Gartner Delivers Continued Strong Growth in EBITDA and EPS
Stamford, CT. (July 18, 2002) — Gartner, Inc. (NYSE: IT and ITB), the world's leading technology research and advisory firm, today reported results for the third fiscal quarter and nine months ending June 30, 2002. Significant increases in pro forma EBITDA(1), net income and EPS were driven by productivity gains and continued expense control.

For the third fiscal quarter of 2002:
  • Total revenue of $236.2 million declined 6% year over year.
  • EBITDA grew 10% over the prior year to $45.7 million.
  • On a GAAP reported basis, including unusual items, net income grew to $18.3 million, or $0.16 per diluted share, compared to a loss of $8.5 million, or ($0.10) per diluted share a year ago.
  • Excluding net losses on minority-owned investments of $2.5 million or $0.01 per share, normalized net income was $19.9 million, or $0.17 per diluted share. The normalized EPS of $0.17 was 2 cents above the high end of the Company's guidance in a press release issued April 24, 2002.(2)
For the nine months ended June 30, 2002:
  • Total revenue of $686.6 million declined 7% year over year.
  • EBITDA grew 12% over the prior year to $116.8 million.
  • On a GAAP reported basis, including unusual items, net income grew to $33.0 million, or $0.32 per diluted share, compared to a loss of $58.1 million, or ($0.67) per diluted share for the comparable nine-month period in 2001.
  • Excluding other charges of $17.2 million or $0.09 per share, net losses on minority-owned investments of $2.4 million or $0.01 per share, gains on sale of investments and businesses of $1.3 million or $0.01 per share, normalized net income totaled $45.1 million, or $0.41 per diluted share.(2)
Michael 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 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. Our cash balance has grown from $27 million at the end of December 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 program announced in July 2001.

Fleisher continued, "It's 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 our content for the specific needs of specific buyers. By evolving and refining our product development, marketing and sales capabilities, we are laying the groundwork for long-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 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 to the current impact of the weaker economy and resulting holdback in technology spending. Other key indicators - the client and 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 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.

  • Consulting revenue of $72.6 million in the third quarter declined 2% from a year ago on a 17% reduction in headcount. As a result, consulting utilization of 57% for the quarter grew 3 points year-over-year and 5 points sequentially. Consulting backlog, the future revenue to be derived from in-process consulting and measurement engagements, was up 4% from a year ago. Sequentially, backlog was down 2% on a 10% increase in consulting revenue as more backlog was worked through and converted to revenue in the quarter.

  • Events revenue totaled $38.4 million in the third quarter, a decline of 2% from a year ago. Events deferred revenue, the unearned revenue from billed events, was $39.0 million, down 24%. The results are due to both external factors (tighter T&E budgets and the overall economy) and internal factors (the deliberate decision to eliminate unproven, less profitable events).
"Implicit in our financial results are a number of encouraging business metrics that are evidence of the durability 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, 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 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; 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 for the fiscal year ended September 30, 2001, which can be found at www.gartner.com/investors and www.sec.gov.

For the fourth quarter of fiscal 2002, the Company is targeting:
  • Total revenue of approximately $213 million to $223 million.
  • Research revenue of approximately $122 million to $126 million; consulting revenue of approximately $73 million to $77 million; events revenue of approximately $14 million; and other revenue of approximately $4 million to $6 million.
  • EBITDA of approximately $33 million to $38 million.
  • Normalized EPS, which excludes unusual items, of $0.09 to $0.13 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, July 18, 2002, 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 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, 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.


1) All references to EBITDA in this release should be interpreted as pro forma EBITDA. Pro forma EBITDA is defined as operating income (loss) excluding depreciation, amortization and other charges. Other charges are described in full in Footnote 1 of the incorporated Income Statement. Although pro forma EBITDA is not a measure of financial performance under 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, 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 of the convertible long-term debt. Normalized results also exclude goodwill amortization on an after-tax basis due to the adoption of SFAS 142.

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 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, 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; 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, 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 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.


Investor Contact:
Heather McConnell
Vice President, Investor Relations
+ 1 203 316 6768
 heather.mcconnell@gartner.com
http://www.gartner.com/investors 		Media Contact:
Carol Wallace
Vice President, Public Relations
+1 203-316-3575
carol.wallace@gartner.com