| Gartner Reports Fiscal Year 2001 EBITDA Growth of 14% on Revenue Growth of 11%
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| Fourth Quarter EBITDA Increases 31% on Revenue Growth of 3%
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Stamford, CT, October 30, 2001 — Gartner, Inc. (NYSE: IT and ITB), the world's leading research and advisory firm, today reported results for the fourth quarter and full fiscal year ending September 30, 2001.
For the full fiscal year 2001:
- Total revenue from continuing operations rose 11% to $952.0 million, up from $854.6 million in fiscal 2000.
- Pro forma EBITDA grew 14% over fiscal 2000 to $142.3 million.
- Income from continuing operations, excluding other charges, losses on investments, and certain one-time tax benefits was $40.7 million, or $0.47 per fully diluted share. Reported loss from continuing operations, including these one-time items, was $0.2 million, or $0.00 per fully diluted share.
For the fourth quarter of fiscal 2001:
- Total revenue from continuing operations was $224.1 million, up 3% from $217.6 million in fiscal 2000.
- Pro forma EBITDA in the fourth quarter grew 31% over fiscal 2000 to $37.8 million.
- Fourth quarter income from continuing operations, excluding other charges, losses on investments, and certain one-time tax benefits was $10.1 million, or $0.12 per fully diluted share. Reported loss from continuing operations, including these items, was $6.3 million, or $0.08 per fully diluted share.
"As our results indicate, we are a company that has been able to generate strong EBITDA in both good times and bad," said Michael D. Fleisher, Gartner's Chairman & CEO. "We saw a dramatic slowdown after the tragic events of September 11th which negatively impacted what's typically our highest selling month. Despite this, we achieved a healthy 31 percent growth in EBITDA during the fourth quarter. On top of that, our client retention rate of 74 percent was undeniable proof that clients seek our services regardless of the economic climate."
Advice that Pays
"We are not immune to a downturn," said Fleisher, "but we are better insulated by our business model and by the resilient value of our diversified product offerings. As enterprises are rigorously evaluating cost and investment, they are coming to Gartner for advice on how to deploy technology most efficiently, how to strengthen relationships with suppliers, and how to maximize the productivity of their technology infrastructure."
"Overall, clients want to preserve revenue and earnings. No one is better qualified than Gartner to provide this advice. We have more brainpower, more research points, more experience, greater global reach, and - of critical importance - the objective, independent perspective companies look to in times of duress."
"Equally important," continued Fleisher, "is how we are helping our clients position themselves for the rebound. Prudent companies are not just being defensive. They are also preparing for the inevitable upturn. Technology will, of course, play a critical role. We understand technology and its impact on our clients' business goals. We are able to show them where to place their strategic bets."
Clear evidence of Gartner's value to its clients was the recent success of the Company's flagship conference, Symposium/ITxpo, held in early October in Orlando, Florida. While competing firms cancelled similar events in the face of post-attack reluctance to travel, Symposium/ITxpo was attended by more than 5,000 Gartner clients. "All the rhetoric in the world can't match a number like that," said Fleisher. "The people traveling on business today are generally doing so only where it's essential. Our insights and advice are considered essential."
A number of other key enhancements to the Gartner business model have contributed to the strong results over the past quarter:
- "Seat-based" pricing now accounts for 84% of all eligible research contract value. Competitors continue to study this model, yet cannot duplicate it because of the vastly greater depth and breadth of Gartner's research.
- Gartner Executive Programs provide top IT managers with a concierge-quality service unequalled in the industry. Continued strong uptake of these programs is proving an ideal entry point for Gartner research and consulting.
- Gartner G2, the Company's recently launched "strategic research" service for non-IT executives, has earned more than 100 new accounts, further diversifying the Company's business model.
Business Review
Research: A Solid Foundation
Research revenue increased 5% to $535.1 million for fiscal 2001 and rose 1% in the fourth quarter to $130.0 million. Ratable contract value, a key measure of potential future research revenue, was $556.0 million, down 4% from prior year after adjusting for foreign exchange and up 1% sequentially.
Consulting: Continued Strong Growth
Consulting revenue grew 27% to $265.5 million for fiscal 2001 and rose 11% in the fourth quarter to $75.3 million. Consulting backlog was $96.9 million, up 3% from a year ago. Effective in the fourth quarter of 2001, backlog relating to strategic advisory services or "SAS" (paid one-day analyst visits) will be included in reported backlog as SAS has reached a material level. Including SAS in both periods, total backlog grew 13% over prior year.
Events: A Substantial Model
Events revenue rose 22% to $132.7 million for fiscal 2001 and increased 2% to $13.7 million in the fourth quarter. Deferred revenue was $70.5 million, down 2% from a year ago.
