Gartner Inc Continues to Build Its Book of Business

Source: Gartner

Gartnerreported third quarter results on Nov. 5, 2015. The leading provider of research and analysis on the global information technology industry saw solid growth in contract value -- a key indicator of future revenue and profitability -- although foreign currency fluctuations continue to take a toll on the company's results.

Gartner results: the raw numbers

Source: Gartner Q3 2015 earnings press release

What happened with Gartner this quarter?

Total revenue rose 6% to$500.2 million (13% excluding the negative impact of foreign exchange-rate fluctuations).

Normalized EBITDA (earnings before interest, taxes, depreciation, and amortization), which excludes stock-based compensation and certain acquisition-related charges, increased 7% to$79.8 million.

Adjusted earnings per share, excluding acquisition-related charges, was$0.45, compared to $0.44in the prior-year quarter.

Business segment resultsDrilling down into Gartner's individual business segments, we see that research revenuerose 8% (16% on a constant-currency basis) to $396.2 million. Gross margin was flat at 69%. Contract value was$1.643 billionatSep. 30, 2015, an increase of 11% (14% on a constant-currency basis). Client retention remained steady at 84%, while wallet retention -- retention times revenue per customer -- increased to 106%, up from 105% in the year-ago quarter.

Somewhat offsetting the gains in the research divisionwas a 9% (3% in constant currency) decrease in consulting revenue to $74.7 million. Consulting segment gross contribution margin also declined, falling to 29% from 30% in Q3 2014, and utilization fell from 65% to 63%. Gartner did, however, grow both its consultant force and backlog during the third quarter, with its billable headcount and backlog rising to 588 and $109.6 million, respectively, as of Sep. 30, 2015, compared to 534 and$108.5 millionatthe end of the third quarter of 2014.

Revenue in Gartner's smallest segment, its event business, was $29.3 million, representing a year-over-year jump of 26% (38% on a constant-currency basis). Gross contribution margin for the events segment climbed to 39%, an increase of nine percentage points year-over-year.

Cash flow, capital returns, and acquisitionsGartnercontinues to generate impressive cash flow, including$266 millionof operating cash flow and $230 million in free cash flow in the first three quarters of 2015. That has allowed the company to return cash to shareholders via stock buybacks, with$453 millionallocated to share repurchases during that time. In addition, $196 million in cash was used to acquire Nubera eBusiness S.L. andCapterra -- two businesses that assist organizations in selecting the right software for their needs.

Looking forward The company also updated its full-year 2015 projections for revenues, earnings per share, normalized EBITDA, and cash flow as follows:

Total revenue of $2.15 billion to $2.19 billion, up 6% to 8% year-over-year
Adjusted earnings per share of $2.29 to $2.39, up 2% to 7%
Normalized EBITDA of $405 million to $420 million, up 5% to 9%
Operating cash flow of $337 million to $352 million, down 3% to up 1%
Free cash flow of $305 million to $320 million, down 2% to up 3%

"Gartner continues to deliver robust results as a company," said CEO Gene Hall. "We achieved another quarter of double-digit CV growth and we continue to deliver strong results across our underlying metrics."

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Joe Tenebruso has no position in any stocks mentioned. The Motley Fool recommends Gartner. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.