David Cohen:

Good morning, everyone. Welcome to Gartner's Second Quarter 2024 Earnings Call. I'm David Cohen, SVP of Investor Relations. At this time, all participants are in a listen-only mode. After comments by Gene Hall, Gartner's Chief Executive Officer; and Craig Safian, Gartner's Chief Financial Officer, there will be a question-and-answer session. Please be advised that today's conference is being recorded. This call will include a discussion of second quarter 2024 financial results and Gartner's outlook for 2024 is disclosed in today's earnings release and earnings supplement, both posted to our website, investor.gartner.com. On the call, unless stated otherwise, all references to EBITDA for adjusted EBITDA, with the adjustments as described in our earnings release and supplement, our contract values and associated growth rates discussed are based on 2024 foreign exchange rates. All growth rates in Gene's comments are FX neutral, unless stated otherwise. All references to share counts are for fully diluted weighted average share counts as stated otherwise. Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website. As set forth in more detail in today's earnings release, certain statements made on this call may constitute forward-looking statements. Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the Company's 2023 annual report on Form 10-K and quarterly reports on Form 10-Q as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents. Now, I will turn the call over to Gartner's Chairman and Chief Executive Officer, Gene Hall.

Craig Safian:

Thank you, Gene, and good morning. Second quarter contract value grew 7% year-over-year, accelerating about 50 basis points from Q1. We believe the first quarter marked the bottom for CV growth this cycle, barring a meaningful shift in the macro or geopolitical environment. Growth may vary from quarter-to-quarter, but we expect the overall trend will be higher from the 6.9% we delivered in the first quarter. Over the medium term, we expect both GTS and GBS to grow 12% to 16%. Second quarter revenue, EBITDA and EPS all came in ahead of our expectations. We are updating our guidance based on the Q2 results, FX and a change in non-subscription research revenue. We have repurchased $565 million of stock through June and remain eager to buy back stock opportunistically. Second quarter revenue was $1.6 billion, up 6% year-over-year as reported and 7% FX neutral. In addition, total contribution margin was 68%, about in line with last year. EBITDA was $416 million, up 8% as reported and 10% FX neutral versus second quarter 2023. Adjusted EPS was $3.22, up 13% from Q2 of last year, and free cash flow was $341 million. Research revenue in the second quarter grew 5% year-over-year as reported and 6% on an FX-neutral basis. Subscription revenue grew 7% FX neutral. The year-over-year change in non-subscription revenue was similar to Q1 2024. Second quarter research contribution margin was 74%, consistent with last year. Contract value was $4.9 billion at the end of the second quarter, up 7% versus the prior year and up about $67 million from the first quarter. CV from enterprise function leaders across GTS and GBS grew 10%. Contract value and CV growth are FX neutral. CV growth was broad-based across practices, industry sectors, company sizes and geographic regions. Across our combined practices, the majority of industry sectors grew at double-digit or high single-digit rates led by the energy, manufacturing and public sectors. CV grew double-digit or high single-digit rates across all enterprise sizes, except small, which has the largest tech vendor mix. We also drove double-digit or high single-digit growth in the majority of our top 10 countries. Global Technology Sales contract value was $3.8 billion at the end of the second quarter, up 6% versus the prior year. GTS enterprise leader CV increased high single digits. Tech vendor CV returned to growth in the quarter. GTS CV increased $40 million from the first quarter. While retention for GTS was 101% for the quarter, up from Q1, enterprise leader wallet retention was consistent with historical levels. GTS new business was up 8% compared to last year. GTS quota-bearing head count was down 2% year-over-year as we manage tech vendor-focused sales territories in response to near-term industry dynamics. Across GTS, we continue to aggressively optimize our territories to align with where we have the best growth opportunities, and we are investing for future growth. We continue to expect mid-single-digit QBH growth by the end of the year. We have the headcount we need to meet commitments for this year. Our regular full set of GTS metrics can be found in our earnings supplement. Global Business Sales contract value was $1.1 billion at the end of the second quarter, up 12% year-over-year. All of our GBS practices grew at double-digit or high single-digit rates other than marketing, which grew mid-single digits. Growth was led by the finance, legal and supply chain practices. GBS CV increased $27 million from the first quarter. Wallet retention for GBS was 106% for the quarter, which compares to 109% in the prior year. GBS new business was up 16% compared to last year. GBS quota-bearing head count was up 6% year-over-year, and we continue to target high single-digit growth for 2024. As with GTS, a regular full set of GBS metrics can be found in our earnings supplement. Conferences revenue for the second quarter was $186 million, increasing 10% as reported and 11% FX neutral compared to Q2 of 2023. Adjusting for the movement of conferences across the year, revenue increased about 15% in the quarter. Contribution margin was 58%. Q2 is our seasonally strongest margin quarter of the year. We held 16 destination conferences. Second quarter consulting revenue increased by 13% year-over-year to $143 million. On an FX-neutral basis, revenue was up 15%. Consulting contribution margin was 38% in the second quarter. Labor-based revenue was $107 million, up 3% versus Q2 of last year's reported and 5% on an FX-neutral basis. Backlog at June 30 was $199 million, increasing 16% year-over-year on an FX-neutral basis with continued booking strength. In contract optimization, we delivered $36 million of revenue in the quarter, up 62% versus the prior year. Our contract optimization business is highly variable. Consolidated cost of services increased 5% year-over-year in the second quarter as reported and 6% on an FX-neutral basis. The biggest driver of the increase was higher compensation costs. SG&A increased 5% year-over-year in the second quarter as reported and on a FX-neutral basis. SG&A increased in the quarter as a result of headcount growth, which contributed to higher compensation costs. EBITDA for the second quarter was $416 million, up 8% from last year's reported and up 10% FX neutral. We have performed in the second quarter through effective expense management and a prudent approach to guidance. Depreciation in the quarter of $28 million was up 16% compared to 2023. Net interest expense, excluding deferred financing costs in the quarter, was $19 million. This is favorable by $4 million versus second quarter of 2023 due to higher interest income on our cash balances. The modest floating rate that we have is fully hedged through the third quarter of 2025. The Q2 adjusted tax rate, which we use for the calculation of adjusted net income, was 24% for the quarter. The tax rate for the items used to adjust net income was 25% for the quarter. Adjusted EPS in Q2 was $3.22, up 13% compared with last year. We had 78 million shares outstanding in the second quarter. This is a reduction of more than 1.5 million shares or about 2% year-over-year. We exited the second quarter with about 78 million shares on an unweighted basis. Operating cash flow for the quarter was $370 million compared with $436 million in Q2 of 2023. The change reflects working capital timing, which we expect to reverse in the second half. CapEx for the quarter was $29 million, in line with our expectations. Free cash flow for the quarter was $341 million. Free cash flow on a rolling four-quarter basis was 17% of revenue and 66% of EBITDA. Free cash flow conversion from GAAP net income was 121%. Our free cash flow conversion is generally higher when CV growth is accelerating. At the end of the second quarter, we had about $1.2 billion of cash. Our June 30 debt balance was about $2.5 billion. Our reported gross debt to trailing 12-month EBITDA was under 2x. Our expected free cash flow generation, available revolver and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy of share repurchases and strategic tuck-in M&A. Our balance sheet is very strong with $1.9 billion of liquidity, low levels of leverage and effectively fixed interest rates. We repurchased $340 million of our stock during the second quarter. We have more than $1 billion of repurchase capacity after the Board recently increased our share buyback authorization by $600 million. As we continue to repurchase shares, our capital base will shrink. Over time, this is accretive to earnings per share and combined with growing profits, also delivers increasing returns on invested capital. We are updating our full year guidance to reflect recent performance and trends. The outlook for subscription research is higher based on the latest FX rates. We increased the outlook for conferences and consulting. And our EBITDA guidance primarily reflects Q2 upside, partially offset by our updated non-subscription research outlook. For subscription research, which was about 76% of revenue in 2023, we continue to innovate and provide a very compelling value proposition for clients and prospects. The executive and their teams face uncertainty and challenges, and they recognize how Gartner can help regardless of the economic environment. For subscription research revenue, based on Q2 results and our outlook for the balance of the year, our FX-neutral guidance is unchanged. We have very high visibility into the subscription research revenue at this point in the year. For non-subscription research, which was about 6% of 2023 revenue, we help small businesses find the right software. We've updated our outlook for this portion of the segment given the most recent trends. We now expect non-subscription revenue of about $305 million for 2024. As a reminder, about 1/3 of our revenue and operating expenses are denominated in currencies other than the U.S. dollar. Based on recent FX rates, we expect currency to be roughly neutral in the back half of the year with a modest benefit in Q4. Our updated 2024 guidance is as follows. We expect research revenue of at least $5.105 billion, which is FX-neutral growth of about 5%. This reflects subscription research revenue growth of about 7%. We expect conferences revenue of at least $565 million, which is FX-neutral growth of about 12%. We expect consulting revenue of at least $530 million, which is growth of about 4% FX neutral. The result is an outlook for consolidated revenue of at least $6.2 billion, which is FX-neutral growth of 5%. We now expect full year EBITDA of at least $1.460 billion, up $5 million from our prior guidance. We expect 2024 adjusted EPS of at least $11.05. For 2024, we expect free cash flow of at least $1.08 billion, consistent with our prior guidance. This reflects the conversion from GAAP net income of 138%. After the second quarter ended, we reached the settlement related to pandemic or event cancellation insurance. We expect pretax proceeds of $300 million during the third quarter. This is not yet included in the cash flow or GAAP EPS guidance. Our guidance is based on 78 million fully diluted weighted average shares outstanding, which reflects the repurchases made through the end of June. And finally, for the third quarter, we expect adjusted EBITDA of at least $295 million. Our financial results through the first half have been ahead of our plan despite continuing global macro uncertainty. CV grew high single digits in the quarter, and we believe Q1 was the bottom for CV growth in this cycle. We repurchased $565 million in stock year-to-date through June and remain eager to return excess capital to our shareholders. We will continue to be price sensitive, opportunistic and disciplined. Looking out over the medium term, our financial model and expectations are unchanged. With 12% to 16% research CV growth, we've delivered double-digit revenue growth. With gross margin expansion, sales costs growing about in line with CV growth and G&A leverage, we will deliver modest EBITDA margin expansion over time. We can grow free cash flow at least as fast as EBITDA because of our modest CapEx needs and the benefits of our clients paying us upfront. And we'll continue to deploy our capital on share repurchases, which will lower the share count over time, and on strategic value-enhancing tuck-in M&A. With that, I'll turn the call back over to the operator, and we'll be happy to take your questions. Operator?

Jeff Meuler:

When you’ve kind of reiterated that you think Q1 marked the bottom for CV growth with the macro and geopolitical caveats, you said growth may vary quarter-to-quarter. Just want to, I guess, zooming on what you're trying to signal there. Is that just an acknowledgment of, I guess, the volatile end market environment? Or are you expecting that you expect deceleration at some point in the near future because of like a known year-over-year comp issue or anything else that you're seeing?

Jeff Meuler:

Got it. And then on the building headcount from here, I guess, the tech vendor territory, I don't know exactly the phrase you use, but I don't know if it's just dynamic territory planning. But was that something that you recently kind of like kicked into gear? Or was that an ongoing dynamic? Just not sure what you're trying to signal there. And is it reassigning salespeople or just managing those territories through attrition?

Craig Safian:

And then just sort of pulling the thread all the way through, we are targeting, even with all that dynamic territory planning, mid-single-digit QBH growth for GTS by the end of the year and high single-digit QBH growth for GBS by the end of the year. And again, implicit in all that are all the things, Gene talked about, that's been our normal operating procedure for the last four or five years now. It's an innovation we put in place in 2019. And again, it doesn't allow us to perfectly match, but it gives us a better chance of making sure that the resources that we're investing in are actually going against the best short-term, medium-term and long-term opportunities.

Toni Kaplan:

I wanted to focus on the research revenue guide. It seems like you lowered it because of the non-subs business. I know tech vendor actually returned to growth on the subscription side, but the non-subs piece, I think still is -- seems to be declining. I guess, was it because -- your guide down, was it because non-subs was worse than you originally thought? Or is just the trajectory not going to be as quick as you were thinking? Just maybe help us through the trajectory on the non-subs piece.

Toni Kaplan:

Great. And then, the cash balance is pretty high, below leverage. You added capacity to the buyback program. Maybe just give us an update on like what conditions could we look for to sort of for you to be buying back more stock? I know you already do, but just sort of elevate that level.

Operator:

Our next question comes from the line of Andrew Nicholas with William Blair. Please proceed.

Gene Hall:

Andrew, it's Gene. So, what I'd say is the selling environment are pretty much the same. But I do think we're focused on improving the productivity of our teams. And as you know, we're always taking actions to be add to respond to changes in the world. I think that's really the impact we see. It's not that the environment got better in any way, really.

Gene Hall:

So, Andrew, I'll get started. Craig can finish. Basically, the -- our basic strategy with clients is when we sell a client, that's not the end. There's plenty of opportunity to sell more seats to those clients over time. And so, one core part of our selling strategy is to keep selling additional business, additional licensed users to clients that sell them. The other part of our strategy is, of course, to sell new logos as well. And so, because that's one factor that you see there is that actually -- and we've always had this as our strategy, which is always keep growing existing clients as well as new clients.

Operator:

Our next question comes from the line of Heather Balsky with Bank of America Securities. Please proceed.

Craig Safian:

Heather, thank you. In terms of the medium-term outlook, it is our goal. And again, we do need a stable, I won't say a great operating environment, but a stable operating environment. I'd argue we're doing really well in a very volatile operating environment globally, probably more volatile than that. We'd all like to see, quite honestly, but we're continuing to do well. GBS is growing in that medium-term guidance range today. The end-user portion or the enterprise leader portion of GTS is growing at high single-digit growth rates. And obviously, we want to get that back up into the 12% to 16% range. And then on the tech vendor side, what I would say is small tech continues to be a super challenging operating environment. We were pleased to see the overall tech vendor business return to growth in this quarter from last quarter, but it is still super challenging, particularly on the lower end of the tech vendor market.

Craig Safian:

Generally, no. So, our selling motion, our conference calendar, things like that, which are a big piece of what drives the typical phasing, are pretty stable. So no, I would expect us to follow the similar trends to what we've seen. Obviously, we called out Q1 of this year earlier because it was a little off trend. But I think back half of the year should look like a normal back half of the year for us from that perspective.

Josh Chan:

If I look at the CV growth, so GTS obviously reaccelerated nicely as you had predicted. How do you think about the shape of GBS as that's been kind of moderating slowly perhaps because of the macro. How do you envision GBS trending from here?

