Gartner, Inc. EBITDA surged on 17.9% and EBITDA Margin increased on 3.6 pp from 16.2% to 19.8%
02/09/2021 • About Gartner, Inc. (
$IT) • By InTwits
Gartner, Inc. reported 2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is expanding: 19.8% in 2020 vs. 16.2% in 2019 vs. 15.0% in 2016
- Gartner, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.8%. At the same time it's in pair with industry average of 3.5%
- CAPEX is quite volatile: $84m in 2020, $149m in 2019, $127m in 2018, $111m in 2017, $50m in 2016
- The company has highly profitable business model: ROIC is 12.7%
- It operates with high leverage: Net Debt/EBITDA is 2.6x while industry average is 0.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Gartner, Inc.'s Revenue decreased on 3.4%. Revenue decline showed acceleration in 20Q4 - it was 7.5% YoY. During the last 5 years Revenue growth topped in 2017 at 35.5% and was decelerating since that time. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 3.6 pp from 16.2% to 19.8% in 2020. During the last 5 years EBITDA Margin bottomed in 2017 at 7.1% and was growing since that time.
Gross Margin increased on 3.7 pp from 63.5% to 67.2% in 2020. Gross Margin stuck to a growing trend at 1.5 pp per annum in the last 5 years. SG&A as a % of Revenue showed almost no change in 2020. SG&A as a % of Revenue followed a growing trend at 1.2 pp per annum in the last 5 years.
Net Income margin increased slightly on 1.0 pp from 5.5% to 6.5% in 2020. During the last 5 years Net Income margin bottomed in 2017 at 0.099% and was growing since that time.
Investments (CAPEX, working capital and M&A)
In 2020 the company had CAPEX/Revenue of 2.0%. Gartner, Inc. showed small CAPEX/Revenue decline of 1.3 pp from 3.3% in 2017 to 2.0% in 2020. For the last three years the average CAPEX/Revenue was 2.9%.
Return on investment
The company operates at high and attractive ROE (26.3%) while ROIC is a bit lower (12.7%). ROIC increased slightly on 1.9 pp from 10.8% to 12.7% in 2020. ROE showed almost no change in 2020. During 2016-2020 ROIC bottomed in 2017 at -0.25% and was growing since that time.
Leverage (Debt)
Debt level is 2.6x Net Debt / EBITDA and 3.5x Debt / EBITDA. Net Debt / EBITDA dropped on 1.5x from 4.1x to 2.6x in 2020. Debt decreased on 8.1% while cash surged on 154%. During 2016-2020 Net Debt/EBITDA topped in 2017 at 11.7x and was declining since that time.
Gartner, Inc. has no short term refinancing risk: cash is higher than short term debt (681.8%).
Valuation and dividends
Gartner, Inc.'s trades at EV/EBITDA 22.2x and P/E 59.6x.
Management team
Gartner, Inc.'s CEO is Eugene A Hall. Eugene A Hall has 4 years tenure with the company. Craig W Safian is a the company's CFO. Craig W Safian has spent 6 years at the company.
