Gartner Reports Financial Results for Third Quarter 2012

  Gartner Reports Financial Results for Third Quarter 2012

        Contract Value Increased 14% YoY FX Neutral to $1,175 Million

         Revenue Increased 8% (12% FX neutral) YoY to $374.4 Million

Business Wire

STAMFORD, Conn. -- November 02, 2012

Gartner, Inc. (NYSE: IT), the leading provider of research and analysis on the
global information technology industry, today reported results for third
quarter 2012 and updated its projection for full year 2012 revenues and
reiterated its outlook for Normalized EBITDA, EPS, and cash flows.

Total revenue was $374.4 million for third quarter 2012, up 8% compared to
third quarter 2011. Total revenue increased 12% excluding the impact of
foreign exchange. Third quarter 2012 net income was $31.4 million, an increase
of 3% over third quarter 2011. Normalized EBITDA was $68.0 million in third
quarter 2012, an increase of 9% over third quarter 2011. Diluted income per
share was $0.33 in third quarter 2012 compared to $0.31 in third quarter 2011.
Diluted Income Per Share Excluding Acquisition Adjustments, which excludes the
impact of acquisition-related adjustments, was $0.35 per share for third
quarter 2012 and $0.31 per share for third quarter 2011. See “Non-GAAP
Financial Measures" below for a discussion of Normalized EBITDA and Diluted
Income Per Share Excluding Acquisition Adjustments.

For the nine months ended September 30, 2012, total revenue was $1,141.1
million, an increase of 10% over the 2011 period. Excluding the impact of
foreign exchange, revenues increased 12%. Net income was $107.1 million in the
nine months ended September 30, 2012, an increase of 17% over the same period
in 2011. Normalized EBITDA was $218.2 million in the 2012 period, an increase
of 12% over 2011. Diluted income per share was $1.12 in 2012 compared to $0.92
in 2011, an increase of 22%. Diluted Income Per Share Excluding Acquisition
Adjustments was $1.16 in 2012 and $0.96 in 2011.

Gene Hall, Gartner's chief executive officer, commented, “We continued our
trend of delivering consistent, double-digit growth in the third quarter.
Revenue, contract value, Normalized EBITDA and EPS were again consistent with
our long-term expectations. The increases in our revenue and contract value,
in addition to maintaining key operating metrics such as client retention at
or near all-time highs, illustrate both the strong value we provide our
clients and the sizeable market opportunity for our services. As we look ahead
to the final quarter of 2012, we remain excited about the opportunity we see
in the market and expect to deliver another year of double-digit growth as
measured by our key business metrics.”

Business Segment Highlights

Research

Third quarter 2012 revenue was $284.0 million, up 11% compared to third
quarter 2011. Excluding the impact of foreign exchange, Research revenue
increased 14%. The gross contribution margin was 68% for both quarters.
Contract value was up 14% on an FX neutral basis at September 30, 2012
compared to September 30, 2011, and 13% as reported. Client and wallet
retention rates for third quarter 2012 were 83% and 99%, respectively,
compared to 82% and 100% in the third quarter 2011.

Consulting

Revenue for third quarter 2012 was $71.7 million, an increase of 1% compared
to third quarter 2011. Adjusted for the impact of foreign exchange, revenue
increased 4%. Gross contribution margin for third quarter 2012 was 34%. Third
quarter 2012 utilization was 64%. Billable headcount was 499 as of September
30, 2012, and backlog was $106.1 million.

Events

Revenue for third quarter 2012 was $18.6 million, a decrease of 2% compared to
third quarter 2011, due to changes in the events calendar and foreign exchange
impact. Excluding the foreign exchange impact, Events segment revenues
increased 2%. Results in this segment were adversely affected by the move of
two large events that had been held in the third quarter of 2011, and will be
held this year in the fourth quarter 2012. On a same-events and FX neutral
basis, revenues increased 17% when comparing the 12 events held in the third
quarter 2012 with their performance in 2011.Gross contribution margin was 24%
in third quarter 2012. The Company held a total of 14 events with 5,566
attendees in the third quarter 2012, compared to 16 events and 6,676 attendees
in third quarter 2011.

Cash Flow and Balance Sheet Highlights

The Company generated almost $209 million of operating cash flow in the nine
months ended September 30, 2012, an increase of 18% over the same period in
2011 and the highest nine months’ operating cash flow in the Company’s
history. Additions to property, equipment and leasehold improvements (“Capital
Expenditures”) totaled $30.8 million in the nine months ended September 30,
2012, which included $11.5 million of Stamford headquarters renovation
expenditures that are reimbursable by the facility landlord.

