Gartner Reports Fiscal 2002 Net Income Up to $48.6 Million
Cash Balance Increases 236% to $125 Million
Stamford, CT. (October 30, 2002) — Gartner, Inc. (NYSE: IT and ITB), the world's leading technology research and advisory firm, today reported results for the fourth fiscal quarter and full year ended September 30, 2002.

For the full fiscal year ended September 30, 2002:
  • Total revenue of $907.2 million declined 6% year over year.
  • EBITDA(1) grew 11% over the prior year to $158.1 million.
  • On a GAAP reported basis, net income grew to $48.6 million, or $0.47 per diluted share, compared to a loss of $66.2 million, or ($0.77) per diluted share for the year ended September 30, 2001.
  • Normalized net income totaled $60.7 million, or $0.56 per share, which was 3 cents above the high end of the Company's guidance given in a press release issued July 18, 2002.(2)
For the fourth quarter of fiscal 2002:
  • Total revenue of $220.5 million declined 3% year over year.
  • EBITDA grew 9% over the prior year to $41.3 million.
  • On a GAAP reported basis, net income grew to $15.6 million, or $0.15 per diluted share, compared to a loss of $8.1 million, or ($0.10) per diluted share a year ago.
  • Normalized net income totaled $15.6 million, or $0.15 per diluted share. Net gains and losses from minority-owned investments and the sale of investments and businesses were immaterial; therefore, normalized net income for the fourth quarter was equal to GAAP net income of $15.6 million.
Michael D. Fleisher, Gartner chairman and chief executive officer, said, "Eighteen months ago, we communicated a fundamental strategic shift to deliver significantly enhanced levels of profitability and cash flow. And we have successfully executed that strategy, even in a very challenging and uncertain environment. We set out to achieve an EBITDA target of $145 to $155 million in fiscal '02. Despite a 6% decline in revenue, we grew EBITDA 11% to $158.1 million, exceeding our goal. At the same time, we delivered yet another quarter of strong growth in cash flow from operations, and increased our cash balance to $125 million at year end.

"We are succeeding in this difficult market because the need for insightful, relevant and objective advice exists in both good times and bad," said Fleisher. "We have generated more than $21 million in new research business for five consecutive quarters. The durability of our market-leading franchise and embedded client relationships is evident in consistently strong retention rates: our research client retention rate for the fourth quarter was 75% and our dollar retention rate 80%. Simply stated, we have a compelling value proposition - to help our clients make better decisions and save money."

Business Segment Review
Research revenue declined 6% to $122.6 million in the fourth quarter and 7% to $496.4 million for the fiscal year, compared to the year-ago periods. Research contract value, the annualized value of all subscription-based research contracts in effect at a given time, declined 11% to $496.0 million from a year ago.

Consulting revenue remained relatively flat at $79.5 million in the fourth quarter and $273.7 million for the fiscal year, compared to the year-ago periods. Consulting backlog, the future revenue to be derived from in-process consulting and measurement engagements, declined 10% to $107.6 million from a year ago.

Events revenue increased 9% to $15.0 million in the fourth quarter and declined 8% to $122.0 million for the fiscal year, compared to the year-ago periods. Events deferred revenue, the unearned revenue from billed events, declined 24% to $53.6 million from a year ago.

Cash Flow
Gartner Chief Financial & Administrative Officer, Maureen E. O'Connell, said, "We remain committed to building value through an intense focus on profitability and strong, consistent cash flow through rigorous expense control and productivity gains. That financial discipline has enabled us to deliver - and even exceed - our profitability goals, achieving double-digit EBITDA growth for the last two years. Our full-year EBITDA margin improved almost 3 points to 17% and our quarterly EBITDA margin was 19% for the second quarter in a row - only 1 point away from our long-term target of 20%.

