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, 2014 |
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 6, 2014, Gartner, Inc. (the “Company”) announced financial results for the three and twelve months ended December 31, 2013. 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 8.01. OTHER EVENTS
On February 4, 2014, the Company’s Board of Directors authorized $800 million to repurchase the Company's common stock. This authorization succeeds the Company’s prior $500 million share repurchase authorization, which has been substantially utilized. The Company may repurchase its common stock from time to time in amounts and at prices the Company deems appropriate, subject to the availability of stock, prevailing market conditions, the trading price of the stock, the Company’s financial performance and other conditions. Repurchases may be made through open market purchases, private transactions or other transactions and will be funded from cash on hand and borrowings under the Company’s credit agreement.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits
EXHIBIT NO. | DESCRIPTION | ||
99.1 | Press Release issued February 6, 2014 with respect to financial results for Gartner, Inc. for the three and twelve months ended December 31, 2013. | ||
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.
Gartner, Inc. | ||
Date: February 6, 2014 | By: | /s/ Christopher J. Lafond |
Christopher J. Lafond Executive Vice President, Chief Financial Officer | ||
EXHIBIT INDEX
EXHIBIT NO. | DESCRIPTION | ||
99.1 | Press Release issued February 6, 2014 with respect to financial results for Gartner, Inc. for the three and twelve months ended December 31, 2013. | ||
EXHIBIT 99.1
Gartner | Press Release |
CONTACT:
Brian Shipman
Group Vice President, Investor Relations
+1 203 316 6537
investor.relations@gartner.com
Gartner Reports Financial Results for Fourth Quarter and Full Year 2013
Contract Value $1,423 Million, up 12% YoY FX Neutral
$800 Million Authorized For Share Repurchases
STAMFORD, Conn., February 6, 2014 — 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 2013 and provided its preliminary financial outlook for full year 2014. The Company also announced that its Board of Directors authorized $800 million to be utilized for share repurchases.
For fourth quarter 2013, total revenue was $520.7 million, an increase of 10% over fourth quarter 2012. Foreign exchange impact was not significant. Fourth quarter 2013 net income was $61.4 million, an increase of 4% over fourth quarter 2012. The effective tax rate was 29.0% in fourth quarter 2013 compared to 24.5% in fourth quarter 2012. Normalized EBITDA was $105.5 million for fourth quarter 2013, an increase of 9% (See “Non-GAAP Financial Measures” below for a discussion of Normalized EBITDA ). Diluted earnings per share was $0.65 in fourth quarter 2013 compared to $0.61 in fourth quarter 2012. The fourth quarters of 2013 and 2012 were negatively impacted by after-tax acquisition-related charges, consisting of intangibles amortization and integration costs, of $(0.01) and $(0.02) per share, respectively.
For full year 2013, total revenue was $1,784.2 million, an increase of 10% over 2012, and 11% excluding the foreign exchange impact. Net income was $182.8 million in 2013, an increase of 10% over 2012. The effective tax rate was 31.4% in 2013 compared to 29.6% in 2012. Normalized EBITDA was $345.4 million in 2013, an increase of 10% over 2012. Diluted earnings per share was $1.93 in 2013 compared to $1.73 in 2012, an increase of 12%, which includes the negative impact of acquisition-related charges of $(0.04) per share in 2013 and $(0.05) per share in 2012.
Gene Hall, Gartner’s chief executive officer, commented, “Our contract value reached an all-time high as we achieved record levels of new business and continued strong client and wallet retention. We again delivered double-digit growth in revenue, EPS and cash flow for the full year 2013. As we look ahead to 2014, we expect an acceleration in contract value growth and another year of double-digit growth in our key financial metrics.”
Business Segment Highlights
Research
Revenue for fourth quarter 2013 was $332.9 million, up 11% compared to fourth quarter 2012 and 12% excluding foreign exchange impact. The quarterly gross contribution margin was 69% in 2013 and 68% in 2012. Contract value at December 31, 2013 increased 12% on a foreign exchange neutral basis compared to year end 2012, and 13% as reported. Client and wallet retention rates for fourth quarter 2013 were 82% and 98%, respectively, compared to 83% and 99% in the fourth quarter of 2012.
-more-
Consulting
Revenue for fourth quarter 2013 was $85.5 million, an increase of 4% compared to fourth quarter 2012 and 5% when adjusted for the impact of foreign exchange. The gross contribution margin was 36% for both quarters. Fourth quarter 2013 utilization was 65% compared to 67% in the fourth quarter of 2012. As of December 31, 2013, billable headcount was 509 and backlog was $106.1 million.
