On Thursday, Gartner , Inc. (NYSE:), a global research and advisory firm, has received a Stable credit rating and a Buy rating from Gimme Credit for its 3.75% notes due 2030 at T5+140. The rating follows Gartner’s announcement earlier this week that it would replace 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 that is viewed as supporting an investment-grade credit profile.
Gartner’s fourth-quarter results showed revenue growth although EBITDA fell 8%. The company’s EBITDA margin was 24%, despite a 400 basis point decline year-over-year. The decline reflects a return to more normalized levels of expenses, such as travel expenses and additional headcount aimed at fueling future revenue growth.
Gimme Credit’s 2024 forecast for Gartner calls for another year of below-trend revenue growth, which is expected to increase by mid-single digits. The report found that “change fatigue” among chief information officers (CIOs) is a factor in delaying spending in 2023, which could continue into 2024. However, this is likely to be offset by growth in non-tech businesses and robust demand in less cyclical verticals. EBITDA for 2024 is forecast to decline slightly to $1.4 billion, with free cash flow forecast to be a strong year and EBITDA conversion approaching 80%.
The company’s positive view of Gartner’s long-term business trajectory is based on the expected continued growth in technology spending and Gartner’s established market leadership. The company’s subscription-based model with high levels of recurring revenue, customer and wallet retention provides transparency and moderate cyclicality. With Gartner’s bonds trading up to triple B grade, analysts expect spreads to narrow as the bonds move to full investment grade status.