Craig Safian:

And again, the medium-term objective for that business is 12% to 16% growth, and we continue to believe that the GBS business and the GTS business can both deliver 12% to 16% CV growth.

Craig Safian:

Thank you, Josh. Great question. So, the way to think about the second half again is sort of back to Heather's question a little bit, too, normal phasing from both a revenue perspective and from an operating expense perspective, coupled with continuing to make sure that we are investing for future growth. And again, we talked about mid-single-digit QBH growth for GTS and high single-digit QBH growth for GBS. So, making sure that those investments are dialed into the second half operating expense forecast and plans. The other thing I would note is that Q2 is our highest margin quarter for conferences. So, despite Q4 being the largest revenue quarter, Q2 is actually the highest margin quarter, which drives some of that benefit that you saw in the second quarter. But if you kind of run the math on revenue, normal OpEx phasing, given our conference calendar and also dialing in that incremental investment for the QBH growth, which again, as you know, it doesn't really benefit the results or top line results this year. Those are really investments for the future. That's how you can sort of reconcile from the Q2 EBITDA margins down to the second half EBITDA margins, which then give you that full year outlook of around 23.5%.

Brendan Popson:

This is Brendan on for Manav. I just want to ask, there's been some, I guess, just reports on companies facing kind of like a Gen AI tech on their IT budgets just with the expense of some of the new technology. I was just curious if what you guys have seen related to that and kind of what your customers are saying? And any -- if there's any impacts from that? Obviously, it's also an opportunity as well, but just what you're seeing near term.

Brendan Popson:

Okay. And then just following up. With the cash and leverage, you mentioned -- you always mentioned tuck-in M&A as a possibility. Just kind of give us an idea what, I guess, what kinds of tuck-in M&A you would consider?

Operator:

Our next question comes from the line of Surinder Thind with Jefferies. Please proceed.

Gene Hall:

So, if you look at our take of our hiring, if you look at the market overall, it's been very, I'd say, uneven over the last few years. There was a pandemic where we slowed down our hiring dramatically. There was the tech bubble afterwards where it's hard to even hire people because the tech companies are suppressively hiring. In the year after that, the tech houses were laying people off. And so, it was very easy to hire people. And so, we've stepped up a couple of years ago very well, and we had a lot of junior people. And so, we want to make sure that those people want to make sure that we got full productivity out of them and also to see kind of what the macroeconomic in geopolitical world looks like. That seems to be more stable now, and we feel like that the tenure of that group we had two years ago now is at a stable point. And so, it makes sense to ramp our hiring up. And the people we hire beginning in the second half of the year are going to position us '25, '26 to '27 because their productivity will improve over the first three years, we hired them. And so, this additional hiring we're planning to do in the second half is really getting back to what we've done traditionally before the rockiness of the last few roads -- in the last few years, and we would expect that kind of hiring trend to continue, which is more even going forward. And this is kind of just getting back to strategy after the last few years of a lot of tumultuous economic times.

Surinder Thind:

That's helpful. And then you mentioned CrowdStrike in the prepared remarks. How does something like that impact the business? Is it just more engagement with existing clients just wanting to access more resources? Or does this drive incremental demand at the top of the funnel that maybe you can convert in the back half of this year?

Operator:

Our next question comes from the line of George Tong with Goldman Sachs. Please proceed.

Gene Hall:

So, I would say the selling environment was pretty consistent between Q1 and Q2. There's not a lot of change there. I don't think our execution was better. It's just why we had a little bit of pickup in parts of our business. The overall macroeconomic and geopolitical environment didn't change much between Q1 and Q2.

Craig Safian:

George, the way I would characterize it is, we came in roughly where we thought we were going to land from a research subscription revenue perspective in the second quarter. CV growth did accelerate 50 basis points from Q1 to Q2. That was pretty much baked into our full year outlook. And so, from where we stand today, we feel really good about the research description revenue line, as we mentioned in the prepared remarks. That's obviously the revenue line that we have the greatest visibility on, but it's also modest changes in CV don't have a huge impact from now until the end of the year. It's really the CV growth delivered for this year will really determine 2025 revenue. So, I think our perspective is sort of on target or on expectation for Q2. No change to the research subscription revenue line for the balance of the year other than the modest uptick that we dialed in for foreign exchange.

Jeff Silber:

I wanted to focus on retention. The retention metrics still going down. I know the declines seem to be getting less worse, which is good to see. But what do you think it will take to get the retention metrics starting to move in a positive direction again? Is there anything you can do from your end?

Jeff Silber:

Okay. Great. And if I could shift over to the contract length for research. If I remember correctly, at one point in time, you were selling more three-year contracts. I might be wrong, but I think more recently, probably shifting a little bit more towards two years. If you could just remind me correct. Are a lot of those two-year terms coming up for renewal over the next few months or so?

Operator:

Thank you. And as I see no further questions in the queue, I will pass the call back to the Chairman and CEO, Gene Hall, for his final comments.

Operator:

And thank you all for participating in today's conference, and you may now disconnect.

David Cohen:

Good morning, everyone. Welcome to Gartner's First Quarter 2024 Earnings Call. I'm David Cohen, SVP of Investor Relations. [Operator Instructions] After comments by Gene Hall, Gartner's Chief Executive Officer; and Craig Safian, Gartner's Chief Financial Officer, there will be a question-and-answer session. Please be advised that today's conference is being recorded.

Eugene Hall:

Good morning, and thanks for joining us today. Gartner remains resilient in a complex environment. In Q1, contract value grew high single digits. Natural results for the quarter were ahead of expectations. We delivered strong profitability and free cash flow, and we increased our guidance for 2024 on an FX neutral basis.

Craig Safian:

Thank you, Gene, and good morning. First quarter financial results were better than planned with particular strength in profitability and free cash flow. We remain well positioned for the global CV growth rate to accelerate from the first or second quarter of this year. We are increasing our revenue, profit and free cash flow guidance on an operating basis and updating for the stronger U.S. dollar. We have a lot of capacity for share repurchases and remain eager to buy back stock opportunistically.

Operator:

[Operator Instructions] And our first question will come from Jeff Meuler from Baird.

Operator:

Yes, sir, we can hear you now.

Jeffrey Meuler:

Okay. And then just on retention, obviously, we have your publicly reported metrics, and just want to recognize that you had previously called out the outsized renewals for tech vendor this quarter.

Craig Safian:

Yes. I think, Jeff, it's a great question. We have seen some stability in the retention rates. And generally, if you look at our NCVI in any given quarter, it's a combination of what did we renew and how much new business we sold.

Toni Kaplan:

I was hoping you could just comment on the first part of the last question, the recalibration and seats as contracts come up for renewal. Are you seeing the large enterprise clients reducing seats? Or was that more of a comment around the tech vendor?

Eugene Hall:

Toni, it's Gene. There's a couple of things going on. One is in the small end of the market, the companies that got funding 2 or 3 years ago that are now coming up for renewal, many of those companies are having difficulty getting funding for two reasons.

Craig Safian:

And then, Toni, just for context, the tech vendor CV is a little less than 25% of total CV, which is pretty consistent with where we've been over the last several quarters.

Heather Balsky:

I'd love to touch on your, I guess, I'll call it guidance that you still think CV should start to accelerate, either after this quarter or after next quarter. It sounds like the selling environment got tougher. We're still seeing layoffs in the tech industry. I'm just curious what you're seeing right now that still gives you confidence that this is the year we see the inflection?

Eugene Hall:

Heather, let me start. So our -- Q1, our enterprise function leaders CV grew 10%, so it was a little tougher economic environment. Decisions got pushed. We still grew 10% in that kind of environment.

Craig Safian:

Yes. I mean, it's -- so obviously, it's got to add up to 100% over the course of the year. And so we were a little overweighted in the first quarter on those tech vendor renewals, and it's much more even over the balance of the year. And again, it's another reason that gives us confidence.

Operator:

And our next question will come from Andrew Nicholas from William Blair.

Craig Safian:

Andrew, I'd say the OpEx favorability was pretty broad based. It wasn't any one particular area where we harvested significant savings. I would say the FX rate actually helped a little bit there, too. It obviously hurts on revenue, but helps on expenses.

Eugene Hall:

The other thing we're doing to Andrew, too, is for some of these existing conferences, we're moving to larger venues, so that we actually can accommodate the incremental demand that we're seeing, which is substantial.

Joshua Chan:

Is there a way to estimate how much the elevated renewals in Q1 impacted your CV growth? And I guess, relatedly, absent this elevated renewal impact in Q2, how should we think about the NCVI in Q2 as compared to last year, which should theoretically be a pretty easy comparison, I think?

Craig Safian:

Yes, it's a great question. So obviously, when we talk about average productivity and what we've seen historically, those are generally measured in more "normal" operating environment. And so clearly, when it's more challenging from an operating environment perspective, we can see some of the productivity measures or at least the final output productivity measures a little more muted.

Manav Patnaik:

Craig, in your prepared remarks, you made a comment around pricing stabilized, that it could be upside to guidance if it improves. So I was just hoping you could just give a little bit more detail on what the pricing, I guess, year-over-year growth is today versus historical. And were you implying that you guys might be raising prices here again?

Manav Patnaik:

Okay. Got it. And then just one quick one. I think the enterprise count is down about 4% year-over-year. I'm guessing a lot of that was the tech vendor challenges you talked about. But just in context of your CV acceleration you're expecting, can you just remind us again of your hiring plans for the quota-bearing sales force?

Operator:

And our next question comes from Surinder Thind from Jefferies.

Craig Safian:

Surinder, I think it's a combination across the portfolio that will fuel the reacceleration for CV. I mean, clearly, tech vendor needs to be a piece of that. It's about 25% of total CV.

Craig Safian:

Surinder, we generally don't guide around contract value. And so, yes, I can't answer that specifically. All I would say is from either the Q1 or Q2 point, we expect total CV to begin to reaccelerate. And certainly, tech vendor CV will contribute there.

Eugene Hall:

Yes. Surinder, great question. So the pricing is based on the -- what we're calling the quality of the leads, which is basically the proportion of leads that we send that turn into actual clients. And so -- and analyzing it, we've determined that increasing that proportion actually increases prices. But what happens is you send the vendor the lead, they have to actually close the deals. And so there's a lag time between when you send a better lead and when the pricing goes up.

Operator:

Our next question will come from George Tong from Goldman Sachs.

Craig Safian:

George, I don't think there's anything really to call out month-to-month. I mean, our business, as you know, tends to be very heavily weighted towards the last month of the quarter. And so it's hard to draw inferences or conclusions from Jan to Feb to March, et cetera.

Keen Fai Tong:

Okay. Got it. And then with respect to margins, you raised your EBITDA margin outlook for the year from 23% to 23.5%. Typically, revenue upside is what drives the margin upside, and expenses are stable at this point. So what's driving your improved margin outlook? And what are your latest thoughts on what normalized EBITDA margin should be?

Operator:

And we will take our last question from Jeff Silber from BMO Capital Markets.

Craig Safian:

Ryan, I'd say it's been pretty stable and normal. So our standard contract is essentially a 2-year contract. I think somewhere around 70% of our contract value are multiyear contracts, 2 or 3 years, but the bulk of them are actually 2-year.

Ryan Griffin:

Got it. And then just on the quarterly cadence, what are the meaningful hiring quarters this year? And then just more broadly, how is the hiring market currently for tech talent?

Craig Safian:

And then, Ryan, on the timing of the phasing, hiring dates can be -- they can happen on June 29, and they're in the second quarter number or they could happen on July 1 and then they're in the third quarter number. We're very focused on making sure that we hire the right amount of people over the course of this year, so that we enter 2025 with the right number of sellers ready to go.

Eugene Hall:

Well, here's what I'd like you to take away from today's call. Gartner delivered financial results ahead of expectations and 10% contract value growth with enterprise function leaders. We have a vast addressable market opportunity. We have a strong value proposition.

David Cohen:

Good morning, everyone. Welcome to Gartner's Fourth Quarter 2023 Earnings Call. I'm David Cohen, SVP of Investor Relations. At this time, all participants are in a listen-only mode. After comments by Gene Hall, Gartner's Chief Executive Officer; and Craig Safian, Gartner's Chief Financial Officer, there will be a question-and-answer session. Please be advised that today's conference is being recorded. This call will include a discussion of fourth quarter 2023 financial results and Gartner's outlook for 2024 as disclosed in today's earnings release and earnings supplement, both posted to our website, investor.gartner.com. On the call, unless stated otherwise, all references to EBITDA are for adjusted EBITDA, with the adjustments as described in our earnings release and supplement, our contract values and associated growth rates we discuss are based on 2023 foreign exchange rates and exclude contributions related to the first quarter divestiture and the 2022 Russia exit. All growth rates in Gene's comments are FX neutral, unless stated otherwise. All references to share counts are for fully diluted weighted average share counts unless stated otherwise. Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website. As set forth in more detail in today's earnings release, certain statements made on this call may constitute forward-looking statements. Forward-looking statements can drive materially from actual results and are subject to a number of risks and uncertainties, including those contained in the company's 2022 annual report on Form 10-K and quarterly reports on Form 10-Q as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents. Now I will turn the call over to Gartner's Chief Executive Officer, Gene Hall.