At September 30, 2012, the Company had over $255 million of cash and $354
million of borrowing capacity on its revolving credit facility. Through
September 30, 2012, the Company used approximately $89 million of cash to
repurchase shares and $10 million of cash on a net basis to complete the Ideas
International Limited acquisition.

Financial Outlook for 2012

The Company has adjusted its revenue guidance as per the table below.
Projected diluted earnings per share, Normalized EBITDA, and cash flow
guidance remain unchanged. As revised, the Company’s full year 2012 guidance
is as follows:

                                                              
Projected Revenue
($ in millions)                           2012 Projected      % Change
Research                                    $1,130  – 1,140       12 % – 13%
Consulting                                   310      – 320         1  % – 4%
Events                                       167     – 177         12 % – 19%
Total Revenue                               $1,607   – 1,637       9  % – 11%
                                                                    
Projected Earnings and Cash Flow
($ in millions, except per share data)    2012 Projected      % Change
Diluted Earnings Per Share                  $1.63    – $1.79       17 % – 29%
Normalized EBITDA ^ (1)                     $315     – $335        13 % – 20%
                                                                    
Operating Cash Flow ^(2)                    $285     – 305         12 % – 19%
Capital Expenditures ^(2)                    (46)    – (48   )
Free Cash Flow ^(1)                         $239     – 257         12 % – 20%
                                                                    

       
    (1)     See “Non-GAAP Financial Measures” below for a discussion of
            Normalized EBITDA and Free Cash Flow.
            Capital expenditures include approximately $16.0 million of
            total projected payments expected in 2012 related to the
            renovation of our Stamford headquarters facility, which are
    (2)     contractually reimbursable from the landlord. The accounting
            impact of these renovation payments increases both cash flow
            from operations and capital expenditures (investing activities)
            by the same amount and as a result has no net impact on Free
            Cash Flow.
                                                                             

Conference Call Information

Gartner has scheduled a conference call at 8:30 a.m. eastern time on Friday,
November 2, 2012 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
888-713-4205 and the international dial-in number is 617-213-4862 and the
participant passcode is 87196156. 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.

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 a valuable partner to clients in over
12,600 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 approximately 5,400 associates, including almost
1,400 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. It should not be
construed as an alternative to any other measure of performance determined in
accordance with generally accepted accounting principles.

Diluted Income Per Share Excluding Acquisition Adjustments: Represents diluted
income per share excluding certain adjustments directly related to
acquisitions, which consists of amortization of identifiable intangibles,
non-recurring acquisition and integration charges such as legal, consulting,
severance and other costs, and non-cash fair value adjustments on
pre-acquisition deferred revenues. We believe Diluted Income Per Share
Excluding Acquisition Adjustments 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 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.

Safe Harbor Statement

Statements contained in this press release regarding the Company’s growth and
prospects, projected 2012 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; 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 Form10-K for the year ended December31, 2011 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.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
                                                                                                    
                     Three Months Ended                         Nine Months Ended
                     September 30,                              September 30,
                     2012            2011                       2012              2011
Revenues:
Research             $ 284,048       $ 255,979       11%        $ 836,970         $ 749,429         12%
Consulting             71,731          70,815        1%           222,970           219,407         2%
Events                18,627         18,990        -2%         81,119           72,058          13%
Total revenues         374,406         345,784       8%           1,141,059         1,040,894       10%
Costs and
expenses:
Cost of
services and           151,143         142,696       6%           458,853           428,473         7%
product
development
Selling,
general and            164,888         148,461       11%          492,627           442,891         11%
administrative
Depreciation           6,301           6,638         -5%          18,378            19,143          -4%
Amortization           1,362           739           84%          3,029             5,788           -48%
of intangibles
Acquisition
and                   944            -             100%        2,126            -               100%
integration
charges
Total costs           324,638        298,534       9%          975,013          896,295         9%
and expenses
Operating              49,768          47,250        5%           166,046           144,599         15%
income
Interest               (2,209)         (2,282)       -3%          (6,557)           (7,863)         -17%
expense, net
Other expense,        (748)          (541)         38%         (1,802)          (1,494)         21%
net
Income before          46,811          44,427        5%           157,687           135,242         17%
income taxes
Provision for         15,436         13,963        11%         50,607           43,364          17%
income taxes
Net income           $ 31,375        $ 30,464        3%         $ 107,080         $ 91,878          17%
                                                                                                    
Income per
common share:
Basic                $ 0.34          $ 0.32          6%         $ 1.15            $ 0.95            21%
Diluted              $ 0.33          $ 0.31          6%         $ 1.12            $ 0.92            22%
                                                                                                    
