Gartner Reports First Quarter 2022 Financial Results

Rhea-AI Summary

Gartner reported a strong Q1 2022 with revenues of $1.3 billion, a 14.4% increase year-over-year. Net income reached $173 million, and diluted EPS was $2.08, a 13.0% rise. Adjusted EBITDA stood at $329 million, up 2.6%, while free cash flow increased by 3.9% to $150 million. The company authorized an additional $500 million for share repurchases. Contract value increased by 16.3% year-over-year, with significant growth in Global Business Sales (+24.4%).

Positive

• Revenues increased by 14.4% YoY to $1.3 billion.
• Net income rose 5.1% YoY to $173 million.
• Diluted EPS improved 13.0% to $2.08.
• Adjusted EBITDA increased by 2.6% to $329 million.
• Contract value growth of 16.3% YoY, with Global Business Sales up 24.4%.
• Increased share repurchase authorization by $500 million.

Negative

• Global Business Sales revenues decreased by 58.3% year-over-year.

Total Contract Value $4.2 billion, +16.3% YoY FX Neutral 

FIRST QUARTER 2022 HIGHLIGHTS

• Revenues: $1.3 billion, +14.4% as reported; +16.4% FX neutral.
• Net income: $173 million; adjusted EBITDA: $329 million, +2.6% as reported, +4.7% FX neutral.
• Diluted EPS: $2.08, +13.0%; adjusted EPS: $2.33, +16.5%.
• Operating cash flow: $168 million; free cash flow: $150 million, +3.9%.
• Repurchased 1.6 million common shares for $451 million; 6.7% reduction in outstanding share count YOY.
• Board of Directors increased the share repurchase authorization by $500 million in April 2022.

STAMFORD, Conn.--(BUSINESS WIRE)-- Gartner, Inc. (NYSE: IT) today reported results for the first quarter of 2022 and updated its financial outlook for the full year 2022. Additional information regarding the Company’s results as well as an updated 2022 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 had a strong start to the year, led by contract value growth of 16%, and we are raising our 2022 outlook for Revenue, EBITDA and Free Cash Flow. We bought back more than $630 million of stock through April, which will serve to increase our per share results this year and beyond.”

CONFERENCE CALL INFORMATION

The Company will host a webcast call at 8:00 a.m. Eastern time on Tuesday, May 3, 2022 to discuss the Company’s financial results. The call will be available via the Company’s website at https://investor.gartner.com or by dialing 844-413-7151 (conference ID 8584527). 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 March 31,									Inc/(Dec)
		2022			2021			Inc/(Dec)			FX Neutral
GAAP Metrics:
Revenues		$	1,263		$	1,104		14.4	%		16.4	%
Net income			173			164		5.1	%		na
Diluted EPS			2.08			1.84		13.0	%		na
Operating cash flow			168			157		6.7	%		na
Non-GAAP Metrics:
Adjusted EBITDA		$	329		$	320		2.6	%		4.7	%
Adjusted EPS			2.33			2.00		16.5	%		na
Free cash flow			150			145		3.9	%		na

na=not available.

SEGMENT RESULTS HIGHLIGHTS

• Global Technology Sales Contract Value (GTS CV): $3.3 billion, +14.3% YOY FX Neutral
• Global Business Sales Contract Value (GBS CV): $0.9 billion, +24.4% YOY FX Neutral

Our segment results for the three months ended March 31, 2022 were as follows:

(Unaudited; $ in millions)
		Research				Conferences				Consulting
Revenues		$	1,136			$	10			$	116
Inc/(Dec)			16.0	%			(58.3	) %			16.6	%
Inc/(Dec) - FX neutral			17.9	%			(57.3	) %			19.9	%
Gross contribution		$	849			$	(3	)		$	51
Inc/(Dec)			17.3	%			(120.7	) %			30.5	%
Contribution margin			74.7	%			(27.8	) %			44.0	%

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 May 3, 2022 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 to executives and their teams. Our expert guidance and tools enable faster, 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 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 factors include, but are not limited to, the following: the impact of the COVID-19 pandemic and related disruptions on our business and on the global economy; the adequacy or effectiveness of steps we take to respond to the pandemic; 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, as well as the timing of our return to in-person conferences and meetings and willingness of participants to attend; 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 recent labor shortages; 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 carry out our strategic initiatives and manage associated costs; 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 of the war in Ukraine and current and future sanctions imposed by governments or other authorities; the U.K.’s exit from the European Union and its impact on our results; the impact of restructuring and other charges on our businesses and operations; cybersecurity incidents; general economic conditions; changes in macroeconomic and market conditions and market volatility, including interest rates and the effect on the credit markets and access to capital; risks associated with the creditworthiness, budget cuts, and shutdown of governments and agencies; the impact of changes in tax policy and heightened scrutiny from various taxing authorities globally; uncertainty from the discontinuance of LIBOR and transition to any other interest rate benchmark; 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) loss on extinguishment of debt, if applicable; (iv) gain on event cancellation insurance claims, if applicable; (v) other (income) expense, net; (vi) stock-based compensation expense; (vii) depreciation, amortization, and accretion; (viii) loss on impairment of lease related assets, net, if 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) loss on extinguishment of debt, if applicable; (iv) gain on event cancellation insurance claims, if applicable; (v) loss on impairment of lease related assets, net if applicable; (vi) the non-cash (gain) loss on de-designated interest rate swaps, if 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 net income (loss) per diluted share 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) loss on extinguishment of debt, if applicable; (iv) gain on event cancellation insurance claims, if applicable; (v) loss on impairment of lease related assets, net if applicable; (vi) the non-cash (gain) loss on de-designated interest rate swaps, if 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 March 31,
		2022				2021
GAAP net income		$	173			$	164
Interest expense, net			31				26
Other income, net			(29	)			(15	)
Tax provision			43				51
Operating income			217				225
Adjustments:
Stock-based compensation expense (a)			32				36
Depreciation, amortization and accretion (b)			49				56
Loss on impairment of lease related assets, net (c)			24				—
Acquisition and integration charges and other non-recurring items (d)			7				2
Adjusted EBITDA		$	329			$	320