Fleisher commented, "We have the most attractive event model in the IT industry. Gartner events combine our proprietary intellectual content with face-to-face analyst interaction and the best possible networking opportunities. Plus, our events are well integrated with our overall product portfolio. We believe this business will continue to demonstrate strength in profitability even in the challenging times ahead."
Other Developments
- On August 29, 2001, the Company purchased 1.9 million shares of Class A common stock from IMS Health at $9.88 per share. Also in the fourth quarter, the Company purchased an additional 500,000 shares of Class A and Class B common stock in the open market, at an average price of $9.42. These transactions were executed under the Company's stock repurchase program announced in the third quarter of fiscal 2001.
- On July 2, 2001, the Company completed the sale of its subsidiary TechRepublic to CNET Networks for $23.0 million in cash and common stock.
- During the fourth quarter, Gartner incurred other non-cash charges of $15.5 million relating to the write-off of certain products and systems made redundant with the launch of Gartner.com, seat-based pricing, and focused consulting practices.
- Also in the quarter, the Company recorded losses from minority-owned investments of $15.1 million relating to venture investments and marketable securities.
- The Company has filed a request with the IRS seeking a ruling that the re-combination of the Gartner Class A and Class B common stock will not adversely affect the tax-free status of the IMS spin-off. Pending IRS approval, the Company will move forward to gain all necessary approvals in order to execute the share re-combination.
Business Outlook
These business outlook statements are based on current expectations and should be considered forward-looking; actual results may differ materially. These statements do not include the potential impact of any business risks, opportunities or developments that may occur after September 30, 2001. 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.
For the full-year of fiscal 2002, the Company is targeting:
- Total revenue: approximately $950 million to $975 million.
- Research revenue to be approximately $535 million to $545 million; consulting revenue to be approximately $290 million to $295 million; events revenue to be approximately $110 million to $120 million; other revenue to be approximately $15 million.
- EBITDA: $145 million to $155 million.
- Fully diluted EPS including Silver Lake bond dilution: $0.42 to $0.48.
- Fully diluted EPS excluding Silver Lake bond dilution: $0.50 to $0.58.
For the first quarter of fiscal 2002, the Company is targeting:
- Total revenue: approximately $242 million to $250 million.
- Research revenue to be approximately $130 million to $132 million; consulting revenue to be approximately $58 million; events revenue to be approximately $50 million to $56 million; other revenue to be approximately $4 million.
- EBITDA: approximately $40 million to $42 million.
- Fully diluted EPS including Silver Lake bond dilution: $0.12 to $0.13.
- Fully diluted EPS excluding Silver Lake bond dilution: $0.14 to $0.16.
Conference Call Information
The Company has scheduled a conference call with investors at 10:00 a.m. ET on Tuesday, October 30, 2001, to discuss the Company's financial results. The conference call will also be available via the Internet 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 11,000 clients understand technology and drive business growth. Gartner's divisions consist of Gartner Research, Gartner Consulting, Gartner Measurement and Gartner Events. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, and has 4,300 associates, including 1,200 research analysts and consultants, in more than 90 locations worldwide. The Company achieved fiscal 2001 revenue of $952 million. For more information, visit www.gartner.com.
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Certain statements contained herein, including statements regarding the Company's business outlook, the develop
ment of the Company's services, the demand for the Company's products and services 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 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; 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; 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 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 including foreign currency fluctuations; and other risks listed from time to time in the Company's reports filed with the Securities and Exchange Commission. Forward-looking statements included herein speak only as of the date hereof and the Company undertakes no 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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 |
GARTNER, INC.
