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

Date of Report (Date of earliest event reported)

February 4, 2010

 

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 06902-7747
(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 February 9, 2010, Gartner, Inc. (the “Company”) announced financial results for the three and twelve months ended December 31, 2009. 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 5.02. ELECTION OF DIRECTORS

On February 4, 2010, Mr. Stephen G. Pagliuca was re-elected to the board of directors of the Company. Mr. Pagliuca, 55, previously served as a director of the Company from July 1990 to September 2009 when he resigned to enter the Massachusetts U.S Senate race. Mr. Pagliuca is a Managing Director of Bain Capital Partners, LLC and is also a Managing Partner and an owner of the Boston Celtics basketball franchise. Mr. Pagliuca joined Bain & Company in 1982, and founded the Information Partners private equity fund for Bain Capital in 1989. Prior to joining Bain, Mr. Pagliuca worked as a senior accountant and international tax specialist for Peat Marwick Mitchell & Company in the Netherlands. Mr. Pagliuca is a director of Burger King Holdings, Inc., Hospital Corporation of America, Warner Chilcott Corporation and various private companies.

ITEM 8.01 OTHER ITEMS

Mr. Max D. Hopper, a member of the board of directors and its audit committee, died on January 25, 2010. Mr. Hopper served as a director of the Company for over 15 years.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

     (d) Exhibits

EXHIBIT NO.		DESCRIPTION
99.1		Press Release issued February 9, 2010 with respect to financial results for Gartner, Inc. for the three and twelve months ended December 31, 2009.

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 February 9, 2010 with respect to financial results for Gartner, Inc. for the three and twelve months ended December 31, 2009.

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 Fourth Quarter and Full Year 2009

Research Contract Value Increased 6% versus September 30, 2009 to $784.4 Million

Full Year 2009 Diluted Income Per Share Was $0.85, Including ($0.02) Per Share in Acquisition and
Integration Charges

Full Year 2009 Cash Provided by Operating Activities Was $161.9 Million and
Free Cash Flow Was $146.8 Million

STAMFORD, Conn., February 9, 2010 — 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 2009, and provided its preliminary financial outlook for 2010.

For fourth quarter 2009, total revenue was $328.8 million, diluted income per share was $0.26, net income was $25.7 million and Normalized EBITDA was $58.0 million. Net income and diluted income per share were negatively impacted by Acquisition and Integration Charges totaling $2.9 million pre-tax, or $0.02 per share after-tax. See “Non-GAAP Financial Measures” for a discussion of Normalized EBITDA and Acquisition and Integration Charges. Excluding the impact of foreign exchange, total revenue decreased 9% year-over-year.

For full year 2009, total revenue was $1,139.8 million, diluted income per share was $0.85, net income was $83.0 million, and Normalized EBITDA was $191.2 million. Net income and diluted income per share were negatively impacted by Acquisition and Integration Charges totaling $2.9 million pre-tax, or $0.02 per share after-tax, recorded in fourth quarter 2009, and were positively impacted by tax benefits totaling $4.7 million, or $0.05 per share, recorded in third quarter 2009. Excluding the impact of foreign exchange, total revenue decreased 8% year-over-year.

Gene Hall, Gartner’s chief executive officer, commented, “Our key business metrics continued to improve during the fourth quarter, reflecting both the success of our initiatives to improve sales effectiveness and a better spending environment. We added a record number of new client enterprises, generated record new business, and sequentially increased both client and wallet retention for the first time since the recession began. As a result, we grew contract value by almost $42 million versus the third quarter. We also completed two strategic acquisitions, AMR Research and Burton Group, which we expect will increase our market opportunity and accelerate our growth rate over time.”

Mr. Hall further stated, “During 2009, we maintained research revenue and contract value nearly unchanged from 2008 levels, excluding the impact of foreign exchange. At the same time, our effective cost management enabled us to deliver strong margins and cash flow. The positive momentum in our businesses positions us well to generate double-digit revenue and contract value growth in 2010.”

-more-

Business Segment Highlights

Research

Revenue for fourth quarter 2009 was $195.2 million, down 3% year-over-year excluding the impact of foreign exchange. Gross contribution margin improved approximately 1 percentage point year-over-year to 63%.

