Gartner Reports Financial Results for Third Quarter 2009

Gartner, Inc. (NYSE: IT), the leading provider of research and analysis on the global information technology industry, today reported results for third quarter 2009. In addition, the Company increased its outlook for cash from operations and reiterated its outlook for revenue, Normalized EBITDA and EPS from continuing operations for full year 2009.

For third quarter 2009, EPS from continuing operations were $0.21, net income was $20.1 million, Normalized EBITDA was $40.8 million, and cash from operations was $55.1 million. EPS from continuing operations and net income were positively impacted by the timing of certain non-cash tax benefits totaling $4.7 million, or $0.05 per share, which are not expected to recur. See "Non-GAAP Financial Measures" for a discussion of Normalized EBITDA.

Total revenue for third quarter 2009 was $267.5 million. Excluding the impact of foreign exchange, total revenue decreased 7% year-over-year.

Gene Hall, Gartner's chief executive officer, commented, "During the third quarter, our key business metrics continued to improve sequentially. We increased salesforce productivity, grew new business in Research and improved retention on Research subscriptions that came up for renewal during the quarter. As a result, our Research Contract Value grew sequentially by almost $7 million. These improvements were driven both by the success of our efforts to improve sales effectiveness and a more favorable economic environment. Looking ahead, we expect our business trends to continue to improve in the fourth quarter and we expect to generate revenue, earnings and cash flow growth in 2010.”

Business Segment Highlights

Research

Revenue for third quarter 2009 was $185.7 million, down 4% year-over-year excluding the impact of foreign exchange. Gross contribution margin improved approximately 1 percentage point year-over-year to 66%.

Contract value was $742.9 million at September 30, 2009, up 1% versus June 30, 2009. Year-over-year, contract value decreased 4% excluding the impact of foreign exchange.

Client and wallet retention rates for third quarter 2009 were 77% and 85%. Wallet retention excludes the impact of foreign exchange.

Consulting

Revenue for third quarter 2009 was $65.7 million, down 16% year-over-year excluding the impact of foreign exchange. Gross contribution margin was 36%.

Third quarter 2009 utilization was 64% and billable headcount was 449. Backlog was $84.7 million at September 30, 2009, up 4% versus June 30, 2009.

Events

Revenue for the third quarter was $16.0 million, down 6% year-over-year excluding the impact of foreign exchange. Gross contribution margin improved approximately 6 percentage points to 37%.

The Company held 15 events with 5,413 attendees during the quarter.

Cash Flow and Balance Sheet Highlights

Gartner generated cash from operations of $55.1 million during third quarter 2009 versus $55.6 million during third quarter 2008. Capital expenditures were $2.7 million during third quarter 2009 versus $5.3 million during third quarter 2008.

During the first nine months of 2009, the Company deployed its cash principally to repay $151.3 million in debt. As of September 30, 2009, the Company had total debt of $265.0 million and cash of $112.8 million.

Financial Outlook for 2009

Based on its results for the first 9-months of 2009 and current business trends, Gartner increased its outlook for cash from operations and reiterated its outlook for revenue, Normalized EBITDA and EPS from continuing operations for full year 2009. The Company’s outlook for revenue by segment and total revenue is as follows. The year-over-year change is presented both as reported and excluding the impact of foreign exchange (FX Neutral):

($ in millions)			2009 Projected Revenue			% Change as Reported			% Change FX Neutral
Research (1)			$737 – 757			(6%) – (3%)			(2%) – 1%
Consulting			265 – 295			(24%) – (15%)			(21%) – (12%)
Events			98 – 108			(35%) – (28%)			(33%) – (26%)
Total Revenue			$1,100 – 1,160			(14%) – (9%)			(10%) – (6%)
(1) Projected research revenue includes the revenue of the Company’s “Other” category, which was eliminated in first     quarter 2009. For 2008, reported “Other” revenue was $8.3 million.

Gartner now expects cash from operations of $125 to $135 million for full year 2009. The Company continues to target Normalized EBITDA of $170 to $200 million, EPS from continuing operations of $0.66 to $0.87, and capital expenditures of $15 to $20 million for full year 2009. Normalized EBITDA excludes a projected $26 to $28 million of pre-tax expense related to SFAS 123(R).

Conference Call Information

Gartner has scheduled a conference call at 10:00 a.m. ET today, Friday, October 30, 2009, to discuss the Company's financial results. The conference call will be available via the Internet by accessing the Company's web site at http://investor.gartner.com. A replay of the webcast will be available for 90 days following the call.

