Gartner Reports Financial Results for First Quarter 2013

  Gartner Reports Financial Results for First Quarter 2013

         Contract Value Increased 14% YOY FX Neutral to $1.3 Billion

                  Revenue Increased 10% YOY to $407 Million

                 Diluted Earnings per Share Increased 6% YOY

Business Wire

STAMFORD, Conn. -- May 02, 2013

Gartner, Inc. (NYSE: IT), the leading provider of research and analysis on the
global information technology industry, today reported results for first
quarter 2013 and reiterated its previously disclosed financial outlook for
full year 2013.

For first quarter 2013, total revenue was $406.8 million, an increase of 10%
compared to first quarter 2012 and 11% excluding the foreign exchange impact.
First quarter 2013 net income was $36.7 million, an increase of 7%, while
Normalized EBITDA was $75.1 million, an increase of 5%. (See “Non-GAAP
Financial Measures" below for a discussion of Normalized EBITDA). Diluted
income per share was $0.38 in first quarter 2013 compared to $0.36 in first
quarter 2012. In the first quarter of 2013 the Company recorded acquisition
charges, which includes intangible amortization and integration costs, net of
tax, of $0.01 per share, as compared to zero in the first quarter of 2012.

Gene Hall, Gartner's chief executive officer, commented, “We continue to see
robust demand for our services across all three segments. Research Contract
Value grew 14% on an FX neutral basis with all geographies, industries, and
client sizes growing at double digit rates. Our Events business grew 20% with
equally strong growth in both attendee and exhibitor revenue in Q1. While
Consulting had a slightly slower start than we expected, our backlog and
pipeline for Q2 are strong. We remain highly confident we will achieve the
guidance we set for the current year.”

Business Segment Highlights

Research

Revenue for first quarter 2013 was $310.3 million, up 13% compared to first
quarter 2012. The impact of foreign exchange on Research revenue was not
significant. Gross contribution margin was 69% for both periods. Contract
value was $1,269 million at March 31, 2013, up 14% compared to March 31, 2012
excluding the impact of foreign exchange. Client retention rates was 82% for
both quarters while wallet retention was 98% in first quarter 2013 and 99% in
first quarter 2012.

Consulting

Revenue for first quarter 2013 was $72.6 million, a decrease of 3% compared to
first quarter 2012. Revenues decreased 2% when adjusted for the impact of
foreign exchange. The gross contribution margin for first quarter 2013 was 31%
compared to 37% in first quarter 2012, primarily due to a decline in
consultant utilization, which was 65% and 70%, respectively. Billable
headcount was 528 at March 31, 2013. Backlog was $97.5 million at March 31,
2013, an increase of 2% compared to March 31, 2012.

Events

Revenue for first quarter 2013 was $23.8 million, an increase of 19% compared
to first quarter 2012. Excluding the impact of foreign exchange, revenues
increased 20%. The gross contribution margin was 30% in first quarter of 2013
compared to 39% in the prior year quarter. The margin decline was due to a
number of factors, including higher operating expenses from several events
that were upgraded or moved to larger facilities. The Company held 12 events
in the first quarter of 2013 and 13 in the first quarter of 2012. Attendees
were 5,788 in first quarter 2013 compared to 5,707 attendees in first quarter
2012.

Cash Flow and Balance Sheet Highlights

Gartner generated operating cash flow of $19.7 million during first quarter
2013 compared to $18.7 million in the prior year quarter. Additions to
property, equipment and leasehold improvements (“Capital Expenditures”)
totaled $9.6 million in first quarter 2013. The Company had $269.1 million of
cash at March 31, 2013. During the first quarter of 2013 the Company deployed
its free cash flow principally to repurchase 1.0 million of its common shares.

We refinanced our debt during the first quarter of 2013 to take advantage of
favorable market conditions, provide for additional liquidity, and extend the
maturity of our debt. Our total borrowing capacity under the new arrangement
is $1.0 billion, which consists of a $150.0 million term loan, a $600.0
million revolving credit facility, and a $250.0 million expansion feature. The
new debt arrangement has a five year maturity.

At March 31, 2013, $200.0 million was outstanding under the new facility.

