Gartner Reports Fourth Quarter and Full Year 2006 Results.Record Contract Value of $640 Million Expects 2007 Revenue to Increase between 8 and 11% STAMFORD, Conn. -- Gartner, Inc. (NYSE NYSE See: New York Stock Exchange : IT), the leading provider of research and analysis on the global information technology industry, today reported results for the fourth quarter and year ended December 31, 2006. Fourth Quarter 2006 Results Total revenue for the 2006 fourth quarter increased 5% to $304 million. Research contract value ended the quarter at $640 million, an increase of 8% over the same quarter last year. Normalized 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 was $52 million. GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). 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. was $0.20 and normalized EPS was $0.22 for the 2006 fourth quarter. Normalized EPS excludes the following pre-tax items: a $4.9 million non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. related to stock-based compensation under 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 123(R); and a $0.4 million non-cash charge for the amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. acquired in the META acquisition. See "Non-GAAP Financial Measures" for a further discussion of normalized EBITDA and normalized EPS. Excluding the effect of foreign currency, total revenue and research contract value for the 2006 fourth quarter increased approximately 3% and 11%, respectively, over the same quarter last year. Full Year 2006 Results Total revenue for 2006 increased 7% to $1,060 million. Normalized EBITDA was $156 million, up 48% from last year. GAAP EPS was $0.50 and normalized EPS was $0.67 for the year. Normalized EPS excludes the following pre-tax items: $16.7 million non-cash charge related to stock-based compensation under SFAS123(R); $1.5 million charge related to the integration activities associated with our acquisition of META; and $10.6 million non-cash charge for the amortization of intangible assets acquired in the META acquisition. See "Non-GAAP Financial Measures" below for a further discussion of normalized EBITDA and normalized EPS. Business Segment Highlights Research. Research revenue was $152 million for the 2006 fourth quarter and $571 million for the year, increases of 16% and 9%, respectively, as compared to the same periods in 2005. At December 31, 2006, Research contract value was $640 million, up from $593 million at December 31, 2005. This represents the highest reported contract value in the Company's history. Client and wallet See digital wallet. retention rates for the 2006 fourth quarter were 81% and 96%, respectively. Consulting. Consulting revenue was $76 million for the 2006 fourth quarter and $305 million for the year as compared to $85 million and $301 million for the same periods a year ago. Utilization averaged 61% during the fourth quarter and 64% for the year. The average 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. revenue per billable headcount is approximately $370,000. Billable headcount was 518 as of December 31, 2006, a slight decline from 525 at the end of 2005. Consulting backlog was $110 million at December 31, 2006. Events. Events revenue was $72 million for the fourth quarter of 2006 and $169 million for the year, up 4% and 12% from the same periods in 2005. The Company held 74 events in 2006 as compared to 70 in 2005, with over 41,000 worldwide attendees in 2006, a 16% increase compared to 2005. Gene Hall, Gartner's chief executive officer, said, "Our results for 2006 reflect the continued successful execution of our strategy to grow the research business and improve margins, with revenue and contract value finishing at all time highs The company has now delivered 12 consecutive quarters of contract value growth. Our normalized EBITDA increased almost 50% over 2005. We will further increase our momentum in 2007 with the continued enhancement of our products, improvements in client service, and continued growth of our sales organization." Share Repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. Program During the fourth quarter in 2006, Gartner repurchased 885,900 shares of its common stock at a cost of $17.2 million. As of December 31, 2006, the Company has repurchased a total of 5.4 million shares at an aggregate cost of $80.3 million under the $100 million share repurchase program authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: in October 2005. In addition, Gartner purchased 10.4 million shares directly from Silver Lake Partners Silver Lake Partners is a notable American private equity firm founded in 1999 and headquartered on Sand Hill Road in Menlo Park, California. It focuses its activities in the information technology industry. in December at a total cost of $200 million. Gartner also announced that its board of directors has authorized up to $200 million for the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of Company stock. This program will replace the prior $100 million share repurchase program previously authorized. Repurchases will be made from time-to-time through open market purchases and are subject to the availability of stock, prevailing market conditions, the trading price Trading price The price at which a security is currently selling. of the stock, the Company's financial performance and other conditions. The program will be funded from 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 and possible borrowings under the Company's existing credit facility. Cash Flow and Capital Expenditures Net cash from operations for the fourth quarter of 2006 totaled $31 million, compared to $0 a year ago. For the full year, net cash from operations totaled $106 million, compared to $27 million in 2005. Capital expenditures were $8 million in the quarter and $21 million for the full year. In 2006 free cash flow was $85 million compared to $5 million in 2005. Business Outlook Gartner also provided its outlook for 2007. For the full year, the Company is targeting total revenue of approximately $1,150 to $1,177 million. By segment, for the full year 2007 the Company is targeting Research revenue of approximately $635 million to $645 million, Consulting revenue of approximately $317 million to $327 million, Events revenue of approximately $188 million to $193 million, and other revenue of approximately $10 million to $12 million. Based on above revenue outlook, the Company is targeting normalized EBITDA for the full year 2007 of $189 to $199 million, or an increase of 21 to 28 percent. In 2007, the Company is projecting $24- $26 million of pre-tax expense related to SFAS 123(R). Gartner is projecting GAAP EPS of $0.68 to $0.75. The Company expects cash flow from operations of $135 to $150 million. Conference Call and Investor Day Information Gartner has scheduled a