Gartner Inc. (NYSE:IT) announced better-than-expected first-quarter 2018 results on Tuesday, detailing double-digit percentage growth led by strong demand for its market-leading research-and-advisory services. The company also modestly reduced its full-year guidance, but only to reflect the impact of recent divestitures.

With shares of Gartner up more than 5% in response, let's take a closer look at how the company kicked off 2018 and what investors should expect in the coming quarters.

Group of employees looking at charts and graphs on paper on a desk

IMAGE SOURCE: GETTY IMAGES

Gartner results: The raw numbers

Metric

Q1 2018

Q1 2017

Year-Over-Year Change

GAAP revenue

$963.6 million

$625.2 million

54.1%

GAAP net income (loss)

($19.6)

$36.4

N/A

GAAP earnings (loss) per diluted share

($0.22)

$0.43

N/A

DATA SOURCE: GARTNER.

What happened with Gartner this quarter?

  • Gartner's top-line growth was driven, in part, by sales from its acquisition of CEB's Talent Assessment and Workforce Survey and Analytics businesses in April 2017.
    • As previously announced, Gartner sold both these businesses last month, fetching $400 million for the Talent Assessment portion and $29 million for the Workforce Surveys division. Last quarter, management noted that, while they were leaders in expanding marketplaces, they were not aligned with Gartner's core focus of providing research-and-advisory services to enterprise customers.
    • Gartner used the proceeds of the sales to help reduce debt. It paid down $305 million in debt during the quarter and another $450 million in April.
  • On an adjusted (non-GAAP) basis -- which excludes items like acquisition expenses and non-recurring tax adjustments -- earnings per share increased 20% year over year, to $0.72.
  • Adjusted revenue, including held-for-sale operations, grew 16%, to $974 million. Excluding held-for-sale operations, adjusted revenue grew 17%, to $920 million.
  • By segment:
    • Research segment adjusted revenue grew 17%, to $770 million, while adjusted contribution margin increased 1 basis point, to 70%. Total segment contract value grew 12% year over year, to $2.88 billion.
    • Events segment adjusted revenue grew 28%, to $46 million, with adjusted contribution margin gaining 4 basis points, to 35%. Gartner held 14 destination events this quarter hosting a total of 11,643 attendees, good for year-over-year growth of 27% and 29%, respectively.
    • Consulting segment adjusted revenue increased 5%, to $83 million, with adjusted contribution margin contracting 1 basis point, to 29%. Segment backlog grew 17% year over year, to $104 million.
  • Talent assessment and other revenue was $70.7 million, driven by CEB.

What management had to say

Gartner CEO Gene Hall stated:

We are off to a great start to 2018. In Q1, we delivered double-digit growth in contract value, revenues, and profitability. Retention metrics are up versus the first quarter of 2017. Demand for our services is strong, and clients continue to receive incredible value from our expanded offerings.

Looking forward 

Gartner also updated its full-year guidance to account for the impact of the CEB divestitures, calling for:

  • Total revenue of $3.92 billion to $4.025 billion.
  • Adjusted earnings per share of $3.51 to $3.91.
  • Operating cash flow of $425 million to $475 million.
  • Free cash flow of $416 million to $456 million.

All things considered, there was little not to like about this strong first quarter. Gartner successfully divested CEB, enabling it to improve its balance sheet and focus on fostering its healthy, growing core businesses. And I think investors should be more than happy with the company's position today.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.