CONSOLIDATED INCOME STATEMENT
(Dollars in thousands, except per share data)
|
| |
Three Months Ended |
|
Fiscal Year Ended |
|
| |
Sept. 30, 2001 |
Sept. 30, 2000 |
|
Sept. 30, 2001 |
Sept. 30, 2000 |
|
| REVENUES: |
|
|
|
|
|
|
| Research |
$129,984 |
$128,647 |
1% |
$535,114 |
$509,781 |
5% |
| Consulting |
75,314 |
68,110 |
11% |
265,450 |
208,810 |
27% |
| Events |
13,723 |
13,401 |
2% |
132,684 |
108,589 |
22% |
| Other |
5,084 |
7,396 |
-31% |
18,794 |
27,414 |
-31% |
| Total revenues |
224,105 |
217,554 |
3% |
952,042 |
854,594 |
11% |
| |
|
|
|
|
|
|
| OPERATING EXPENSES: (1) |
|
|
|
|
|
|
| Cost of services & product development |
94,960 |
95,320 |
F |
439,629 |
387,746 |
13% |
| Selling, general & administrative |
91,307 |
93,285 |
-2% |
370,096 |
341,874 |
8% |
| Depreciation |
11,751 |
7,996 |
47% |
40,873 |
27,839 |
47% |
| Amortization of intangibles |
2,836 |
3,362 |
-16% |
12,367 |
13,004 |
-5% |
| Other charges |
15,479 |
- |
U |
46,563 |
- |
U |
| Total operating expenses |
216,333 |
199,963 |
8% |
909,528 |
770,463 |
18% |
| |
|
|
|
|
|
|
| Operating income |
7,772 |
17,591 |
-56% |
42,514 |
84,131 |
-49% |
| |
|
|
|
|
|
|
| Net gain (loss) on sale of investments |
- |
11,451 |
U |
(640) |
29,630 |
U |
| Loss from minority-owned investments |
(15,126) |
(548) |
U |
(26,817) |
(775) |
U |
| Interest income (expense), net |
(5,070) |
(4,173) |
-21% |
(20,775) |
(20,964) |
-1% |
| Other income (expense), net |
(2,091) |
1,205 |
U |
(3,674) |
(722) |
U |
| |
|
|
|
|
|
|
| Income (loss) before provision for income taxes |
(14,515) |
25,526 |
-157% |
(9,392) |
91,300 |
-110% |
| Provision (benefit) for income taxes |
(8,199) |
10,211 |
-180% |
(9,172) |
36,447 |
-125% |
| |
|
|
|
|
|
|
| Income (loss) from continuing operations |
(6,316) |
15,315 |
-141% |
(220) |
54,853 |
-100% |
| |
|
|
|
|
|
|
| Extraordinary loss from debt extinguishment, net of tax |
- |
(1,729) |
F |
- |
(1,729) |
F |
| |
|
|
|
|
|
|
| Discontinued operations, net of tax: |
|
|
|
|
|
|
| Loss from discontinued operations |
- |
(9,673) |
F |
(26,059) |
(27,578) |
-6% |
| Loss on disposal of discontinued operations |
(1,750) |
- |
U |
(39,924) |
- |
U |
| |
|
|
|
|
|
|
| Loss from discontinued operations |
(1,750) |
(9,673) |
-82% |
(65,983) |
(27,578) |
-139% |
| |
|
|
|
|
|
|
| Net income (loss) |
$ (8,066) |
$ 3,913 |
U |
$(66,203) |
$ 25,546 |
U |
| |
|
|
|
|
|
|
| Basic earnings per common share: |
|
|
|
|
|
|
| Income (loss) from continuing operations |
$ (0.08) |
$ 0.18 |
-144% |
$ 0.00 |
$ 0.63 |
-100% |
| Extraordinary loss |
- |
(0.02) |
F |
- |
(0.02) |
F |
| Loss from discontinued operations |
- |
$ (0.11) |
F |
(0.30) |
(0.31) |
-3% |
| Loss on disposal of discontinued operations |
(0.02) |
- |
U |
(0.47) |
- |
U |
| Net income (loss) |
$ (0.10) |
$ 0.05 |
U |
$ (0.77) |
$ 0.30 |
U |
| |
|
|
|
|
|
|
| Diluted earnings per common share: |
|
|
|
|
|
|
| Income (loss) from continuing operations |
$ (0.08) |
$ 0.17 |
-147% |
$ 0.00 |
$ 0.62 |
-100% |
| Extraordinary loss |
- |
(0.02) |
F |
- |
(0.02) |
F |
| Loss from discontinued operations |
- |
(0.11) |
F |
(0.30) |
(0.31) |
-3% |
| Loss on disposal of discontinued operations |
(0.02) |
- |
U |
(0.47) |
- |
U |
| Net income (loss) |
$ (0.10) |
$ 0.04 |
U |
$ (0.77) |
$ 0.29 |
U |
| |
|
|
|
|
|
|
| Weighted average shares outstanding |
|
|
|
|
|
|
| Basic |
84,511 |
85,640 |
-1% |
85,862 |
86,564 |
-1% |
| Diluted |
84,511 |
87,805 |
-4% |
85,862 |
89,108 |
-4% |
| PRO FORMA SUPPLEMENTAL INFORMATION |
| |
|
|
|
|
| EBITDA(2) |
$ 37,838 |
$ 28,949 |
31% |
$142,317 |
$ 124,974 |
14% |
| Normalized EPS (3) |
$ 0.12 |
$ 0.10 |
20% |
$ 0.47 |
$ 0.42 |
12% |
FOOTNOTES
(1) Operating expenses in the first and second quarters of fiscal 2000 have been restated to reflect the reclassification of the one-time retention payments as components of cost of services & product development and selling, general & administrative expenses.(2) EBITDA represents operating income excluding amortization, depreciation and other charges.(3) Normalized EPS is based on income (loss) from continuing operations, excluding other charges, net gain (loss) on sale of investments, loss from minority-owned investments --all net of tax-- and certain one-time tax benefits.
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GARTNER, INC.
