Contract Value $4.7 billion, +8.1% YoY FX
Neutral
THIRD QUARTER 2023 HIGHLIGHTS
- Revenues: $1.4 billion, +5.8% as reported; +4.9% FX
neutral.
- Net income: $180 million, +3.7% as reported; adjusted EBITDA:
$333 million, +0.6% as reported, +0.1% FX neutral.
- Diluted EPS: $2.26, +4.1%; adjusted EPS: $2.56, +6.2%.
- Operating cash flow: $331 million, +5.1%; free cash flow: $302
million, +6.9%.
- Repurchased 0.6 million common shares for $209 million.
- Board of Directors increased the share repurchase authorization
by $500 million in October 2023.
Gartner, Inc. (NYSE: IT) today reported results for the third
quarter of 2023 and updated its financial outlook for the full year
2023. Additional information regarding the Company’s results as
well as the updated 2023 financial outlook is provided in an
earnings supplement available on the Company’s Investor Relations
website at https://investor.gartner.com.
Gene Hall, Gartner’s Chief Executive Officer, commented,
“Gartner delivered another strong quarter with high single-digit
growth in contract value and better than expected performance in
revenue, profitability, and free cash flow. We are increasing our
2023 guidance and positioning ourselves well for 2024 and
beyond.”
CONFERENCE CALL INFORMATION
The Company will host a webcast call at 8:00 a.m. Eastern time
on Friday, November 3, 2023 to discuss the Company’s financial
results. Listeners can access the webcast live at
https://edge.media-server.com/mmc/p/4j84zigo. To participate
actively in the live call via dial-in, please register at
https://register.vevent.com/register/BI71f8585fb7c34da3be153f56669ef2f2.
Once registered, participants will receive a dial-in number and a
unique PIN to access the call. A replay of the webcast will be
available on the Company’s website for approximately 30 days
following the call.
CONSOLIDATED RESULTS HIGHLIGHTS
(Unaudited; $ in millions, except per share amounts)
Three Months Ended
September 30,
Inc/(Dec)
2023
2022
Inc/(Dec)
FX Neutral
GAAP Metrics:
Revenues
$
1,409
$
1,332
5.8
%
4.9
%
Net income
180
174
3.7
%
na
Diluted EPS
2.26
2.17
4.1
%
na
Operating cash flow
331
315
5.1
%
na
Non-GAAP Metrics:
Adjusted EBITDA
$
333
$
332
0.6
%
0.1
%
Adjusted EPS
2.56
2.41
6.2
%
na
Free cash flow
302
283
6.9
%
na
na=not available.
CONTRACT VALUE HIGHLIGHTS
- Global Technology Sales Contract Value (GTS CV): $3.6 billion,
+6.5% YOY FX Neutral
- Global Business Sales Contract Value (GBS CV): $1.0 billion,
+14.0% YOY FX Neutral, excluding the previously disclosed
divestiture
SEGMENT RESULTS HIGHLIGHTS
Our segment results for the three months
ended September 30, 2023 were as follows: (Unaudited; $ in
millions)
Research
Conferences
Consulting
Revenues
$
1,219
$
57
$
133
Inc/(Dec)
6.2
%
(25.7
)%
24.1
%
Inc/(Dec) - FX neutral
5.3
%
(26.0
)%
23.2
%
Gross contribution
$
894
$
20
$
49
Inc/(Dec)
5.4
%
(49.3
)%
30.5
%
Contribution margin
73.4
%
35.8
%
36.5
%
nm=not meaningful.
Additional details regarding our segment results can be obtained
from the earnings supplement, our quarterly report on Form 10–Q
filed with the SEC on November 3, 2023 and our webcast.
Certain financial metrics contained in this Press Release are
considered non-GAAP financial measures. Definitions of these
non-GAAP financial measures are included in this Press Release
under “Non-GAAP Financial Measures” and the related reconciliations
are under “Supplemental Information — Non-GAAP Reconciliations.” In
this Press Release, some totals may not add due to rounding. The
percentage changes are based on the unrounded whole number and
recalculation based on millions may yield a different result.
ABOUT GARTNER
Gartner, Inc. (NYSE: IT) delivers actionable, objective insight
that drives smarter decisions and stronger performance on an
organization’s mission-critical priorities.
FORWARD LOOKING STATEMENTS
Statements contained in this press release regarding the
Company’s growth and prospects, projected financial results,
long-term objectives, and all other statements in this release
other than recitation of historical facts are forward-looking
statements within the meaning of Section 27A of the Securities
Exchange Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such forward-looking statements
involve known and unknown risks, estimates, uncertainties and other
factors that may cause actual results to be materially different.