Craig Safian:

Thank you, Gene, and good morning. Fourth quarter revenue, EBITDA, adjusted EPS and free cash flow were better than expected as we continue to execute very well in a complex environment. Our financial performance for the full year 2023 included global contract value and consolidated revenue growth of 8%, EBITDA of $1.5 billion, diluted adjusted EPS of $11.33 and free cash flow of $1.1 billion. We are introducing 2024 guidance, which we view as achievable across a wide range of economic and geopolitical scenarios with opportunity for upside. Fourth quarter revenue was $1.6 billion, up 5% year-over-year as reported and 4% FX neutral. In addition, total contribution margin was 67%. EBITDA was $386 million, ahead of our guidance primarily as a result of disciplined cost management. Adjusted EPS was $3.04 and free cash flow was $196 million. We finished the quarter with 20,237 associates, up 5%, excluding the 2023 divestiture and about the same as Q3. We have a great team across Gartner, driven by a very compelling associate value proposition. Moving into 2024, we are in an excellent position from a talent and tenure perspective. Research revenue in the fourth quarter grew 6% year-over-year as reported and 5% FX-neutral. Subscription revenue grew 8% on an organic FX-neutral basis. Non-subscription revenue performance in the quarter reflects a shift to higher-quality traffic. While this action has a short-term effect on revenue, we expect it will drive higher prices and increase revenue over time. Fourth quarter research contribution margin was 74%, consistent with the prior year period as we have caught up on hiring and return to the new expected levels of travel. For the full year 2023, research revenues increased by 6%, both as reported and FX neutral. The gross contribution margin for the year was 74%. Contract Value, or CV, was $4.8 billion at the end of the fourth quarter, up 8% versus the prior year. CV growth is FX neutral and excludes the first quarter 2023 divestiture. We expect new business to be a leading indicator for retention and, in turn, contract value growth. We had the highest one month of new business dollars ever in December 2023. For the fourth quarter, CV from enterprise function leaders across GTS and GBS grew at double-digit rates. New business with enterprise function leaders increased double digits as well. CV from tech vendors was about flat versus the prior year and up sequentially. Tech vendor CV continued the quarterly improvement we saw in Q3. Tech vendor new business was up high single digits in Q4, marking the first year-over-year increase in 2023. Quarterly net contract value increase, or NCVI, was $180 million. As we've discussed in the past, there is notable seasonality in this metric. CV growth was broad-based across practices, industry sectors, company sizes and geographic regions. Across our combined practices, the majority of the industry sectors grew at double-digit or high single-digit rates led by the energy, manufacturing and public sectors. We had high single-digit growth across almost all of our enterprise size categories. The small category, which has the largest tech vendor mix grew modestly. We also drove double-digit or high single-digit growth in the majority of our top 10 countries. Global Technology Sales contract value was $3.7 billion at the end of the fourth quarter, up 6% versus the prior year. GTS CV increased $134 million from the third quarter. Wallet retention for GTS was 101% for the quarter, reflecting net growth even before the addition of new clients. In the fourth quarter, IT enterprise function leaders wallet retention was consistent with historical GTS levels. GTS new business increased 12% versus last year. New business with IT enterprise function leaders increased mid-teens compared to 2022. New business with tech vendors increased high single digits in the quarter. GTS quota-bearing head count was about flat year-over-year. With the dynamic territory planning we introduced a few years ago, the catch-up hiring we did last year and our teams moving up 10-year curve, we're well positioned for growth moving into 2024. Operationally, we are continuously allocating resources to the best near-term opportunities even as we ensure we are well positioned to capture the large addressable market opportunity over time. Our regular full set of GTS metrics can be found in the earnings supplement. Global Business Sales contract value was $1.1 billion at the end of the fourth quarter, up 13% year-over-year. The majority of our GBS practices grew at double-digit rates. Growth was led by supply chain, legal and HR. GBS CV increased $46 million from the third quarter. Wallet retention for GBS was 107% for the quarter, reflecting strong net growth with our existing clients. GBS new business was up 13% compared to last year. GBS quota-bearing head count was up 8% versus the fourth quarter of 2022. This excludes headcount associated with the Q1 divestiture. As with GTS, our regular full set of GBS metrics can be found in the earnings supplement. As we do each year at this time, we've provided 2 years of quarterly historical contract value data updated to 2024 FX rates in the appendix of the earnings supplement. Conferences revenue for the fourth quarter was $214 million, up 14% year-over-year. Contribution margin in the quarter was 50%, consistent with typical seasonality. We held 11 destination conferences in the quarter, all in person. For the full year 2023, we delivered an all-time high revenue of $505 million, which was an increase of 30% on a reported basis and 29% FX neutral. Gross contribution margin was 50%. Fourth quarter consulting revenues were $128 million compared with $138 million in 2022 when we saw a record performance in the Contract Optimization business. Consulting contribution margin was 27% in the fourth quarter, affected by revenue mix and growth hiring. Labor-based revenues were $99 million, up 3% versus Q4 of last year as reported and on an FX-neutral basis. Backlog at December 31 was $162 million, increasing 21% year-over-year on an FX-neutral basis with continued booking strength. We delivered $29 million of Contract Optimization revenue in the quarter. This part of our business is highly variable. For the second half of 2023, revenues were $62 million, up from the second half of 2022 when we delivered our largest ever quarter in Q4. Full year Consulting revenue was up 7% on a reported basis and 8% FX-neutral. Gross contribution margin was 35% compared to 39% in 2022. Consolidated cost of services increased 11% year-over-year in the fourth quarter as reported and 10% on an FX-neutral basis. The biggest driver of the increase was higher headcount to support our future growth. SG&A increased 9% year-over-year in the fourth quarter as reported and 8% on an FX-neutral basis. SG&A increased in the quarter as a result of headcount growth. EBITDA for the fourth quarter was $386 million compared to $421 million last year. Fourth quarter EBITDA upside to our guidance primarily reflected disciplined expense management. EBITDA for the full year was almost $1.5 billion, a 1% increase over 2022 on a reported basis and up 2% FX-neutral. Depreciation in the quarter of $26 million was up modestly compared to 2022. Net interest expense, excluding deferred financing costs in the quarter was $19 million. This was down $9 million versus the fourth quarter of 2022 due to higher interest income on our cash balances. The modest floating rate debt we have is fully hedged through maturity. The Q4 adjusted tax rate, which we use for the calculation of adjusted net income was 24% for the quarter. The tax rate for the items used to adjust net income was 15% for the quarter. The full year tax rate for the calculation of adjusted net income was 22%. Adjusted EPS in Q4 was $3.04 compared with $3.70 last year. We had 79 million shares outstanding in the fourth quarter. This is a reduction of about 1 million shares or about 1% year-over-year. We exited the fourth quarter with about 79 million shares on an unweighted basis. For the full year, adjusted EPS was $11.33, up modestly from 2022. Operating cash flow for the quarter was $224 million, up 10% compared to last year. CapEx for the quarter was $28 million, down $4 million as a result of catch-up spend on technology investments in 2022, which normalize this year. Free cash flow for the quarter was $196 million, up 19% compared to last year. Free cash flow for the full year was almost $1.1 billion, a 6% increase versus 2022. Free cash flow on a rolling four quarter basis was 18% of revenue and 71% of EBITDA. Adjusting for the Q1 divestiture, the full year free cash flow conversion from GAAP net income would have been 138%. Our free cash flow conversion is generally higher when CV growth is accelerating. We have a new slide in the earnings supplement, which shows the conversion from both EBITDA and GAAP net income to free cash flow on a rolling four quarter basis. The past 2 years have had some unusual items affecting the conversion, including insurance proceeds related to pandemic conference cancellations and the 2023 divestiture. We expect about a 4 to 6 point difference between EBITDA margin and free cash flow margins in a typical year. The normal free cash flow conversion from GAAP net income is 140% to 160%. At the end of the fourth quarter, we had about $1.3 billion of cash. Our December 31 debt balance was about $2.5 billion. Our reported gross debt to trailing 12-month EBITDA was under two times. Our expected free cash flow generation, available revolver and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy of share repurchases and strategic tuck-in M&A. Our balance sheet is very strong with $2.3 billion of liquidity, low levels of leverage and effectively fixed interest rates. We repurchased $158 million of stock during the fourth quarter and more than $600 million for the full year. At the end of December, we had about $1 billion of authorization for repurchases remaining, and we expect the Board will continue to refresh the repurchase authorization going forward. As we continue to repurchase shares, our capital base will shrink. Over time, this is accretive to earnings per share and combined with growing profits also delivers increasing returns on invested capital. Before providing the 2024 guidance details, I want to discuss our base level assumptions and planning philosophy for 2024. For research, we continue to innovate and provide a very compelling value proposition for clients and prospects. Executives and their teams face uncertainty and challenges, and they recognize how Gartner can help regardless of the economic environment. The outlook for 2024 research revenue growth is a function of three primary factors

Jeff Meuler:

Yeah, thank you. Just want to dig in first. I know it's not a huge business, but on the research nonsubscription headwinds and need for recalibration. I know it's been weak all year, but I was interpreting that previously more is like cyclical headwinds. And now it seems like you're responding more operationally to drive higher quality traffic. So just I guess, I don't know if there was like a business review or, I guess, the why now in terms of cyclicality of the business versus where there's an opportunity for operational improvement?

Jeff Meuler:

Okay. And then I hear you loud and clear on the better tech vendor, new business sold trends. Maybe talk through more on the retention for tech vendor, just like how you're thinking about the tail that has not yet renewed in a more difficult environment? Or just what's the typical lag time from when you've seen prior inflections in new business, like how long it kind of takes for the retention trend to similarly improved?

Jeff Meuler:

Got it. Thank you.

Toni Kaplan:

Thank you. Actually, maybe following on a similar line to the last question. The commentary around new business in the prepared remarks, and this is beyond tech vendors. So just in general, the enterprise new business sounded very good, even the tech vendor improvement in new business sounded good. Just wanted to understand if there was anything that could - that is a risk to that sort of starting to flow through contract value in the next few quarters? And how quickly you could expect to see sort of that shift in contract value? I know you mentioned in the prepared remarks that you're expecting an inflection this year? Thanks.

Toni Kaplan:

Makes a lot of sense. And then just for a follow-up, I wanted to ask about headcount. The - I guess, what are your expectations for headcount growth in '24? And just wanted to understand a little bit more about - it seems like headcount growth has been slowing the last two quarters to like below normal levels. I know there was a catch-up in sort of the prior year and earlier in '23. So I guess, is the slower headcount sort of helping manage margin? Or is it, I guess, an indicator that there's - I don't think you're saying there's less opportunity, but just wanted to understand the sort of below normal headcount growth levels that we're seeing now?

Craig Safian:

And as we mentioned during our prepared remarks, we've actually got dialed into our plan, combination GTS, GBS, quarter-bearing headcount growth of mid to high single digits. And as always, we're prepared to go faster. As both Gene and I mentioned, we have recruitment capacity to go faster if we want to. And so we've got dialed in mid to high single-digit growth in GTS and GBS, quota-bearing head count, and we can go faster if we see that rebound coming faster as well.

Operator:

Thank you. Our next question comes from the line of Heather Balsky with Bank of America. Your line is now open. Heather, your line is open. Please check your mute button.

Gene Hall:

Again, if you look at the larger companies in the market, renewals are going kind of normally - it's a little slower than usual because, again, they're laying off tens of thousands of people. We expect that will change. There's plenty of demand. Again, we expect global IT spending issue to grow by 7% to almost $5 trillion. So there's plenty of demand there. We expect over time that will normalize. And so the real issue on retention is these very small tech vendors which are, over time, a great market for us, but there's a shift going on now from what used to get funding through now. What does get funding is, as I mentioned, there's a real focus on AI. And so those companies that are in less popular segments for funding these days can't get funding and if they haven't as successful commercially, they either get acquired or go out of business, in which case our retention affects our retention.

Heather Balsky:

And then just kind of asking another version of probably something you've already said and the same question, but you were talking about CV on the tech vendor side normalizing. Last quarter, you talked about normalizing over 12 to 18 months. Is that still your outlook based on what you saw in the fourth quarter, how are you thinking about that?

Heather Balsky:

Got it. Thanks.

Seth Weber:

Hey guys. Good morning. I think maybe first, just a clarification. When you talk about your research revenue guide, I think backing into it, it kind of implies a nonsubscription revenue growth of down - like down low double digits. Is that the right way to think about what's baked into your model?

Seth Weber:

Okay. Thank you. And then just on the strong new business wins, can you just frame that a little bit? I mean, is that a function of comps are easier productivity is better? Or are you actually seeing or hearing better sentiment from your customers? Is - are the sales cycles getting shorter? It just seems like the new business wins are just really strong, and I'm just trying to tie all these things together with your guidance. Thanks.

Seth Weber:

Right. But has sentiment - has customer sentiment changed at all over the last quarter? Has it gotten better? Or have the sales cycles changed? Or anything you'd call out for the acceleration of new business wins here?

Seth Weber:

Okay. All right. Thank you, guys. I'll pass it on.

Andrew Nicholas:

Hi, good morning. Thanks for taking my question. I wanted to touch on artificial intelligence as a driver of new business. I realize it was one of the topics Gene that you outlined at the front. Just kind of curious, is there any way to kind of quantify or maybe even subjectively talk about AI as a driver of new business, cross-sell, new conversations with clients. I understand it's part of an ever-evolving tech landscape, but I'm just wondering if there's been any boost or notable boost from that topic specifically as it relates to new client wins or new business?

Andrew Nicholas:

Great. And then for my follow-up, I just wanted to hone in on the CV growth bottoming part of your guidance. I recognize that first quarter and first half NCVI are important inputs and you've been conservative. Gene, I think in the press release, you said that you had an opportunity for upside and that guidance was achievable across a wide range of economic scenarios. So just trying to putting all these pieces together, is it fair for us to assume that CV growth is bottoming in the second half in your guidance? And then upside would be from that happening earlier? Or is there some other way for us to think about the underlying assumptions there? Thank you.

Andrew Nicholas:

Understood. Thank you.

Unidentified Analyst:

Hi. This is Brendan on for Manav. I just want to ask how you guys think about getting back to double-digit CV growth. Obviously, if your – your QBH is mid to high single digit. Your new business is still pretty strong. So it seems like really it's just like a wallet retention, higher cancellation issue for now. Is it just that, that kind of goes away over time? Or do you actually expect even more kind of new business productivity, if you will, from QBH or I guess, how do you guys think about that?

Unidentified Analyst:

Okay. And then just any callouts or growth rates you can give us within GBS? Obviously, it's still performing pretty well. So just anything - any other color you can give us?

Unidentified Analyst:

All right, thanks.

Josh Chan:

Hi. Good morning. Thanks for taking my questions. I know that you don't guide to CV trajectory or NCVI, but I guess it sounds like you are emphasizing more the tech vendor renewal dynamic here. So I guess, are we to interpret that as there being more of an impact of that on Q1 than normal. Could you just kind of explain the rationale behind calling that specific dynamic out the way you did?

Josh Chan:

Okay. I appreciate the color there. That's really helpful. And if I can shift over to margins. Could you talk about the different drivers of margin year-over-year? I mean, you have positive revenue growth, you have reaccelerating CV, the cost structure seems to be in a good spot. So are there more margin pluses and minuses? And how does that reconcile with the guidance? Thank you.

Josh Chan:

Perfect. Thanks for the color, Craig. And thanks both for your time.

Surinder Thind:

Thank you. Just taking a step back, if we look at the big picture and what I would call the relative strength of the economy, why do you think the clients on the tech side aren't spending more at this point? And I guess in your conversations, what would get them to commit? Like what are they looking for at this point?

Gene Hall:

And just to add a little bit..

Gene Hall:

When you're selling into a company that is actively making layoffs, the attention of people's focus on who they're going to lay off or whether, in fact, they're going to get laid off. And so it takes a little while - that's a much tougher - that's kind of the toughest selling environment. They'll get through that, and it will return to normal. That's the larger end. And then on the small end, Craig described very well.

Gene Hall:

So our perspective is there's nothing structural about it. What happened was during the pandemic, there was a pull forward of tech spending. In fact, many of the tech companies, probably most of them assume that was going to last forever, turned out it was just a pull forward. Now they're just adjusting to getting back to normal. And it's as simple as that. So unless pandemics become cyclical, I think we're in pretty good shape.

