Gartner Delivers Continued Strong Growth in EBITDA and EPS.Business Editors Gartner (Gartner, Inc., Stamford, CT, www.gartner.com) The largest information technology consulting firm that specializes in research and analysis. Founded in 1979 by Gideon Gartner, it has grown through acquisitions, including Dataquest in 1995 and Techrepublic in 2000. , Inc. (NYSE NYSE See: New York Stock Exchange : IT and ITB ITB Invitation To Bid ITB In The Beginning ITB Internationale Tourismusbörse (German) ITB In The Business (aka in the business service industry) ITB Intrathecal Baclofen Therapy ), the world's leading technology research and advisory firm, today reported results for the third fiscal quarter and nine months ending June June: see month. 30, 2002. Significant increases in pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (1), net income and EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. were driven by productivity gains and continued expense control. For the third fiscal quarter of 2002: - Total revenue of approximately $900 million to $910 million. - Research revenue of approximately $496 million to $500 million; consulting revenue of approximately $268 million to $271 million; events revenue of approximately $121 million; and other revenue of approximately $16 million to $18 million. - EBITDA of approximately $150 million to $155 million. - Normalized EPS, which excludes unusual items, of $0.50 to $0.53 on 133 million diluted shares. For the nine months ended June 30, 2002: - Total revenue of approximately $900 million to $910 million. - Research revenue of approximately $496 million to $500 million; consulting revenue of approximately $268 million to $271 million; events revenue of approximately $121 million; and other revenue of approximately $16 million to $18 million. - EBITDA of approximately $150 million to $155 million. - Normalized EPS, which excludes unusual items, of $0.50 to $0.53 on 133 million diluted shares. Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. D. Fleisher, Gartner chairman and chief executive officer, said, "Our results reflect both our sustained success in growing profits and cash to maximize shareholder value as well as a difficult economy. The steps we have taken to diligently dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d manage expenses and drive productivity gains throughout the organization have clearly yielded positive results. We delivered a 19% EBITDA margin this quarter, up 2.7 points from last year. "We also delivered another quarter of very strong growth in cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses . Our cash balance has grown from $27 million at the end of December December: see month. 2001 to $79 million at the end of March to $110 million at June 30, notwithstanding $34.1 million we spent repurchasing common stock thus far in fiscal '02." During the quarter, the Company purchased 1.9 million shares of its common stock in the open market, for a total of $20.9 million. The transactions were executed under the Company's $75 million stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program announced in July July: see month. 2001. Fleisher continued, "It's it's 1. Contraction of it is. 2. Contraction of it has. See Usage Note at its. it's it is or it has it's be ~have clear that the uncertain economic environment will not disappear any time soon. That uncertainty compels us to focus on forging strong client relationships to drive retention rates and to continue to raise the bar on Gartner's financial performance, specifically optimizing EBITDA margins, segment margins and cash flow. "Even from the current vantage point, we can see - and are actively pursuing - growth opportunities for Gartner within our core audience of IT professionals, as well as within the broader audience of business executives, to aggregate and repackage re·pack·age tr.v. re·pack·aged, re·pack·ag·ing, re·pack·ag·es To package again or anew, especially in a more attractive package. re·pack our content for the specific needs of specific buyers. By evolving and refining refining, any of various processes for separating impurities from crude or semifinished materials. It includes the finer processes of metallurgy, the fractional distillation of petroleum into its commercial products, and the purifying of cane, beet, and maple sugar our product development, marketing and sales capabilities, we are laying the groundwork for long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. profitable revenue growth." Business Review - Research revenue of $121.6 million in the third quarter declined 9% from a year ago. Research contract value, the annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. value of all subscription-based research contracts in effect at a given time, declined 9% to $502.9 million. The decline in revenue and contract value is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the current impact of the weaker economy and resulting holdback hold·back n. 1. a. The act of holding back. b. Something held back. 2. A device that retains or restrains. 3. in technology spending. Other key indicators - the client and wallet See digital wallet. retention rates of 75% and 80%, respectively, multi-year contracts, and average contract size - remain very stable, reflecting the fundamental - relevance of Gartner research and the strength of the Company's embedded Inserted into. See embedded system. client relationships. On July 2, Gartner announced that Eileen McPartland, formerly of Ariba, will be joining the Company to lead Gartner's worldwide research business. - Total revenue of approximately $900 million to $910 million. - Research revenue of approximately $496 million to $500 million; consulting revenue of approximately $268 million to $271 million; events revenue of approximately $121 million; and other revenue of approximately $16 million to $18 million. - EBITDA of approximately $150 million to $155 million. - Normalized EPS, which excludes unusual items, of $0.50 to $0.53 on 133 million diluted shares. "Implicit in Adj. 1. implicit in - in the nature of something though not readily apparent; "shortcomings inherent in our approach"; "an underlying meaning" underlying, inherent our financial results are a number of encouraging business metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. that are evidence of the durability du·ra·ble adj. 1. Capable of withstanding wear and tear or decay: a durable fabric. 2. of our franchise and the market opportunities that lie ahead," said Fleisher. "Our research client retention rate rose slightly in the quarter to 75% and wallet retention remains at 80%. For clients who spend more than $100,000 with us, client and wallet retention was even higher at 90%. Even though technology spending has stalled stall 1 n. 1. A compartment for one domestic animal in a barn or shed. 2. a. A booth, cubicle, or stand used by a vendor, as at a market. b. , demand for our products and services continues, as evidenced by $24 million in new research business in the quarter, more than half of which came from new clients." Fleisher concluded, "Prudent investment in long-term growth initiatives such as GartnerG2 and Gartner Executive Programs has already begun to yield returns. GartnerG2, our research product for business strategists, continues to hit its milestones and reached $6.9 million in contract value and contributed nearly $1 million in new research contract value in the quarter. EXP, our concierge-level CIO CIO: see American Federation of Labor and Congress of Industrial Organizations. (Chief Information Officer) The executive officer in charge of information processing in an organization. program, grew its contract value 26% year over year and contributed more than $3.1 million in new research contract value." Business Outlook These business outlook statements are based on current expectations and should be considered forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. ; actual results may differ materially. These statements do not include the potential impact of any business risks, opportunities or developments that may occur after June 30, 2002. See the discussion below. Readers are also strongly encouraged to read the full cautionary statements included in this release and in the Company's SEC filings, including the Company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended September September: see month. 