Slide 1: Chris Lafond, Chief Financial Officer
Chris Lafond Chief Financial Officer
Slide 2: Forward-Looking Statements
Forward-Looking Statements Statements contained in this presentation regarding the growth and prospects of the business, the Company's projected 2009 financial results, long-term objectives and all other statements in this presentation other than recitation of historical facts are forward-looking st
Slide 3: Gartner's Financial Strength
Gartner's Financial Strength Business services company providing cost effective, high value to clients Leading brand in technology research driven by 650 analysts 470 consultants focused on delivering substantial cost savings for clients World's leading IT conference provider with over 40,000 attend
Slide 4: What We Said in 2005
What We Said in 2005 Focus on returning the Research business to growth Increase sales capacity and coverage to capture market opportunity Evolve our offerings to add more value to clients Deliver extraordinary research content Provide world class service to improve retention Continue to effectively
Slide 5: Continuous Improvement and Innovation: Research
Continuous Improvement and Innovation Research Significantly increased and improved our sales capacity Successfully launched role-based Research offerings Optimized and improved our Research content Improved client service Increased pricing Completed the acquisition and integration of Meta Group Inc
Slide 6: Continuous Improvement and Innovation: Events, Consulting, Profitability
Continuous Improvement and Innovation Events Effectively managed the Events portfolio to respond to client interest Increased the attendance at our conferences Consulting Significantly increased the productivity and profitability of Consulting Improved our Managing Partner capabilities Profitability
Slide 7: Continuous Improvement and Innovation: Revenue Growth
Continuous Improvement and Innovation Revenue Growth 2004 2005 2006 2007 2008 868.73 964.14 1037.299 1168.475 1279.065 2004 2005 2006 2007 2008 480.4856 523.033 571.217 673.335 773.257 2004 2005 2006 2007 2008 113.302 126.475 146.4119621 160.065 150.08 Total Revenue (a) $ in millions Research Revenu
Slide 8: Continuous Improvement and Innovation: Earnings Growth
Continuous Improvement and Innovation Earnings Growth 2004 2005 2006 2007 2008 102.728 100.334 150.3464695 190.387 213.464 2004 2005 2006 2007 2008 0.61 0.59 0.6 0.64 0.66 2004 2005 2006 2007 2008 0.52 0.54 0.52 0.51 0.43 Normalized EBITDA (a) $ in millions Research Contribution Margin 2004 2005 200
Slide 9: Continuous Improvement and Innovation: Cash Flow Growth
Continuous Improvement and Innovation Cash Flow Growth 2004 2005 2006 2007 2008 48.2007 27.122 106.264 148.335 184.35 2004 2005 2006 2007 2008 23.0967 4.766 85.151 124.163 160.018 2004 2005 2006 2007 2008 25.104 22.356 21.113 24.172 24.332 Operating Cash Flow $ in millions Free Cash Flow $ in millio
Slide 10: Continuous Improvement and Innovation: Shares Outstanding
Continuous Improvement and Innovation Shares Outstanding 2003 2004 2005 2006 2007 2008 129.9 111.2 113.8 102.6 98.8 93.7 Basic Shares Outstanding In millions - at Year End 2003 2004 2005 2006 2007 2008 31.7 25.9 18.3 16.2 14.1 11.2 Equity Plan Shares Outstanding In millions - at Year End Shares Outs
Slide 11: Continuous Improvement and Innovation: Research Metrics
Continuous Improvement and Innovation Research Metrics 2004 2005 2006 2007 2008 509 593 640 753 834 2004 2005 2006 2007 2008 58 64 68 74 79 2004 2005 2006 2007 2008 0.8 0.81 0.81 0.82 0.82 2004 2005 2006 2007 2008 0.95 0.93 0.96 1.01 0.98 Contract Value $ in millions Contract Value per Organization
Slide 12: Continuous Improvement and Innovation: Events Metrics
Continuous Improvement and Innovation Events Metrics 2004 2005 2006 2007 2008 38 53 58 62 70 Number of Events (a) 2004 2005 2006 2007 2008 31.223 35.502 41.084 44.216 41.379 Number of Attendees In thousands (a) Restated to exclude results of Vision Events