Such forward-looking statements involve known and unknown risks,
estimates, uncertainties and other factors that may cause actual
results to be materially different. Such factors include, but are
not limited to, the following: the impact of general economic
conditions, including inflation (and related monetary policy by
governments in response to inflation), on economic activity and our
operations; changes in macroeconomic and market conditions and
market volatility, including interest rates and the effect on the
credit markets and access to capital; the impact of global economic
and geopolitical conditions, including inflation, and recession;
our ability to carry out our strategic initiatives and manage
associated costs; our ability to recover potential claims under our
event cancellation insurance; the timing of conferences and
meetings, in particular our Gartner Symposium/Xpo series that
normally occurs during the fourth quarter; our ability to achieve
and effectively manage growth, including our ability to integrate
our acquisitions and consummate and integrate future acquisitions;
our ability to pay our debt obligations; our ability to maintain
and expand our products and services; our ability to expand or
retain our customer base; our ability to grow or sustain revenue
from individual customers; our ability to attract and retain a
professional staff of research analysts and consultants as well as
experienced sales personnel upon whom we are dependent, especially
in light of labor competition; our ability to achieve continued
customer renewals and achieve new contract value, backlog and
deferred revenue growth in light of competitive pressures; our
ability to successfully compete with existing competitors and
potential new competitors; our ability to enforce and protect our
intellectual property rights; additional risks associated with
international operations, including foreign currency fluctuations;
the impact on our business resulting from changes in international
conditions, including those resulting from the war in Ukraine and
current and future sanctions imposed by governments or other
authorities; the impact of restructuring and other charges on our
businesses and operations; cybersecurity incidents; risks
associated with the creditworthiness, budget cuts, and shutdown of
governments and agencies; our ability to meet ESG commitments; the
impact of changes in tax policy (including the Inflation Reduction
Act of 2022) and heightened scrutiny from various taxing
authorities globally; changes to laws and regulations; and other
risks and uncertainties described under “Risk Factors” in our most
recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K, which can be found on Gartner’s
website at https://investor.gartner.com and the SEC’s website at
www.sec.gov. Forward-looking statements included herein speak only
as of the date hereof and Gartner 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, except as required by applicable law.
NON-GAAP FINANCIAL MEASURES
Certain financial measures used in this Press Release are not
defined by U.S. generally accepted accounting principles (“GAAP”)
and as such are considered non-GAAP financial measures. We provide
these measures to enhance the user’s overall understanding of the
Company’s current financial performance and the Company’s prospects
for the future. Investors are cautioned that these non-GAAP
financial measures may not be defined in the same manner by other
companies and, as a result, may not be comparable to other
similarly titled measures used by other companies. Also, these
non-GAAP financial measures should not be construed as
alternatives, or superior, to other measures determined in
accordance with GAAP. The non-GAAP financial measures used in this
Press Release are defined below.
Adjusted EBITDA and Adjusted EBITDA Margin: Represents
GAAP net income (loss) adjusted for: (i) interest expense, net;
(ii) tax provision (benefit); (iii) gain on event cancellation
insurance claims, as applicable; (iv) gain/loss on divestitures, as
applicable; (v) other (income) expense, net; (vi) stock-based
compensation expense; (vii) depreciation, amortization, and
accretion; (viii) loss on impairment of lease related assets, as
applicable; and (ix) acquisition and integration charges and
certain other non-recurring items. Adjusted EBITDA Margin
represents Adjusted EBITDA divided by GAAP Revenue. We believe
Adjusted EBITDA and Adjusted EBITDA Margin are important measures
of our recurring operations as they exclude items not
representative of our core operating results.
Adjusted Net Income: Represents GAAP net income (loss)
adjusted for the impact of certain items directly related to
acquisitions and other non-recurring items. These adjustments
include: (i) the amortization of acquired intangibles; (ii)
acquisition and integration charges and other non-recurring items;
(iii) gain on event cancellation insurance claims, as applicable;
(iv) gain/loss on divestitures, as applicable; (v) loss on
impairment of lease related assets, as applicable; (vi) the
non-cash (gain) loss on de-designated interest rate swaps, as
applicable; and (vii) the related tax effect. We believe Adjusted
Net Income is an important measure of our recurring operations as
it excludes items that may not be indicative of our core operating
results.
Adjusted EPS: Represents GAAP diluted EPS adjusted for
the impact of certain items directly related to acquisitions and
other non-recurring items. These adjustments include on a per share
basis: (i) the amortization of acquired intangibles; (ii)
acquisition and integration charges and other non-recurring items;
(iii) gain on event cancellation insurance claims, as applicable;
(iv) gain/loss on divestitures, as applicable; (v) loss on
impairment of lease related assets, as applicable; (vi) the
non-cash (gain) loss on de-designated interest rate swaps, as
applicable; and (vii) the related tax effect. We believe Adjusted
EPS is an important measure of our recurring operations as it
excludes items that may not be indicative of our core operating
results.
Free Cash Flow: Represents cash provided by operating
activities determined in accordance with GAAP less payments for
capital expenditures. We believe Free Cash Flow is an important
measure of the recurring cash generated by the Company’s core
operations that may be available to be used to repay debt
obligations, repurchase our stock, invest in future growth through
new business development activities, or make acquisitions.
