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01/11 03:22
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings report shows moderate growth in revenue and financial metrics, but the Q&A reveals concerns about U.S. federal contracts and a downward revision of research revenue outlook. Positive elements include strong free cash flow and a share repurchase program. However, the lack of clarity in management responses and the cautious guidance suggest a mixed sentiment, likely resulting in a neutral stock price movement.
Contract Value (CV) $5.1 billion, up 7% year-over-year. Excluding the U.S. Federal government, CV grew 8%.
Revenue $1.5 billion, up 4% year-over-year as reported and 6% FX neutral.
EBITDA $385 million, up 1% as reported and 3% FX neutral.
Adjusted EPS $2.98, up 2% from Q1 of last year.
Free Cash Flow $288 million, up 73% compared to Q1 in 2024.
Research Revenue Grew 4% year-over-year as reported and 6% FX neutral.
Subscription Revenue Grew 8% FX neutral.
Consulting Revenue $140 million, up 4% as reported and 5% FX neutral.
Contract Optimization Revenue $36 million, up 36% versus Q1 of last year and 38% FX neutral.
Contribution Margin Total contribution margin was 69%, up 20 basis points from last year.
SG&A Expenses Increased 6% year-over-year as reported and about 7% on an FX-neutral basis.
Operating Cash Flow $314 million, up 66% compared with last year.
CapEx $26 million, up about $3 million year-over-year.
Backlog $214 million, increasing 16% year-over-year FX-neutral.
Debt Balance About $2.5 billion.
Cash Balance About $2.1 billion.
Gross Debt to EBITDA Ratio Well under 2 times.
Share Repurchase $163 million of stock repurchased during the first quarter.
Shares Outstanding 78 million shares, an improvement of over 1 million shares or about 1% year-over-year.
Research Revenue Growth: Research revenue in the quarter grew 4% year-over-year as reported and 6% FX neutral.
Consulting Revenue Growth: Q1 consulting revenue was $140 million compared with $135 million in the year-ago period, about 4% as reported and 5% FX neutral.
Contract Optimization Revenue Growth: In Contract Optimization, we delivered $36 million of revenue in the quarter, up 36% versus Q1 of last year and 38% FX neutral.
Contract Value Growth: First quarter contract value grew 7% year-over-year, with tech vendor CV growth continuing to accelerate.
Global Business Sales Growth: Global business sales contract value increased 11% year-over-year.
Conferences Revenue Growth: On the same conference basis, revenue grew 12%.
Sales Headcount Growth: We increased headcount across our sales organizations by 4%.
Free Cash Flow: First quarter free cash flow was $288 million, a very strong performance for our first quarter.
Cost Management: We practice disciplined cost management while remaining agile and prudently investing for future growth.
Sales Strategy: For the remainder of 2025, we plan to grow sales headcount in the mid-single-digits, excluding directly impacted areas.
Share Repurchase Program: We repurchased $163 million of stock in the quarter, maintaining flexibility as the market digests the changes in the macro landscape.
Future Growth Strategy: We expect to reaccelerate CV growth to our target of 12% to 16%, when the macroeconomic environment returns to normal.
Macroeconomic Uncertainty: Persistent elevated levels of volatility in the macroeconomic environment, including the COVID-19 pandemic, high inflation, rising interest rates, and geopolitical tensions, create a complex landscape for business operations.
U.S. Federal Government Contracts: The U.S. federal business, which represents approximately 4% of total contract value, is facing challenges due to recent policy changes, with nearly all contracts up for renewal in 2025 and a retention rate of almost 50% in Q1.
Competitive Pressures: The evolving global macro economy has led to a shift in the broader selling environment, affecting decision-making processes among company executives.
Labor Market Challenges: The labor-based revenue segment of consulting is experiencing a downturn, with a 4% decrease compared to the previous year, indicating potential challenges in workforce management and client demand.
Currency Fluctuations: About one-third of revenue and operating expenses are denominated in currencies other than the U.S. dollar, making the company susceptible to foreign exchange rate changes.
Consulting Revenue Variability: The contract optimization segment has shown strong performance but remains highly variable, indicating potential risks in revenue predictability.
Sales Headcount Growth: For the remainder of 2025, Gartner plans to grow sales headcount in the mid-single-digits, excluding directly impacted areas, reflecting a commitment to invest for future growth.
AI Initiatives: Gartner is focusing on helping clients harness the potential of artificial intelligence, advising both end-user enterprises and technology vendors.
Client Value Proposition: Gartner emphasizes its unique client value proposition, delivering actionable insights and guidance to help clients succeed with mission-critical priorities.
Cost Management: Gartner practices disciplined cost management while remaining agile and investing for future growth.
Share Repurchase Program: Gartner remains eager to repurchase shares aggressively as a way to return value to shareholders.
2025 Revenue Guidance: Gartner expects consolidated revenue of at least $6.535 billion, reflecting FX-neutral growth of 4%.
Research Revenue Guidance: Research revenue is expected to be at least $5.34 billion, with FX-neutral growth of about 4%.
Conferences Revenue Guidance: Conferences revenue is expected to be at least $625 million, with FX-neutral growth of about 6%.
Consulting Revenue Guidance: Consulting revenue is expected to be at least $575 million, reflecting growth of about 2%, FX neutral.
2025 EBITDA Guidance: Gartner expects full year EBITDA of at least $1.535 billion, up $25 million from prior guidance.
2025 Adjusted EPS Guidance: Adjusted EPS is expected to be at least $11.70, up about $0.25 from last quarter.
Free Cash Flow Guidance: Gartner expects free cash flow of at least $1.145 billion for 2025, reflecting a conversion from GAAP net income of 137%.
Share Repurchase: Gartner repurchased $163 million of stock in Q1 2025 and maintains a share repurchase authorization of approximately $870 million. The company remains eager to repurchase shares aggressively, optimizing returns by being price sensitive, opportunistic, and disciplined.
The earnings call summary presents a mixed outlook: strong AI initiatives and AskGartner rollout suggest potential growth, but financial projections show modest growth rates. The Q&A revealed management's vague responses on CV improvement and AI impact, raising uncertainties. Despite operational improvements and revenue growth, the lack of detailed guidance and muted growth in key areas like non-subscription revenue and consulting tempers optimism. Therefore, the overall sentiment is neutral, expecting a stock price movement between -2% and 2%.
The earnings call summary shows a mix of positive and negative indicators. While there is strong demand for optimization services and a robust pipeline in AI and cybersecurity, there are concerns about tariffs affecting business and stretched selling cycles. The Q&A section reveals management's evasiveness on AI's cost impact and tariff details, adding uncertainty. Guidance is optimistic, but operational challenges and client behavior shifts temper enthusiasm. Overall, the sentiment is balanced, leading to a neutral stock price prediction.
The earnings report shows moderate growth in revenue and financial metrics, but the Q&A reveals concerns about U.S. federal contracts and a downward revision of research revenue outlook. Positive elements include strong free cash flow and a share repurchase program. However, the lack of clarity in management responses and the cautious guidance suggest a mixed sentiment, likely resulting in a neutral stock price movement.
The earnings call summary indicates strong financial performance with revenue growth and a robust pipeline, despite some challenges in consulting revenue. The Q&A section reveals positive sentiment from analysts, especially regarding future growth and a strong value proposition. The share repurchase program and positive free cash flow also contribute to a positive outlook. Although there are some concerns, the overall sentiment is positive, likely leading to a stock price increase of 2% to 8% over the next two weeks.
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