conference call at 10 a.m. ET today, Tuesday, February 6, 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 http://investor.gartner.com. A replay of the webcast will be available for 30 days following the call. The Company will also host an Investor Day conference on Thursday, March 8, 2007 at Cipriani in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. . The conference will begin at 8:30 a.m EST EST electroshock therapy. EST abbr. electroshock therapy and will conclude at approximately 1:00 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. . Registration is required. Please contact Germaine Scott at 203-316-3411 for further information. About Gartner Gartner, Inc. (NYSE: IT) delivers the technology-related insight necessary for our clients to make the right decisions, every day. Gartner serves 10,000 organizations, including chief information officers and other senior IT executives in corporations and government agencies, as well as technology companies and the investment community. The Company consists of Gartner Research, Gartner Executive Programs, Gartner Consulting 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. , U.S.A., and has 3,700 associates, including 1,200 research analysts and consultants in 75 countries worldwide. For more information, visit gartner.com. Non-GAAP Financial Measures Investors are cautioned that normalized EBITDA and normalized EPS information contained in this press release are not financial measures 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). In addition, they should not be construed as alternatives to any other measures of performance determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP. These non-GAAP financial measures are provided to enhance the user's overall understanding of the Company's current financial performance and the Company's prospects for the future. We believe normalized EBITDA and normalized EPS are important measures of our recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. operations as they exclude items that may not be indicative of our core operating results and calculate earnings per share in a manner consistent with prior periods. Normalized EBITDA is based on 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. , excluding impact of SFAS 123(R), depreciation and amortization, goodwill impairments, and other charges. Normalized EPS is based on net income (loss) excluding other charges, impact of SFAS 123(R), non-cash charges, goodwill impairments, amortization of acquired intangible assets, and gains and losses on investments. See "Supplemental Information" at the end of this release for reconciliation of GAAP EBITDA and EPS to normalized EBITDA and EPS. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement Statements contained in this press release regarding the growth and prospects of the business, the Company's full year 2007 financial results, future restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. , acquisition of META Group, Inc. 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: the Company's ability to expand or even retain the Company's customer base; the Company's ability to grow or even sustain revenue from individual customers; the Company's 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; the Company's ability to pay the Company's debt obligations; the Company's ability to achieve continued customer renewals and achieve new contract value, backlog and deferred revenue growth in light of competitive pressures; the Company's ability to carry out the Company's strategic initiatives and manage associated costs; substantial competition from existing competitors and potential new competitors; 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; the impact of restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and other charges on the Company's businesses and operations; and other risks listed from time to time in the Company's reports filed with the Securities and Exchange Commission. These filings can be found on Gartner's Web site at www.investor.gartner.com 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 after the date hereof or to reflect the occurrence of unanticipated events or circumstances.
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Footnotes
(1) Normalized EBITDA is based on operating income (loss) before
interest, taxes, depreciation amortization, and certain
normalizing adjustments.
Normalized net income & EPS is based on net income (loss),
excluding normalizing adjustments which includes other charges,
non-cash charges, META integration and amortization charges,
goodwill impairments, gains and losses on investments, and charges
for stock-based compensation under SFAS No. 123(R) (see Footnote
4 below).
Normalized EBITDA, as well as normalized net income and EPS, are
not measurements of operating performance calculated in accordance
with generally accepted accounting principles (GAAP) and should
not be considered substitutes for operating income (loss) and net
income (loss) in accordance with GAAP. In addition, because these
measurements may not be defined consistently by other companies,
these measurements may not be comparable to similarly titled
measures of other companies.
However, we believe these indicators are relevant and useful to
investors because they provide alternative measures that take into
account certain adjustments that are viewed by our management as
being non-cash items or charges.
(2) Other charges during 2005 included first quarter pre-tax charges
of $10.6 related to a reduction in workforce and $3.7 million
primarily for restructuring within the Company's international
operations, a second quarter pre-tax charge of $8.2 million,
primarily related to a reduction in facilities, a third quarter
pre-tax charge of $6.0 related to an option buyback, and a fourth
quarter charge of $0.7 million related to a reduction in
workforce.
(3) The META integration charges are related to our acquisition of the
META Group, Inc. These costs were primarily for severance, and for
consulting, accounting, and tax services.
(4) The stock compensation charge represents the cost of stock-based
compensation awarded by the Company to its employees under
Statement of Financial Accounting Standards No. 123(R),
"Share-Based Payments" ("SFAS No. 123R"). The Company adopted SFAS
No. 123(R) on January 1, 2006, under the modified propective
method of adoption.
(5) The amortization of META intangibles represents the non-cash
amortization charges related to the other intangible assets
recorded as a result of the META acquisition.
(6) The loss on investments relate to impairment losses on
investments. These charges are recorded in "Loss from investments,
net."
(7) The normalized effective tax rates were 32.6% and 37% for 2006 and
2005, respectively.
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