On Thursday, Gartner , Inc. (NYSE:IT), a global research and advisory firm, was given a "stable" credit score and a "Buy" rating by Gimme Credit for its 3.75% notes due 2030 at T5+140. This rating follows Gartner's announcement earlier in the week about the replacement of its existing secured credit facility with a new $1 billion unsecured revolving credit facility. The move maintains Gartner's debt/EBITDA ratio at 1.7x and marks the completion of the company's transition to a fully unsecured capital structure, which is seen as supportive of an investment-grade credit profile.
Gartner's fourth-quarter results showed an increase in revenues, although EBITDA declined by 8%. The company's EBITDA margins stood at a healthy 24%, despite a 400 basis point drop from the previous year. This decrease reflects a return to more normalized spending levels, such as travel expenses and additional headcount aimed at driving future revenue growth.
Gimme Credit's outlook for Gartner in 2024 anticipates another year of below-trend top-line growth, expected to rise by mid-single digits. The report identifies "change fatigue" among Chief Information Officers (CIOs) as a factor for delayed spending in 2023, which might persist into 2024. However, this is likely to be offset by growth in non-technology-related business and steady demand in less cyclical verticals. EBITDA for 2024 is projected to be slightly down at $1.4 billion, with a forecast of a strong year for free cash flow and EBITDA conversion nearing 80%.
The firm's positive outlook on Gartner's long-term business trajectory is based on anticipated secular growth in technology spending and Gartner's established market leadership. The company's subscription-based model, with high levels of recurring revenue, client retention, and wallet retention, provides visibility and moderate cyclicality. With Gartner bonds trading wide to the triple 'B' benchmark, analysts expect the spreads to tighten as the bonds migrate to full investment grade status.