About Gartner

Gartner, Inc. (NYSE: IT) is the world’s leading information technology research and advisory company. We deliver the technology-related insight necessary for our clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, we are the indispensable partner to 60,000 clients in 10,000 distinct organizations. Through the resources of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events, we work with every client to research, analyze and interpret the business of IT within the context of their individual role. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,000 associates, including 1,200 research analysts and consultants, and clients in 80 countries. For more information, visit www.gartner.com.

Non-GAAP Financial Measures

Investors are cautioned that normalized EBITDA contained in this press release is not a financial measure under generally accepted accounting principles. In addition, it should not be construed as an alternative to any other measures of performance determined in accordance with generally accepted accounting principles. This non-GAAP financial measure is provided to enhance the user's overall understanding of the Company's current financial performance and the Company's prospects for the future. We believe normalized EBITDA is an important measure of our recurring operations as it excludes items that may not be indicative of our core operating results. Normalized EBITDA is based on operating income, excluding depreciation, accretion on obligations related to excess facilities, amortization, SFAS 123 (R) expense, and Other charges.

Safe Harbor Statement

Statements contained in this press release regarding the growth and prospects of the business, the Company's projected 2009 financial results and all other statements in this release other than recitation of historical facts are forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). Such forward-looking statements include risks and uncertainties; consequently, actual results may differ materially from those expressed or implied thereby. Factors that could cause actual results to differ materially include, but are not limited to ability to expand or even retain the Company's customer base; ability to grow or even sustain revenue from individual customers; ability to attract and retain professional staff of research analysts and consultants upon whom the Company is dependent; ability to achieve and effectively manage growth; ability to pay the Company's debt obligations; ability to achieve continued customer renewals and achieve new contract value, backlog and deferred revenue growth in light of competitive pressures; ability to carry out the Company's strategic initiatives and manage associated costs; substantial competition from existing competitors and potential new competitors; additional risks associated with international operations including foreign currency fluctuations; the impact of restructuring and other charges on the Company's businesses and operations; general economic conditions; and other risks listed from time to time in the Company's reports filed with the Securities and Exchange Commission. These filings can be found on Gartner's Web site at www.gartner.com/investors and the SEC's Web site at www.sec.gov. Forward-looking statements included herein speak only as of the date hereof and the Company 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.

GARTNER, INC.
Condensed Consolidated Statements of Operations
(Unaudited; in thousands, except per share amounts)
			Three Months Ended												Nine Months Ended
			September 30,												September 30,
			2009				2008								2009				2008
Revenues:
Research (a)			$	185,718			$	199,646			-7	%			$	557,325			$	589,415			-5	%
Consulting				65,708				80,404			-18	%				205,341				253,129			-19	%
Events				16,043				17,656			-9	%				48,307				89,200			-46	%
Total revenues				267,469				297,706			-10	%				810,973				931,744			-13	%
Costs and expenses:
Cost of services and product development (a)				118,120				128,490			-8	%				351,864				415,569			-15	%
Selling, general and administrative (a)				115,049				127,707			-10	%				345,980				387,373			-11	%
Depreciation				6,363				6,427			-1	%				19,176				19,000			1	%
Amortization of intangibles				416				400			4	%				1,220				1,215			0	%
Total costs and expenses				239,948				263,024			-9	%				718,240				823,157			-13	%
Operating income				27,521				34,682			-21	%				92,733				108,587			-15	%
Interest expense, net				(4,914	)			(4,997	)		-2	%				(13,105	)			(14,672	)		-11	%
Other (expense) income, net				(127	)			(860	)		>100%					(2,505	)			(487	)		>100%
Income before income taxes				22,480				28,825			-22	%				77,123				93,428			-17	%
Provision for income taxes				2,413				10,044			-76	%				19,875				29,926			-34	%
Income from continuing operations				20,067				18,781			7	%				57,248				63,502			-10	%
Income from discontinued operations, net of taxes (b)				-				-			-					-				6,723			>100%
Net income			$	20,067			$	18,781			7	%			$	57,248			$	70,225			-18	%
Income per common share:
Basic:
Income from continuing operations			$	0.21			$	0.20			5	%			$	0.61			$	0.66			-8	%
Income from discontinued operations				-				-			0	%				-				0.07			>100%
Income per share			$	0.21			$	0.20			5	%			$	0.61			$	0.73			-16	%
Diluted:
Income from continuing operations			$	0.21			$	0.19			11	%			$	0.59			$	0.63			-6	%
Income from discontinued operations				-				-			0	%				-				0.07			>100%
Income per share			$	0.21			$	0.19			11	%			$	0.59			$	0.70			-16	%
Weighted average shares outstanding:
Basic				94,872				94,539			0	%				94,380				95,725			-1	%
Diluted				97,657				98,552			-1	%				96,885				99,750			-3	%