CONSOLIDATED BALANCE SHEET DATA
(Dollars in thousands)
|
|
| Sept. 30, 2001
|
| Sept. 30, 2000
| |
| ASSETS
|
| Cash
| $ 37,128
|
| $ 61,698
| -40% |
| Marketable equity securities
| 3,250
|
| 35,404
| -91% |
| Fees receivable, net
| 300,306
|
| 323,849
| -7% |
| Deferred commissions
| 34,822
|
| 46,756
| -26% |
| Prepaid expenses and other current assets
| 73,315
|
| 34,738
| 111% |
| Net assets of discontinued operations
| -
|
| 76,329
| U |
| TOTAL CURRENT ASSETS
| 448,821
|
| 578,774
| -22% |
|
|
|
|
| |
| Property & equipment, net
| 100,288
|
| 88,402
| 13% |
| Intangible assets, net
| 222,233
|
| 237,105
| -6% |
| Other assets
| 67,660
|
| 68,080
| -1% |
| TOTAL ASSETS
| $839,002
|
| $972,361
| -14% |
|
|
|
|
| |
|
|
|
|
| |
| LIABILITIES & SHAREHOLDERS' EQUITY
|
| Accounts payable & accrued expenses
| $161,251
|
| $191,465
| -16% |
| Deferred revenue
| 351,263
|
| 384,966
| -9% |
| Short-term debt
| 15,000
|
| -
| U |
| TOTAL CURRENT LIABILITIES
| 527,514
|
| 576,431
| -8% |
|
|
|
|
| |
| Other liabilities
| 19,806
|
| 13,856
| 43% |
| Long-term debt
| 326,200
|
| 307,254
| 6% |
| TOTAL LIABILITIES
| 873,520
|
| 897,541
| -3% |
|
|
| Total shareholders' (deficit) equity
| (34,518)
|
| 74,820
| U |
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY
| $839,002
|
| $972,361
| -14% |
| |
|
|
| SELECTED STATISTICAL DATA |
Sept. 30, 2001 |
|
Sept. 30, 2000 |
|
| (Dollars in thousands) |
|
|
|
|
| Research contract value |
$555,983 |
|
$599,169 |
-7% |
| Backlog |
$118,9888 |
|
$105,466 |
13% |
| Deferred revenue - Events |
$70,541 |
|
$72,212 |
-2% |
| Research client organizations |
9,687 |
|
10,014 |
-3% |
| (Note: Direct expense includes cost of services, depreciation and certain G&A expense |
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|
BUSINESS SEGMENT DATA
(Dollars in thousands)
|
| |
Revenue |
Direct Expense |
Gross Contribution |
Contribution Margin |
| Three Months Ended 9/30/01 |
|
|
|
|
| Research |
$129,984 |
$ 42,560 |
$ 87,424 |
67% |
| Consulting |
75,314 |
44,523 |
30,791 |
41% |
| Events |
13,723 |
8,066 |
5,657 |
41% |
| Other |
5,084 |
2,052 |
3,032 |
60% |
| TOTAL |
$224,105 |
$97,201 |
$126,904 |
57% |
| |
|
|
|
|
| |
Revenue |
Direct Expense |
Gross Contribution |
Contribution Margin |
| Three Months Ended 9/30/00 |
|
|
|
|
| Research |
$128,647 |
$ 43,914 |
$ 84,733 |
66% |
| Consulting |
68,110 |
40,140 |
27,970 |
41% |
| Events |
13,401 |
8,333 |
5,068 |
38% |
| Other |
7,396 |
4,916 |
2,480 |
34% |
| TOTAL |
$217,554 |
$ 97,303 |
$120,251 |
55% |
| |
|
|
|
|
| |
Revenue |
Direct Expense |
Gross Contribution |
Contribution Margin |
| Fiscal Year Ended 9/30/01 |
|
|
|
|
| Research |
$535,114 |
$ 182,540 |
$352,574 |
66% |
| Consulting |
265,450 |
178,501 |
86,949 |
33% |
| Events |
132,684 |
69,059 |
63,625 |
48% |
| Other |
18,794 |
14,567 |
4,227 |
22% |
| TOTAL |
$952,042 |
$ 444,667 |
$507,375 |
53% |
| |
|
|
|
|
| |
Revenue |
Direct Expense |
Gross Contribution |
Contribution Margin |
| Fiscal Year Ended 9/30/00 |
|
|
|
|
| Research |
$509,781 |
$ 168,720 |
$341,061 |
67% |
| Consulting |
208,810 |
133,158 |
75,652 |
36% |
| Events |
108,589 |
57,985 |
50,604 |
47% |
| Other |
27,414 |
16,183 |
11,231 |
41% |
| TOTAL |
$854,594 |
$ 376,046 |
$478,548 |
56% |
| |
| (Note: Direct expense includes cost of services, depreciation and certain G&A expenses.) |
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