30, 2001, which can be found at www.gartner.com/investors and www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. . For the fourth quarter of fiscal 2002, the Company is targeting: - Total revenue of approximately $900 million to $910 million. - Research revenue of approximately $496 million to $500 million; consulting revenue of approximately $268 million to $271 million; events revenue of approximately $121 million; and other revenue of approximately $16 million to $18 million. - EBITDA of approximately $150 million to $155 million. - Normalized EPS, which excludes unusual items, of $0.50 to $0.53 on 133 million diluted shares. For the full year of fiscal 2002, the Company is targeting: - Total revenue of approximately $900 million to $910 million. - Research revenue of approximately $496 million to $500 million; consulting revenue of approximately $268 million to $271 million; events revenue of approximately $121 million; and other revenue of approximately $16 million to $18 million. - EBITDA of approximately $150 million to $155 million. - Normalized EPS, which excludes unusual items, of $0.50 to $0.53 on 133 million diluted shares. Conference Call Information The Company has scheduled a conference call with investors at 10:00 a.m. ET on Thursday Thursday: see week. , July 18, 2002, to discuss the Company's financial results. The conference call will also be available via the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the by accessing Gartner's web site at www.gartner.com/investors. A replay of the webcast will be available for 30 days following the call. About Gartner Gartner, Inc. is a research and advisory firm that helps more than 10,500 clients understand technology and drive business growth. Gartner's businesses consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut Stamford is a city in Fairfield County, Connecticut, United States. According to 2006 Census Bureau estimates, the population of the city is 119,261, making it the fourth largest city in the state. , and has 4,000 associates, including 1,200 research analysts and consultants, in more than 90 locations worldwide. Fiscal 2001 revenue totaled $963 million. For more information, visit www.gartner.com. This press release contains statements regarding the Company's business outlook, the development of the Company's services, the demand for the Company's products and services and all other statements in this release other than recitation rec·i·ta·tion n. 1. a. The act of reciting memorized materials in a public performance. b. The material so presented. 2. a. Oral delivery of prepared lessons by a pupil. b. of historical facts are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. (as defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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: ability to expand or even retain the Company's customer base in light of the adverse current economic conditions, including the impact of the September 11 terrorist attacks; ability to grow or even sustain revenues from individual customers in light of the adverse impact of the current economic conditions on overall IT spending; the duration and severity of the current economic slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. ; ability to attract and retain professional staff of research analysts and consultants upon whom the Company is dependent; ability to achieve and effectively manage growth, particularly as the Company seeks to reduce its overall workforce; ability to achieve continued customer renewals and achieve new contract value, backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. and deferred revenue growth in light of competitive pressures; ability to integrate operations of possible acquisitions; ability to carry out the Company's strategic initiatives and manage associated costs; ability to manage the Company's strategic partnerships; rapid technological advances which may provide increased indirect competition to the Company from a variety of sources; substantial competition from existing competitors and potential new competitors; risks associated with intellectual property rights important to the Company's products and services; additional risks associated with international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. including foreign currency fluctuations; and other risks listed from time to time in the Company's reports filed with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2001. These filings can be found on Gartner's website 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 here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" and the Company disclaims any obligation to revise or update such statements to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date hereof or to reflect the occurrence of unanticipated events or circumstances. 1) All references to EBITDA in this release should be interpreted as pro forma EBITDA. Pro forma EBITDA is defined as operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. (loss) excluding depreciation, amortization and other charges, the latter of which is described in full in Footnote Text that appears at the bottom of a page that adds explanation. It is often used to give credit to the source of information. When accumulated and printed at the end of a document, they are called "endnotes." 1 of the incorporated Income Statement. Although pro forma EBITDA is not a measure of financial performance under generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "), it is a widely used financial measure that provides relevant and useful information for evaluating financial performance. Pro forma EBITDA should not be considered an alternative to measures of operating performance as determined by GAAP as there may be significant factors or trends that it fails to address. Our reported pro forma EBITDA may not be comparable to similarly titled measures used by other companies. 2) Normalized net income and EPS are based on income (loss) from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the , excluding other charges, net gain (loss) on sale of investments, net gain (loss) from minority-owned investments, and the gain (loss) from sale of a business, and include any dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). of the convertible long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. . Normalized results also exclude goodwill amortization on an after-tax basis After-tax basis The comparison basis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond. due to the adoption of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 142.