(a) Consists of charges 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 incremental and directly-related charges related to acquisitions, facility-related exit costs, workforce reductions 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 March 31,
		2022								2021
		Amount				Per Share				Amount				Per Share
GAAP net income and GAAP net income per diluted share		$	173			$	2.08			$	164			$	1.84
Acquisition and other adjustments:
Amortization of acquired intangibles (a)			25				0.30				31				0.34
Acquisition and integration charges and other non-recurring items (b), (c)			8				0.10				3				0.04
Loss on impairment of lease related assets, net (d)			24				0.29				—				—
Gain on de-designated interest rate swaps (e)			(30	)			(0.36	)			(16	)			(0.18	)
Tax impact of adjustments (f)			(7	)			(0.08	)			(4	)			(0.05	)
Adjusted net income and Adjusted EPS (g)		$	193			$	2.33			$	178			$	2.00

(a) Consists of non-cash amortization charges from acquired intangibles.
(b) Consists of incremental and directly-related charges related to acquisitions, facility-related exit costs, workforce reductions 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 and in the Adjusted EBITDA table above.
(d) Includes impairment loss for lease related assets, net of a reduction in lease liabilities.
(e) Represents the fair value adjustment for interest rate swaps after de-designation.
(f) The blended effective tax rates on the adjustments were approximately 24.0% and 22.4% for the three months ended March 31, 2022 and 2021, respectively.
(g) Adjusted EPS was calculated based on 83.0 million and 89.1 million diluted shares for the three months ended March 31, 2022 and 2021, respectively.

Reconciliation - GAAP Cash Provided by Operating Activities to Free Cash Flow (Unaudited; $ in millions)
		Three Months Ended March 31,
		2022				2021
GAAP cash provided by operating activities		$	168			$	157
Cash paid for capital expenditures			(17	)			(13	)
Free Cash Flow		$	150			$	145

GARTNER, INC.

Condensed Consolidated Statements of Operations (Unaudited; in millions, except per share data)
	Three Months Ended March 31,
	2022				2021
Revenues:
Research	$	1,136.3			$	979.7
Conferences		10.4				24.8
Consulting		116.0				99.5
Total revenues		1,262.7				1,104.0
Costs and expenses:
Cost of services and product development		377.0				334.4
Selling, general and administrative		618.0				487.3
Depreciation		23.2				25.8
Amortization of intangibles		25.1				30.5
Acquisition and integration charges		2.2				0.6
Total costs and expenses		1,045.5				878.6
Operating income		217.2				225.4
Interest expense, net		(31.4	)			(26.1	)
Other income, net		29.2				15.5
Income before income taxes		215.0				214.8
Provision for income taxes		42.5				50.7
Net income	$	172.5			$	164.1
Net income per share:
Basic	$	2.10			$	1.86
Diluted	$	2.08			$	1.84
Weighted average shares outstanding:
Basic		82.0				88.4
Diluted		83.0				89.1

Source: Gartner, Inc.

Gartner-IR

View source version on businesswire.com: https://www.businesswire.com/news/home/20220503005413/en/

David Cohen

SVP, Investor Relations, Gartner

+1 203.316.6631

Kathleen Persaud

Senior Director, Investor Relations, Gartner

+1 203.316.1672

investor.relations@gartner.com

Source: Gartner, Inc.

FAQ

What were Gartner's Q1 2022 earnings results?

Gartner reported Q1 2022 revenues of $1.3 billion, net income of $173 million, and diluted EPS of $2.08.

How much did Gartner increase its share repurchase authorization in 2022?

Gartner increased its share repurchase authorization by $500 million in April 2022.

What is Gartner's financial outlook for 2022?

Gartner raised its outlook for revenue, EBITDA, and free cash flow for 2022, following strong contract value growth.

How did Gartner's contract value perform in Q1 2022?

Gartner's total contract value grew by 16.3% year-over-year, reaching $4.2 billion.

What was Gartner's adjusted EBITDA for Q1 2022?

Gartner's adjusted EBITDA for Q1 2022 was $329 million, representing a 2.6% increase year-over-year.