Gartner Reports Fourth Quarter 2023 Financial Results
- None.
- None.
Insights
The reported financial results of Gartner, Inc. reflect a mixed performance, with an increase in contract values and revenues, yet a notable decline in net income and earnings per share (EPS). The 8% year-over-year (YoY) growth in contract value to $4.8 billion, coupled with a revenue increase to $5.9 billion, indicates a solid expansion in the company's core business operations. However, investors may express concerns over the 19% decline in net income and the corresponding 18% decrease in both diluted and adjusted EPS. This contraction in profitability metrics, despite top-line growth, suggests increased costs or potential inefficiencies that may need to be addressed.
Free cash flow (FCF) figures are particularly relevant for shareholder value, with a reported 19% increase in the quarter and 6% for the full year. FCF is a critical indicator of financial health, as it represents the cash available for dividends, share repurchases and debt repayment. The 1% reduction in outstanding share count due to repurchases can be viewed positively, as it often leads to an increase in EPS and is a sign that the company believes its shares are undervalued.
From a financial analysis perspective, the stability of operating cash flow, which increased by 5%, is a positive sign of operational efficiency. However, the modest increase in adjusted EBITDA of only 1% YoY may signal that the company's margin expansion is not keeping pace with revenue growth, a potential red flag for future profitability.
Gartner's segment results provide a deeper insight into the company's operational focus and market performance. The Research segment, with a 6% increase in revenue and a robust 74% contribution margin, remains the cornerstone of Gartner's business model. The Conferences segment also showed impressive growth, with a 14% increase in revenue and an 8% increase in gross contribution, indicating strong market demand for professional gatherings and knowledge sharing, which can be a positive leading indicator for the business sector's health.
On the contrary, the Consulting segment experienced a 7% decline in revenue and a significant 32% decrease in gross contribution. This underperformance may reflect competitive pressures, project completion rates, or a shift in client preferences. The contribution margin of 27% in Consulting is considerably lower than the other segments, which could be a concern for the overall profitability mix of the company.
Considering the global economic uncertainties, Gartner's guidance for sustained double-digit growth is ambitious. The company's ability to achieve this target across various economic scenarios will depend on its adaptability and the continued relevance of its services to its client base.
Examining Gartner, Inc.'s financial performance through an economic lens reveals resilience amidst a potentially turbulent economic landscape. The company's FX-neutral growth in contract value and revenues suggests that it has effectively managed currency fluctuation risks, which is crucial for multinational corporations in times of volatile foreign exchange markets. The emphasis on a financial outlook that is 'achievable across a wide range of economic scenarios' underscores a strategic focus on risk mitigation and adaptability.
Furthermore, the company's strong free cash flow generation of more than $1 billion indicates healthy liquidity, which can be critical in weathering economic downturns. However, the slight growth in adjusted EBITDA might raise questions about the company's cost structure and pricing power in an inflationary environment.
Lastly, the strategic share repurchases reflect confidence in the company's valuation and a shareholder-friendly capital allocation policy. It also suggests that Gartner's management is proactive in using excess capital to create shareholder value, a strategy that can be particularly effective during periods of economic uncertainty when stock prices may be depressed.
Contract Value
FOURTH QUARTER 2023 HIGHLIGHTS
-
Revenues:
$1.6 billion 5% as reported, +4% FX neutral. -
Net income:
$209 million 19% ; adjusted EBITDA:$386 million 8% as reported, -9% FX neutral. -
Diluted EPS:
$2.64 18% ; adjusted EPS:$3.04 18% . -
Operating cash flow:
$224 million 10% ; free cash flow:$196 million 19% .
FULL YEAR 2023 HIGHLIGHTS
-
Revenues:
$5.9 billion 8% as reported and FX neutral. -
Net income:
$882 million 9% ; adjusted EBITDA:$1.5 billion 1% as reported, +2% FX neutral. -
Diluted EPS:
$11.08 11% ; adjusted EPS:$11.33 1% . -
Operating cash flow:
$1.2 billion 5% ; free cash flow:$1.1 billion 6% . -
Repurchased 1.8 million common shares for
$0.6 billion 1% reduction in outstanding share count YoY.