Surinder Thind:

Got it. Thank you.

Jeff Silber:

Thanks. I know it's late. I'll just ask one though, it's multi part. Can we talk about the pricing environment? Can you just remind us what price increases you put in for this year? Are you getting any pushback? And others in the space have been providing some breaks for extending the length of the term? Is that something you're doing as well? Thanks.

Jeff Silber:

Okay. Thanks so much.

George Tong:

Hi. Thanks. Good morning. You mentioned 1Q tech vendor renewals are especially important because of a little bubble there. Can you help quantify that? How much concentration is there compared to other quarters in the year?

George Tong:

Got it. That's helpful. And then you're guiding to EBITDA margins of 23% for the year. What do you see as the major driver of potential upside to that target?

George Tong:

Got it. Thank you.

Gene Hall:

So here are the takeaways for today's call. Gartner drove another strong performance in Q4. We deliver incredible value, whether our clients are struggling, thriving or anywhere in between. We're exceptionally agile and continuously adapt to the changing world, and we know the right things to do to be successful in any environment. Looking ahead, we're well positioned to continue our sustained record of success far into the future. Our client value proposition and addressable market opportunity will allow us to drive long-term sustained double-digit revenue growth. We expect margins will expand modestly over time, and we generate significant free cash flow well in excess of net income. As we invest for future growth, we'll return significant levels of excess capital to our shareholders. This reduces shares outstanding and increases returns over time. Thanks for joining us today, and we look forward to updating you again next quarter.

David Cohen :

Good morning, everyone. Welcome to Gartner's Third Quarter 2023 Earnings Call. I'm David Cohen, SVP of Investor Relations. [Operator Instructions]. After comments by Gene Hall, Gartner's Chief Executive Officer, and Craig Safian, Gartner's Chief Financial Officer, there will be a question-and-answer session. Please be advised that today's conference is being recorded. This call will include a discussion of third quarter 2023 financial results and Gartner's outlook for 2023 as disclosed in today's earnings release and earnings supplement, both posted to our website investor.gartner.com. On the call, unless stated otherwise, all references to EBITDA are for adjusted EBITDA, with the adjustments as described in our earnings release and supplement. Our contract values and associated growth rates we discuss are based on 2023 foreign exchange rates and exclude contributions related to the first quarter divestiture and the 2022 Russia exit. All growth rates in Gene's comments are FX neutral, unless stated otherwise. All references to share counts are for fully diluted weighted average share counts unless stated otherwise. Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website. As set forth in more detail in today's earnings release, certain statements made on this call may constitute forward-looking statements. Forward-looking statements can vary materially from actual results and are subject to number of risks and uncertainties, including those contained in the company's 2022 annual report on Form 10-K and quarterly reports on Form 10-Q as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents. Now I will turn the call over to Gartner's Chief Executive Officer, Gene Hall.

Craig Safian:

Thank you, Gene, and good morning. Third quarter results were strong with high single-digit growth in contract value. Revenue, EBITDA, adjusted EPS and free cash flow were better-than-expected with outstanding performance in consulting and disciplined cost management. With strong results in the quarter and good visibility into Q4, we are increasing our 2023 guidance. Third quarter revenue was $1.4 billion, up 6% year-over-year as reported and 5% FX neutral. In addition, total contribution margin was 68%, compared to 69% in the prior year, as the 2022 hiring catch-up continue to flow through the P&L as expected. EBITDA was $333 million ahead of our guidance and about inline with last year. Adjusted EPS was $2.56, up 6% from Q3 of last year. And free cash flow was $302 million. We have finished the quarter with 20,253 associates, up 6% from the prior year and 1% from the end of the second quarter. We remain well-positioned from a talent perspective, as our associates continue to move up the tenure curve. Research revenue in the third quarter grew 6% year-over-year as reported and 5% on an FX neutral basis. Subscription revenue grew 8% on an organic FX neutral basis. Non-subscription revenue performance was similar to Q2. Third quarter research contribution was 73%, compared to 74% in the prior year period, as we have caught up on hiring and returned to the new expected levels of travel. Contract value or CV was $4.7 billion at the end of the third quarter, up 8% versus the prior year. The third quarter last year was a very strong research quarter with outstanding performance across most key metrics. CV growth is FX neutral and excludes the first quarter 2023 divestiture. CV from enterprise function leaders across GTS and GBS, grew at double-digit rates. New business with enterprise function leaders increased double-digits as well. CV from tech vendors grew low single-digits, compared to mid-teens growth in the third quarter of 2022. Quarterly net contract value increase or NCVI was $101 million. As we have discussed in the past, there is notable seasonality in this metric. CV growth was broad-based across practices, industry sectors, company sizes, and geographic regions. Across our combined practices, the majority of the industry sectors grew at double-digit rates, led by the transportation, services, and public sectors. We had high single-digit growth across all of our enterprise size categories other than the small category, which has the largest tech vendor mix, and grew low single-digits. We also drove double-digit or high single-digit growth in the majority of our Top 10 countries. Global Technology sales contract value was $3.6 billion at the end of the third quarter, up 7% versus the prior year. GTS CV increased $65 million from the second quarter. Wallet retention for GTS was 102% for the quarter, which compares to 107% in the prior year, when we saw a near record high for this metric. IT Enterprise function leaders while retention remained above historical GTS levels during the third quarter. GTS new business was up 7% versus last year. New business with IT enterprise function leaders increased mid-teens compared to the prior year. GTS quota bearing headcount was up 5% year-over-year. With the dynamic territory planning we introduced a few years ago. The catch up hiring we did last year and our teams moving up the 10-year curve we're well-positioned for growth moving into 2024. Our regular full set of GTS metrics can be found in the appendix of our earning supplement. Global business sales contract value was $1 billion at the end of the third quarter up 14% year-over-year. All of our GBS practices grew a double-digit or high single-digit rates other than sales, which grew mid-single digits. Growth was again led by supply chain and HR. GBS CV increased $36 million from the second quarter, while retention for GBS was 108% for the quarter, which compares to 114% in the prior year when we saw one of the highest ever results for this metric. GBS new business was up 10% compared to last year. GBS quota bearing headcount was up 10% year-over-year. This excludes headcount associated with the Q1 divestiture. As with GTS, our regular full set of GBS metrics can be found in the appendix of our earning supplement. Conferences revenue for the third quarter was $57 million ahead of our expectations during a seasonally small period, we delivered strong growth for the conferences we held in Q3 compared to the same conferences in 2022. The calendar shifted significantly from 2022 to 2023 with the return to in-person. Contribution margin in the quarter was 36% consistent with typical seasonality and reflecting investments for future growth. We held nine destination conferences in the quarter, all in person. Third quarter consulting revenues increased by 24% year-over-year to $133 million. On an FX neutral basis, revenues were up 23%. Consulting contribution margin was 37% in the third quarter. Labor-based revenues were $100 million up 10% versus Q3 of last year, as reported and on an FX neutral basis. Backlog at June 30th was $180 million, increasing 15% year-over-year on an FX neutral basis with continued booking straight. Our contract optimization business is highly valuable. We delivered $33 million of revenue in the quarter with some of the revenue pulled forward from the fourth quarter relative to our prior outlook. Consolidated cost of services increased 8% year-over-year in the third quarter as reported and 7% on an FX neutral basis. The biggest driver of the increase was higher head counts to support our future growth. SG&A increased 8% year-over-year in the third quarters reported and 7% on an FX neutral basis. SG&A increased in the quarter as a result of headcount growth. EBITDA for the third quarter was $333 million, about in line with last year. Third quarter EBITDA upside to our guidance primarily reflected revenue exceeding our expectations in consulting and prudent expense management. Depreciation in the quarter of $25 million was up modestly compared to 2022. Net interest expense excluding deferred financing costs in the quarter was $21 million. This was down $8 million versus the third quarter of 2022 due to higher interest income on our cash balances. The modest floating rate debt we have is fully hedged through maturity. The Q3 adjusted tax rate, which we used for the calculation of adjusted debt income was 22% for the quarter. The tax rate for the item was used to adjust that income was 35% for the quarter. Adjusted EPS in Q3 was $2.56 up 6% compared with last year. We had 80 million shares outstanding in the third quarter. This is a reduction of close to 1 million shares or about 1% year over year. We exited the third quarter with about 79 million shares on an unweighted basis. Operating cash flow for the quarter was $331 million, up to 5% compared to last year. CapEx for the quarter was $28 million, down 11% year over year as a result of catch up spend on technology investments in 2022, which normalized this year. Free cash flow for the quarter was $302 million. Free cash flow is a percent of revenue on a rolling four quarter basis was 18% of revenue and 67% of EBITDA. Adjusted for the after-tax impact of the Q1 divestiture free cash flow conversion from gap net income was 122%. Our free cash flow conversion is generally higher when CV growth is accelerating. At the end of the third quarter, we had about $1.2 billion of cash. Our September 30th debt balance was about $2.5 billion. Our reported gross debt to trailing 12-month EBITDA was under two times. Our expected free cash flow generation available revolver and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy, share repurchases, and strategic tuck-in M&A. Our balance sheet is very strong with $2.2 billion of liquidity, low levels of leverage, and effectively fixed interest rates. We repurchase $209 million of stock during the third quarter and about $100 million in October. The board increased the authorization by $500 million earlier this week, and we expect they will continue to refresh the repurchase authorization as needed going forward. At the end of October, following the increased authorization, we had about $1 billion available for repurchases. As we continue to repurchase shares, our capital base will shrink. Over time, this is accretive to earnings per share and combined with growing profits also delivers increasing returns on invested capital. We are raising our full-year guidance to reflect the better than expected Q3 performance and good visibility into the fourth quarter. For research, we continue to innovate and provide a very compelling value proposition for clients and prospects. Subscription research growth will reflect recent trends in contract value. We continue to expect stronger growth from the subscription business than the non-subscription part of the segment consistent with the third quarter. For conferences, we still expect Q4 to be the largest quarter of the year. For consulting revenues, the labor business continues to perform well. We have very tough contract optimization comparisons in Q4 and pulled some revenue into Q3 relative to our prior expectations. We will continue both to manage expenses prudently to support future growth and deliver strong margins. Our updated 2023 guidance is as follows. We expect research revenue of at least $4.875 billion, which is FX neutral growth of about 6% or 7%, excluding the Q1 divestiture. The update to the research revenue guides reflects better than planned NCVI performance in Q3 with continued stability in the non-subscription part of the business. There is modest incremental upside relative to the expectations we built into the guidance last quarter. We expect conference revenue of at least $500 million, which is FX neutral growth of about 27%. We have increased our outlook for conferences by $10 million to reflect a good start to the fourth quarter. We expect consulting revenue of at least $550 million, which is growth of about 8% FX neutral, reflecting the very strong performance of Q3 and timing in the contract optimization business. The result is an outlook for consolidated revenue of $5.89 billion, which is FX neutral growth of 8%. We now expect full-year EBITDA of at least $1.440 billion, up $80 million from our prior guidance. With the strong performance in Q3, we have increased confidence in the margin forecast for the fourth quarter. We expect typical operating expense seasonality from Q3 to Q4. We now expect 2023 adjusted EPS of at least $10.90 per share. For 2023, we now expect free cash flow of at least $1.025 billion, up $50 million from our prior guidance. The higher free cash flow reflects a conversion from GAAP net income of 136%, excluding the after-tax divestiture proceeds. Our guidance is based on 80 million fully diluted, weighted-average shares outstanding, which reflects the repurchases made through the end of October. We are performing well this year, despite continuing global macro uncertainty and the dynamic tech vender market. CV grew high single-digits in the quarter. Revenue and EBITDA performance exceeded our expectations, and we increased our guidance. Free cash flow was strong in the quarter, and we increased the guidance for the full year. We have repurchased about $550 million in stock year-to-date through October, and remain eager to return excess capital to our shareholders. We will continue to be disciplined, opportunistic, and price-sensitive. Looking out over the medium-term, our financial model and expectations are unchanged. With 12% to 16% research CV growth, we will deliver double-digit revenue growth. With gross margin expansion, sales costs growing in about inline with CV growth and G&A leverage, we will expand to EBITDA margins modestly over time. We can grow free cash flow at least as fast as EBITDA because of our modest CapEx needs and the benefits of our clients pay us up front. And we will continue to deploy our capital on share repurchases, which will lower the share count over time and on strategic value enhancing tuck-in M&A. With that, I will turn the call back over to the operator, and we will be happy to take your questions. Operator?

Heather Balsky:

Hi. Thank you for taking my question. I was hoping to ask a question about expenses management, as you look into next year, assuming that tech vendor spending to potentially start to lap with either comparison, there is an opportunity to win back those sales. Do you think you need to invest behind that, or do you think you have an opportunity with your existing salesforce? And then also just your thoughts around expense management as you head into 2024, more broadly?

Heather Balsky:

And so just to clarify then, when you think about the tech vendor opportunity, do you think you can win back those sales with the sales force you have that's the fair assumption.

Craig Safian:

And Heather, it’s Craig. The other thing I would add is as our tech business, as the contract value growth accelerated over the last two years, we also increased the number of territories we had serving that market. And so, we did a lot of hiring across all of both GTS and GBS as Gene mentioned, over the last couple years, tech vendor market included. And so, a lot of new people joined the company in 2022 in selling positions, and they are coming up the tenure curve. And so, as we think about our territory coverage, if you will, heading into 2024 and beyond, as well as the maturation of our sales force heading into 2024, we feel like we're in a really good position to return to the kind of target growth, that we want to over the medium term.

Toni Kaplan:

Thank you. I was hoping you could give us some metrics around the current average tenure of your salespeople, compared to sort of any reference point, maybe it's year-over-year or pre-pandemic or versus a historical average. Just want to get a sense of where we are now versus some historical point. Thanks.

Toni Kaplan:

Yes. That makes sense. I wanted to ask about client retention. Sort of a step down in both GTS and GPS, the levels I think are still pretty within historical range, but like, I guess, is there anything you're doing to put in place initiatives to address retention? Or do you feel like you're at sort of more normal levels and I guess what's driving that? And any concern to call out?

Gene Hall :

As Craig said, even with the rates we have now, we are never satisfied. And so, we have a whole set of programs designed to improve those retention rates over time. And it includes things like how we use our conferences, the as the tools, the support tools we give to our service delivery associates as well as the training we have when people first come on board, and then the current trains throughout their careers, et cetera. So, we are never satisfied with the matter no matter how good it is, we always want to be better.