For full year 2009, revenue was $752.5 million, down 1% year-over-year excluding the impact of foreign exchange. Gross contribution margin improved approximately 2 percentage points year-over-year to 65%.

Contract value was $784.4 million at December 31, 2009, up 6% versus September 30, 2009. Year-over-year, contract value decreased 1% excluding the impact of foreign exchange. Contract value does not include the impact of the recent acquisitions of AMR Research and Burton Group.

Client and wallet retention rates for fourth quarter 2009 were 78% and 87%, respectively, up from 77% and 85% for third quarter 2009. Client and wallet retention do not include the impact of the recent acquisitions of AMR Research and Burton Group and wallet retention excludes the impact of foreign exchange.

Consulting

Revenue for fourth quarter 2009 was $81.5 million, down 17% year-over-year excluding the impact of foreign exchange. Gross contribution margin increased 2 percentage points year-over-year to 41%.

For full year 2009, revenue was $286.8 million, down 15% year-over-year excluding the impact of foreign exchange. Gross contribution margin was 39%.

Fourth quarter 2009 utilization was 68% and billable headcount was 442. Backlog was $90.9 million at December 31, 2009, up 7% versus September 30, 2009. These metrics do not include the impact of the recent acquisitions of AMR Research and Burton Group.

Events

Revenue for fourth quarter 2009 was $52.1 million, down 19% year-over-year excluding the impact of foreign exchange. Gross contribution margin increased 1 percentage point year-over-year to 47%.

For full year 2009, revenue was $100.4 million, down 32% excluding the impact of foreign exchange. Gross contribution margin was 41%.

During fourth quarter 2009, the Company held 13 events with 15,634 attendees. During full year 2009, the Company held 54 events with 30,610 attendees. These metrics do not include the impact of the recent acquisitions of AMR Research and Burton Group.

Cash Flow and Balance Sheet Highlights

Gartner generated cash provided by operating activities of $44.3 million during fourth quarter 2009 and $161.9 million during full year 2009. Additions to property, equipment and leasehold improvements (“Capital Expenditures”) were $4.0 million for fourth quarter 2009 and $15.1 million for full year 2009. Free Cash Flow for full year 2009 was $146.8 million. See “Non-GAAP Financial Measures” for a discussion of Free Cash Flow.

Gartner, Inc.		page 2

During 2009, the Company deployed its cash principally to acquire AMR Research and Burton Group and to repay $87.3 million in debt. As of December 31, 2009, the Company had total debt of $329.0 million and cash of $116.6 million.

Preliminary Financial Outlook for 2010

Gartner also provided its preliminary financial outlook for 2010. For revenue, the year-over-year change is presented both as reported and excluding the impact of foreign exchange (FX Neutral):

Projected Revenue

($ in millions)		2010 Projected				% Change FX Neutral				% Change as Reported
Research		$	845 — 865				10% — 13	%			12% — 15	%
Consulting			300 — 315				3% — 8	%			5% — 10	%
Events			104 — 109				2% — 7	%			4% — 9	%
Total Revenue (1)		$	1,249 — 1,289				8% — 11	%			10% — 13	%

Projected Earnings and Cash Flow

($ in millions, except per share data)		2010 Projected				% Change
Diluted Income Per Share (1)		$	0.74 — $0.87				(13%) — 2	% (2)
Acquisition and Integration Charges (3)		$	0.17 — $0.16
Income Per Share, Excluding Acquisition and Integration Charges (1) (3)		$	0.91 — $1.03				5% — 18	% (2)
Normalized EBITDA (3) (4)		$	208 — 223				9% — 17	%
Cash provided by operating activities		$	162 — 182				0% — 12	%
Cash Acquisition and Integration Charges (3)			8 — 8
Capital Expenditures			(15) — (20	)
Free Cash Flow (3)		$	155 — 170				6% — 16	%

Gartner, Inc.		page 3

Conference Call and Investor Day Information

Gartner has scheduled a conference call at 10:00 a.m. ET today, Tuesday, February 9, 2010, 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 11, 2010 in Greenwich, Connecticut. 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 2010 Annual Meeting of Stockholders will be held at 10:00 a.m. ET on Thursday, June 3, 2010, 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. 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 valuable partner to approximately 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 approximately 4,300 associates, including approximately 1,200 research analysts and consultants, and clients in 80 countries. For more information, visit www.gartner.com.