Gene Hall, Gartner’s Chief Executive Officer, commented, “Gartner delivered another strong year, providing exceptional value for our clients, driving high single digit growth in contract value and generating more than
CONFERENCE CALL INFORMATION
The Company will host a webcast call at 8:00 a.m. Eastern time on Tuesday, February 6, 2024 to discuss the Company’s financial results. Listeners can access the webcast live at https://edge.media-server.com/mmc/p/8au4rmz5. To participate actively in the live call via dial-in, please register at https://register.vevent.com/register/BIe86287ab7c5c4158baacfa155679d9d9. 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 |
|
|
|
|
||||||
|
|
December 31, |
|
|
|
Inc/(Dec) |
||||||
|
|
2023 |
|
2022 |
|
Inc/(Dec) |
|
FX Neutral |
||||
GAAP Metrics: |
|
|
|
|
|
|
|
|
||||
Revenues |
|
$ |
1,586 |
|
$ |
1,505 |
|
5 |
% |
|
4 |
% |
Net income |
|
|
209 |
|
|
257 |
|
(19 |
)% |
|
na |
|
Diluted EPS |
|
|
2.64 |
|
|
3.21 |
|
(18 |
)% |
|
na |
|
Operating cash flow |
|
|
224 |
|
|
203 |
|
10 |
% |
|
na |
|
|
|
|
|
|
|
|
|
|
||||
Non-GAAP Metrics: |
|
|
|
|
|
|
|
|
||||
Adjusted EBITDA |
|
$ |
386 |
|
$ |
421 |
|
(8 |
)% |
|
(9 |
)% |
Adjusted EPS |
|
|
3.04 |
|
|
3.70 |
|
(18 |
)% |
|
na |
|
Free cash flow |
|
|
196 |
|
|
166 |
|
19 |
% |
|
na |
|
na=not available |
||||||||||||
CONTRACT VALUE HIGHLIGHTS
-
Global Technology Sales Contract Value (GTS CV):
$3.7 billion 6% YoY FX Neutral -
Global Business Sales Contract Value (GBS CV):
$1.1 billion 13% YoY FX Neutral
SEGMENT RESULTS HIGHLIGHTS
Our segment results for the three months ended December 31, 2023 were as follows:
(Unaudited; $ in millions) |
|
|
|
|
|
|
||||||
|
|
Research |
|
Conferences |
|
Consulting |
||||||
|
|
|
|
|
|
|
||||||
Revenues |
|
$ |
1,243 |
|
|
$ |
214 |
|
|
$ |
128 |
|
Inc/(Dec) |
|
|
6 |
% |
|
|
14 |
% |
|
|
(7 |
)% |
Inc/(Dec) - FX neutral |
|
|
5 |
% |
|
|
12 |
% |
|
|
(7 |
)% |
|
|
|
|
|
|
|
||||||
Gross contribution |
|
$ |
921 |
|
|
$ |
108 |
|
|
$ |
35 |
|
Inc/(Dec) |
|
|
6 |
% |
|
|
8 |
% |
|
|
(32 |
)% |
Contribution margin |
|
|
74 |
% |
|
|
50 |
% |
|
|
27 |
% |
Additional details regarding our segment results can be obtained in the earnings supplement and on our webcast call.
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 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; our ability to keep pace with technological developments in artificial intelligence; 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 conflict in the
NON-GAAP FINANCIAL MEASURES
Certain financial measures used in this Press Release are not defined by
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, net, 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, net 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, net 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
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 December 31, |
|
Year Ended December 31, |
||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
GAAP net income |
|
$ |
209 |
|
$ |
257 |
|
|
$ |
882 |
|
|
$ |
808 |
|
|
Interest expense, net |
|
|
20 |
|
|
30 |
|
|
|
94 |
|
|
|
121 |
|
|
Gain on event cancellation insurance claims (a) |
|
|
— |
|
|
— |
|
|
|
(3 |
) |
|
|
— |
|
|
Other expense (income), net |
|
|
4 |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(48 |
) |
|
Tax provision |
|
|
69 |
|
|
47 |
|
|
|
265 |
|
|
|
219 |
|
|
Operating income |
|
|
301 |
