Gartner, Inc. (IT)

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Gartner Inc. (IT)

Q4 2008 Earnings Call

February 5, 2009 10:00 am ET


Hank Diamond – Vice President of Investor Relations and Corporate Finance

Gene Hall – Chief Executive Officer

Chris Lafond – Executive Vice President and Chief Financial Officer


Jeff King – William Blair

Peter Appert – Piper Jaffrey

Dave Lewis – JPMorgan

Brian Murphy – Sidoti & Company



Good morning and welcome to Gartner, Incorporated earnings conference call for the fourth quarter and full year 2008. (Operator Instructions). I will now turn the conference call over to Mr. Hank Diamond, Group Vice President of Investor Relations and Corporate Finance for opening remarks and introductions. Please go head, sir.

Hank Diamond

Good morning everyone and thank you all for joining us. On the call with me today are Gartner's CEO, Gene Hall and CFO Chris Lafond. Before we discuss our results I would like to remind everyone of four things. First, the rebroadcast, reproduction and retransmission of this conference call or webcast without the express written consent of Gartner are strictly prohibited. Second, if you did not receive a copy of our press release it is available on our website at or on the FirstCall system.

Third, the company will be making statements about its future results and other forward-looking statements during this call. Statements about future results made during the call constitute forward-looking statement within the meaning of the Private Securities and Litigation Reform Act of 1995. These statements are based on current expectations and the current economic environment.

Forward-looking statements and projections are inherently subject to significant economic competitive and other uncertainties and contingencies which are beyond the control of management. The company cautions that these statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements. Important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements and projections, are specified in the company's filings with the SEC, including in its annual report on Form 10-K for fiscal year 2007.

Finally, during the call the company will be using certain non-GAAP financial measures as defined under SEC rules. Where required we have provided a reconciliation of those measures to the most direct comparable GAAP measures in the tables and the press release.

Before I turn the call over to our CEO, let me briefly review the major points from today's press release. At December 31, 2008, contract value, which is a key leading indicator for Gartner's research business was a record $834 million, up 11% year-over-year as reported and 8% excluding the impact of foreign exchange.

Revenue for fourth quarter 2008 was $347 million, a year-over-year increase of 1% as reported and 6% excluding the impact of foreign exchange. And revenue for the full year 2008 was $1.279 billion, an increase of 9% as reported and 8% excluding the impact of foreign exchange. EPS from continuing operations for fourth quarter 2008 was $0.35 per share versus $0.36 per share in fourth quarter 2007 and EPS from continuing operations for full year 2008 was $0.98, up 51% over 2007.

For the fourth quarter 2008 net income was $34 million and the normalized EBITDA was $66 million. For the full year net income was $104 million, up 41% versus 2007 and the normalized EBITDA was $213 million, up 12% versus 2007.

Turning to cash flow and liquidity, for the full year 2008 Gartner generated $184 million of operating cash flow, up 24% versus 2007 and spent $24 million on capital expenditures. During 2008 the company repurchased 9.7 million shares of its stock for a total of $199 million. On the balance sheet the company had total debt of $416 million and cash of $141 million as of December 31, 2008.

Now, I would like to turn the call over to Gartner's Chief Executive Officer, Gene Hall.

Gene Hall

Thanks, Hank. Good morning everyone and thanks for joining us. During 2008 Gartner grew its total revenue by 9%, including 15% growth in revenue from our research segment. We expanded our profit margins. We generated $184 million of operating cash flow, added new clients and ended the year with record contract value.

We achieved these results despite an already weak economic environment which deteriorated sharply and rapidly during the fourth quarter. Our results demonstrate the tremendous value that our services provide to our clients, our vast market opportunity and the effective management of IT programs and investments is always a critical business function.

Even during the fourth quarter when macroeconomic conditions worsened substantially, we were able to grow our revenue and EPS due to the resiliency of our resulting research and consulting businesses. Although companies became increasingly more cautious on spending in November and December, both our existing and potential clients continue to recognize the importance of using Gartner services. As a result we were able to deliver 11% FX neutral growth in research revenues and 8% FX neutral growth in consulting revenues.

In research we grew contract value to a record of $834 million at December 31st. Up 8% year-over-year excluding the impact of foreign exchange. This growth was broad-based across all industry sectors, including financial services, and was driven by sales to both existing clients and new client enterprises. We added 201 net new enterprises as clients in the fourth quarter, growing our base of client enterprises by 3% versus the third quarter and 5% year-over-year.

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