Seth Weber :

Good morning. I wanted to go back to the expense question just for a second. I mean, your margin guidance for this year is pretty well ahead of the initial framework that you guys were talking about earlier in the year or last year. And I'm just trying to think through, are there any big cost buckets that could come back next year? I think, Craig, you mentioned travel is kind of back T&E. So, I'm just trying to think through the margin leverage going forward in higher revenue, in a revenue growth rate environment. If there's anything we should be considering.

Seth Weber :

Okay. That's helpful. Thanks. And then it just falling on that, is there any reason to think that pricing would be softer next year than it was in 2023?

Seth Weber :

Perfect. Okay. Thank you, guys.

Unidentified Analyst:

Hello?

Unidentified Analyst:

Can you hear me now?

Unidentified Analyst:

Okay. Thank you. Sorry to drag you back to it. I know you said you have sufficient sales capacity. I just want to make sure I am understanding the management of sales headcount appropriately. So, is this that you have already seen a slowing environment and you have already rebuilt your sales capacity? So, with those dynamics, you are well-calibrated? Or should we be reading into it that there's any sort of, like, incremental weakening you are seeing because we are not seeing that in any of your externally reported metrics?

Unidentified Analyst:

Okay. And then, Craig, you just alluded to this, but, I guess, I was surprised to see subscription revenue performance as well as it did in research. And I am not sure if there is some FX impact or divestiture impact or something. But, to see it on Slide 7 actually accelerate, while CV's still been decelerating, if you can just address why research subscription revenue would be accelerating, with those dynamics.

Operator:

Comes from the line of Andrew Nicholas with William Blair. Please proceed.

Craig Safian:

Hey, good morning, Andrew. It's Greg. I think the way we're thinking about it again, we'll provide full guidance in February, but as we've mentioned throughout the course of this year, we are constantly recalibrating based on the external situation and how our business is performing. Looking at the headcount, sort of quarter-to-quarter, there can obviously be a little bit of noise in those numbers. And so, as Gene and I both included too, there's really nothing to see there. And as we roll into next year and beyond the algorithm that we continue to think about is we're going to grow our territories and our headcount in that kind of within four points – four points to five points of contract value growth. And the four points to five points is really dependent on what we're seeing from a wage inflation perspective. And so, wage of inflation is abating a little bit, will be closer to CV minus four. If wage inflation is higher, it'll be CV minus five or whatever. But that's the algorithm over the long term or medium term, quarter-to-quarter it may shift a little bit just given what's going on. But over the long term, given the huge addressable market opportunity, that's the algorithm we're going to go after.

Craig Safian :

Hey, Andrew, sorry, you cut out at the very beginning. Are you talking about consulting?

Craig Safian :

Yes, I mean, I think it is just consistent with the story, and the facts we've been telling for a while, which is business leaders, outside of IT and HR and finance and legal and sales need help on their mission critical priorities. And we have great products that offer tremendous value in that space. That's really the headline there. We've gotten better at the insights we create. We've gotten better with our selling motions. We've gotten better in everything we do. But the net of it is -- is that business leaders have problems and we have great products to help them solve those problems. And again, we believe that that won't change moving forward.

Andrew Nicholas:

Yes, thank you.

Joshua Chan :

You mentioned that NCVI was better this quarter than you expected. So, is there any themes in terms of types of clients to call out and do you think that the strength is more a function of the market turning or is it your Salesforce gaining traction there?

Joshua Chan :

Thank you for that Gene, and I guess on the consulting side, I appreciate that you mentioned there was some timing pull forward there. But do you think the contract optimization string is more a function of where we are in the cycle and clients looking to, I guess, optimize their spend? Or is that more of a kind of a one-time type of event for you? Do you expect kind of sustained strength in the contract optimization business for the next couple of quarters, I guess?

Operator:

And it's from the line of Manav Patnaik with Barclays. Please proceed.

Craig Safian :

Yes. Good morning, Manav. I think it is -- I would characterize it as roughly normal. I do think that as we pivot into next year we are likely to get back to a little bit faster headcount and territory growth. And so, we need to model that in. But that's probably the biggest lever on that operating expense base. Other than the timing of conferences and things like that. It is just -- as Jean mentioned earlier, we grew a lot, particularly in 2022. And so, this year we have been, we are sort of operationalizing maturing, and digesting a lot of that growth. And so there has not been a huge amount of net headcount growth baked into the 2023 numbers. There is some, but not, as much as we have had historically. I think we get back to a more normal level of that next year. So that would have to be modeled in our normal wage inflation and merit increase, and things like that. But the other stuff is generally normal course.

Gene Hall:

So, in terms of the selling environment, again, I think it is unchanged. We see the same selling grind sort of Q2, Q3, and we are expecting the same environment in Q4 in terms of comp outlook. Craig?

Manav Patnaik :

Apologies, Craig. I was referring to the new business number, but I appreciate the headcount color as well.

Manav Patnaik :

Okay. Thank you so much.

George Tong:

Hi. Thanks. Good morning. Going back to tech vendor trends, you mentioned that, research non-subscription revenues were similar in terms of performance to 2Q, and tech vendor CV growth was in the low single-digits. Can you elaborate a little bit more on what you are seeing with tech vendors? And if you are updated 2023 guide, assumes stabilization or improvement in performance.

Craig Safian:

I mean, I think it's stabilization, George. So, we haven't yet seen signs that market has shifted yet. We do believe, again, over the medium-term or the next year, year-and-a-half that, we will get back to more normal growth trends there, but, I would say, what we saw in Q3 and what's embedded in the guidance. And again, I mean, the reality just also remember that, contract value or growth we sell in Q4 really has almost a de minimis impact on the full-year research revenue numbers from a subscription revenue perspective. And so, stabilization baked in there and similarly on the non-sub line we have not assumed any crazy rebound, sort of what we're seeing is stabilization, and that's what we've modeled into the guidance.

Craig Safian:

Sure. Happy to. So, I think, the view is really not changed from prior quarters and prior discussions. So, what I'd say is, our view on our margin profile today is that the base or foundational margins are in the low 20s. Obviously, that is significantly higher than they were before the pandemic and before the CEB acquisition. In addition to that, as always, we believe there is operating leverage in the business and that our margins will go higher over time. We'll give guidance in February as we always do. We talked about on some of the other OpEx questions, this year's operating expense as a reasonable starting point to think about the margins and the overall P&L for next year. But just obviously keep in mind that there are other things beyond just the OpEx level and the level of investment we put into the business next year that will impact. The margins most notably where we end this year from a contract value perspective, because as we've talked about, there is a lag in terms of the revenue and the CV relationship, both when CV decelerating, but also when CV begins to accelerate as well. So, it does take a quarter or two for a lag for the sub-revenue to kind of catch up with the CV. And so again, just be mindful of that as you think about 2024 as well. We'll provide all those details in February when we come out with our initial guidance for 2024.

Operator:

One moment for our next question, please. And it comes from the line of Jeffrey Silber with BMO Capital Markets.

Gene Hall :

Alright, Jeff, I'll get started. Which is -- as I mentioned earlier, we haven't seen any, it is the time we increased prices. It rolls through obviously as clients renew. And I'd say it's a normal environment. We haven't seen any pushback.

Jeffrey Silber:

Okay. That’s helpful, appreciate. Let me shift over to conferences. I know the numbers have been strong. But typically, when we're in an environment of economic uncertainty, that area of the business might tend to be a little bit weaker. Do you think we're just seeing kind of a bounce back from the pandemic and the fact that nobody was traveling and nobody was mingling, and maybe as we go into next year, you might see some softness in that business?

Jeffrey Silber:

Okay. Thanks, so much.

Gene Hall:

Well, here's what I'd like you to take away for today's call. Gartner drove another strong performance in Q3. We deliver unparalleled value to enterprise leaders in their teams across every major function with a thriving, struggling, or anywhere in between. We're exceptionally agile and continuously adapt to the changing world, and we know the right things to do to be successful in any environment. Looking ahead, we're well-positioned to continue our sustained record of success far into the future. Our client value proposition and addressable market opportunity will allow us to drive long-term sustained double-digit growth. We expect margins will expand modestly over time. We generate significant free cash flow well in excess of net income. Even as we invest for future growth, we'll return significant levels of excess capital, to our shareholders. This reduce the shares outstanding and increases for returns over time. Thanks for joining us today, and we look forward to updating you again next quarter.

David Cohen:

Good morning, everyone. Welcome to Gartner's Second Quarter 2023 Earnings Call. I'm David Cohen, SVP of Investor Relations. [Operator Instructions] After comments by Gene Hall, Gartner's Chief Executive Officer, and Craig Safian, Gartner's Chief Financial Officer, there will be a question-and-answer session. Please be advised that today's conference is being recorded. This call will include a discussion of second quarter 2023 financial results and Gartner's outlook for 2023 as disclosed in today's earnings release and earnings supplement, both posted to our site investor.gartner.com. On the call, unless stated otherwise, all references to EBITDA are for adjusted EBITDA, with the adjustments as described in our earnings release and supplement. Our contract values and associated growth rates we discuss are based on 2023 foreign exchange rates and exclude contributions related to the recent first quarter divestiture and the 2022 Russia exit. All growth rates in Gene's comments are FX neutral, unless stated otherwise. All references to share counts are for fully diluted weighted average share counts unless stated otherwise. Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website. As set forth in more detail in today's earnings release, certain statements made on this call may constitute forward-looking statements. Forward-looking statements can vary materially from actual results and are subject to number of risks and uncertainties, including those contained in the company's 2022 annual report on Form 10-K and quarterly reports on Form 10-Q as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents. Now I will turn the call over to Gartner's Chief Executive Officer, Gene Hall.

Craig Safian:

Thank you, Gene. And good morning. Second quarter results were strong, with high-single digit growth in contract value and double-digit FX neutral revenue growth. EBITDA, EBITDA margins and adjusted EPS were better than expected as a result of modest revenue upside and disciplined cost management. Free cash flow in the quarter was excellent. With good visibility into the balance of the year, we are increasing our 2023 EBITDA and free cash flow guidance. Second quarter revenue was $1.5 billion, up 9% year-over-year as reported and 10% FX neutral. In addition, total contribution margin was 68% compared to 69% in the prior year as we caught up on hiring during 2022. EBITDA was $384 million, ahead of our guidance and about in line with last year. Adjusted EPS was $2.85, consistent with Q2 of last year. And free cash flow was $410 million. We finished the quarter with 20,104 associates, up 12% from the prior year and 1% from the end of the first quarter. We remain well positioned from a talent perspective, with low levels of open territories and our new associates coming up the tenure curve. We will continue to carefully calibrate headcount and operating expenses based on near term revenue growth and opportunities to invest for the future. Research revenue in the second quarter grew 6% year-over-year as reported and 7% on a FX neutral basis. Subscription revenue grew 9% on an organic FX neutral basis. Second quarter Research contribution margin was 73% compared to 74% in the prior-year period, as we have caught up on hiring and return to the new expected levels of travel. Contract value, or CV, was $4.6 billion at the end of the second quarter, up 9% versus the prior year. The second quarter last year was one of our strongest research quarters ever, with outstanding performance on nearly every metric we provide. CV growth is FX neutral and excludes the first quarter of 2023 divestiture. CV from enterprise function leaders across GTS and GBS grew at double-digit rates. CV from tech vendors grew low-single digits compared to mid-teens growth in the second quarter of 2022. Quarterly net contract value increase, or NCBI, was $41 million. As we've discussed in the past, there's notable seasonality in this metric. CV growth was broad based across practices, industry sectors, company sizes and geographic regions. Across our combined practices, the majority of industry sectors grew at double-digit rates, again led by the transportation, retail and public sectors. We had high-single digit growth across all of our enterprise size categories other than the small category, which grew mid-single digits. This category has the largest tech vendor mix. We also drove double-digit or high-single-digit growth in the majority of our top 10 countries. Global technology sales contract value was $3.5 billion at the end of the second quarter, up 7% versus the prior year. GPS had quarterly NCBI of $14 million. Wallet retention for GTS was 102% for the quarter, which compares to 107% in the prior year when we saw a record high for this metric. IT enterprise function leaders wallet retention remained above historical GTS levels during the second quarter. GTS new business was down 4% versus last year. New business with IT enterprise function leaders increased high-single digits compared to the prior year against the tough compare. GTS quota-bearing headcount was up 13% year-over-year, reflecting the catch-up hiring we did in 2022. We will continue to manage hiring based on both short term performance and the medium term opportunity. A regular full set of GTS metrics can be found in the appendix of our earnings supplement. Global business sales contract value was $1 billion at the end of the second quarter, up 15% year-over-year, which remains towards the higher end of our medium term outlook of 12% to 16%. All of our GBS practices grew at double-digit or high-single digit rates, again led by supply chain and HR. GBS CV increased $27 million from the first quarter. Wallet retention for GBS was 109% for the quarter as compared to 115% in the prior year when we saw one of the highest ever results for this metric. GBS new business was up 2% compared to last year against the strong compare. GBS quota-bearing headcount was up 15% year-over-year. This excludes headcount associated with the Q1 divestiture. As with GTS, our regular full set of GBS metrics can be found in the appendix of our earnings supplement. Conferences revenue for the second quarter was $169 million, ahead of our expectations as we saw strong performance with both exhibitors and attendees. Contribution margin in the quarter was 58%, consistent with typical seasonality. We held 17 destination conferences in the quarter, all in person. Second quarter Consulting revenues increased by 5% year-over-year to $126 million. On an FX neutral basis, revenues were up 6%. Consulting contribution margin was 37% in the second quarter. Labor-based revenues were $104 million, up 9% versus Q2 of last year and up 11% on an FX neutral basis. Backlog at June 30 was $172 million, increasing 17% year-over-year on an FX neutral basis with continued booking strength. Our contract optimization business is highly variable. We delivered $22 million of revenue in the quarter and the pipeline for both contract optimization and labor-based revenues remained strong. Consolidated cost of services increased 15% year-over-year in the second quarter as reported and on an FX neutral basis. The biggest driver of the increase was higher headcount to support our continued strong growth. We also saw an increase in cost year-over-year with the return to in-person conferences. SG&A increased 12% year-over-year in the second quarter as reported and 14% on an FX mutual basis. SG&A increased in the quarter as a result of headcount growth. EBITDA for the second quarter was $384 million compared to $389 million in the year-ago period. Second quarter EBITDA upside to our guidance reflected revenue exceeding our expectations in conferences and prudent expense management. Depreciation in the quarter of $24 million was up modestly compared to 2022. Net interest expense excluding deferred financing costs in the quarter was $23 million. This was down $5 million versus the second quarter of 2022 due to higher interest income on our cash balances. The modest floating rate debt we have is fully hedged through maturity. The Q2 adjusted tax rate, which we use for the calculation of adjusted net income, was 25% for the quarter. The tax rate for the items used to adjust net income was 27% for the quarter. Adjusted EPS in Q2 was $2.85, in line with last year. We had 80 million shares outstanding in the second quarter. This is a reduction of close to 1 million shares or about 1% year-over-year. We exited the second quarter with about 80 million shares on an unweighted basis. Operating cash flow for the quarter was $436 million, up 5% compared to last year. CapEx for the quarter was $26 million, up 21% year-over-year as a result of an increase in technology investments. Free cash flow for the quarter was $410 million. Free cash flow as a percent of revenue on a rolling four quarter basis was 17% of revenue and 66% of EBITDA. Adjusted for the after tax impact of the Q1 divestiture, free cash flow conversion from GAAP net income was 119%. Our free cash flow conversion is generally higher when CV growth is accelerating. At the end of the second quarter, we had about $1.2 billion of cash. Our June 30 debt balance was about $2.5 billion. Our reported gross debt to trailing 12-month EBITDA was under 2 times. Our expected free cash flow generation, available revolver and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy of share repurchases and strategic tuck-in M&A. Our balance sheet is very strong, with $2.2 billion of liquidity, low levels of leverage and effectively fixed interest rates. We repurchased $132 million of stock during the second quarter. We had about $830 million remaining on our share repurchase authorization at June 30. We expect the board to continue to refresh the repurchase authorization as needed going forward. As we continue to repurchase shares our capital base will shrink. Over time, this is accretive to earnings per share and combined with growing profits also delivers increasing returns on invested capital over time. We are increasing our full year Conferences EBITDA and free cash flow guidance to reflect the strong Q2 performance. We are updating our Research revenue guidance to reflect tech vendor market dynamics on the non-subscription part of the business. For Research, we continue to innovate and provide a very compelling value proposition for clients and prospects. We've got tough compares across most of the segment for another quarter. We expect stronger growth from subscription business and the non-subscription part of the segment as we indicated last quarter. The non-subscription part of the business has direct exposure to tech vendor spending. The outlook continues to be based on all of our 47 destination conferences for 2023 running in-person. There is seasonality to the business based on the conference's calendar, which is different than the historical pattern. We still expect Q4 to be the largest quarter of the year. We expect Q3 will be the smallest revenue quarter of the year as I noted in May. For Consulting revenues, contract optimization remains highly variable. We had a very strong year in 2022, especially in contract optimization in the fourth quarter. We will continue both to manage expenses prudently to support future growth and deliver strong margins. Our updated 2023 guidance is as follows. We expect Research revenue of at least $4.855 billion, which is FX neutral growth of about 6%, or 7% excluding the Q1 divestiture. The update to Research revenue guidance reflects the effect of tech vendor market dynamics on the non-subscription part of the business. We expect Conferences revenue of at least $490 million, which is growth of about 26%. We've increased our outlook for Conferences by $20 million. We expect Consulting revenue of at least $505 million, which is growth of about 5% FX neutral, consistent with the outlook we gave in May. The result is an outlook for consolidated revenue of at least $5.85 billion, which is FX neutral growth of 7%. The guidance reflects an update to non-subscription Research revenue, partially offset by an increase to Conferences. We now expect full year EBITDA of at least $1.36 billion, up $30 million from our prior guidance and an increase in our margin outlook as well. We will deliver on our margin guidance in most economic scenarios. If revenue is stronger than our outlook, EBITDA would be better than our guidance. We now expect 2023 adjusted EPS of at least $10. For 2023, we now expect free cash flow of at least $975 million, up $55 million from our prior guidance. This higher free cash flow reflects a conversion from GAAP net income of about 140% excluding the after tax divestiture proceeds. Our guidance is based on 80 million fully diluted weighted average shares outstanding, which reflects the repurchases made through the end of June. Finally, for the third quarter of 2023, we expect EBITDA of at least $275 million. We had a strong first half despite continuing global macro uncertainty in a dynamic tech vendor market. TV and revenue grew high-single digits in the quarter. Conferences and EBITDA performance exceeded our expectations, and we increased our guidance as well. Margins are strong, consistent with our prior commentary. Free cash flow was strong in the quarter and we increased the guidance for the full year. We repurchased over $230 million in stock during the first half and remain committed to returning excess capital to our shareholders. And we have ample liquidity that we are ready to deploy on behalf of shareholders over the coming quarters. Looking out over the medium term, our financial model and expectations are unchanged. With 12% to 16% Research CV growth, we will deliver double-digit revenue growth. With gross margin expansion, sales costs growing in line with CV growth over time, and G&A leverage, we can modestly expand margins. We can grow free cash flow at least as fast as EBITDA because of our modest CapEx needs and the benefits of our clients paying us up front. And we'll continue to deploy our capital on share repurchases, which will lower the share count over time and on strategic value enhancing tuck-in M&A. With that, I'll turn the call back over to the operator and we'll be happy to take your questions. Operator?