Financial Outlook for 2013

Gartner also reiterated its previously disclosed full year 2013 projections
for revenues, EPS, and cash flow:

                                      
Projected Revenue
($ in millions)      2013 Projected    % Change
Research                $1,280 – 1,300       13% – 14%
Consulting              310 – 325            2% – 7%
Events                  185 – 195            6% – 12%
Total Revenue           $1,775 – 1,820       10% – 13%
                                             

                                                           
Projected Earnings and Cash Flow
($ in millions, except per share data)    2013 Projected    % Change
Diluted Earnings Per Share                   $1.96 – $2.10        13% – 21%
Normalized EBITDA (1)                        $350 – $370          11% – 17%
                                                                  
Operating Cash Flow                          $296 – 316           6% – 13%
Capital Expenditures                         (37) – (38)
Free Cash Flow (1)                           $259 – 278           10% – 17%

(1) See “Non-GAAP Financial Measures” below for a discussion of Normalized
    EBITDA and Free Cash Flow.

Conference Call Information

Gartner has scheduled a conference call at 8:30 a.m. eastern time on Thursday,
May 2, 2013 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
888-713-4211 and the international dial-in number is 617-213-4864 and the
participant passcode is 49677071. 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 2013 Annual Meeting of Stockholders at 10:00 a.m.
eastern time on Thursday, May 30, 2013 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. 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
13,200 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 as of March 31, 2013, had 5,634 associates, including
1,452 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.

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 2013 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, 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.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)


                                    Three Months Ended            
                                       March 31,
                                        2013        2012    
Revenues:
Research                               $ 310,331       $ 274,620         13  %
Consulting                               72,633          74,563          -3  %
Events                                  23,790        19,988         19  %
Total revenues                           406,754         369,171         10  %
Costs and expenses:
Cost of services and product             163,737         146,463         12  %
development
Selling, general and                     180,478         162,518         11  %
administrative
Depreciation                             7,100           5,895           20  %
Amortization of intangibles              1,334           739             81  %
Acquisition and integration             100           -              100 %
charges
Total costs and expenses                352,749       315,615        12  %
Operating income                         54,005          53,556          1   %
Interest expense, net                    (2,436  )       (2,195  )       11  %
Other income (expense), net             211           (978    )       >100%
Income before income taxes               51,780          50,383          3   %
Provision for income taxes              15,105        16,162         -7  %
Net income                             $ 36,675       $ 34,221         7   %
                                                                         
Income per common share:
Basic                                  $ 0.39          $ 0.37            5   %
Diluted                                $ 0.38          $ 0.36            6   %
                                                                         
Weighted average shares
outstanding:
Basic                                    93,595          93,416          0   %
Diluted                                  95,537          96,199          -1  %
                                                                         


BUSINESS SEGMENT DATA
(Unaudited; in thousands)

                               Direct      Gross          Contribution
                     Revenue       Expense       Contribution     Margin
                                                                  
Three Months
Ended 3/31/13
Research             $ 310,331     $ 95,117      $   215,214      69     %
Consulting             72,633        50,095          22,538       31     %
Events                23,790       16,682         7,108        30     %
TOTAL                $ 406,754     $ 161,894     $   244,860      60     %
                                                                  
Three Months
Ended 3/31/12
Research             $ 274,620     $ 86,018      $   188,602      69     %
Consulting             74,563        46,963          27,600       37     %
Events                19,988       12,093         7,895        39     %
TOTAL                $ 369,171     $ 145,074     $   224,097      61     %



SELECTED STATISTICAL DATA

                                    March 31,          March 31,   
                                       2013                  2012
Research contract value                $ 1,269,200   (a)     $ 1,110,928   (a)
Research client retention                82%                   82%
Research wallet retention                98%                   99%
Research client organizations            13,203                12,303
Consulting backlog                     $ 97,500      (a)     $ 95,533      (a)
Consulting--quarterly                    65%                   70%
utilization
Consulting billable headcount            528                   476
Consulting--average annualized
revenue
per billable headcount                 $ 404         (a)     $ 437         (a)
Events--number of events for the         12                    13
quarter
Events--attendees for the                5,788                 5,707
quarter


(a) Dollars in thousands.


SUPPLEMENTAL INFORMATION (in thousands, except per share amounts)

Reconciliation - Operating income to Normalized EBITDA (a):

                                               Three Months Ended
                                                March 31,
                                                           
                                                2013         2012
Net income                                      $ 36,675     $ 34,221 
Interest expense, net                             2,436        2,195
Other (income) expense, net                       (211   )     978
Tax provision                                    15,105     16,162 
Operating income                                $ 54,005     $ 53,556
                                                             
Normalizing adjustments:
Stock-based compensation expense (b)              12,342       10,939
Depreciation, accretion, and amortization (c)     8,478        6,690
Acquisition and integration adjustments (d)      237        -      
Normalized EBITDA                               $ 75,062    $ 71,185 
                                                             

(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.
    
    Consists of charges and adjustments related to the acquisition of Ideas
    International, which we acquired in June 2012. The charges consist of
(d) directly-related expenses for 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.
   

Contact:

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