Slide 13: Continuous Improvement and Innovation: Consulting Metrics
Continuous Improvement and Innovation Consulting Metrics 2004 2005 2006 2007 2008 0.63 0.62 0.64 0.69 0.72 2004 2005 2006 2007 2008 354 407 386 430 459 2004 2005 2006 2007 2008 111.779 119.903 109.622 121.38 97.169 Utilization Annual Revenue per Billable Headcount $ in thousands Backlog $ millions
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Slide 15: Our Business Model
Our Business Model RESEARCH EVENTS CONSULTING SALES ANALYSTS PROPRIETARY ANALYTICS AND DATA
Slide 16: Attractive Business Model
Attractive Business Model Vast, untapped market opportunity in all 3 businesses High incremental contribution margins Recurring, predictable Research revenue with annual subscription model and high retention rates Strong cash flow Diverse, global customer base with 47% of revenues outside of U.S. Ta
Slide 17: Business Model
Business Model Notes: * 2004 figures re-stated to reflect impact of Equity Compensation expense - impact as follows: Research 1 pt, Events 0 pt, Consulting 1 pt, Sales & Marketing 0 pt, G&A 1 pt, EBITDA 2 pt Gross Contribution Margin 66% 60% 70% Research 43% 52% 50% Events 41% 35% 40% Consulting 200
Slide 18: Research
Research World-class Objective Insight on IT Vast, untapped market opportunity High retention rates New business volume and timing Annual subscriptions Multi-year contracts Up-front billing terms for majority of contracts Cost and Margin: 650 analysts with significant ability to leverage this cost b
Slide 19: Research Key Indicators & Contract Value Economics
Research Key Indicators & Contract Value Economics CV Growth:[ (e) ÷ (a)] - 1 = 10% Wallet Retention: [(a) + (b) + (c)] ÷ (a) = 100% Opening Contract Value Client Attrition New to Existing Clients New to New Organizations Ending Contract Value (a) (b) (c) (d) (e) 500 (100) +100 +50 550 New Business:
Slide 20: Research Contract Value to Revenue Conversion
Research Contract Value to Revenue Conversion On October 1, we sell a 2 year contract worth $240K On December 31, we would report the following: Contract Value $120K Revenue Recognized $30K Deferred Revenue $90K YR1 $120K Oct $10 Nov $10 Dec $10 YR2 $120K Oct Sep $240K $30K
Slide 21: Events
Events Leveraging Gartner's Research Platform Economic Drivers Portfolio Number of attendees Number of exhibitors Number of events held Cost and Margin: Separate exhibitor sales channel Fixed costs related to holding an event Variable costs based on number of attendees 50% incremental margin Attende
Slide 22: Consulting
Practice Areas Consulting Independent and Objective IT Strategy Advice 3 major practice areas Billable headcount (470) Utilization rate (72%) Revenue per head ($400k +) Backlog (4+ months and $97 million) Average deal size ($300k) Average deal length (8 month) Cost and Margin: Billable headcount 40%
Slide 23: Sales, G&A and Other Expenses
Sales, G&A and Other Expenses Sales expense driven by sales force growth in '08 Depreciation driven by capital spending of $24 million in '07 and '08 Amortization continues to decline Interest expense reduced with lower interest rate environment Other income/expense is primarily transaction FX gains
Slide 24: Proven Strategy Delivering Results
Proven Strategy Delivering Results 2004 2008 2004 2008 2004 2008 2004 2008 $834M $509M 79K 58K 10,579 8,720 Contract Value Quota Bearing Headcount Research Client Organizations Average Contract Value per Organization +$325M 928 443 +485 +1,859 +$21K
Slide 25: Strong Cash Flow Profile and Balance Sheet
Strong Cash Flow Profile and Balance Sheet Up-front billing for majority of research contracts Improved cash collection efficiency Non-capital intensive business Low debt Cash used to repurchase shares and acquire Meta
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Slide 27: Prudently Managing Business Through Challenging Economic Environment