Non-GAAP Financial Measures

Investors are cautioned that Income Per Share Excluding Acquisition and Integration Charges, Normalized EBITDA and Free Cash Flow are not financial measures under generally accepted accounting principles. In addition, they should not be construed as alternatives to any other measures of performance determined in accordance with generally accepted accounting principles. These non-GAAP financial measures are provided to enhance the user’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future.

Income Per Share Excluding Acquisition and Integration Charges: Represents diluted income per share excluding charges related to the acquisitions of AMR Research and Burton Group, which primarily consist of amortization for identifiable intangibles, fair value adjustments on pre-acquisition deferred revenue and certain non-recurring costs such as severance and other exit costs (“Acquisition and Integration Charges”). We believe Income Per Share Excluding Acquisition and Integration Charges is an important measure of our recurring operations as it excludes items that may not be indicative of our core operating results.

Gartner, Inc.		page 4

Normalized EBITDA: Represents operating income excluding depreciation, accretion on obligations related to excess facilities, amortization, stock based compensation expense, Acquisition and Integration Charges, and Other charges. 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.

Free Cash Flow: Represents cash provided by operating activities excluding cash charges related to the acquisitions of AMR Research and Burton Group, which primarily consist of certain non-recurring costs such as severance and other exit costs (“Cash Acquisition and Integration Charges”), less additions to property, equipment and leasehold improvements (“Capital Expenditures”). We believe that Free Cash Flow is an important measure of the recurring cash generated by the Company’s core operations that is available to be used to repurchase stock, repay debt obligations and invest in future growth through new business development activities or acquisitions.

Safe Harbor Statement

Statements contained in this press release regarding the growth and prospects of the business, the Company’s projected 2010 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, the ability to expand or retain Gartner’s customer base; the ability to grow or sustain revenue from individual customers; the ability to retain the professional staff of research analysts and consultants upon whom Gartner is dependent; the ability to achieve and effectively manage growth; the ability to pay Gartner’s debt obligations; the ability to achieve continued customer renewals and achieve new contract value, backlog and deferred revenue growth in light of competitive pressures; the ability to carry out Gartner’s strategic initiatives and manage associated costs; the ability to effectively integrate the businesses of AMR Research and Burton Group; 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 Gartner’s businesses and operations; general economic conditions; and other risks listed from time to time in Gartner’s reports filed with the Securities and Exchange Commission, including Gartner’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. 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 Gartner 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 5

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

		Three Months Ended												Twelve Months Ended
		December 31,												December 31,
		2009 (a)				2008								2009 (a)				2008
Revenues:
Research (b)		$	195,180			$	192,166				2	%		$	752,505			$	781,581				-4	%
Consulting			81,506				94,275				-14	%			286,847				347,404				-17	%
Events			52,141				60,880				-14	%			100,448				150,080				-33	%
Total revenues			328,827				347,321				-5	%			1,139,800				1,279,065				-11	%
Costs and expenses:
Cost of services and product development (b)			146,499				156,639				-6	%			498,363				572,208				-13	%
Selling, general and administrative (b)			131,023				127,621				3	%			477,003				514,994				-7	%
Depreciation			6,211				6,880				-10	%			25,387				25,880				-2	%
Amortization of intangibles			416				400				4	%			1,636				1,615				1	%
Acquisition and integration charges			2,934				—				-100	%			2,934				—				-100	%
Total costs and expenses			287,083				291,540				-2	%			1,005,323				1,114,697				-10	%
Operating income			41,744				55,781				-25	%			134,477				164,368				-18	%
Interest expense, net			(2,927	)			(4,597	)			-36	%			(16,032	)			(19,269	)			-17	%
Other (expense) income, net			(414	)			129				>-100	%			(2,919	)			(358	)			>-100	%
Income before income taxes			38,403				51,313				-25	%			115,526				144,741				-20	%
Provision for income taxes			12,687				17,667				-28	%			32,562				47,593				-32	%
Income from continuing operations			25,716				33,646				-24	%			82,964				97,148				-15	%
Income from discontinued operations, net of taxes			—				—				—				—				6,723				-100	%
Net income		$	25,716			$	33,646				-24	%		$	82,964			$	103,871				-20	%
Income per common share:
Basic:
Income from continuing operations		$	0.27			$	0.36				-25	%		$	0.88			$	1.02				-14	%
Income from discontinued operations			—				—				0	%			—				0.07				-100	%
Income per share		$	0.27			$	0.36				-25	%		$	0.88			$	1.09				-19	%
Diluted:
Income from continuing operations		$	0.26			$	0.35				-26	%		$	0.85			$	0.98				-13	%
Income from discontinued operations			—				—				0	%			—				0.07				-100	%
Income per share		$	0.26			$	0.35				-26	%		$	0.85			$	1.05				-19	%
Weighted average shares outstanding:
Basic			95,493				93,811				2	%			94,658				95,246				-1	%
Diluted			99,241				96,599				3	%			97,549				99,028				-1	%

