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A month has gone by since the last earnings report for Gartner (IT). Shares have added about 9.5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Gartner due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Second-Quarter Results
Gartner reported strong second-quarter 2018 results, with revenues and earnings surpassing the Zacks Consensus Estimate.
Adjusted earnings of $1.03 per share outpaced the consensus mark by 6 cents and increased 17% on a year-over-year basis. Revenues totaled $1 billion, which exceeded the Zacks Consensus Estimate by $15 million. The reported figure was up 19% year over year. Adjusted revenues of $1 billion were up 14% from the year-ago quarter. Strength across the majority of the segments drove the top line. Total contract value was approximately $2.9 billion, up 12% year over year.
Revenues by Segment
Revenues at the Research segment increased 25% year over year to $770 million. Gross contribution margin was 69% in the second quarter, up from 65% in the year-ago period. Under Global Technology Sales, client retention was 82% and wallet retention was 105%. Global Business Sales client retention was 83% and wallet retention was 97%.
Revenues at the Consulting segment grew 5% from the year-ago quarter to $96 million. Gross contribution margin was 35% in the quarter, up from 34% in the year-ago period. Backlog, the key leading indicator of future revenue growth for the Consulting business, totaled $106 million compared with $91 million in the prior-year period.
Revenues at the Events segment increased 22% from the year-ago quarter to $111 million. Gross contribution margin was 57%, up from 55% in the year-ago period. Revenues at the Other segment summed $23 million, while gross contribution margin was 65%.
Operating Results
Adjusted EBITDA increased 11% year over year to $191 million. Adjusted EBITDA margin contracted 50 basis points (bps) to 19.1%.
Balance Sheet and Cash Flow
Gartner exited the second quarter with cash and cash equivalents balance of $141.8 million compared with $190 million at the end of the prior quarter. Long-term debt at the end of the second quarter was $2.15 billion compared with $2.19 billion at the end of the second quarter. Operating cash flow totaled $174 million and free cash flow was $183 million in the reported quarter.