UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

GARTNER, INC.

(Exact name of registrant as specified in its charter)

DELAWARE		1-14443		04-3099750
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

P.O. Box 10212
56 Top Gallant Road
Stamford, CT 06902-7700
(Address of Principal Executive Offices, including Zip Code)

(203) 316-1111
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On October 30, 2008, Gartner, Inc. (the “Company”) announced financial results for the three and nine months ended September 30, 2008. A copy of the Company’s press release is furnished as Exhibit 99.1.

In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02 and in Exhibit 99.1 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

     (d) Exhibits

EXHIBIT NO.		DESCRIPTION
99.1		Press Release issued October 30, 2008 with respect to financial results for Gartner, Inc. for the three and nine months ended September 30, 2008.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EXHIBIT INDEX

EXHIBIT NO.		DESCRIPTION
99.1		Press Release issued October 30, 2008 with respect to financial results for Gartner, Inc. for the three and nine months ended September 30, 2008.

Exhibit 99.1

Press Release

CONTACT:
Henry A. Diamond
Group Vice President
Investor Relations and Corporate Finance
+1 203 316 3399
henry.diamond@gartner.com

Gartner Reports Financial Results for Third Quarter 2008

Contract Value Increased 15% to $812.2 Million

Total Revenue Increased 11% to $297.7 Million

Diluted EPS from Continuing Operations Increased 90% to $0.19

Cash Provided by Operating Activities Increased 43% to $55.6 Million

STAMFORD, Conn., October 30, 2008 — Gartner, Inc. (NYSE: IT), the leading provider of research and analysis on the global information technology industry, today reported results for third quarter 2008.

Contract value, a key leading indicator for Gartner’s Research segment, increased 15% year-over-year to a record level of $812.2 million, reflecting the successful execution of the Company’s strategy to accelerate the growth of its Research business. Total revenue for third quarter 2008 grew 11% year-over-year to $297.7 million, driven by growth in Gartner’s Research and Consulting business segments. Excluding the impact of foreign exchange, research contract value and total revenue increased 12% and 9%, respectively, year-over-year.

For third quarter 2008, diluted EPS from continuing operations increased 90% year-over-year to $0.19, net income increased 50% year-over-year to $18.8 million and Normalized EBITDA increased 33% year-over-year to $47.0 million. These results were driven by the Company’s strong revenue growth and operating leverage, coupled with a continued focus on expense management. See “Non-GAAP Financial Measures” for a discussion of Normalized EBITDA and a reconciliation to net income.

Gene Hall, Gartner’s chief executive officer, commented, “The solid growth in our revenue during the third quarter demonstrates the tremendous value that our services provide to clients, even in challenging economic environments. We continue to gain new clients and to grow our business with existing clients, as we further penetrate our untapped market opportunities.”

Business Segment Highlights

Research – Revenue for third quarter 2008 increased 16% year-over-year to $197.8 million and gross contribution margin improved 2 percentage points to 67%. At September 30, 2008, research contract value was a record $812.2 million, up 15% year-over-year. Client and wallet retention rates for third quarter 2008 were 81% and 100%, respectively.

Consulting – Revenue for third quarter 2008 increased 9% year-over-year to $80.4 million and gross contribution margin improved 3 percentage points to 41%. Third quarter utilization increased 5 percentage points year-over-year to 69% and backlog increased 1% year-over-year to $110.1 million at September 30, 2008. Billable headcount was 494 as of September 30, 2008, versus 469 last year.

-more-

Events – Revenue for third quarter 2008 was $17.7 million, versus $21.9 million in third quarter 2007, and gross contribution margin was 31%. During third quarter 2008, the Company held 16 events with 6,179 attendees, as compared to 18 events with 7,307 attendees in third quarter 2007.

Cash Flow and Balance Sheet Highlights

During third quarter 2008, Gartner generated cash provided by operating activities of $55.6 million, up 43% versus last year, and had capital expenditures of $5.3 million. The Company deployed its cash principally to repurchase 1.03 million shares of its common stock at a cost of $24.8 million. As of September 30, 2008, the Company had total debt of $424.5 million and cash of $145.2 million.