BUSINESS SEGMENT DATA
(Dollars in thousands)

						Direct				Gross				Contribution
		Revenue				Expense				Contribution				Margin
Three Months Ended 12/31/09
Research (a)		$	195,180			$	72,125			$	123,055				63	%
Consulting			81,506				47,721				33,785				41	%
Events			52,141				27,496				24,645				47	%
TOTAL		$	328,827			$	147,342			$	181,485				55	%
Three Months Ended 12/31/08
Research (a)		$	192,166			$	73,841			$	118,325				62	%
Consulting			94,275				57,636				36,639				39	%
Events			60,880				33,001				27,879				46	%
TOTAL		$	347,321			$	164,478			$	182,843				53	%
Twelve Months Ended 12/31/09
Research (a)		$	752,505			$	262,643			$	489,862				65	%
Consulting			286,847				174,748				112,099				39	%
Events			100,448				59,503				40,945				41	%
TOTAL		$	1,139,800			$	496,894			$	642,906				56	%
Twelve Months Ended 12/31/08
Research (a)		$	781,581			$	286,141			$	495,440				63	%
Consulting			347,404				206,009				141,395				41	%
Events			150,080				85,126				64,954				43	%
TOTAL		$	1,279,065			$	577,276			$	701,789				55	%

SELECTED STATISTICAL DATA

		December 31,				December 31,
		2009 (a)				2008
Research contract value		$	784,443	(c)		$	834,321	(a)
Research client retention			78	%			82	%
Research wallet retention (b)			87	%			95	%
Research client organizations			10,492				10,579
Consulting backlog		$	90,891	(c)		$	97,169	(c)
Consulting—quarterly utilization			68	%			70	%
Consulting billable headcount			442				499
Consulting—average annualized revenue per billable headcount		$	435	(c)		$	445	(c)
Events—number of events for the quarter			13				17
Events—attendees for the quarter			15,634				16,071

SUPPLEMENTAL INFORMATION
(in thousands)

Reconciliation — Operating income to Normalized EBITDA (a):

		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
		2009				2008				2009				2008
Net income		$	25,716			$	33,646			$	82,964			$	103,871
Interest expense, net			2,927				4,597				16,032				19,269
Other expense (income), net			414				(129	)			2,919				358
Income from discontinued operations			—				—				—				(6,723	)
Tax provision			12,687				17,667				32,562				47,593
Operating income		$	41,744			$	55,781			$	134,477			$	164,368
Normalizing adjustments:
Depreciation, accretion, and amortization			6,769				7,470				27,704				28,399
Stock-based compensation expense			6,589				2,381				26,066				20,696
Acquisition and integration charges (b)			2,934				—				2,934				—
Normalized EBITDA		$	58,036			$	65,632			$	191,181			$	213,463

Reconciliation — Cash Provided by Operating Activities to Free Cash Flow (a):

		Twelve Months Ended
		December 31,
		2009				2008
Cash provided by operating activities		$	161,937			$	184,350
Adjustments:
Acquisition and integration costs			—				—
Additions to capital expenditures			(15,142	)			(24,332	)
Free Cash Flow		$	146,795			$	160,018