Prudently Managing Business Through Challenging Economic Environment 2009 operating plan assumes similar economic and business trends as in fourth quarter 2008 Quickly executed cost reduction actions Eliminated approximately 120 positions and reduced other expenses to generate $50 million in cost sa
Slide 28: Prudently Managing Business Through Challenging Economic Environment
Prudently Managing Business Through Challenging Economic Environment Continuing limited investment for long-term growth during 2009 Continue product development efforts Ensure effective client service Maintain analyst headcount at current levels Maintain current size of sales force Identify investme
Slide 29: 2009 Quarterly Phasing - Revenue
2009 Quarterly Phasing - Revenue Research revenue driven by retention rates and timing of new business Fourth quarter is historically the largest for new business Events revenue recognized when conferences delivered Symposium Series in Q4 drives phasing Consulting revenue is seasonal, with Q2 and Q4
Slide 30: 2009 Quarterly Phasing - Revenue
2009 Quarterly Phasing - Revenue Approximate revenue phasing in 2009: Above based on midpoint of revenue guidance Research Consulting Events Q1 Q2 Q3 Q4 25% 25% 25% 25% 23% 26% 24% 27% 16% 17% 17% 50%
Slide 31: 2009 Quarterly Phasing - Expense
2009 Quarterly Phasing - Expense Quarterly fluctuations in cost of services driven primarily by the conference schedule in our Events business Higher Research and Sales expenses in Q4 related to Symposia and year-end sales support activities G&A is less seasonal
Slide 32: 2009 Quarterly Phasing - Earnings
2009 Quarterly Phasing - Earnings Approximate EPS from continuing operations: Above based on the midpoint of guidance Based upon business conditions the Company may accelerate or postpone expenses throughout the year which could shift earnings between quarters Q1 Q2 Q3 Q4 20% 40% 20% 20%
Slide 33: 2009 Guidance
2009 Guidance Research $730 - - 750 (1%) - - 1% Consulting 265 - - 295 (21%) - - (12%) Events 98 - - 108 (33%) - - (26%) Other 7 - - 7 Total Revenue $1,100 - - 1,160 (10%) - - (6%) Normalized EBITDA (1) $165 - - 200 EPS from Continuing Operations $0.63 - - $0.87 Operating Cash Flow $100 - - 125 Repo
Slide 34: Impact of Foreign Exchange
Impact of Foreign Exchange FX movements have historically had minimal impact on earnings Mix of revenue and expenses have provided a natural hedge Contract value reported at fixed FX rate each year and revalued annually on January 1 Impact of strengthening dollar reduces CV by $40 million Wallet ret
Slide 35: Long-Term Financial Objectives
Long-Term Financial Objectives Note: See the attached Glossary for the definition of Normalized EBITDA, and cautionary statement regarding this non-GAAP financial measure Total Revenue Growth 11 - 16% Research 15 - 20% Consulting 3 - 8% Events 5 - 10% Normalized EBITDA* margin improvement 0 - 100 bp
Slide 36: Gartner's Financial Strength
Gartner's Financial Strength Attractive business model Vast, untapped market opportunity Operational excellence / continuous improvement focus Strong cash flow Solid balance sheet Annual double digit revenue and earnings growth Long-term value focus
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Slide 38: Glossary: Non-GAAP Financial Measures
Glossary Non-GAAP Financial Measures Normalized EBITDA: Normalized EBITDA represents operating income excluding depreciation, accretion on obligations related to excess facilities, amortization, META integration charges, SFAS 123 (R), goodwill impairments, and other charges. Investors are cautioned
Slide 39: Glossary: Non-GAAP Financial Measures
Glossary Non-GAAP Financial Measures Free Cash Flow: Represents cash provided by operating activities less additions to property, equipment and leasehold improvements. Investors are cautioned that Free Cash Flow contained in this presentation is not a financial measure under generally accepted accou
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