Weighted
average shares
outstanding:
Basic                  93,522          96,057        -3%          93,429            96,462          -3%
Diluted                95,611          98,259        -3%          95,791            99,467          -4%
                                                                                                    

                                                              
BUSINESS
SEGMENT
DATA
(Unaudited;
in
thousands)
                                                                               
                                            Direct          Gross              Contribution
                          Revenue           Expense         Contribution       Margin
                                                                               
Three
Months
Ended
9/30/12
Research                  $ 284,048         $ 90,508        $   193,540        68%
Consulting                  71,731            47,351            24,380         34%
Events                     18,627           14,116           4,511          24%
TOTAL                     $ 374,406         $ 151,975       $   222,431        59%
                                                                               
Three
Months
Ended
9/30/11
Research                  $ 255,979         $ 82,364        $   173,615        68%
Consulting                  70,815            46,357            24,458         35%
Events                     18,990           13,437           5,553          29%
TOTAL                     $ 345,784         $ 142,158       $   203,626        59%
                                                                               
Nine Months
Ended
9/30/12
Research                  $ 836,970         $ 265,423       $   571,547        68%
Consulting                  222,970           143,084           79,886         36%
Events                     81,119           48,252           32,867         41%
TOTAL                     $ 1,141,059       $ 456,759       $   684,300        60%
                                                                               
Nine Months
Ended
9/30/11
Research                  $ 749,429         $ 243,009       $   506,420        68%
Consulting                  219,407           140,587           78,820         36%
Events                     72,058           43,525           28,533         40%
TOTAL                     $ 1,040,894       $ 427,121       $   613,773        59%
                                                                               

                                                                
SELECTED STATISTICAL
DATA
                                                                           
                                   September 30,           September 30,
                                   2012                    2011
Research contract                  $  1,174,700    (a)     $  1,035,926    (a)
value
Research client                       83%                     82%
retention
Research wallet                       99%                     100%
retention
Research client                       12,612                  11,770
organizations
Consulting backlog                 $  106,100      (a)     $  92,887       (a)
Consulting--quarterly                 64%                     61%
utilization
Consulting billable                   499                     482
headcount
Consulting--average
annualized revenue
per billable headcount             $  415          (a)     $  404          (a)
Events--number of                     14                      16
events for the quarter
Events--attendees for                 5,566                   6,676
the quarter

                                                                           
(a) Dollars in
thousands.
                                                                           

                                                                       
SUPPLEMENTAL INFORMATION (in thousands, except per share amounts)
                                                                                    
Reconciliation - Operating income to Normalized EBITDA (a):
                                                                                    
                    Three Months Ended                        Nine Months Ended
                    September 30,                             September 30,
                    2012                 2011                 2012                  2011
Net income          $    31,375       $    30,464       $    107,080       $    91,878
Interest                    2,209                2,282                6,557                 7,863
expense, net
Other                       748                  541                  1,802                 1,494
expense, net
Tax provision           15,436           13,963           50,607            43,364
Operating           $       49,768       $       47,250       $       166,046       $       144,599
income
                                                                                    
Normalizing
adjustments:
Stock-based
compensation                9,219                7,757                28,021                24,750
expense (b)
Depreciation,
accretion,
and                         7,712                7,442                21,569                25,287
amortization
(c)
Acquisition
and
integration             1,320            -                2,583             -
adjustments
(d)
Normalized          $    68,019       $    62,449       $    218,219       $    194,636
EBITDA

(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.
                                                       
      Includes charges and adjustments related to the acquisition of Ideas
      International. The charges consist of directly-related expenses for
(d)   legal, consulting, and severance. Also included are non-cash fair value
      adjustments on pre-acquisition deferred revenues, which are being
      amortized ratably over the remaining life of the underlying contracts.
    


Reconciliation - Diluted income per share to Diluted income per share excluding
acquisition
adjustments                                                     
(a):
                 Three Months Ended September 30,
                 2012                                 2011
                 After-tax                            After-tax
                 Amount              EPS              Amount             EPS
Diluted
income per       $    31,375      $    0.33     $    30,464     $    0.31
share
Acquisition
adjustments,
net of tax
effect (b):
Amortization
of                       874                 0.01             457                -
intangibles
(c)
Acquisition
and
integration          904             0.01         -              -
adjustments
(d)
Diluted
income per
share
excluding        $    33,153      $    0.35     $    30,921     $    0.31
acquisition
adjustments
(e)
                                                                         
                 Nine Months Ended September 30,
                 2012                                 2011
                 After-tax                            After-tax
                 Amount              EPS              Amount             EPS
Diluted
income per       $       107,080     $       1.12     $       91,878     $       0.92
share
Acquisition
adjustments,
net of tax
effect (b):
Amortization
of                       1,898               0.02             3,576              0.04
intangibles
(c)
Acquisition
and
integration          1,769           0.02         -              -
adjustments
(d)
Diluted
income per
share
excluding        $    110,747     $    1.16     $    95,454     $    0.96
acquisition
adjustments
(f)
                                                                         

      Diluted income per share excluding acquisition adjustments is based on
(a)  GAAP diluted income per share adjusted for the per share impact of
      acquisition adjustments, net of tax effect.
      
