Gartner, Inc. (IT)

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Gartner, Inc. (IT)

Q1 2009 Earnings Call

May 8, 2009 10:00 am ET

Executives

Hank Diamond - Group Vice President Investor Relations

Eugene A. Hall - Chief Executive Officer, Director

Christopher J. Lafond - Chief Financial Officer, Executive Vice President

Analysts

Peter P. Appert - Piper Jaffray & Co.

William Sutherland - Boenning & Scattergood

David Lewis - JP Morgan

Brian Murphy - Sidoti & Company

Laura Lederman - William Blair

Presentation

Operator

Good morning, ladies and gentlemen. Welcome to Gartner Inc.’s earnings conference call for the first quarter of 2009. (Operator Instructions) I will now turn the conference over to Hank Diamond, Group Vice President of Investor Relations and Corporate Finance for opening remarks and introductions. Please go ahead, 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 expression 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 www.gartner.com, or on the first call 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 statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations in 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 2008.

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 highlights of our first quarter 2009 financial results. Starting with earnings, EPS from continuing operations increased 50% year over year to $0.21, net income was $20 million, and normalized EBITDA increased 20% year over year to $48.3 million.

At March 31, 2009, contract value, which is a key leading indicator for Gartner's research business, was $760.7 million. Excluding the impact of foreign exchange, contract value increased 2% year over year.

Revenue increased 1% year over year excluding the impact of foreign exchange and was $273.5 million for the first quarter. Cash from operations increased 4% year over year to $14.8 million and capital expenditures were $4.5 million.

Finally, on the balance sheet, as of March 31, 2009, the company had total debt of $338 million and cash of $70.3 million.

In addition to announcing first quarter earnings, we raised the low end of our full year 2009 guidance for EPS from continuing operations in normalized EBITDA and we reiterated our guidance for revenue and cash flow from operations. Now, I would like to turn the call over to Gartner's Chief Executive Officer, Gene Hall.

Eugene A. Hall

Thanks, Hank. Good morning, everyone. Thanks for joining us. There are four key points that I would like you all to take away from our call today. First, our results last quarter continue to demonstrate the value our research provides in supporting the critical need to run effective and cost efficient IT operations and programs. As a result, we are well-positioned to succeed in both good economies and bad.

Second, we are effectively executing a strategy to both control expenses and maximize profitability during the current downturn, while at the same time positioning the company for long-term growth.

Third, our businesses are performing well. Revenue trends are in line with our expectations and our focus on controlling costs allowed us to generate substantial earnings growth and solid cash flow in the first quarter.

And fourth, we are well-positioned to quickly return to double-digit revenue and earnings growth as the global economy returns to more normal activity levels and we remain confident in our long-term outlook.

Now let me now address each of these points in more detail. Starting with point one, Gartner's well-positioned to succeed in the current economic environment. Our three businesses -- research, consulting, and events -- have strong synergies with a clear focus on IT cost optimization and effectiveness.

This portfolio of products provides a comprehensive suite of offerings that support critical operational and strategic decisions that IT leaders must make to run effective and cost-efficient IT programs. Our research provides our clients with tremendous value at relatively small cost and in fact is often self-funding.

Our size and scale is a significant competitive advantage at a time when companies are scrutinizing every expense to ensure that value is being delivered. With almost 1,200 analysts and consultants, we continue to demonstrate that our research offerings are differentiated in this market.

Importantly, the extremely low single-digit turnover in our analyst community means that our clients will build relationships and work with the same analysts over many years.

Read the rest of this transcript for free on seekingalpha.com