Events
Revenue for fourth quarter 2013 was $102.2 million, an increase of 10% compared to fourth quarter 2012. The impact of foreign exchange was not significant. Gross contribution margin was 53% in fourth quarter 2013 compared to 51% in the prior year quarter. The Company held 11 events with 20,786 attendees in the fourth quarter 2013, compared to 14 events and 22,548 attendees in fourth quarter 2012.
Cash Flow and Balance Sheet Highlights
The Company generated $316 million of operating cash flow in full year 2013, an increase of 13% compared to 2012. Additions to property, equipment and leasehold improvements (“Capital Expenditures”) totaled $36 million in 2013, which included $8 million of Stamford headquarters renovation expenditures. Free Cash Flow for the full year 2013 was $280 million, an increase of 18% over 2012 (See “Non-GAAP Financial Measures” below for a discussion of Free Cash Flow). At December 31, 2013, the Company had $424 million of cash and $541 million of borrowing capacity on its revolving credit facility. During 2013, the Company deployed its free cash flow primarily to repurchase 3.4 million of its shares.
Share Repurchase Authorization
On February 4, 2014, the Company’s Board of Directors authorized $800 million to repurchase the Company's common stock. This authorization will succeed the Company’s prior $500 million share repurchase plan, which has been substantially utilized.
Financial Outlook for 2014
The Company also provided its preliminary financial outlook for 2014:
Projected Revenue
($ in millions) | 2014 Projected | % Change | ||||||||||||
Research | $ | 1,415 | $ | 1,435 | 11 | % | 13 | % | ||||||
Consulting | 315 | 330 | 0 | 5 | ||||||||||
Events | 210 | 220 | 6 | 11 | ||||||||||
Total Revenue | $ | 1,940 | $ | 1,985 | 9 | % | 11 | % | ||||||
Projected Earnings and Cash Flow
($ in millions, except per share data) | 2014 Projected | % Change | ||||||||||||
Diluted Earnings Per Share | $ | 2.12 | $ | 2.30 | 10 | % | 19 | % | ||||||
Normalized EBITDA (1) | 375 | 400 | 9 | 16 | ||||||||||
Operating Cash Flow | 336 | 358 | 6 | 13 | ||||||||||
Capital Expenditures | (36 | ) | (38 | ) | (1 | ) | 4 | |||||||
Free Cash Flow (1) | $ | 300 | $ | 320 | 7 | % | 14 | % | ||||||
(1) | See “Non-GAAP Financial Measures” below for a discussion of Normalized EBITDA and Free Cash Flow. |
Gartner, Inc. | page 2 |
Conference Call Information
Gartner has scheduled a conference call at 8:30 a.m. eastern time on Thursday, February 6, 2014 to discuss the Company’s financial results. The conference call will be available via the Internet by accessing the Company’s website at http://investor.gartner.com or by dial-in. The U.S. dial-in number is 888-679-8018 and the international dial-in number is 617-213-4845 and the participant passcode is 54009742. The question and answer session of the conference call will be open to investors and analysts only. A replay of the webcast will be available for approximately 90 days following the call.
Annual Meeting of Stockholders
Gartner will hold its 2014 Annual Meeting of Stockholders at 10:00 a.m. eastern time on Thursday, May 29, 2014 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 clients in over 14,000 distinct organizations. Through the resources of Gartner Research, 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 as of December 31, 2013 had 5,997 associates, including 1,475 research analysts and consultants, and clients in 85 countries. For more information, visit www.gartner.com.
Non-GAAP Financial Measures
Normalized EBITDA: Represents operating income excluding depreciation, accretion on obligations related to excess facilities, amortization, stock-based compensation expense, and acquisition-related adjustments. 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. Investors are cautioned that Normalized EBITDA is not a financial measure defined under generally accepted accounting principles and as a result is considered a non-GAAP financial measure. We provide this measure to enhance the user’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future. Normalized EBITDA should not be construed as an alternative to any other measure of performance determined in accordance with generally accepted accounting principles.
Free Cash Flow: Represents cash provided by operating activities plus cash acquisition and integration payments 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.