"At the same time, we have significantly bolstered our financial stability by increasing liquidity and enhancing our balance sheet. As a result, we have no short-term debt and an unused $200 million line of credit. We continue to be consistently strong cash generators and have grown our cash balance from $37 million a year ago to $125 million at September 30, even while spending $47 million to repurchase our common stock during the fiscal year."

Stock Repurchase
Gartner purchased $13 million of its common stock in the open market in the fourth quarter, bringing the total to $47 million for the 2002 fiscal year and $70 million since the $75 million stock repurchase program was announced in July 2001. On August 1, 2002, the Company announced a $50 million extension to that buyback program.

Change in Fiscal Year End
Gartner's board of directors has approved a change of the Company's fiscal year end from September 30th to December 31st. The change in the fiscal year end will better align the Company's overall operations with its sales organization, which was already operating under a December 31st year end to correspond with the majority of its clients. The Company intends to file an audited Form 10-K for both the fiscal year ended September 30, 2002, and the three months ended December 31, 2002. The Company plans to issue a press release and hold its regular conference call to discuss results for the three months ended December 31, 2002. The adoption of the change in fiscal year end is not expected to have a material impact on the Company's financial statements.

Other Developments
The Company expects to incur a charge of an estimated $25 million in the quarter ending December 31, 2002, for reductions in facilities, headcount and other areas as it continues to align business resources with revenue expectations.

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, 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.

Said O'Connell, "We believe that in the latter half of '03, we can stabilize revenue and begin to grow research contract value. Under this scenario, we intend to move to a prudent balance between generating profitability/EBITDA at or near current levels while maintaining a streamlined cost structure and applying resources with an intense focus on turning around research contract value."

Based on the current fiscal year and a continuing difficult business environment, the Company's high-level guidance for the 2003 fiscal year is for total revenue and earnings to be flat to slightly down. O'Connell said, "Due to the shift in our fiscal year end and the resulting change to our normal business planning process over the next few months, we will give more detailed guidance for fiscal '03 with our next quarterly update."

For the quarter ended December 31, 2002, the Company is targeting:
  • Total revenue of approximately $222 million to $232 million.
  • Research revenue of approximately $114 million to $119 million; consulting revenue of approximately $57 million to $61 million; events revenue of approximately $47 million; and other revenue of approximately $4 million to $5 million.
  • EBITDA of approximately $30 million to $36 million.
  • Normalized EPS of $0.09 to $0.13 on 130 million diluted shares.
Conference Call Information
The Company has scheduled a conference call with investors at 10:00 a.m. ET on Wednesday, October 30, 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 excluding depreciation, amortization and other charges. Other charges are described in full in Footnote 1 of the 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 net gain (loss) from sale of a business, and include any dilutive effect of the convertible long-term debt. Normalized results for the prior year also exclude goodwill amortization on an after-tax basis due to the adoption of SFAS 142. See "Supplemental Information" at the end of this release.

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/investorsand 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
www.gartner.com/investors
 Media Contact:
Carol Wallace
Vice President, Public Relations
+ 1 203 316 3575
 carol.wallace@gartner.com








(Note: segment expenses include cost of services, depreciation and select G&A expenses.)



General Notes
  • 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 net gain (loss) from sale of a business, and include any dilutive effect of the convertible long-term debt. Normalized results for the prior year also exclude goodwill amortization on an after-tax basis due to the adoption of SFAS 142.
  • The effective tax rate was 34% for fiscal 2002 and 37% for fiscal 2001.

    Footnotes
    (1) After-tax interest on convertible long-term debt is added back to income when calculating EPS, unless anti-dilutive.
    (2) Goodwill amortization was discontinued in fiscal 2002 with the adoption of SFAS 142. Normalized EPS for fiscal 2001 has been restated to exclude goodwill amortization, consistent with fiscal 2002.
    (3) An after-tax gain of $0.3 million from the sale of a business was recorded during the second quarter of fiscal 2002.
    (4) Common share equivalents (including options and convertible debt) are included in diluted EPS, unless the resulting EPS calculation is anti-dilutive.
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