESS SEGMENT DATA |
(Unaudited; in thousands) |
Revenue |
Direct |
Gross |
Contribution |
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Three Months Ended 3/31/17 | |||||||||||||||||||
Research | $ | 504,652 | $ | 157,944 | $ | 346,708 | 69% | ||||||||||||
Consulting | 85,248 | 56,906 | 28,342 | 33% | |||||||||||||||
Events | 35,269 | 21,702 | 13,567 | 38% | |||||||||||||||
TOTAL | $ | 625,169 | $ | 236,552 | $ | 388,617 | 62% | ||||||||||||
Three Months Ended 3/31/16 | |||||||||||||||||||
Research | $ | 440,271 | $ | 132,085 | $ | 308,186 | 70% | ||||||||||||
Consulting | 84,940 | 55,562 | 29,378 | 35% | |||||||||||||||
Events | 32,055 | 19,072 | 12,983 | 41% | |||||||||||||||
TOTAL | $ | 557,266 | $ | 206,719 | $ | 350,547 | 63% | ||||||||||||
SELECTED STATISTICAL DATA (unaudited) |
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March 31, |
March 31, |
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Total contract value (a), (b) | $ | 1.953 | $ | 1.721 | ||||||
Research client retention | 83 | % | 84 | % | ||||||
Research wallet retention | 104 | % | 105 | % | ||||||
Research client enterprises | 11,166 | 10,474 | ||||||||
Consulting backlog (c) | $ | 103,200 | $ | 114,100 | ||||||
Consulting—quarterly utilization | 65 | % | 67 | % | ||||||
Consulting billable headcount | 650 | 618 | ||||||||
Consulting—average annualized revenue per billable headcount (c) | $ | 359 | $ | 386 | ||||||
Events—number of events for the quarter | 11 | 12 | ||||||||
Events—attendees for the quarter | 9,035 | 7,640 |
(a) | Total contract value represents the value attributable to all of our subscription-related contracts. It is calculated as the annualized value of all contracts in effect at a specific point in time, without regard to the duration of the contract. Total contract value primarily includes Research deliverables for which revenue is recognized on a ratable basis, as well as other deliverables (primarily Events tickets) for which revenue is recognized when the deliverable is utilized. | ||
(b) | In billions. | ||
(c) | In thousands. | ||
SUPPLEMENTAL INFORMATION |
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Reconciliation - Operating income to Adjusted EBITDA (a) (Unaudited; in thousands): |
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|
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Three Months Ended |
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2017 | 2016 | |||||||||
Net income | $ | 36,433 | $ | 44,987 | ||||||
Interest expense, net | 5,906 | 6,006 | ||||||||
Other income, net | (889 | ) | (1,884 | ) | ||||||
Tax provision | 12,064 | 15,320 | ||||||||
Operating income | $ | 53,514 | $ | 64,429 | ||||||
Normalizing adjustments: | ||||||||||
Stock-based compensation expense (b) | 22,576 | 15,495 | ||||||||
Depreciation, accretion, and amortization (c) | 16,553 | 15,038 | ||||||||
Acquisition and integration adjustments (d) | 13,415 | 8,368 | ||||||||
Adjusted EBITDA | $ | 106,058 | $ | 103,330 | ||||||
(a) | Adjusted EBITDA is based on GAAP operating income adjusted for certain normalizing adjustments. | ||
(b) | Consists of charges for stock-based compensation awards. | ||
(c) | Includes depreciation expense, accretion on excess facilities accruals, and amortization of intangibles. | ||
(d) | Consists of directly-related incremental expenses from acquisitions and non-cash fair value adjustments on pre-acquisition deferred revenues. | ||
Reconciliation - GAAP Diluted Earnings Per Share to Adjusted Earnings Per Share (a) (Unaudited; in thousands, except per share amounts): |
Three Months Ended March 31, | ||||||||||||||||||||||
2017 | 2016 | |||||||||||||||||||||
Total |
EPS |
Total |
EPS | |||||||||||||||||||
GAAP diluted earnings per share | $ | 36,433 | $ | 0.43 | $ | 44,987 | $ | 0.54 | ||||||||||||||
Acquisition and other adjustments: | ||||||||||||||||||||||
Amortization of acquired intangibles (b) | 6,196 | 0.07 | 6,089 | 0.07 | ||||||||||||||||||
Acquisition and integration adjustments (c) | 13,415 | 0.16 | 8,368 | 0.10 | ||||||||||||||||||
Tax impact of adjustments (d) | (5,406 | ) | (0.06 | ) | (3,715 | ) | (0.04 | ) | ||||||||||||||
Adjusted earnings per share (e) | $ | 50,638 | $ | 0.60 | $ | 55,729 | $ | 0.67 | ||||||||||||||
(a) | Adjusted earnings per share represents GAAP diluted earnings per share adjusted for the impact of certain items directly-related to acquisitions and other items. | ||
(b) | Consists of non-cash amortization charges from acquired intangibles. | ||
(c) | Consists of directly-related incremental charges from acquisitions and non-cash fair value adjustments on pre-acquisition deferred revenues. | ||
(d) | The effective tax rates were 28% and 26% for the three months ended March 31, 2017 and 2016, respectively. | ||
(e) | Calculated based on 84.1 million and 83.5 million shares for the three months ended March 31, 2017 and 2016, respectively. | ||
Reconciliation - Cash Provided by Operating Activities to Free Cash Flow (a) (Unaudited; in thousands): |
Three Months Ended |
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2017 | 2016 | |||||||||||
Cash (used in) provided by operating activities | $ | (29,605 | ) | $ | 13,331 | |||||||
Adjustments: | ||||||||||||
Cash acquisition and integration payments | 17,585 | 11,100 | ||||||||||
Cash paid for capital expenditures | (10,700 | ) | (6,560 | ) | ||||||||
Free Cash Flow | $ | (22,720 | ) | $ | 17,871 | |||||||
(a) | Free cash flow is based on cash provided by operating activities determined in accordance with GAAP plus cash acquisition and integration payments less additions to capital expenditures. |
View source version on businesswire.com: http://www.businesswire.com/news/home/20170504005460/en/
Source:
Gartner, Inc.
Sherief Bakr, +1-203-316-6537
Group Vice President, 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.