Gartner, Inc. | page 3 |
Safe Harbor Statement
Statements contained in this press release regarding the Company’s growth and prospects, projected 2014 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 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 and effectively manage growth, including our ability to integrate acquisitions and consummate future acquisitions; our ability to pay our debt; 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; manage 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, 2012 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 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 4 |
GARTNER, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||||||
Revenues: | ||||||||||||||||||||||
Research | $ | 332,929 | $ | 300,177 | 11 | % | $ | 1,271,011 | $ | 1,137,147 | 12 | % | ||||||||||
Consulting | 85,547 | 81,923 | 4 | % | 314,257 | 304,893 | 3 | % | ||||||||||||||
Events | 102,231 | 92,649 | 10 | % | 198,945 | 173,768 | 14 | % | ||||||||||||||
Total revenues | 520,707 | 474,749 | 10 | % | 1,784,213 | 1,615,808 | 10 | % | ||||||||||||||
Costs and expenses: | ||||||||||||||||||||||
Cost of services and product development | 210,108 | 200,214 | 5 | % | 713,484 | 659,067 | 8 | % | ||||||||||||||
Selling, general and administrative | 212,805 | 186,216 | 14 | % | 760,458 | 678,843 | 12 | % | ||||||||||||||
Depreciation | 7,621 | 6,991 | 9 | % | 28,996 | 25,369 | 14 | % | ||||||||||||||
Amortization of intangibles | 1,357 | 1,373 | (1 | )% | 5,446 | 4,402 | 24 | % | ||||||||||||||
Acquisition and integration charges | 59 | 294 | (80 | )% | 337 | 2,420 | (86 | )% | ||||||||||||||
Total costs and expenses | 431,950 | 395,088 | 9 | % | 1,508,721 | 1,370,101 | 10 | % | ||||||||||||||
Operating income | 88,757 | 79,661 | 11 | % | 275,492 | 245,707 | 12 | % | ||||||||||||||
Interest expense, net | (2,133 | ) | (2,302 | ) | (7 | )% | (8,837 | ) | (8,859 | ) | — | % | ||||||||||
Other income (expense), net | (152 | ) | 550 | >-100% | (216 | ) | (1,252 | ) | (83 | )% | ||||||||||||
Income before income taxes | 86,472 | 77,909 | 11 | % | 266,439 | 235,596 | 13 | % | ||||||||||||||
Provision for income taxes | 25,054 | 19,086 | 31 | % | 83,638 | 69,693 | 20 | % | ||||||||||||||
Net income | $ | 61,418 | $ | 58,823 | 4 | % | $ | 182,801 | $ | 165,903 | 10 | % | ||||||||||
Income per common share: | ||||||||||||||||||||||
Basic | $ | 0.67 | $ | 0.63 | 6 | % | $ | 1.97 | $ | 1.78 | 11 | % | ||||||||||
Diluted | $ | 0.65 | $ | 0.61 | 7 | % | $ | 1.93 | $ | 1.73 | 12 | % | ||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||
Basic | 92,205 | 93,488 | (1 | )% | 93,015 | 93,444 | — | % | ||||||||||||||
Diluted | 93,946 | 95,716 | (2 | )% | 94,830 | 95,842 | (1 | )% | ||||||||||||||
BUSINESS SEGMENT DATA |
(Unaudited; in thousands) |
Revenue | Direct Expense | Gross Contribution | Contribution Margin | |||||||||||
Three Months Ended 12/31/13 | ||||||||||||||
Research | $ | 332,929 | $ | 102,500 | $ | 230,429 | 69% | |||||||
Consulting | 85,547 | 54,818 | 30,729 | 36% | ||||||||||
Events | 102,231 | 48,333 | 53,898 | 53% | ||||||||||
TOTAL | $ | 520,707 | $ | 205,651 | $ | 315,056 | 61% | |||||||
Three Months Ended 12/31/12 | ||||||||||||||
Research | $ | 300,177 | $ | 97,381 | $ | 202,796 | 68% | |||||||
Consulting | 81,923 | 52,556 | 29,367 | 36% | ||||||||||
Events | 92,649 | 45,397 | 47,252 | 51% | ||||||||||
TOTAL | $ | 474,749 | $ | 195,334 | $ | 279,415 | 59% | |||||||
Twelve Months Ended 12/31/13 | ||||||||||||||
Research | $ | 1,271,011 | $ | 391,627 | $ | 879,384 | 69% | |||||||
Consulting | 314,257 | 206,692 | 107,565 | 34% | ||||||||||
Events | 198,945 | 107,729 | 91,216 | 46% | ||||||||||
TOTAL | $ | 1,784,213 | $ | 706,048 | $ | 1,078,165 | 60% | |||||||
Twelve Months Ended 12/31/12 | ||||||||||||||
Research | $ | 1,137,147 | $ | 362,805 | $ | 774,342 | 68% | |||||||
