Key Points
- Revenue reached $1.6 billion, growing by 6.1% year over year.
- Net income increased by 15.9% year over year to $230 million.
- Operating cash flow declined by 15.1% to $370 million, signaling potential liquidity issues.
Research and advisory company Gartner (IT -4.26%)released second-quarter earnings Monday that showed strong revenue and profit growth. The company reported revenue of $1.6 billion, a 6.1% increase from the same quarter last year. On the profit side, Gartner's net income grew by 15.9% year over year to $230 million. Stripping out one-time items, the company's adjusted earnings per share came in at $3.22, topping the forecasted $3.02. However, operating cash flow fell by 15.1% year over year to $370 million, raising concerns about liquidity management.
Overall, the quarter was robust but highlighted the need for close cash flow monitoring.
| Metric | Q2 2024 | Analyst Estimate | Q2 2023 | Change (YOY) |
|---|---|---|---|---|
| Revenue | $1.6 billion | $1.59 billion | $1.5 billion | 6.1% |
| Net income | $230 million | N/A | $198 million | 15.9% |
| Adjusted EPS | $3.22 | $3.02 | $2.85 | 13% |
| Adjusted EBITDA | $416 million | N/A | $384 million | 8.2% |
| Free cash flow | $341 million | N/A | $410 million | (17.0%) |
Source: Gartner. Analysts consensus estimate from FactSet. YOY = Year over year. EBITDA = Earnings before interest, taxes, depreciation, and amortization.
Gartner's Business Overview
Gartner, a research and advisory company, focuses on insights and advice for leaders in IT, finance, HR, and other sectors. Its services consist of three core business segments: research, conferences, and consulting.
Recently, it has prioritized extending market reach and deepening client relationships. Key success factors include maintaining proprietary research, expanding intellectual property, and investing in human capital.
Quarterly Highlights and Activities
Gartner saw significant developments across its core business segments in the second quarter. The Research segment contributed the highest revenue at $1.23 billion, a 4.8% increase year over year, and managed a strong 73.7% contribution margin. The Conferences segment generated $186 million, showing a strong 10.2% growth. Consulting services also experienced robust growth with revenue of $143 million jumping 13.1%.
From a client perspective, Global Technology Sales contract value increased by 6.1% to $3.8 billion, while Global Business Sales saw a 12.0% rise to $1.1 billion. The combined $4.9 billion contract figure (up 7.4%) underscores Gartner's strategic focus on expanding market presence and diversifying client engagement.
Financially, GAAP diluted EPS of $2.93 represented an 18.1% increase, while adjusted EBITDA climbed 8.2% to $416 million. However, the notable decline in operating and free cash flow, down 15.1% and 17.0% respectively, suggests increased reinvestment in growth initiatives. Gartner also repurchased $340 million in shares, and the board authorized an additional $600 million repurchase program in July.
Material one-time events included the lack of significant gains from divestitures and event cancellation recoveries seen in prior years. No new significant dividend changes were declared during the quarter.
Looking Ahead
Management slightly lowered full-year revenue guidance to $6.2 billion (from $6.24 billion) which implies 5% growth. It raised its adjusted EPS guidance from approximately $10.55 up to $11.05. Emphasis was placed on contract value growth acceleration and the benefits of strategic investments aimed at enhancing market reach and client services.
Investors should watch Gartner's liquidity management closely, given the cash flow declines. Other forward-looking considerations include the geopolitical and market uncertainties discussed in prior quarters, and Gartner's ability to navigate these while maintaining strong growth.