Financial Outlook for 2008

Gartner updated its financial outlook for the full year 2008. The Company increased its guidance for diluted EPS from continuing operations, reiterated its most recent guidance for Normalized EBITDA and cash flow from operations, and trimmed its guidance for revenue. The increase to the Company’s diluted EPS from continuing operations outlook reflects lower expected interest expense and SFAS 123 (R) expense. The reduction to the Company’s revenue outlook is due to reduced operating expectations for its Events business and lower expected foreign exchange benefits across all three of its businesses.

For the full year 2008, the Company is now targeting total revenue of $1.255 to $1.275 billion, an increase of 7% to 9% versus 2007. By segment, the Company is now targeting Research revenue of $771 to $776 million, an increase of 15% versus 2007, Consulting revenue of $330 to $340 million, an increase of 2% to 5% versus 2007, Events revenue of $147 to $151 million, a decrease of 6% to 8% versus 2007, and other revenue of $7 to $8 million. The reduced revenue expectations for Research and Consulting are due entirely to lower expected foreign exchange benefits.

Based on the above revenue outlook, coupled with the impact of tight cost controls, Gartner is now targeting diluted EPS from continuing operations of $0.90 to $1.00, an increase of 36% to 52% versus 2007, and is continuing to target Normalized EBITDA of $209 to $219 million, an increase of 10% to 15% versus 2007, cash flow from operations of $155 to $170 million and capital expenditures of $25 to $27 million. Normalized EBITDA excludes a projected $23 to $24 million of pre-tax expense related to SFAS 123 (R). Gartner’s 2008 outlook excludes the results of its former Vision Events business, which was sold in February 2008 and is now reported as a discontinued operation, and the $7.1 million gain-on-sale resulting from the divestiture.

Conference Call Information

Gartner has scheduled a conference call at 10:00 a.m. ET today, Thursday, October 30, 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.

Gartner, Inc.		page 2

About Gartner

Gartner, Inc. (NYSE: IT) is the world’s leading information technology research and advisory company. We deliver the technology-related insight necessary for our 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, we are the indispensable partner to 60,000 clients in 10,000 distinct organizations. Through the resources of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events, we work with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,000 associates, including 1,200 research analysts and consultants in 80 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, SFAS 123 (R) expense, and Other charges.

Safe Harbor Statement

Statements contained in this press release regarding the growth and prospects of the business, the Company’s 2008 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; general economic conditions; 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.		page 3

GARTNER, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)

		Three Months Ended												Nine Months Ended
		September 30,												September 30,
		2008				2007								2008				2007
Revenues:
Research		$	197,754			$	170,218				16	%		$	583,093			$	492,771				18	%
Consulting			80,404				73,838				9	%			253,129				233,660				8	%
Events			17,656				21,868				-19	%			89,200				91,157				-2	%
Other			1,892				2,350				-19	%			6,322				7,731				-18	%
Total revenues			297,706				268,274				11	%			931,744				825,319				13	%
Costs and expenses:
Cost of services and product development			124,343				124,071				0	%			402,456				384,269				5	%
Selling, general and administrative			131,854				114,913				15	%			400,486				349,895				14	%
Depreciation			6,427				6,255				3	%			19,000				18,002				6	%
Amortization of intangibles			400				509				-21	%			1,215				1,634				-26	%
Other charges			—				—				0	%			—				9,084				-100	%
Total costs and expenses			263,024				245,748				7	%			823,157				762,884				8	%
Operating income			34,682				22,526				54	%			108,587				62,435				74	%
Interest expense, net			(4,997	)			(5,223	)			4	%			(14,672	)			(16,884	)			13	%
Other (expense) income, net			(860	)			303				>100	%			(487	)			2,079				>100	%
Income before income taxes			28,825				17,606				64	%			93,428				47,630				>100	%
Provision for income taxes			10,044				5,943				69	%			29,926				15,011				99	%
Income from continuing operations			18,781				11,663				61	%			63,502				32,619				95	%
Income from discontinued operations, net of taxes (a)			—				831				-100	%			6,723				2,115				>100	%
Net income		$	18,781			$	12,494				50	%		$	70,225			$	34,734				>100	%
Income per common share:
Basic:
Income from continuing operations		$	0.20			$	0.11				82	%		$	0.66			$	0.31				>100	%
Income from discontinued operations			—				0.01				-100	%			0.07				0.02				>100	%
Income per share		$	0.20			$	0.12				67	%		$	0.73			$	0.33				>100	%
Diluted:
Income from continuing operations		$	0.19			$	0.10				90	%		$	0.63			$	0.30				>100	%
Income from discontinued operations			—				0.01				-100	%			0.07				0.02				>100	%
Income per share		$	0.19			$	0.11				73	%		$	0.70			$	0.32				>100	%
Weighted average shares outstanding:
Basic			94,539				104,728				-10	%			95,725				104,169				-8	%
Diluted			98,552				109,197				-10	%			99,750				109,034				-9	%