Financial and operational results
FY ended 12/31/2020
Gartner, Inc. ($IT) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 2,445 | 3,311 | 3,975 | 4,245 | 4,099 | -3.4% |
| Gross Profit | 1,499 | 1,991 | 2,507 | 2,695 | 2,754 | 2.2% |
| SG&A | 1,089 | 1,599 | 1,884 | 2,103 | 2,039 | -3.1% |
| EBITDA | 367 | 234 | 515 | 688 | 811 | 17.9% |
| EBIT | 305 | -6 | 260 | | | |
| Tax | 95 | -131 | 59 | | | |
| Net Income | 194 | 3 | 122 | 233 | 267 | 14.3% |
| Stock Based Compensation | 47 | 79 | 66 | | | |
Balance Sheet
|
|---|
| Cash | 474 | 539 | 156 | 281 | 713 | 153.7% |
| Accounts Receivable | 643 | 1,177 | 1,255 | | | |
| Short Term Debt | 30 | 380 | 166 | 216 | 105 | -51.7% |
| Long Term Debt | 664 | 2,899 | 2,116 | 2,876 | 2,738 | -4.8% |
Cash flow
|
|---|
| Capex | 50 | 111 | 127 | 149 | 84 | -43.7% |
| Acquisitions | 34 | 2,635 | 16 | | | |
Ratios
|
|---|
| Revenue growth | 13.0% | 35.5% | 20.1% | 6.8% | -3.4% | |
| EBITDA growth | 9.5% | -36.3% | 120.4% | 33.5% | 17.9% | |
|
|---|
| Gross Margin | 61.3% | 60.1% | 63.1% | 63.5% | 67.2% | 3.7% |
| EBITDA Margin | 15.0% | 7.1% | 13.0% | 16.2% | 19.8% | 3.6% |
| EBIT Margin | 12.5% | -0.2% | 6.5% | | |
| SG&A, % of revenue | 44.6% | 48.3% | 47.4% | 49.5% | 49.7% | 0.2% |
| SBC, % of revenue | 1.9% | 2.4% | 1.7% | | |
| Net Income Margin | 7.9% | 0.1% | 3.1% | 5.5% | 6.5% | 1.0% |
| CAPEX, % of revenue | 2.0% | 3.3% | 3.2% | 3.5% | 2.0% | -1.5% |
|
|---|
| ROIC | 41.0% | -0.2% | 6.9% | 10.8% | 12.7% | 1.9% |
| ROE | | 0.6% | 13.4% | 26.1% | 26.3% | 0.2% |
| Net Debt/EBITDA | 0.6x | 11.7x | 4.1x | 4.1x | 2.6x | -1.5x |
People
|
|---|
| Insider ownership | 3.0% | 3.0% | 3.0% | | | |
| Employees | 8,813 | 15,131 | 15,173 | | | |
| Revenue/Employee, th. $ | 277 | 219 | 262 | | | |
Gartner, Inc. ($IT) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,019 | 973 | 995 | 1,113 | | 5.0% | -9.1% | -0.6% | -7.5% |
| EBITDA | 206 | 178 | 169 | 258 | | 61.9% | -8.3% | 15.2% | 17.4% |
| Net Income | 75 | 55 | 17 | 120 | | 261.1% | -46.7% | -59.0% | 76.7% |
Balance Sheet
|
|---|
| Cash | 228 | 357 | 554 | 713 | | 52.6% | 63.3% | 80.5% | 153.7% |
| Short Term Debt | 226 | 118 | 103 | 105 | | -17.1% | -39.2% | -51.1% | -51.7% |
| Long Term Debt | 2,849 | 2,739 | 2,743 | 2,738 | | -0.5% | -3.1% | -3.0% | -4.8% |
Ratios
|
|---|
| Gross Margin | 66.5% | 66.9% | 66.8% | 68.4% | | 2.2% | 3.1% | 3.3% | 5.9% |
| EBITDA Margin | 20.2% | 18.3% | 17.0% | 23.1% | | 7.1% | 0.2% | 2.3% | 4.9% |
| Net Income Margin | 7.4% | 5.7% | 1.7% | 10.7% | | 5.2% | -4.0% | -2.4% | 5.1% |
Peers in IT Consulting & Other Services
Below you can find Gartner, Inc. benchmarking vs. other companies in IT Consulting & Other Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| CLPS Incorporation ($CLPS) | - | 8.1% | 56.0% | 32.7% | 37.7% |
| Endava plc ($DAVA) | - | 38.1% | 36.5% | 32.3% | 21.9% |
| EPAM Systems, Inc. ($EPAM) | - | 25.0% | 27.1% | 24.5% | 15.9% |