(a)		The Company eliminated its previously reported “Other” revenue line in the first quarter of 2009.
		"Other" revenue and related expenses are now being reported in the Research segment.
		In addition, certain expenses that were formerly classified as Selling, general and administrative (SG&A) are now presented in Cost of services and product development (COS) and are considered to be expenses of the Research segment.
		Corresponding prior period presentations of these revenues and expenses have been reclassified in a consistent manner for comparability purposes.
(b)		2008 includes the results and gain on sale of the Vision Events business, which we sold in February 2008.

BUSINESS SEGMENT DATA
(Dollars in thousands)
											Direct					Gross					Contribution
						Revenue					Expense					Contribution					Margin
Three Months Ended 9/30/09
Research (a)						$	185,718				$	63,107				$	122,611				66	%
Consulting							65,708					42,050					23,658				36	%
Events							16,043					10,109					5,934				37	%
TOTAL						$	267,469				$	115,266				$	152,203				57	%
Three Months Ended 9/30/08
Research (a)						$	199,646				$	69,220				$	130,426				65	%
Consulting							80,403					47,520					32,883				41	%
Events							17,657					12,199					5,458				31	%
TOTAL						$	297,706				$	128,939				$	168,767				57	%
Nine Months Ended 9/30/09
Research (a)						$	557,325				$	190,518				$	366,807				66	%
Consulting							205,341					127,027					78,314				38	%
Events							48,307					32,007					16,300				34	%
TOTAL						$	810,973				$	349,552				$	461,421				57	%
Nine Months Ended 9/30/08
Research (a)						$	589,415				$	212,300				$	377,115				64	%
Consulting							253,129					148,373					104,756				41	%
Events (b)							89,200					52,125					37,075				42	%
TOTAL						$	931,744				$	412,798				$	518,946				56	%

(a)		The Company eliminated its previously reported “Other” revenue line in the first quarter of 2009.
		"Other" revenue and related expenses are now being reported in the Research segment.
		In addition, certain expenses that were formerly classified as Selling, general and administrative (SG&A) are now presented in Cost of services and product development (COS) and are considered to be expenses of the Research segment.
		Corresponding prior period presentations of these revenues and expenses have been reclassified in a consistent manner for comparability purposes.
(b)		Excludes the results of the Vision Events business, which we sold in February 2008.

SELECTED STATISTICAL DATA
					September 30,						September 30,
					2009						2008
Research contract value					$	742,885	(a)				$	812,210	(a)
Research client retention						77%						81%
Research wallet retention (b)						85%						97%
Research client organizations						9,998						10,347
Consulting backlog					$	84,747	(a)				$	110,141	(a)
Consulting--quarterly utilization						64%						69%
Consulting billable headcount						449						494
Consulting--average annualized revenue
per billable headcount					$	389	(a)				$	440	(a)
Events--number of events for the quarter						15						16
Events--attendees for the quarter						5,413						6,179
(a) Dollars in thousands.
(b) Excludes the impact of foreign exchange.

SUPPLEMENTAL INFORMATION
GAAP to Normalized EBITDA Reconciliation
(in thousands)
Reconciliation - GAAP to Normalized EBITDA (1):
				Three Months Ended									Nine Months Ended
				September 30,									September 30,
				2009				2008					2009				2008
Net income				$	20,067			$	18,781				$	57,248			$	70,225
Interest expense, net					4,914				4,997					13,105				14,672
Other expense, net					127				860					2,505				487
Income from discontinued operations (2)					-				-					-				(6,723	)
Tax provision					2,413				10,044					19,875				29,926
Operating income				$	27,521			$	34,682				$	92,733			$	108,587
Normalizing adjustments:
Depreciation, accretion, and amortization					6,941				7,046					20,935				20,929
Stock-based compensation expense (3)					6,352				5,259					19,477				18,315
Normalized EBITDA				$	40,814			$	46,987				$	133,145			$	147,831

(1)		Normalized EBITDA is based on operating income excluding depreciation,
		accretion on obligations related to excess facilities, amortization of intangibles,
		Other charges, and stock-based compensation expense.
(2)		The nine months ended September 30, 2008, includes the gain on sale of the Vision Events business.
(3)		Stock-based compensation expense represents the cost of stock-based compensation
		awarded by the Company to its employees. The expense is determined in accordance
		with FASB Accounting Standards Codification Topic 718.