Jeffrey Meuler:

Q2 CV and new business sold seemed solid meet, but just want to make sure and 100% confirm that there was no change to Research subscription revenue expectations in the guidance that's signaling, like surprising step down recently or incremental slowing recently in CV. And if it's all limited to just the non-subs, the $70 million reduction on a $422 million revenue base seems like a big mid-year adjustment if you can just talk through the dynamics there.

Jeffrey Meuler:

When I hear about tech vendor marketing spend weakness, obviously, we see that in the broader landscape. So what's happening in your non-subs business in Research directionally make sense, but the thing that I would worry about is does Conferences revenue also get hit again or get hit at some point? And I get that the Conferences attendance is strong, but it seems surprising to me that the exhibitor bookings are doing as well as they are in Conferences against that landscape. And maybe if you could compare and contrast, like, if there's a major client difference or if it's just the value prop is so strong or if how you think about, I guess, future risk on exhibitor bookings in Conferences.

Operator:

And our next question coming from the line of Heather Balsky with Bank of America.

Craig Safian:

I think the trends on the enterprise function leader part of the business were pretty consistent from Q1 to Q2, so nothing within the quarter and really nothing too much from a variability perspective from Q1 to Q2. So those businesses continue to perform very well. And our expectation is they continue to perform very well. So, nothing really to see there from a monthly perspective or from quarter to quarter perspective.

Gene Hall:

What I say is, on a short term basis, no change Q1 to Q2 in terms of tech vendor demand, very similar, with the exception of the non-subscription business, which is we've talked about. It's our perspective that what happened with Gartner, tech industry is that demand got pulled forward during the pandemic. So, there was some demand that was already filled in. And demand will get back to trend once sort of a little time elapses. And how long that takes, we don't know. But we believe that technology business will get back to trend in the medium term.

Toni Kaplan:

I was hoping that you could talk about the current client spending appetite, if you're seeing cost cutting or if you're seeing just business as usual. It sounds like the subscription business is performing well and it's just this tech vendor piece that's having a little bit of a hiccup. So just wanted to get any color on the overall customer environment.

Toni Kaplan:

I wanted to ask about whether AI could actually be a help for you with regard to adding additional seats across the enterprise. Are you thinking that corporations will start to need an AI strategy across some of the GBS lines like finance, legal, HR? Could that lead to additional seats? And then similarly, within GTS, could that lead to additional seats as well? Or do you view this as being sort of similar to prior technology trends like cloud, and so therefore, it's just a change of topic.

Craig Safian:

The only thing I'd add is just underscore your point on the broad applicability of AI being a little bit different than some other topics because, to your point, finance leaders care about it, legal leaders care about it, HR leaders care about it, in addition to IT leaders and their teams caring about it. So there is the potential that is a little more broad based to your point than prior technology lens.

Seth Weber:

I wanted to ask just about the implied EBITDA margin raise for the year. Is that just a function of mix? Or is there something else that's supporting the stronger margin outlook for the year?

Seth Weber:

Just on the big ramp in the quota-bearing headcount, can you just talk to where you think you are from an efficiency perspective for the new hires? Are they kind of on track or any kind of metrics that you could call out as far as efficiency or productivity goes with the new hires?

Operator:

And our next question coming from the line of Manav Patnaik with Barclays.

Craig Safian:

We are back to what we believe to be roughly the new normal from both T&E perspective. And last year, in particular, we were playing catch-up on hiring throughout the course of the year. And so, as you look at our operating expenses now, I think we're at pretty "normal level" of operating expenses. And so, what we're looking at from Q2 through the end of this year is normal seasonality from an OpEx perspective with our new normal levels of T&E minus headcount growth and make sure that we're investing for the future, et cetera, kind of baked in. So I think it is a good, normalized, if you will, OpEx level that we're working off of this year.

Craig Safian:

Yeah, I think there's a few things in there. One is the seasonality with our Conferences business. We are performing really, really well in Conferences. And Q4 is by far our largest Conference quarter. And that means you generally see expenses up in the fourth quarter just to deliver those conferences. And then because it's the fourth quarter, because we have so many conferences, there's a lot of additional travel and marketing activity that spikes in the fourth quarter as well, which, again, is sort of back to our typical seasonality that we had from an OpEx perspective pre-pandemic. So if you think about OpEx, it's relatively flattish from 2Q to Q3. A little bit of step down because it's a lighter conferences quarter and then a pretty big step up in OpEx from Q3 to Q4, driven by the conferences calendar, significant travel to support our conferences calendar, and marketing to support the conferences calendar and the close of our year as well. We are running a number of scenarios and we are planning in a very agile way in terms of the headcount that we plan to add between now and the end of this year. And there's a wide range of scenarios. And we've got a wide range of recruiting scenarios as well. One of the things that we've been very careful about is making sure that we maintain our recruitment capacity, so that when supercharged growth returns, we are more than ready to turn that dial from a recruitment perspective. So we're maintaining our recruitment capacity, and we're ready to tune those dials up or down, depending on what the second half of the year looks like, predominantly from a contract value growth perspective.

Joshua Chan:

I guess on GTS, obviously, the wallet retention is impacted by the overall environment. I was just wondering what you think the trajectory of the GTS wallet retention will be over the coming quarters? Would it surprise you if it went below 100% or is that too drastic of a scenario?

Joshua Chan:

On your comments about headcount, I guess, what indicators are you looking for in order to kind of toggle up or toggle down the recruitment in the second half?

Operator:

And our next question coming from the line pf Stephanie Moore with Jefferies.

Craig Safian:

I think one of our core goals with pricing is to make sure that, at a minimum, we are offsetting our projected wage inflation. And so, the past few years, when we were seeing higher wage inflation, we went a little bit stronger on price increase. This year, again, the labor market, for the type of people that we are recruiting is still relatively strong. But the wage inflation we expect to be a little bit more muted. We're still working through all the details of the price increase, which, again, to your point, goes into effect in November. But I would suspect it's a little bit lighter than what we've done the last few years, just given the inflationary environment, particularly wage inflationary environment, had abated a little bit.

George Tong:

Following up on some of the tech vendor non-subscription trends, can you talk about which products specifically are seeing reduced demand due to a slowdown in tech vendor marketing spend? And generally, is the non-subscription demand leading coincident or lagging with broader client IT spend?

George Tong:

Yeah, within your non-subscription book of products?

George Tong:

Separately, can you talk about how the tech vendor non-subscription performance trended over the course of the quarter? Did you see a bottoming? Did you see further deterioration as you move through the quarter? And does your updated guide assume trends stabilize from 2Q levels or worsen from two key levels?

Jeffrey Silber:

I'm sorry to keep on focusing on the non-subscriptions piece. Normally, can you just tell us from a breakdown perspective, what percentage comes from tech vendors and what percentage comes from enterprise customers? And if we could just focus in on the enterprise customers component of that, can you talk about how that's trending?

Jeffrey Silber:

I wanted to actually circle back and talk about AI, but the potential impact on your business internally. Do you think it's going to make your analysts more efficient? Do you think you might be able to reduce headcount from an analyst perspective just to take advantage of technology? Any thoughts would be great.

Operator:

Thank you. I'm showing no further questions in the queue. At this time, I will now turn the call back over to Mr. Gene Hall for any closing remarks.

Operator:

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.

David Cohen:

Good morning, everyone. Welcome to Gartner’s First Quarter 2023 Earnings Call. I’m David Cohen, SVP of Investor Relations. [Operator Instructions] After comments by Gene Hall, Gartner’s Chief Executive Officer; and Craig Safian, Gartner’s Chief Financial Officer there will be a question-and-answer session. Please be advised that today’s conference is being recorded. This call will include a discussion of first quarter 2023 financial results and Gartner’s outlook for 2023 as disclosed in today’s earnings release and earnings supplement both posted to our site investor.gartner.com. On the call, unless stated otherwise, all references to EBITDA are for adjusted EBITDA, with the adjustments as described in our earnings release and subsequent. Our contract values and associated growth rates we discuss are based on 2023 foreign exchange rates and exclude contributions related to the recent divestiture and the Russia exits. All growth rates in Gene’s comments are FX neutral, unless stated otherwise. All references to share counts are for fully diluted weighted average share counts unless stated otherwise. Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website. As set forth in more detail in today’s earnings release, certain statements made on this call may constitute forward-looking statements. Forward-looking statements can vary materially from actual results and are subject to number of risks and uncertainties, including those contained in the company’s 2022 annual report on Form 10-K and quarterly reports on Form 10-Q as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents. Now I will turn the call over to Gartner’s Chief Executive Officer, Gene Hall.