GARTNER, INC.
CONSOLIDATED INCOME STATEMENT
(Unaudited, dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
------------------ -----------------
June 30, June 30, June 30, June 30,
2002 2001 2002 2001
--------- --------- -------- ---------
REVENUES:
Research $121,619 $133,203 -9% $373,828 $405,130 -8%
Consulting 72,611 74,153 -2% 194,235 197,329 -2%
Events 38,438 39,126 -2% 107,004 118,961 -10%
Other 3,489 3,593 -3% 11,580 13,710 -16%
-------- --------- -------- --------
Total revenues 236,157 250,075 -6% 686,647 735,130 -7%
-------- --------- -------- --------
OPERATING EXPENSES:
Cost of services
& product
development 106,045 115,210 -8% 310,215 351,862 -12%
Selling, general &
administrative 84,412 93,180 -9% 259,637 278,788 -7%
Depreciation 10,577 11,008 -4% 30,845 29,122 6%
Amortization of
intangibles 445 3,052 -85% 1,450 9,531 -85%
Other charges (1) - 31,084 F 17,246 31,084 -45%
-------- --------- -------- --------
Total operating
expenses 201,479 253,534 -21% 619,393 700,387 -12%
-------- --------- -------- --------
Operating income 34,678 (3,459) F 67,254 34,743 94%
(loss)
Net gain (loss) on
sale of investments (1) (5,451) -100% 791 (640) F
Net loss from
minority-owned
investments (2,531) (6,618) -62% (2,374) (11,691)-80%
Interest income
(expense), net (5,282) (5,262) - (15,706) (15,705) -
Other income
(expense), net 452 16 F 8 (1,584) F
------- ------ --- -------- -------- ---
Income (loss) before
provision for
income taxes 27,316 (20,774) F 49,973 5,123 F
Provision (benefit)
for income taxes 9,061 (10,555) U 16,991 (973) U
------- ------ -------- --------
Income (loss) from
continuing
operations 18,255 (10,219) F 32,982 6,096 F
Discontinued operation,
net of tax:
Loss from
discontinued
operation - - - - (26,059) F
Gain (loss) on
disposal of
discontinued
operation - 1,765 U - (38,174) F
------- ------ -------- --------
Gain (loss) from
discontinued
operation - 1,765 U - (64,233) F
------- ------ -------- --------
Net income (loss) $18,255 $(8,454) F $32,982 $(58,137) F
======= ======== ======= =========
Basic earnings per
common share:
Continuing
operations $ 0.22 $ (0.12) F $ 0.39 $ 0.07 F
Discontinued
operation - 0.02 U - (0.74) F
------- -------- ------- -------
Total $ 0.22 $ (0.10) F $ 0.39 $(0.67) F
======= ======== ======= =======
Diluted earnings
per common share:
Continuing
operations $ 0.16 $ (0.12) F $ 0.32 $ 0.07 F
Discontinued
operation - 0.02 U - (0.74) F
------- -------- ------- -------
Total $ 0.16 $ (0.10) F $ 0.32 $(0.67) F
======= ======== ======= =======
Weighted average
common shares
outstanding
Basic 83,719 86,341 -3% 84,072 86,313 -3%
Diluted 132,299 86,341 53% 131,600 86,933 51%
SUPPLEMENTAL
INFORMATION
EBITDA
(pro forma) (2) $ 45,700 $ 41,685 10% $ 116,795 $ 104,480 12%
Normalized
EPS (3) $ 0.17 $ 0.15 13% $ 0.41 $ 0.41 -
FOOTNOTES
(1) Other charges for the nine months ended June 30, 2002 include
costs/losses associated with a reduction in facilities ($10.0
million), a reduction in workforce ($5.8 million), and the
write-off of assets ($1.4 million). Other charges for the three
and nine months ended June 30, 2001 include costs/losses
associated with a reduction in workforce ($25.5 million) and the
write-off of discontinued products and other restructuring and
advisory costs ($5.6 million).