Consulting | 304,893 | 195,640 | 109,253 | 36% | ||||||||||
Events | 173,768 | 93,649 | 80,119 | 46% | ||||||||||
TOTAL | $ | 1,615,808 | $ | 652,094 | $ | 963,714 | 60% | |||||||
SELECTED STATISTICAL DATA
(unaudited)
December 31, 2013 | December 31, 2012 | |||||||||||
Research contract value | $ | 1,423,179 | (a) | $ | 1,262,865 | (a) | ||||||
Research client retention | 82 | % | 83 | % | ||||||||
Research wallet retention | 98 | % | 99 | % | ||||||||
Research client organizations | 14,099 | 13,305 | ||||||||||
Consulting backlog | $ | 106,130 | (a) | $ | 102,718 | (a) | ||||||
Consulting—quarterly utilization | 65 | % | 67 | % | ||||||||
Consulting billable headcount | 509 | 503 | ||||||||||
Consulting—average annualized revenue per billable headcount | $ | 430 | (a) | $ | 445 | (a) | ||||||
Events—number of events for the quarter | 11 | 14 | ||||||||||
Events—attendees for the quarter | 20,786 | 22,548 | ||||||||||
(a) Dollars in thousands. | |
SUPPLEMENTAL INFORMATION
Reconciliation - Operating income to Normalized EBITDA (a):
(Unaudited; in thousands)
Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net income | $ | 61,418 | $ | 58,823 | $ | 182,801 | $ | 165,903 | ||||||||
Interest expense, net | 2,133 | 2,302 | 8,837 | 8,859 | ||||||||||||
Other expense (income), net | 152 | (550 | ) | 216 | 1,252 | |||||||||||
Tax provision | 25,054 | 19,086 | 83,638 | 69,693 | ||||||||||||
Operating income | $ | 88,757 | $ | 79,661 | $ | 275,492 | $ | 245,707 | ||||||||
Normalizing adjustments: | ||||||||||||||||
Stock-based compensation expense (b) | 7,687 | 8,357 | 34,735 | 36,378 | ||||||||||||
Depreciation, accretion, and amortization (c) | 9,015 | 8,413 | 34,601 | 29,982 | ||||||||||||
Acquisition and integration adjustments (d) | 59 | 584 | 596 | 3,167 | ||||||||||||
Normalized EBITDA | $ | 105,518 | $ | 97,015 | $ | 345,424 | $ | 315,234 | ||||||||
(a) | Normalized 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 charges and adjustments related to the 2012 acquisition of Ideas International. The charges consist of directly-related expenses for legal, consulting, and severance. Also included are non-cash fair value adjustments on pre-acquisition deferred revenues, which were being amortized ratably over the remaining life of the underlying contracts. |
Selected Balance Sheet data (Unaudited; in thousands)
December 31, | ||||||||
2013 | 2012 | |||||||
Cash and cash equivalents | $ | 423,990 | $ | 299,852 | ||||
Fees receivable, net | 490,923 | 463,968 | ||||||
Total assets | 1,783,582 | 1,621,277 | ||||||
Deferred revenues | 766,114 | 692,237 | ||||||
Total current and long-term debt | 205,000 | 205,000 | ||||||
Total liabilities | 1,422,266 | 1,314,604 | ||||||
Total stockholders’ equity | $ | 361,316 | $ | 306,673 | ||||
Selected Cash Flow Data (Unaudited; in thousands)
Twelve Months Ended December 31, | ||||||||||||
2013 | 2012 | |||||||||||
Cash provided by operating activities | $ | 315,654 | $ | 279,813 | ||||||||
Cash paid for capital expenditures | 36,498 | (a) | 44,337 | (a) | ||||||||
Cash paid for treasury stock | 181,736 | 111,304 | ||||||||||
Cash paid for acquisitions, net | — | 10,336 | ||||||||||
Cash receipts (payments) on debt, net | $ | — | $ | 5,000 | ||||||||
(a) Includes expenditures related to the renovation of our Stamford headquarters facility.
SUPPLEMENTAL INFORMATION (unaudited) continued
Reconciliation - Cash Provided by Operating Activities to Free Cash Flow (a):
(in thousands)
Twelve Months Ended December 31, | ||||||||
2013 | 2012 | |||||||
Cash provided by operating activities | $ | 315,654 | $ | 279,813 | ||||
Adjustments: | ||||||||
Cash acquisition and integration payments | 1,099 | 1,437 | ||||||
Cash paid for capital expenditures | (36,498 | ) | (44,337 | ) | ||||
Free Cash Flow | $ | 280,255 | $ | 236,913 | ||||
(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. | |