Craig Safian:

Thank you, Gene. And good morning. First quarter results were strong with double-digit growth in contract value, revenue, EBITDA and adjusted EPS. FX-neutral growth was even stronger than our reported results. We also again delivered better-than-planned EBITDA margins. The upside reflected stronger Conferences and Consulting revenue and disciplined cost management. With results ahead of our expectations, we are increasing our 2023 guidance. First quarter revenue was $1.4 billion, up 12% year-over-year as reported and 14% FX neutral. In addition, total contribution margin was 69%, down 103 basis points versus the prior year. EBITDA was $379 million, up 15% year-over-year and up 19% FX neutral. Adjusted EPS was $2.88 up 24%. And free cash flow in the quarter was $144 million. We finished the quarter with 19,830 associates, up 15% from the prior year and 2% from the end of the fourth quarter. We are well positioned from a talent perspective with low levels of open territories and our new associates coming up the ten-year curve. And we will continue to carefully calibrate headcount and operating expenses based on near-term revenue growth and opportunities to invest for the future. Research revenue in the first quarter grew 7% year-over-year as reported and 9% on an FX-neutral basis. Subscription revenue grew 11%, FX neutral. First quarter research contribution margin was 74%, down about one point as we have caught up on hiring and return to the new expected levels of travel. Contract value or CV was $4.5 billion at the end of the first quarter, up 10% versus the prior year. The first quarter last year was one of our strongest research quarters ever with outstanding performance on nearly every metric we provide. CV growth is FX neutral and excludes both Russia and the recent divestiture. CV from enterprise function leaders across GTS and GBS grew at double-digit rates. CV from tech vendors grew mid-single digits compared to high teens growth in the first quarter of 2022. Quarterly net contract value increase, or NCVI, was $26 million. As we’ve discussed in the past, there is notable seasonality in this metric. CV growth was broad-based across practices, industry sectors, company sizes and geographic regions. Across our combined practices, all industry sectors grew at double-digit rates other than technology and media, which both grew at mid-single-digit rates. The fastest growth was in the transportation, retail and public sectors. We had high single-digit growth across all of our enterprise size categories. We also drove double-digit or high single-digit growth in all of our top ten countries. Global Technology Sales contract value was $3.5 billion at the end of the first quarter, up 9% versus the prior year. GTS had quarterly NCVI of $10 million. While retention for GTS was 104% for the quarter, which compares to 107% in the prior year when we saw a record high for this metric. While tech vendor wallet retention remained under pressure, on a net basis, our clients spend more with us compared to the prior year. GTS new business was down 1% versus last year. New business with IT function leaders increased compared to the prior year against the tough compare. New business with tech vendors declined versus very strong performance last year. GTS quota-bearing headcount was up 22% year-over-year and 11% on a 2-year compound annual growth rate basis. We will continue to manage hiring based on both short-term performance and the medium-term opportunity. Our regular full set of GTS metrics can be found in the appendix of our earnings supplement. Global Business Sales contract value was $983 million at the end of the first quarter, up 16% year-over-year, which is at the high end of our medium-term outlook of 12% to 16%. All of our GBS practices other than sales and marketing grew at double-digit rates. Supply chain and HR both continued to grow faster than 20%. GBS CV increased $16 million from the fourth quarter. While retention for GBS was 110% for the quarter, which compares to 115% in the prior year when we saw the highest end result for this metric. In addition to continued strong client retention, our clients spent significantly more with us than they did a year ago. GBS new business was down 4% compared to last year against a very strong compare. The two-year compound annual growth rate for new business was 6%. GBS quota-bearing headcount was up 18% year-over-year. This excludes headcount associated with the Q1 divestiture. As with GTS, our regular full set of GBS metrics can be found in the appendix of our earnings supplement. Conferences revenue for the first quarter was $65 million, ahead of our expectations as we saw strong performance with both exhibitors and attendees. The first quarter is always a seasonally small quarter, but we are off to a strong start for the year. Contribution margin in the quarter was 41%, consistent with typical seasonality. We held ten destination conferences in the quarter, all in-person. First quarter Consulting revenues increased by 10% year-over-year to $127 million. On an FX-neutral basis, revenues were up 14%. Consulting contribution margin was 40% in the first quarter, consistent with the incremental hiring and return to travel. Labor-based revenues were $97 million, up 1% versus Q1 of last year and up 5% on an FX neutral basis. Backlog at March 31 was $161 million, increasing 14% year-over-year on an FX-neutral basis with continued booking stream. Our Contract Optimization business had another very strong quarter, up 53% as reported and 56% on an FX-neutral basis versus the prior year. As we have detailed in the past, this part of the Consulting segment is highly variable. Consolidated cost of services increased 15% year-over-year in the first quarter as reported and 17% on an FX-neutral basis. The biggest driver of the increase was higher headcount to support our continued strong growth. We also saw an increase in cost year-over-year with a return to in-person conferences. SG&A increased 6% year-over-year in the first quarter as reported and 9% on an FX-neutral basis. SG&A increased in the quarter as a result of headcount growth. The increase was partially offset by lower charges associated with real estate rationalization. EBITDA for the first quarter was $379 million, up 15% year-over-year on a reported basis and up 19% FX neutral. First quarter EBITDA upside to our guidance reflected revenue exceeding our expectations in Conferences and Consulting and prudent expense planning. Depreciation in the quarter of $24 million was up modestly compared to 2022. Net interest expense, excluding deferred financing costs in the quarter was $26 million, down $4 million versus the first quarter of 2022, resulting from higher interest income on our cash balances. The modest floating rate debt we have is fully hedged through maturity. The Q1 adjusted tax rate, which we use for the calculation of adjusted net income, was 18% for the quarter. The tax rate for the items used to adjust that income was 35% for the quarter. Adjusted EPS in Q1 was $2.88, up 24% year-over-year. We had 80 million shares outstanding in the first quarter. This is a reduction of close to three million shares or about 3% year-over-year. We exited the first quarter with about 80 million shares on an unweighted basis. Operating cash flow for the quarter was $165 million, down 2% compared to last year. CapEx for the quarter was $21 million, up 22% year-over-year as a result of an increase in technology modernization investments and equipment for new associates. Free cash flow for the quarter was $144 million. Free cash flow as a percent of revenue on a rolling four-quarter basis was 18% of revenue and 65% of EBITDA. Adjusted for the after-tax impact of the divestiture and interest rate swap gains, free cash flow conversion from GAAP net income was 120%. Our free cash flow conversion is generally higher when CV growth is accelerating. At the end of the first quarter, we had $894 million of cash. Our March 31 debt balance was $2.5 billion. Our reported gross debt to trailing 12-month EBITDA was under two times. Our expected free cash flow generation, available revolver and excess cash remaining on the balance sheet provides ample liquidity to deliver on our capital allocation strategy of share repurchases and strategic tuck-in M&A. Our balance sheet is very strong with $1.9 billion of liquidity, low levels of leverage and effectively fixed interest rates. We repurchased more than $100 million of stock during the first quarter. We had about $950 million remaining on our share repurchase authorization at March 31. As we continue to repurchase shares, our capital base will shrink. This is accretive to earnings per share and combined with growing profits also delivers increasing returns on invested capital over time. We are increasing our full year guidance to reflect the strong Q1 performance, while still allowing for a higher-than-normal level of uncertainty in the world. As we move through the year, we have more visibility into the revenue outlook and the corresponding expenses needed to support the business and drive growth. For research, we continue to innovate and provide a very compelling value proposition for clients and prospects. Our plans for 2023 allows for a higher-than-normal range of outcomes as we discussed last quarter. We’ve got tough compares across the business and particularly with tech vendors and in GBS for another quarter or two. We’ve taken a prudent approach based on historical trends, which we’ve reflected in the guidance. We expect stronger growth from the subscription business than the non-subscription part of the segment. The non-subscription part of the business faces tough compares and has more direct exposure to tech vendor spending. The outlook continues to be based on 100% of our 47 destination conferences for 2023 running in person. There is seasonality to the business based on the conferences calendar, which is different than the historical matter. We expect Q4 to be the largest quarter and Q3 to be the smallest of the year. For Consulting revenues, we have more visibility into the second quarter than the second half based on the composition of our backlog and pipeline as usual. Contract optimization remains highly variable. We had a very strong year in 2022, especially in contract optimization in the fourth quarter. With Q1 behind us, we are comfortable we can run the business successfully for this year, while investing for future growth with lower consolidated expenses than we built into the original guidance. We will continue both to manage expense prudently to support future growth and deliver strong margins. Our updated guidance for 2023 is as follows

Jeffrey Meuler:

Yes, thank you. So I thought CV was good considering the macro and the comp. I know that you said comps are still tough another quarter or two. I don’t know what macro is going to do later in the year. But it sounds like the relative weakness is still just concentrated in the tech vendor channel. So, I guess, as you look at retention trends on business that’s coming up for renewal on a quarterly basis or new business sold trends in a quarter on a seasonally adjusted sequential basis, I guess the question is, have those metrics kind of stabilized after stepping down concentrated in the tech vendor channel last year? Or have you seen any sort of incremental weakening, including with the recent banking sector challenges and any derivative effects from it?

Jeffrey Meuler:

Okay. But are those smaller things, including like the banking challenges, are they causing incremental deterioration, or is that not a meaningful factor for you?

Jeffrey Meuler:

Got it. Good to hear. And then I just love your perspective, Gene on, I guess, the opportunities and risks from generative AI, including anything on how far along you are with implementing it. And to me, I could see potential benefits on a number of fronts, sales productivity, research productivity, I guess, improving the client experience on your platform, given the high-quality content library, as well as you mentioned among the hot topic areas that could drive demand and client engagement. Also curious just on how you think about any potential risks that publicly available content becomes a lot easier to curate via generative AI. Thanks.

Jeffrey Meuler:

Appreciate the comprehensive answer. Thank you.

Heather Balsky:

Hi, good morning. Thank you for taking my question. Can you help us think about the cadence of CV as we move through the year, both taking into account the sort of environment right now, especially with your tech vendors as well as just sort of comparisons year-over-year. Just curious kind of do you expect the kind of softness as the year progresses and improvement to the fourth quarter? Just what’s based into your sales outlook? Thanks.

Heather Balsky:

Thank you. I appreciate that. And as my follow-up, in an environment like we're seeing right now, whether it's the tech industry, realigning what's going on in banks, from both the GBS and GTS perspective what are you doing on the research side to say to customers keeping them active Gartner customer [indiscernible] keeping that retention strong? Thanks.

Heather Balsky:

Great. Thanks very much.

Toni Kaplan:

Thank so much. Wanted to ask about GBS, I know you mentioned in the prepared remarks that all of the areas grew double digits, except for sales and marketing. Can you just give maybe a little bit of color on what slowed there, anything you're seeing? Or is that just a – maybe is a tough comp? Or I'm sure each quarter, some are more positive and some are more negative. So is it sort of normal or anything to call out there?

Toni Kaplan:

Great. Wanted to also ask about the retention of salespeople, I imagine it's a lot better now than it was in recent history when we had the sort of tighter later labor market. I guess how are you thinking about that with regard to maturity of salespeople? Could that have upside potential for the guide this year? And maybe talk about sort of if we should see productivity improvement as a result.

Toni Kaplan:

Perfect. Thank you.

Seth Weber:

Hi. Good morning. I wanted to ask you about the raised EBITDA margin outlook for the year. Is that just a function of higher revenue flowing through? Or is there something else that you feel like has changed there relative to how you were thinking about the business last quarter? Thanks.

Seth Weber:

Right. That makes sense. Thanks. And then maybe just on the maintained free cash flow outlook. Anything you'd call out there? I seem to remember, over the last couple of quarters, there were some pickups with collections and things like that. Is there anything notable that you cite not raising the free cash flow guidance?

Seth Weber:

Got it. That's helpful. Thank you, guys. I appreciate it.

Andrew Nicholas:

Hi. Good morning. Thanks for taking my question. Wanted to follow up on a few of the earlier questions to start; first, I guess, Craig, on the margins could you spend a bit of time talking on first quarter upside or where some of that upside came from on the cost side? And then understanding the EBITDA guidance bridge or the change versus last quarter, it still seems like there's a pretty significant ramp-up in implied expenses through the remainder of the year. If you could just give a little bit more color on that. I was under the impression that second half hiring activity was now in the run rate. So just trying to figure out where else the increased expense comes from over the next couple of quarters.

Andrew Nicholas:

Very helpful. Thank you. And then for my follow-up, I just wanted to ask a little bit more on headcount growth and kind of talent environment. I guess, Gene, you mentioned it being fantastic. I guess, one, can you talk a little bit about why you think the environment for hiring sales talent is so good today versus a year ago maybe? And then also how much does that impact your ability to be nimble on the headcount front? It would seem like if there's a bunch of supply, you can be a little bit more careful and not feel like you need to hoard all the best people right away? Or is it a different dynamic where you decide to take advantage of all that's out there and potentially have a little bit narrower gap between headcount growth and CV growth? Just how you're thinking about those dynamics? Thank you.

Andrew Nicholas:

Understood. Thank you.

George Tong:

Alright. Thanks. Good morning. You talked about Research CV being relatively stable in end markets outside of tech vendors. Just going back to that topic, can you elaborate on what you're seeing in other verticals? How would you characterize the selling environment? How are client budgets performing? And what are you seeing with sales cycles?

George Tong:

Got it. And then as it relates to your research sales headcount expectations, can you outline what the cadence of hiring should look like in GBS and GTS over the remainder of this year now that the bulk of hiring is behind you?

George Tong:

Got it. Thanks for the color.

Jeff Silber:

Thanks so much. Wanted to focus on the research pricing environment, if you can remind us what price increases you've been pushing through so far this year, what your expectations are for the rest of the year? And I know others in this space may not necessarily be direct competitors, but we're seeing some companies extending terms of their contract renewals but taking lower price. Is that something that you're doing or considering? Thanks.

Jeff Silber:

Okay. That's helpful. If I switch to the Consulting segment, I know it can be choppy, but utilization was down pretty significantly in the first quarter. Can we talk about what's going on or what your expectations are for the rest of the year on that metric? Thanks.

Jeff Silber:

Okay. Appreciate the color. Thanks so much.

Manav Patnaik:

Thank you. Good morning. Craig, I was just hoping on the expense side, specific to SG&A, you could help us with just the cadence through the quarters there. And is the S-part still like two-thirds of that mix right now?

Manav Patnaik:

Got it. Okay. That's helpful. And then just my second question was more, can you remind us what your multiyear contract? Like how much of your business is now multiyear contract, what that average duration is because that should help you be obviously more resilient here?

Manav Patnaik:

Got it. Thank you.

Stephanie Moore:

Hi. Good morning. Yes. No. Hi. Good morning. I just wanted to touch on the comp side of the business, clearly really strong growth. Would love to get more color on what you're hearing in regards to maybe advanced bookings and other demand if that demand has changed all versus maybe throughput levels to still [indiscernible]?

Stephanie Moore:

Great. Thank you. And then just for a follow-up. I'm curious what you're seeing in general on the Consulting side from just an overall upselling and cross-selling standpoint. Maybe any customers or clients in part that are pulling back at all on just number of fees just given the uncertain macro? Or you're still kind of seeing the same level of activity? Thank you.

Stephanie Moore:

No. I'm sorry. I apologize. I was just curious on what you're seeing from an upsell and cross-sell standpoint, and if you've seen any change in activity as of late, maybe clients pulling back at all? Thank you.

Stephanie Moore:

Great. Understood. Thank you so much.

Gene Hall:

Well, here's what I'd like you to take away from today's call. In the first quarter of 2023, we again saw strong growth across the business. Gartner delivers incredible value of enterprises that are thriving, struggling or anywhere in between. Our insights address today's mission-critical priorities. And by being exceptionally agile and adapting to the changing world, we've delivered a sustained record of success. We've covered around and aligned our hiring with recent demand and our long-term opportunity. We know the right things to do to be successful in any environment. Looking ahead, we are well positioned to drive growth far into the future. We expect margins to increase modestly over time, and we generate significant free cash flow well in excess of net income. Even as we invest in future growth, we'll return significant levels of excess capital to our shareholders, which reduces shares outstanding and increases returns over time. Thanks for joining us today, and we look forward to updating you again next quarter.