| Switch, Inc. ($SWCH) | - | 18.8% | 7.3% | 13.9% | 10.7% |
| Perficient, Inc. ($PRFT) | - | -0.4% | 2.7% | 13.5% | 8.2% |
| |
|---|
| Median (14 companies) | 8.3% | 3.9% | 3.6% | 6.3% | 2.3% |
|---|
| Gartner, Inc. ($IT) | - | 35.5% | 20.1% | 6.8% | -3.4% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Teradata Corporation ($TDC) | 51.2% | 47.5% | 47.4% | 50.3% | 55.5% |
| Switch, Inc. ($SWCH) | 47.0% | 47.6% | 44.7% | 47.5% | 45.4% |
| Perficient, Inc. ($PRFT) | 31.1% | 33.3% | 35.8% | 37.4% | 37.8% |
| Cognizant Technology Solutions Corporation ($CTSH) | 39.9% | 38.2% | 39.0% | 36.6% | 35.9% |
| EPAM Systems, Inc. ($EPAM) | 36.5% | 36.5% | 35.6% | 35.1% | 34.9% |
| |
|---|
| Median (14 companies) | 28.8% | 28.8% | 29.4% | 35.1% | 32.7% |
|---|
| Gartner, Inc. ($IT) | 61.3% | 60.1% | 63.1% | 63.5% | 67.2% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Switch, Inc. ($SWCH) | 37.0% | 28.5% | 39.8% | 44.1% | 47.8% |
| Amdocs Limited ($DOX) | 18.7% | 18.9% | 16.1% | 19.0% | 21.2% |
| EPAM Systems, Inc. ($EPAM) | 13.5% | 13.9% | 15.3% | 17.9% | 19.4% |
| Accenture plc ($ACN) | 15.9% | 14.8% | 16.3% | 16.7% | 18.7% |
| Cognizant Technology Solutions Corporation ($CTSH) | 19.8% | 19.7% | 20.5% | 19.2% | 17.8% |
| |
|---|
| Median (14 companies) | 6.7% | 6.9% | 7.2% | 13.9% | 11.7% |
|---|
| Gartner, Inc. ($IT) | 15.0% | 7.1% | 13.0% | 16.2% | 19.8% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Switch, Inc. ($SWCH) | 90.2% | 106.4% | 67.9% | 66.6% | 67.8% |
| Amdocs Limited ($DOX) | 3.5% | 3.4% | 5.8% | 3.1% | 4.9% |
| ServiceSource International, Inc. ($SREV) | 10.4% | 7.2% | 6.5% | 4.7% | 4.0% |
| Endava plc ($DAVA) | 2.4% | 4.1% | 2.5% | 2.6% | 2.8% |
| EPAM Systems, Inc. ($EPAM) | 2.5% | 2.1% | 2.0% | 4.3% | 2.6% |
| |
|---|
| Median (14 companies) | 1.1% | 1.4% | 1.5% | 2.0% | 1.9% |
|---|
| Gartner, Inc. ($IT) | 2.0% | 3.3% | 3.2% | 3.5% | 2.0% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Accenture plc ($ACN) | 81.3% | 61.7% | 66.1% | 62.1% | 40.7% |
| EPAM Systems, Inc. ($EPAM) | 18.2% | 18.9% | 21.2% | 20.2% | 19.4% |
| Cognizant Technology Solutions Corporation ($CTSH) | 21.3% | 21.9% | 23.8% | 20.4% | 17.5% |
| Amdocs Limited ($DOX) | 13.0% | 14.4% | 11.9% | 15.9% | 14.5% |
| Endava plc ($DAVA) | - | 36.0% | 29.6% | 26.1% | 9.8% |
| |
|---|
| Median (14 companies) | 7.3% | 6.4% | 7.0% | 10.1% | 7.8% |
|---|
| Gartner, Inc. ($IT) | 41.0% | -0.2% | 6.9% | 10.8% | 12.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Switch, Inc. ($SWCH) | 4.0x | 3.2x | 3.3x | 4.0x | 4.0x |
| Perficient, Inc. ($PRFT) | 0.4x | 1.0x | 1.3x | 1.0x | 1.5x |
| ServiceSource International, Inc. ($SREV) | 156.0x | - | -35.5x | 2.9x | 0.6x |
| Teradata Corporation ($TDC) | -1.1x | -1.5x | -1.3x | 0.9x | 0.5x |
| Amdocs Limited ($DOX) | -0.8x | -0.9x | -0.7x | -0.6x | 0.1x |
| |
|---|
| Median (12 companies) | 0.1x | 0.2x | 0.1x | -0.4x | -0.4x |
|---|
| Gartner, Inc. ($IT) | 0.6x | 11.7x | 4.1x | 4.1x | 2.6x |