BUSINESS SEGMENT DATA (a)
(Dollars in thousands)

						Direct				Gross				Contrib.
		Revenue				Expense				Contribution				Margin
Three Months Ended 9/30/08
Research		$	197,754			$	64,305			$	133,449				67	%
Consulting			80,404				47,520				32,884				41	%
Events			17,656				12,199				5,457				31	%
Other			1,892				359				1,533				81	%
TOTAL		$	297,706			$	124,383			$	173,323				58	%
Three Months Ended 9/30/07
Research		$	170,218			$	59,422			$	110,796				65	%
Consulting			73,838				46,019				27,819				38	%
Events			21,868				14,079				7,789				36	%
Other			2,350				542				1,808				77	%
TOTAL		$	268,274			$	120,062			$	148,212				55	%
Nine Months Ended 9/30/08
Research		$	583,093			$	196,723			$	386,370				66	%
Consulting			253,129				148,373				104,756				41	%
Events			89,200				52,125				37,075				42	%
Other			6,322				1,299				5,023				79	%
TOTAL		$	931,744			$	398,520			$	533,224				57	%
Nine Months Ended 9/30/07
Research		$	492,771			$	180,099			$	312,672				63	%
Consulting			233,660				143,496				90,164				39	%
Events			91,157				49,501				41,656				46	%
Other			7,731				1,867				5,864				76	%
TOTAL		$	825,319			$	374,963			$	450,356				55	%

SELECTED STATISTICAL DATA (a)

		September 30,				September 30,
		2008				2007
Research contract value		$	812,210	(b)		$	704,721	(b)
Research client retention			81	%			82	%
Research wallet retention			100	%			102	%
Research client organizations			10,347				9,749
Consulting backlog		$	110,141	(b)		$	108,622	(b)
Consulting—quarterly utilization			69	%			64	%
Consulting billable headcount			494				469
Consulting—average annualized revenue per billable headcount		$	440	(b)		$	390	(b)
Events—number of events for the quarter			16				18
Events—attendees for the quarter			6,179				7,307

SUPPLEMENTAL INFORMATION
GAAP to Normalized EBITDA Reconciliation
(in thousands)

Reconciliation — GAAP to Normalized EBITDA (1):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2008				2007				2008				2007
Net income		$	18,781			$	12,494			$	70,225			$	34,734
Interest expense, net			4,997				5,223				14,672				16,884
Other expense (income), net			860				(303	)			487				(2,079	)
(Income) from discontinued operations (2)			—				(831	)			(6,723	)			(2,115	)
Tax provision			10,044				5,943				29,926				15,011
Operating income		$	34,682			$	22,526			$	108,587			$	62,435
Normalizing adjustments:
Depreciation, accretion, and amortization			7,046				6,893				20,929				20,574
Other charges (3)			—				—				—				9,084
SFAS No. 123(R) stock compensation expense (4)			5,259				5,818				18,315				19,225
Normalized EBITDA		$	46,987			$	35,237			$	147,831			$	111,318