      The effective tax rates were 33.7% and 34.7% for the three and nine
(b)   months ended September 30, 2012, respectively, and 39.5% for both the
      three and nine months ended September 30, 2011.
      
(c)   Consists of non-cash amortization charges related to acquired
      intangibles.
      
      Includes charges and adjustments related to the acquisition of Ideas
      International. The charges consist of directly-related expenses for
(d)   legal, consulting, and severance. Also included are non-cash fair value
      adjsutments on pre-acquisition deferred revenues, which are being
      amortized ratably over the remaining life of the underlying contracts.
      
(e)   Based on fully diluted shares of 95.6 million in 2012 and 98.3 million
      in 2011.
                                            
(f)   Based on fully diluted shares of 95.8 million in 2012 and 99.5 million
      in 2011.
    


GARTNER, INC.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
                                                               
                                                                  
                                                  September 30,   December 31,
                                                  2012            2011
Assets
Current assets:
Cash and cash equivalents                         $  255,391      $  142,739
Fees receivable, net                                 370,951         421,033
Deferred commissions                                 65,870          78,492
Prepaid expenses and other current assets           89,766         63,521
Total current assets                                 781,978         705,785
Property, equipment and leasehold improvements,      80,344          68,132
net
Goodwill                                             519,200        508,550
Intangible assets, net                               13,142         7,060
Other assets                                        84,484         90,345
Total Assets                                      $  1,479,148    $  1,379,872
                                                                  
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities          $  206,290      $  259,490
Deferred revenues                                    682,603         611,647
Current portion of long term debt                   80,000         50,000
Total current liabilities                            968,893         921,137
Long term debt                                       120,000         150,000
Other liabilities                                   128,790        126,951
Total Liabilities                                    1,217,683       1,198,088
                                                                  
Total Stockholders' Equity                          261,465        181,784
Total Liabilities and Stockholders' Equity        $  1,479,148    $  1,379,872
                                                                  

                                                      
GARTNER, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
                                                              
                                                              
                                        Nine Months Ended
                                        September 30,
                                        2012                  2011
Operating activities:
Net income                              $   107,080         $   91,878
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization                 21,407                24,931
of intangibles
Stock-based compensation                      28,021                24,750
expense
Excess tax benefits from                      (20,366 )             (22,458  )
stock-based compensation
Deferred taxes                                (3,268  )             3,812
Amortization and writeoff of                  1,512                 1,733
debt issuance costs
Changes in assets and
liabilities
Fees receivable, net                          54,157                16,023
Deferred commissions                          13,202                11,354
Prepaid expenses and other                    (18,803 )             (6,241   )
current assets
Other assets                                  2,429                 2,051
Deferred revenues                             60,681                74,021
Accounts payable, accrued, and             (37,301 )       (45,389  )
other liabilities
Cash provided (used) by                    208,751        176,465  
operating activities
                                                              
Investing activities:
Additions to property,
equipment and leasehold                       (30,800 )             (23,720  )
improvements
Acquisition (net of cash                   (10,336 )          -        
acquired)
Cash used by investing                     (41,136 )          (23,720  )
activities
                                                              
Financing activities:
Proceeds from stock issued                    10,560                17,771
under stock plans
Proceeds from debt issuance                   22,500                5,000
Payments on debt                              (22,500 )             (15,156  )
Purchases of treasury stock                   (89,300 )             (141,214 )
Excess tax benefits from stock             20,366            22,458   
compensation
Cash (used) provided by                    (58,374 )          (111,141 )
financing activities
Net increase (decrease) in cash               109,241               41,604
and cash equivalents
Effects of exchange rates on                  3,411                 (4,882   )
cash and cash equivalents
Cash and cash equivalents,                 142,739           120,181  
beginning of period
Cash and cash equivalents, end          $   255,391        $   156,903  
of period
                                                              

Contact:

Gartner, Inc.
Brian Shipman, +1 203-316-3659
Group Vice President, Investor Relations
brian.shipman@gartner.com