|
|
332 |
|
|
|
1,237 |
|
|
|
1,100 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
||||||||
Stock-based compensation expense (b) |
|
|
26 |
|
|
13 |
|
|
|
130 |
|
|
|
91 |
|
|
Depreciation, amortization and accretion (c) |
|
|
50 |
|
|
49 |
|
|
|
192 |
|
|
|
193 |
|
|
Loss on impairment of lease related assets, net (d) |
|
|
1 |
|
|
16 |
|
|
|
20 |
|
|
|
54 |
|
|
Acquisition and integration charges and other non-recurring items (e) |
|
|
9 |
|
|
11 |
|
|
|
39 |
|
|
|
33 |
|
|
Gain from sale of divested operation (f) |
|
|
— |
|
|
— |
|
|
|
(135 |
) |
|
|
— |
|
|
Adjusted EBITDA |
|
$ |
386 |
|
$ |
421 |
|
|
$ |
1,483 |
|
|
$ |
1,471 |
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
(a) |
Consists of the gain on event cancellation insurance claims for events cancelled in 2020. |
|||||||||||||||
(b) |
Consists of charges for stock-based compensation awards. |
|||||||||||||||
(c) |
Includes depreciation expense, amortization of intangibles and accretion on asset retirement obligations. |
|||||||||||||||
(d) |
Includes impairment loss for lease related assets, net of a reduction in lease liabilities. |
|||||||||||||||
(e) |
Consists of direct and incremental expenses related to acquisitions and divestitures, facility-related exit costs, and other non-recurring items. |
|||||||||||||||
(f) |
Consists of the gain on our February 2023 divestiture. |
|||||||||||||||
Reconciliation - GAAP Net Income and GAAP income per share to Adjusted Net Income and Adjusted EPS |
|||||||||||||||||
(Unaudited; $ in millions, except per share amounts) |
|||||||||||||||||
Three Months Ended December 31, |
|||||||||||||||||
|
2023 |
2022 |
|||||||||||||||
|
Amount |
Per Share |
Amount |
Per Share |
|||||||||||||
GAAP net income |
$ |
209 |
|
$ |
2.64 |
|
$ |
257 |
|
$ |
3.21 |
|
|||||
Acquisition and other adjustments: |
|||||||||||||||||
Amortization of acquired intangibles (a) |
|
23 |
|
|
0.29 |
|
|
24 |
|
|
0.30 |
|
|||||
Acquisition and integration charges and other non-recurring items (b), (c) |
|
10 |
|
|
0.12 |
|
|
12 |
|
|
0.15 |
|
|||||
Loss on impairment of lease related assets, net (f) |
|
1 |
|
|
0.02 |
|
|
16 |
|
|
0.21 |
|
|||||
Loss (gain) on de-designated interest rate swaps (g) |
|
4 |
|
|
0.05 |
|
|
(1 |
) |
|
(0.01 |
) |
|||||
Tax impact of adjustments (h) |
|
(6 |
) |
|
(0.07 |
) |
|
(12 |
) |
|
(0.15 |
) |
|||||
Adjusted net income and Adjusted EPS (i) |
$ |
241 |
|
$ |
3.04 |
|
$ |
297 |
|
$ |
3.70 |
|
|||||
|
|||||||||||||||||
|
|
Year Ended December 31, |
|||||||||||||||
|
|
2023 |
|
2022 |
|||||||||||||
|
|
Amount |
|
Per Share |
|
Amount |
|
Per Share |
|||||||||
GAAP net income |
|
$ |
882 |
|
|
$ |
11.08 |
|
|
$ |
808 |
|
|
$ |
9.96 |
|
|
Acquisition and other adjustments: |
|
|
|
|
|
|
|
|
|||||||||
Amortization of acquired intangibles (a) |
|
|
92 |
|
|
|
1.16 |
|
|
|
99 |
|
|
|
1.22 |
|
|
Acquisition and integration charges and other non-recurring items (b), (c) |
|
|
44 |
|
|
|
0.55 |
|
|
|
38 |
|
|
|
0.47 |
|
|
Gain on event cancellation insurance claims (d) |
|
|
(3 |
) |
|
|
(0.04 |
) |
|
|
— |
|
|
|
— |
|
|
Gain from sale of divested operation (e) |
|
|
(135 |
) |
|
|
(1.70 |
) |
|
|
— |
|
|
|
— |
|
|
Loss on impairment of lease related assets, net (f) |
|
|
20 |
|
|
|
0.26 |
|
|
|
54 |
|
|
|
0.67 |
|
|
Gain on de-designated interest rate swaps (g) |
|
|
(4 |
) |
|
|
(0.05 |
) |
|
|
(52 |
) |
|
|
(0.65 |
) |
|
