Gartner, Inc. (NYSE: IT), the leading provider of research and
analysis on the global information technology industry, today reported
results for third quarter 2007, including GAAP EPS of $0.11, which
increased 38 percent versus third quarter 2006. Contract value
increased 18 percent and revenue increased 13 percent versus third
quarter 2006. Gartner increased its full year 2007 revenue expectations
for Research and Consulting but reduced expectations for Events.
Gene Hall,
Gartner's chief executive officer, commented, "Our ongoing focus on
growth is yielding excellent results, including our third consecutive
quarter of high-teens contract value growth. We are well positioned to
continue to achieve our long-term financial roadmap objectives,
including double-digit revenue growth and expanding margins."
Contract value, a key leading indicator for Gartner’s Research
segment, increased 18% year-over-year to a record level of $704.7
million, reflecting the successful execution of the Company’s strategy
to accelerate research growth by productively growing the salesforce.
Total revenue for third quarter 2007 grew 13% year-over-year to $273.1
million, driven by growth in all three of Gartner’s business segments.
Excluding the impact of foreign exchange, research contract value and
revenue increased 14% and 10%, respectively.
For third quarter 2007, Net Income increased 30% year-over-year to
$12.5 million and Normalized EBITDA increased 21% year-over-year to
$36.3 million. See "Non-GAAP Financial Measures" for a discussion of
Normalized EBITDA.
Cash flow from operating activities for third quarter 2007 was $38.8
million and capital expenditures were $6.2 million. During the third
quarter, the Company repurchased 1.6 million shares of its common stock
at a cost of $36.0 million. As of September 30, 2007, the Company had
total debt of $367.0 million and cash of $117.7 million.
Business Segment Highlights
Research: Revenue for the third quarter increased 18%
year-over-year to $170.2 million and gross contribution margin improved
approximately 3 percentage points to 65%. At September 30, 2007,
Research contract value was a record $704.7 million, up 18%
year-over-year. Client and wallet retention rates for third quarter
2007 increased to 82% and 102%, respectively, versus 81% and 93%,
respectively, for third quarter 2006.
Consulting: Revenue for the third quarter increased 6%
year-over-year to $73.8 million and gross contribution margin improved
approximately 1 percentage point to 38%. Utilization increased 3
percentage points year-over-year to 64% and backlog increased 1%
year-over-year to $108.6 million at September 30, 2007. Billable
headcount was 469 as of September 30, 2007, versus 517 last year,
reflecting the exiting of consulting operations in Asia Pacific.
Events: Revenue for the third quarter increased 11%
year-over-year to $26.7 million. The Company held 22 events with 7,307
attendees, as compared to 17 events with 6,578 attendees during the
same period in 2006. Gross contribution margin for the third quarter
was 36%.
Updated Guidance for Full Year 2007
Gartner increased its full year 2007 revenue expectations for
Research and Consulting but reduced expectations for Events. Overall,
Gartner slightly increased the low end of its guidance for total
revenue. The Company is now targeting total revenue for full year 2007
of $1.171 to $1.187 billion, an increase of 10% to 12% over 2006. By
segment, Gartner is now targeting Research revenue of $665 to $670
million, Consulting revenue of $320 to $325 million, Events revenue of
$177 to $181 million, and other revenue of $9 to $11 million.
The Company reiterated its guidance for full year 2007 cash flow
from operations of $135 to $150 million. Gartner now expects that
capital expenditures will be approximately $25 million.
Gartner currently expects that 2007 GAAP EPS and Normalized EBITDA
will be at or near the low end of the Company’s most recent guidance
issued on July 31, 2007. That guidance was for GAAP EPS of $0.66 to
$0.73 per share (including $0.04 in special charges recorded in the
second quarter), or an increase of 32% to 46% over last year, and
Normalized EBITDA of $193 to $203 million, or an increase of 24% to 30%
over last year.
Gene Hall, Gartner’s chief executive officer, commented, “Our
guidance reflects the success of our strategy to accelerate the growth
of our Research business through the investments we have made during
2007 in sales capacity and research product management. As a result of
these investments, contract value and revenue in the Research segment
have grown ahead of the expectations we established in our financial
roadmap. Given this performance, we continue to accelerate our
investments to grow the Research business, which we expect will yield
benefits in 2008 and beyond.”
Conference Call Information
Gartner scheduled a conference call for 10 a.m. ET today, Tuesday,
October 30, 2007, to discuss the Company's financial results. The
conference call will be available via the Internet by accessing the
Company's web site at the link below. A replay of the webcast will be
available for 90 days following the call.