STAMFORD, Conn., October 30, 2003 — Gartner, Inc. (NYSE: IT and ITB), the world's leading technology research and advisory firm, today reported results for the third quarter and nine months ended September 30, 2003.
Results for the recent quarter were in line with the Company's prior guidance:
Total revenue was $197 million, an 11% decrease from the same period of 2002.
Net income was $5 million, or $0.07 per diluted share on a GAAP and normalized basis. Net income for the year ago quarter was $16 million, or $0.15 per diluted share on a GAAP and normalized basis.
Research contract value was $470 million, compared with $468 million in the June quarter. Client retention in Research reached 76%, a one-point increase from the same period of 2002. Wallet share, a measure of dollar retention in the Research business was 85%, compared with 80% in the same period last year.
Consulting backlog was $93 million, an increase of $2 million over the second quarter.
For the first nine months of 2003:
Total revenue was $615 million, a decrease of 7% from the comparable 2002 period.
Net income was $17 million, or $0.21 per diluted share, on a GAAP basis. For the same nine months of 2002, net income was $30 million, or $0.30 per diluted share on a GAAP basis.
Normalized EPS was $0.21 and $0.39 per diluted share for the nine-month periods of 2003 and 2002, respectively. See "Non-GAAP Financial Measures" for a further discussion of normalized EPS.
Michael Fleisher, Gartner's chairman and chief executive officer, stated, "In the third quarter, we began to see an increase in Research contract value and Consulting backlog, as well as strength in other key business measures such as client retention and wallet share. These are positive indications that we have begun to make inroads within our target companies through our sales channel strategy."
Chris Lafond, executive vice president and chief financial officer, commented, "Our recent note conversion eliminated our debt, greatly strengthening our balance sheet. In addition our cash position has nearly doubled since December bolstering our financial flexibility."
Business Segment Highlights
Research revenue was $116 million for the 2003 third quarter, a 6% decrease from the same period of 2002. For the first nine months of 2003, Research revenue totaled $349 million, a decrease of 5% from the same period last year. Research contract value was $470 million at the quarter end, an increase of $2 million over the June quarter and the first sequential increase in contract value in two years. Client retention in Research improved one percentage point over the second quarter, to 76%. Wallet share, a measure of dollar retention in the Research business, improved two percentage points over the June quarter to 85%, and five percentage points over the same period last year.
Consulting revenue was $63 million for the latest quarter, a decline of 21% from the comparable 2002 period. For the first nine months of 2003, Consulting revenue was $191 million, a 12% decrease from a year ago. The Consulting backlog was $93 million at September 30, 2003, versus $91 million at June 30, 2003.
Events revenue was $16 million for the third quarter of 2003, rising 6% from a year ago, on the strength of three successful new events. There were three fewer events overall in the quarter compared with the prior year. For the first nine months of 2003, Events revenue totaled $65 million, an increase of 3% over the prior year period.
Gartner's cash position increased to $207 million at September 30, 2003, compared with $110 million at December 31, 2002. The Company repurchased $9 million in common stock during the quarter and $32 million year to date. In October 2003 the Company completely eliminated its debt as a result of the conversion into common stock of Silver Lake Partners' convertible subordinated notes. The notes were converted into approximately 49.4 million shares of Gartner Class A common stock. The conversion will have no negative effect on reported diluted earnings per share, as the shares issued already had been factored into the Company's fully diluted EPS calculations.
Management
As previously announced, Maureen O'Connell, formerly executive vice president and chief financial and administrative officer, was named to the new position of president and chief operating officer, with responsibility for all business units, and sales and marketing functions. Chris Lafond succeeded Ms. O'Connell, as executive vice president and chief financial officer. Mr. Lafond has held positions of increasing responsibility in the finance organization since joining Gartner in 1995, most recently head of worldwide financial operations. Additionally, the Company announces that Robert Knapp, executive vice president and chief strategy officer, will be leaving the Company to pursue other opportunities, but will remain in place during a transition period.
Business Outlook
For the fourth quarter ending December 31, 2003, the Company is targeting:
Total revenue of approximately $230 million to $241 million.
Research revenue of approximately $112 million to $115 million.
Consulting revenue of approximately $63 million to $68 million.
Events revenue of approximately $52 million to $54 million.
Other revenue of approximately $3 million to $4 million.
GAAP and Normalized EPS of $0.16 to $0.20 per share on 129 million diluted shares. See "Non-GAAP Financial Measures" for a further discussion of normalized EPS.
For the full year ending December 31, 2003, the Company is targeting:
Total revenue of approximately $844 million to $855 million.
Research revenue of approximately $461 million to $464 million.
Consulting revenue of approximately $254 million to $259 million.
Events revenue of approximately $117 million to $119 million.
Other revenue of approximately $12 million to $13 million.
GAAP and Normalized EPS of $0.37 to $0.41 per share on 129 million diluted shares. See "Non-GAAP Financial Measures" for a further discussion of normalized EPS.
Conference Call Information
The Company has scheduled a conference call at 10:00 a.m. ET on Thursday, October 30, 2003, 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 following the call.
About Gartner:
Gartner, Inc. is the leading provider of
research and analysis on the global information technology industry. Gartner serves more
than 10,000 clients, 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 focuses on delivering objective, in-depth analysis
and actionable advice to enable clients to make more informed business and technology
decisions. The Company's businesses consist of Gartner Intelligence, research and
events for IT professionals; Gartner Executive Programs, membership programs and peer
networking services; and Gartner Consulting, customized engagements with a specific
emphasis on outsourcing and IT management. Founded in 1979, Gartner is headquartered in
Stamford, Connecticut, and has 3,700 associates, including more than 1,000 research
analysts and consultants, in more than 75 locations worldwide. For more information,
visit www.gartner.com.
Non-GAAP Financial Measures
Investors are cautioned that normalized EPS information contained in this press release is not a financial measure under generally accepted accounting principles. In addition, it should not be construed as an alternative to any other measures of performance determined in accordance with generally accepted accounting principles. This non-GAAP financial measure is 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 EPS is an important measure of our recurring operations as it excludes items that may not be indicative of our core operating results and calculates earnings per share in a manner consistent with prior periods by including the effect of debt conversion. Normalized EPS is based on net income, excluding other charges, gains and losses on investments, and gains from the sale of businesses. Normalized EPS includes the effect of the convertible debt as if it had been converted as of the beginning of each period. This calculation reflects the expectation that the convertible debt will have a dilutive effect on EPS for the full year of 2003. [See "Supplemental Information" at the end of this release for a reconciliation of GAAP net income and EPS to normalized net income and EPS.]
Safe Harbor Statement
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. 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 revenue 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 Transitional Report on Form 10-KT for the three month transitional period ended December 31, 2002. These filings can be found on Gartner's Web site 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.