(2) Pro forma EBITDA is defined as operating income (loss) excluding
depreciation, amortization and other charges, which are described
in Footnote 1 above. A detailed definition of pro forma EBITDA
can be found on Page 1 of this press release.
(3) Normalized EPS is based on income (loss) from continuing
operations, excluding other charges, net gain (loss) on sale of
investments, net losses from minority-owned investments.
Normalized EPS also excludes the gain from sale of a business
($0.5 million) and excludes goodwill amortization on an after-tax
basis of $2.0 million, or $0.02, for the quarter ended June 30,
2001, and $6.4 million, or $0.07, for the nine months ended June
30, 2001, due to the Company's adoption of SFAS 142.
GARTNER, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited, dollars in thousands)
June 30, September 30,
2002 2001
----------- -------------
ASSETS
Cash $ 109,888 $ 37,128 196%
Marketable equity securities 18 3,250 -99%
Fees receivable, net 258,101 300,306 -14%
Deferred commissions 31,934 34,822 -8%
Prepaid expenses and
other current assets 37,675 73,315 -49%
-------- -------
TOTAL CURRENT ASSETS 437,616 448,821 -2%
Property & equipment, net 81,322 100,288 -19%
Intangible assets, net 224,219 222,233 1%
Other assets 62,710 67,660 -7%
--------- -------
TOTAL ASSETS $ 805,867 $ 839,002 -4%
========= ==========
LIABILITIES & SHAREHOLDERS'
EQUITY (DEFICIT)
Accounts payable &
accrued expenses $ 130,033 $ 137,751 -6%
Deferred revenue 301,143 351,263 -14%
Short-term debt - 15,000 F
----------- ----------
TOTAL CURRENT LIABILITIES 431,176 504,014 -14%
Other liabilities 44,737 43,306 3%
Long-term convertible debt 341,188 326,200 5%
----------- ----------
TOTAL LIABILITIES 817,101 873,520 -6%
Total shareholders'
equity (deficit) (11,234) (34,518) F
----------- ----------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $ 805,867 $ 839,002 -4%
============ ==========
SELECTED STATISTICAL DATA June 30, 2002 June 30, 2001
(Dollars in thousands)
Research contract value $ 502,937 $ 550,292 -9%
Consulting backlog $ 124,382 $ 119,841 4%
Events deferred revenue $ 38,971 $ 51,000 -24%
Research client organizations 9,226 9,713 -5%
BUSINESS SEGMENT DATA
(Dollars in thousands)
Direct Gross Contrib.
Revenue Expense Contribution Margin
---------- -------------- -------------- --------
Three Months
Ended 6/30/02
Research $ 121,619 $ 41,975 $ 79,644 65%
Consulting 72,611 44,855 27,756 38%
Events 38,438 20,692 17,746 46%
Other 3,489 1,121 2,368 68%
--------- ------------ ---------- -----
TOTAL $ 236,157 $ 108,643 $ 127,514 54%
========= ============ ========== ======
Direct Gross Contrib.
Revenue Expense Contribution Margin
---------- -------------- -------------- --------
Three Months
Ended 6/30/01
Research $ 133,203 $ 43,302 $ 89,901 67%
Consulting 74,153 45,437 28,716 39%
Events 39,126 20,852 18,274 47%
Other 3,593 3,631 (38) -1%
---------- -------------- ------------- ------
TOTAL $ 250,075 $ 113,222 $ 136,853 55%
========= ============== ============ ======
Direct Gross Contrib.
Revenue Expense Contribution Margin
---------- -------------- ------------ ---------
Nine Months
Ended
6/30/02
Research $ 373,828 $ 126,632 $ 247,196 66%
Consulting 194,235 129,919 64,316 33%
Events 107,004 48,107 58,897 55%
Other 11,580 4,908 6,672 58%
---------- ------------ ---------- -----
TOTAL $ 686,647 $ 309,566 $ 377,081 55%
========== ============ ========== =====
Direct Gross Contrib.
Revenue Expense Contribution Margin
---------- ------------- ------------ ----------
Nine Months
Ended 6/30/01
Research $ 405,130 $ 139,980 $ 265,150 65%
Consulting 197,329 141,171 56,158 28%
Events 118,961 60,993 57,968 49%
Other 13,710 12,515 1,195 9%
---------- ----------- --------- ------
TOTAL $ 735,130 $ 354,659 $ 380,471 52%
========== =========== ========= ======
(Note: segment expenses include cost of services, depreciation and
select G&A expenses.)
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