Gartner (IT 0.89%) reported first-quarter financial results on May 4. The leading provider of research and analysis on the IT industry saw its profits dinged by acquisition-related charges, but management expects the company's recent deals to be meaningfully accretive to earnings in the years ahead.

Gartner results: The raw numbers


Q1 2017

Q1 2016

Year-Over-Year Change


$625.169 million

$557.266 million


Net income

$36.433 million

$44.987 million


Earnings per share




Data Source: Gartner Q1 2017 earnings press release.

What happened this quarter?

  • Total revenue jumped 12% year over year to $625.2 million -- and 13% excluding the impact of foreign currency headwinds -- fueled primarily by growth in its research division.
  • Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), which excludes stock-based compensation and certain acquisition-related charges, rose 3% to $106.1 million, and 1% on a currency-neutral basis.
  • Earnings per share -- adjusted to exclude acquisition-related items -- declined 10% to $0.60.

Business segment results

Research revenue leapt 15% to $504.7 million. Gross contribution margin decreased to 69% from 70% in Q1 2016. Client retention and wallet retention (retention times revenue-per-customer) also declined, to 83% and 104%, respectively, compared to 84% and 105% in prior-year period. And contract value was $1.95 billion at the end of the first quarter, a year-over-year increase of 13% (15% in constant currency).

Consulting revenue rose 2% on a constant-currency basis to $85.2 million. Consulting segment gross contribution margin fell to 33% from 35% in the year-ago quarter, and utilization dropped to 65% from 67%. Gartner's billable headcount for its consultant force at the end of the quarter was 650, which was up from 618 in Q1 2016. Its backlog, however, decreased to $103.2 million at March 31, 2017, compared to $114.1 million a year earlier.

Additionally, revenue for its events business increased 10% to $35.3 million, with gross contribution margin declining to 38% from 41%.

Two businessmen shaking hands

Image source: Getty Images.

CEB acquisition update

On Jan. 5, Gartner announced that it was acquiring CEB Inc., the operational-best-practices and talent-management company. The deal closed on April 5, for a total enterprise value of approximately $3.5 billion.

Commenting on the acquisition in Gartner's earnings release, CEO Gene Hall said that he's "extremely excited about our prospects for long term growth in both the Gartner and CEB businesses."

Looking forward

Gartner updated its financial outlook for 2017 to reflect the closing of the CEB deal, including:

  • Total revenue of $3.219 billion to $3.314 billion, compared to previous estimates of $2.680 billion to $2.745 billion
  • Adjusted EBITDA of $685 million to $735 million, up from $495 million to $530 million
  • Adjusted EPS of $3.32 to $3.60, versus $3.15 to $3.35

"The combination of Gartner and CEB will create tremendous value," Hall said during a conference call with analysts. "We continue to expect that, by 2020, we will see an attractive double-digit growth for both the CEB and the Gartner businesses."