Tax impact of adjustments (h) |
|
|
6 |
|
|
|
0.07 |
|
|
|
(32 |
) |
|
|
(0.40 |
) |
|
Adjusted net income and Adjusted EPS (i) |
|
$ |
903 |
|
|
$ |
11.33 |
|
|
$ |
914 |
|
|
$ |
11.27 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(a) |
Consists of non-cash amortization charges 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 and in the Adjusted EBITDA table above. |
||||||||||||||||
(d) |
Consists of the gain on event cancellation insurance claims for events cancelled in 2020. |
||||||||||||||||
(e) |
Consists of the gain on our February 2023 divestiture. |
||||||||||||||||
(f) |
Includes impairment loss for lease related assets, net of a reduction in lease liabilities. |
||||||||||||||||
(g) |
Represents the fair value adjustment for interest rate swaps after de-designation. |
||||||||||||||||
(h) |
The blended effective tax rates on the adjustments were approximately |
||||||||||||||||
(i) |
Adjusted EPS was calculated based on 79.0 million and 80.1 million diluted shares for the three months ended December 31, 2023 and 2022, respectively, and 79.7 million and 81.1 million diluted shares for the years ended December 31, 2023 and 2022, respectively. |
||||||||||||||||
Reconciliation - GAAP Cash Provided by Operating Activities to Free Cash Flow |
||||||||||||||||
(Unaudited; $ in millions) |
||||||||||||||||
|
|
Three Months Ended December 31, |
|
Year Ended December 31, |
||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
GAAP cash provided by operating activities |
|
$ |
224 |
|
|
$ |
203 |
|
|
$ |
1,156 |
|
|
$ |
1,101 |
|
Cash paid for capital expenditures |
|
|
(28 |
) |
|
|
(38 |
) |
|
|
(103 |
) |
|
|
(108 |
) |
Free cash flow |
|
$ |
196 |
|
|
$ |
166 |
|
|
$ |
1,053 |
|
|
$ |
993 |
|
|
|
|
|
|
|
|
|
|
||||||||
GARTNER, INC. Condensed Consolidated Statements of Operations (Unaudited; in millions, except per share data) |
||||||||
|
Three Months Ended |
|||||||
|
December 31, |
|||||||
|
2023 |
|
2022 |
|||||
Revenues: |
|
|
|
|||||
Research |
$ |
1,243.2 |
|
|
$ |
1,178.3 |
|
|
Conferences |
|
214.4 |
|
|
|
188.3 |
|
|
Consulting |
|
128.5 |
|
|
|
138.1 |
|
|
Total revenues |
|
1,586.1 |
|
|
|
1,504.7 |
|
|
Costs and expenses: |
|
|
|
|||||
Cost of services and product development |
|
529.8 |
|
|
|
475.4 |
|
|
Selling, general and administrative |
|
703.8 |
|
|
|
645.0 |
|
|
Depreciation |
|
26.5 |
|
|
|
24.4 |
|
|
Amortization of intangibles |
|
22.8 |
|
|
|
24.3 |
|
|
Acquisition and integration charges |
|
1.8 |
|
|
|
3.3 |
|
|
Total costs and expenses |
|
1,284.7 |
|
|
|
1,172.4 |
|
|
Operating income |
|
301.4 |
|
|
|
332.3 |
|
|
Interest expense, net |
|
(20.5 |
) |
|
|
(29.9 |
) |
|
Other (expense) income, net |
|
(3.7 |
) |
|
|
1.7 |
|
|
Income before income taxes |
|
277.2 |
|
|
|
304.1 |
|
|
Provision for income taxes |
|
68.6 |
|
|
|
47.3 |
|
|
Net income |
$ |
208.6 |
|
|
$ |
256.8 |
|
|
|
|
|
|
|||||
Net income per share: |
|
|
|
|||||
Basic |
$ |
2.66 |
|
|
$ |
3.24 |
|
|
Diluted |
$ |
2.64 |
|
|
$ |
3.21 |
|
|
Weighted average shares outstanding: |
|
|
|
|||||
Basic |
|
78.4 |
|
|
|
79.2 |
|
|
Diluted |
|
79.0 |
|
|
|
80.1 |
|
|
Source: Gartner, Inc.
Gartner-IR
View source version on businesswire.com: https://www.businesswire.com/news/home/20240206364723/en/
David Cohen
SVP, Investor Relations, Gartner
+1 203.316.6631
investor.relations@gartner.com
Source: Gartner, Inc.
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