Gartner, Inc. (IT)

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Gartner Inc. (IT)

Q3 2012 Results Earnings Call

November 2, 2012 8:30 AM ET

Executives

Brian Shipman - Group Vice President, Investor Relations

Gene Hall - Chief Executive Officer

Chris Lafond - Chief Financial Officer

Analysts

Tim McHugh - William Blair

Peter Appert - Piper Jaffray

Brian Karimzad - GS

Dan Leben - Robert W. Baird

Anj Singh - Credit Suisse

Gary Bisbee - Barclays

Bill Sutherland - Northland Capital

Presentation

Operator

Good morning, ladies and gentlemen. And welcome to the Gartner’s Earnings Conference Call for the Third Quarter 2012. A replay of this call will be available through December 3, 2012. The replay can be accessed by dialing 888-286-8010 for domestic calls and 617-801-6888 for international calls, and by entering the passcode 87651517. This call is being simultaneously webcast and will be archived on Gartner’s website at www.gartner.com for approximately 90 days.

I will now turn the conference over to Brian Shipman, Gartner’s Group Vice President of Investor Relations for opening remarks and introductions. Please go ahead, sir.

Brian Shipman

Thank you, and good morning, everyone. Welcome to Gartner’s third quarter 2012 earnings call. With me today is our Chief Executive Officer, Gene Hall; and our Chief Financial Officer, Chris Lafond.

This call will begin with a discussion of Q3 2012 financial results disclosed in today’s press release, followed by an opportunity for you to ask questions. I’d like to remind everyone that the press release is available on our website, that URL is www.gartner.com.

Before we begin, we need to remind you that certain statements made on this call may constitute forward-looking statements. Forward-looking statements can vary materially from actual results, and are subject to a number of risks and uncertainties, including those contained in the company’s 2011 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as in other filings with the SEC. I would encourage all of you to review the risk factors listed in these documents. The company undertakes no obligation to update any of its forward-looking statements.

With that, I would like to hand the call over to Gartner’s Chief Executive Officer, Gene Hall. Gene?

Gene Hall

Good morning, everyone. Welcome to our quarterly earnings call and thanks for joining us. We had a great Q3 and our business performed well across all three segments, consistent with our performance since 2009.

For the third quarter, our Research segment achieved double-digit growth in contract value across all regions and in all industry segments. We also achieved 83% client retention, which is an all-time high. Year-over-year, we added more than 800 new client organizations.

Our Consulting segment has strong bookings with our backlog up 14% year-over-year. Our Event segment revenues were up 17% year-over-year on a same Events and FX neutral basis. We’ve achieved these results because of the tremendous value we bring our clients.

This is a unique and exciting time to be an IT. Information technology continues to be the most important driver of growth and productivity for the global economy. But IT’s complex never changing. It’s tough to get it right.

To find solutions to the challenges, CIOs and senior business and IT leaders are coming to Gartner. Gartner is a single best source for the facts, the analysis and the roadmaps our clients need to succeed in this era of unprecedented uncertainty. Our value proportion is stronger today then it’s ever been, putting the Gartner brand and it classify itself.

As you heard me say before, the fundamentals of our strategy are to create extraordinary research insights to build strong sales capability, to deliver high-value differentiate offerings, to provide world-class service and to continue improve our operational effectiveness. This strategy has been successful across all our lines of business and across all geographies.

Gartner Symposium/ITxpo is our flagship event series and it’s the world’s most important gathering of CIOs and senior IT executives. I just return from a symposium in Orlando, Florida, where we hosted more than 10,000 attendees, which is up more than 18% over last year, and it included more than 2,300 CIOs. It was a largest event yet, it set new records for both attendance and revenue.

At this even I spoke with the number of our clients and I can tell you, they are incredibly excited about the impact of IT on the enterprises and the critical role Gartner plays in helping to achieve their enterprises objectives.

As with the opportunities speak with a large number of our sales people this event and they is enthusiastic about Gartner’s brand and marketing opportunity as I’ve ever seen before.

Like our clients and sales people, I too, I’m extremely excited about Gartner. We have a vast untapped market opportunity, with the right strategy, with the right economic model and the right operating approaches. With these, I believe we will continue to deliver sustained profitable growth over the long-term.

With that, I’ll turn it over to Chris for additional details, our results, and financial outlook.

Chris Lafond

Thanks, Gene, and good morning, everyone. We deliver another very strong quarter of Q3. On an FX neutral basis we once again achieved double-digit growth in revenue, earnings and cash flow. In Research, year-over-year contract value growth remained strong at 14% on an FX neutral basis and retention rates ended at or near all-time highs.

In Events, our same events revenue were up 17% FX neutral and accelerated in Q3 from Q2, and in Consulting, our benchmark and core consulting practices grew a combined 7% year-over-year FX neutral.

Demand for our services was robust across all three business segments in the third quarter. Our strong topline performance and effective execution in capitalizing on the operating leverage in our business allowed us to once again expand our gross contribution margin, which is now at 60%, up from 59% in Q3 2011.

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