Foreign Currency Neutral (FX Neutral): We provide foreign
currency neutral dollar amounts and percentages for our contract
values, revenues, certain expenses, and other metrics. These
foreign currency neutral dollar amounts and percentages eliminate
the effects of exchange rate fluctuations and thus provide a more
accurate and meaningful trend in the underlying data being
measured. We calculate foreign currency neutral dollar amounts by
converting the underlying amounts in local currency for different
periods into U.S. dollars by applying the same foreign exchange
rates to all periods presented.
SUPPLEMENTAL INFORMATION - NON-GAAP RECONCILIATIONS
The tables below provide reconciliations of certain Non-GAAP
financial measures used in this Press Release with the most
directly comparable GAAP measure. See “Non-GAAP Financial Measures”
above for definitions of these measures.
Reconciliation - GAAP Net Income to
Adjusted EBITDA (Unaudited; $ in millions)
Three Months Ended September
30,
2023
2022
GAAP net income
$
180
$
174
Interest expense, net
22
30
Other income, net
(2
)
(9
)
Tax provision
44
59
Operating income
244
253
Adjustments:
Stock-based compensation expense (a)
27
21
Depreciation, amortization and accretion
(b)
49
47
Loss on impairment of lease related assets
(c)
—
2
Acquisition and integration charges and
other non-recurring items (d)
13
8
Adjusted EBITDA
$
333
$
332
(a) Consists of costs for stock-based
compensation awards.
(b) Includes depreciation expense,
amortization of intangibles and accretion on asset retirement
obligations.
(c) Includes impairment loss for lease
related assets.
(d) Consists of direct and incremental
expenses related to acquisitions and divestitures, facility-related
exit costs and other non-recurring items.
Reconciliation - GAAP Net Income and
GAAP Net Income per Diluted Share to Adjusted Net Income and
Adjusted EPS (Unaudited; $ in millions, except per share
amounts)
Three Months Ended September
30,
2023
2022
Amount
Per Share
Amount
Per Share
GAAP net income and GAAP net income per
diluted share
$
180
$
2.26
$
174
$
2.17
Acquisition and other adjustments:
Amortization of acquired intangibles
(a)
24
0.30
24
0.30
Acquisition and integration charges and
other non-recurring items (b), (c)
14
0.18
9
0.11
Loss on impairment of lease related assets
(d)
—
—
2
0.03
Gain on de-designated interest rate swaps
(e)
(3
)
(0.03
)
(11
)
(0.14
)
Tax impact of adjustments (f)
(12
)
(0.16
)
(5
)
(0.06
)
Adjusted net income and Adjusted EPS
(g)
$
203
$
2.56
$
193
$
2.41
(a) Consists of non-cash amortization from
acquired intangibles.
(b) Consists of direct and incremental
expenses related to acquisitions and divestitures, facility-related
exit costs and other non-recurring items.
(c) Includes the amortization and
write-off of deferred financing fees, which are recorded in
Interest expense, net in the Company’s accompanying Condensed
Consolidated Statements of Operations.
(d) Includes impairment loss for lease
related assets.
(e) Represents the fair value adjustment
for interest rate swaps after de-designation.
(f) The blended effective tax rates on the
adjustments were approximately 34.9% and 20.2% for the three months
ended September 30, 2023 and 2022, respectively.
(g) Adjusted EPS was calculated based on
79.5 million and 80.1 million diluted shares for the three months
ended September 30, 2023 and 2022, respectively.
Reconciliation - GAAP Cash Provided by
Operating Activities to Free Cash Flow (Unaudited; $ in
millions)
Three Months Ended September
30,
2023
2022
GAAP cash provided by operating
activities
$
331
$
315
Cash paid for capital expenditures
(28
)
(32
)
Free Cash Flow
$
302
$
283
GARTNER, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in millions, except per share data)
Three Months Ended
September 30,
2023
2022
Revenues:
Research
$
1,218.8
$
1,147.8
Conferences
57.2
77.0
Consulting
132.8
107.0
Total revenues
1,408.8
1,331.8
Costs and expenses:
Cost of services and product
development
450.8
416.8
Selling, general and administrative
660.6
613.0
Depreciation
24.5
22.9
Amortization of intangibles
24.0
24.4
Acquisition and integration charges
4.5
1.3
Total costs and expenses
1,164.4
1,078.4
Operating income
244.4
253.4
Interest expense, net
(21.8
)
(30.3
)
Other income, net
1.9
8.9
Income before income taxes
224.5
232.0
Provision for income taxes
44.5
58.5
Net income
$
180.0
$
173.5
Net income per share:
Basic
$
2.28
$
2.19
Diluted
$
2.26
$
2.17
Weighted average shares outstanding:
Basic
78.9
79.3
Diluted
79.5
80.1
Source: Gartner, Inc. Gartner-IR
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231103858813/en/
David Cohen SVP, Investor Relations, Gartner +1 203.316.6631
investor.relations@gartner.com
Gartner (NYSE:IT)
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