Operator:

Good morning, everyone. Welcome to Gartner's Fourth Quarter 2022 Earnings Call. I'm David Cohen, SVP of Investor Relations. At this time, all participants are in a listen-only mode. After comments by Gene Hall Gartner’s Chief Executive Officer and Craig Safian Gartner’s Chief Financial Officer. There will be a question-and-answer session. Please be advised that today's conference is being recorded. This call will include a discussion of fourth quarter 2022 financial results and Gartner's outlook for 2023 as disclosed in today's earnings release and earnings supplement both posted to our website, investor.gartner.com. On the call, unless stated otherwise, all references to EBITDA are for adjusted EBITDA. With the adjustments as described in our earnings release and supplement. All growth rates in Gene's comments are FX neutral unless stated otherwise. And its contract value comments exclude Russia from 2021. All references to share counts are for fully diluted weighted average share counts unless stated otherwise. Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website. Finally, all contract values and associated growth rates we discuss are based on 2022 foreign exchange rates unless stated otherwise. As set forth in more detail in today's earnings release, certain statements made on this call may constitute forward-looking statements. Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the company's 2021 Annual Report on Form 10-K, quarterly reports on Form 10-Q, as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents. Now, I will turn the call over to Gartner's Chief Executive Officer, Gene Hall.

Craig Safian:

Thank you, Gene, and good morning. Fourth quarter results were strong with double-digit growth in contract value, revenue, EBITDA and adjusted EPS. FX neutral growth was even stronger than our reported results. We also delivered better than planned EBITDA margins. During 2022, we generated almost $1 billion of free cash flow and we returned more than that to shareholders through stock repurchases. Our financial performance for the full-year 2022 included total contract value growth of 12%, total revenue growth of 16%, EBITDA growth of 14%, diluted adjusted EPS of $11.27, and free cash flow of $993 million. We are introducing 2023 guidance, which reflects higher than normal variability in the set of reasonably likely outcomes. The guidance accounts for the tough compares at the start of the year and the opportunity for upside if near-term demand is stronger than we built into the outlook. With the catch up hiring we did last year; we are very well positioned to add value to enterprise function leaders and their teams across all industries and around the world. Fourth quarter revenue was $1.5 billion, up 15% year-over-year as reported and 20% FX neutral. In addition, total contribution margin was 68%, down 100 basis points versus the prior year. EBITDA was $421 million, up 37% year-over-year and up 44% FX neutral. Adjusted EPS was $3.70, up 24% and free cash flow in the quarter was $166 million. We finished the year with 19,505 associates, up 18% from the end of 2021. About 40% of the headcount growth was catch up from prior years. Our hiring has been carefully calibrated to revenue growth and future demand and we are well positioned from a talent perspective heading into 2023. Research revenue in the fourth quarter grew 9% year-over-year as reported and 13% on an FX neutral basis driven by our strong contract value growth. Fourth quarter research contribution margin was 74%, consistent with 2021. The contribution margin had a benefit during the quarter from somewhat lower headcount levels and travel expenses still modestly below our post-pandemic expectations. For the full-year 2022, research revenues increased by 12% on a reported basis and 16% FX neutral. The gross contribution margin for the year was 74% in line with 2021. Contract value or CV represents the annualized revenue under contract at a point in time. In looking at our global contract value across both GTS and GBS, more than 75% of our CV is from enterprise function leaders and their teams with the bulk of the balance coming from leaders at tech vendors. Our enterprise function leader’s business includes IT leaders, who are end users of technology and who we serve through our GTS sales force. And leaders of other business functions who we serve through our GBS sales force. In both cases, we serve leaders around the world and across all industries. We're helping these enterprise function leaders address their most important mission critical priorities. CV was $4.7 billion at the end of the fourth quarter, up 11.9% versus the prior year and up 12.3% adjusted for the impact of exiting Russia. CV from enterprise function leaders across GTS and GBS grew at strong double-digit rates. CV from tech vendors grew high-single-digits, compared to a high-teens growth rate in the fourth quarter of ‘21. Quarterly net contract value increase or NCVI was $189 million [Technical Difficulty] business of almost $400 million. CV growth was broad-based across practices, industry sectors, company sizes and geographic regions. Across our combined practices, all industry sectors grew at double-digit rates other than technology and media, which grew at high-single-digit rates. The fastest growth was in the transportation, retail and manufacturing sectors. We had double-digit growth across all of our enterprise size categories. We also drove double-digit growth in nine of our top 10 countries, with high-single-digit growth in the 10. Global technology sales CV was $3.6 billion at the end of the fourth quarter, up 10% versus prior year and up 10.5% adjusted for the exit of Russia. GTS had quarterly NCVI of $138 million, while retention for GTS was 105% for the quarter. GTS new business was down 8.5% versus last year. New business with IT function leaders was up modestly year-over-year against a tough compare. New business with tech vendors facing even tougher compare against Q4 of 2021, which was its strongest quarter ever. GTS quota-bearing headcount was up 18%, compared to December of last year, about 40% of the growth was catch up hiring from 2021. Our continued investments in our sales teams will drive long-term sustained double-digit growth. Our regular full set of GTS metrics can be found in the appendix of our earnings supplement. Global business sales CV was over $1 billion at the end of fourth quarter, up 19% year-over-year, which is above the high-end of our medium-term outlook of 12% to 16%. All of our GBS practices other than marketing grew at double-digit growth rates led by supply chain and HR, which both continued to grow faster than 20%. GBS CV increased $52 million from the third quarter, while retention for GBS was 112%. GBS new business was up 3% versus last year against a very strong compare. The two-year compound annual growth rate for new business was 9%. GBS quota-bearing headcount increased 22% year-over-year with a little more than 50% of the growth being catch up from 2021. Headcount we hired in 2022 will help to position us for sustained double-digit growth in the future. As with GTS, our regular full set of GBS metrics can be found in the appendix of our earnings supplement. Conferences revenue for the fourth quarter was $188 million, contribution margin in the quarter was 53%, we held nine in-person conferences in the quarter. It has been very exciting for our business to return to in-person conferences. For the full year 2022, revenue increased 82% on a reported basis and 90% FX neutral. Gross contribution margin was 54%. Fourth quarter consulting revenues increased by 17% year-over-year to $138 million. On an FX neutral basis, revenues were up 24%. Consulting contribution margin was 37% in the fourth quarter. Labor based revenues were $96 million, up 11% versus Q4 of last year and up 19% on an FX neutral basis. Backlog at December 31 was $140 million, increasing 24% year-over-year on an FX neutral basis with another strong bookings quarter. The inclusion of multi-year contracts in our backlog calculation a change we described earlier last year, contributed about 13 percentage points to the year-over-year growth rate. Our contract optimization business had a very strong quarter increasing 36 % as reported and 39% on an FX neutral basis versus the prior year. As we have detailed in the past, this part of the consulting segment is highly variable. Full-year consulting revenue was up 15% on a reported basis and 22% on an FX neutral basis. Gross contribution margin of 39% was up 140 basis points from 2021. Consolidated cost of services increased 19% year-over-year in the fourth quarter as reported and 24% on an FX neutral basis. The biggest drivers of the increase were higher headcount to support our continued strong growth and the return to in-person destination conferences. SG&A decreased 3% year-over-year in the fourth quarter as reported and increased 1% on an FX neutral basis. We had lower non-cash non-recurring charges in 2022, compared to 2021. On a comparable basis, SG&A was up due to additional headcount for sales and G&A functions. For the full -year, cost of services increased 17% on a reported basis and 21% on an FX neutral basis. SG&A increased 15% on a reported basis and 19% on an FX neutral basis in 2022. EBITDA for the fourth quarter was $421 million, up 37% year-over-year on a reported basis and up 44% FX neutral. Fourth quarter EBITDA upside to our guidance reflected revenue exceeding our forecasts, most notably in consulting and expenses at the low-end of our expectations. EBITDA for the full-year was $1.47 billion, 14% increase over 2021 on a reported basis and up 19% FX neutral. Depreciation was $24 million in the fourth quarter, down modestly versus 2021. Net interest expense excluding deferred financing costs in the quarter was $29 million about flat with the prior year. The modest floating rate debt we have is fully hedged through maturity. The Q4 adjusted tax rate, which we use for the calculation of adjusted net income was 16.7% for the quarter. The tax rate for the items used to adjust net income was 23.2% for the quarter. The full-year tax rate was 21.6% on the same basis. Adjusted EPS in Q4 was $3.70, up 19% year-over-year. The average share count for the fourth quarter was 80 million shares. This is a reduction of about 3.7 million shares or about 4% year-over-year. We exited the fourth quarter with about 80 million shares outstanding on an unweighted basis. For the full-year, adjusted EPS was $11.27, EPS growth for the year was 22%. Operating cash flow for the quarter was $203 million, excluding insurance proceeds in Q4 of 2021, operating cash flow was down about 7%. Q4 cash flow was impacted by Hurricane Ian, which hit our center of excellence in Fort Myers extremely hard in late September. While we were able to sell and service our clients from Fort Myers, we did have some delays in getting invoices out as quickly as we normally would. Elections for some of these delayed invoices slipped into January, but we are now caught up. CapEx for the quarter was $38 million, up about $16 million year-over-year, led by increases in capitalized technology labor costs and catch-up laptop spend. Free cash flow for the quarter was $166 million. Free cash flow growth continues to be an important part of our business model with modest CapEx needs and upfront client payments. As many of you know, we generate free cash flow well in excess of net income. Our conversion from EBITDA is also very strong. With the differences being cash interest, cash taxes and modest CapEx, partially offset by strong working capital cash inflows. Free cash flow as a percent of revenue or free cash flow margin was 18% on a rolling fourth quarter basis. On the same basis, free cash flow was 68% of EBITDA and 123% of GAAP net income. At the end of the fourth quarter, we had almost $700 million of cash. Our December 31 debt balance was $2.5 billion. Our reported gross debt to trailing-12-month EBITDA was under 2 times. Our expected free cash flow generation, unused revolver and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy of share repurchases, and strategic tuck-in M&A. Our balance sheet is very strong with $1.7 billion of liquidity, low levels of leverage and effectively fixed interest rates. We repurchased more than $1 billion of stock throughout 2022. We expect the Board will refresh our share repurchase authorization as needed, which they did earlier this month. We now have about $1 billion authorized for share repurchases. Across the past two years, we have returned $2.7 billion to shareholders by repurchasing more than 11 million shares. Over that timeframe, we have reduced our shares outstanding by 11%. As we continue to repurchase shares, our capital base will shrink. This is accretive to earnings per share and combined with growing profits also delivers increasing returns on invested capital over time. Before providing the 2023 guidance details, I want to discuss our base level assumptions and planning philosophy for 2023. For research, we continue to innovate and provide a very compelling value proposition for clients and prospects. Executives and their teams face uncertainty and challenges and they recognize how Gartner can help regardless of the economic environment. Our plan allows for a higher-than-normal level of uncertainty in the world as Gene discussed. We've got tough compares across the business and particularly with tech vendors for another quarter or two. We've taken a prudent approach based on historical trends, as well as more normal patterns which we reflected in the guidance. If near-term demand is stronger than we've built into the outlook and NCVI phasing, retention rates, and non-subscription growth performed closer to the way they have historically, there would be upside to our guidance. In addition, our teams are focused on driving greater growth than what's embedded in the guidance. Finally, as you think about GBS overall CV and revenue growth for 2023, please keep in mind that we closed on the divestiture of a small non-core asset last week. We sold Talentneuron which we acquired as part of the CEB transaction for $164 million. In the earnings supplement appendix, we've provided historical contract value updated for 2023 FX rates, as well as the removal of Talentneuron from prior years. For conferences, we are basing our guidance on being 100% in-person for the 47 destination conferences we have planned for 2023. We expect to return to more typical seasonality for the business with fourth quarter the largest followed by the second quarter. For consulting revenues, we have more visibility into the first half based on the composition of our backlog and pipeline as usual. Contract optimization is seasonally slower in the first quarter and remains highly variable. We had a very strong year in 2022, especially in contract optimization in the fourth quarter. Our base level assumptions for consolidated expenses reflect significant headcount increases from 2022 annualizing into 2023. Our plan for headcount for 2023 is more in line with our normal model as we caught up on hiring last year. If demand is stronger than what's in the initial plan, we will have opportunity to add even more great talent to our teams. We also expect T&E cost to more fully normalize this year. Finally, we continue to invest in our systems and process automation, both client facing and internal applications as part of our innovation and continuous improvement programs. We will continue both to manage expenses prudently to support future growth and deliver strong margins. At current rates, FX will be a modest tailwind to growth for the full-year with the benefit in the second half. Our guidance for 2023 is as follows

Jeff Meuler:

Yes, thank you. Maybe if you could talk through what you think for the outlook for the tech vendor channel? Just given the more recent risks and a need to cycle through kind of renewals on annual and multi-year contracts? And related to that, is there an opportunity or a plan to reallocate some of those sales resources into, kind of, the functional leader channels?

Craig Safian:

And Jeff, the last part of your question on the territory assignment and where we're putting our growth, we've got a pretty robust territory optimization and analytics team that is always looking at this and we have the ability to very quickly and with a lot of agility flex up or down on where we're putting those territories. And so obviously as we're looking at our selling environment and the growth of the business, we're continuing to allocate those resources accordingly. And then the last thing, I mentioned and you sort of had this buried in your question, but I'll pull it out, is our business selling to the enterprise functions, both in IT and outside of IT through GBS performed very, very well in Q4 and for the full-year. And it was really the tech vendors that had, as Gene said, a very tough compare going from high-teens growth to high-single-digit growth in the quarter.

Gene Hall:

Yes. So Jeff, I mean, again, the way to kind of think about the results in quarter and if you look at it on a rolling four quarter basis, is again that the end user side of the GTS business held up really, really well. And performed really well throughout the year and in the fourth quarter, including the productivity. And again just we saw that deceleration from high-teens to high-single-digits, obviously impacting the productivity as well. I think as we have brought in more and more new associates and the sales force. Last year, we talked about in 2021 rather, we had the best tender mix we've ever had. In 2022, we had really the highest proportion of new people we've ever had that's obviously going to impact productivity. We'll start to see the benefits of the tenuring over the course of 2023 as all of those people we hired over the course of 2022 start getting up the productivity curves.

Operator:

Thank you. Our next question comes from Heather Balsky from Bank of America. Your line is open.

Craig Safian:

Sure. Good morning, Heather, and thanks for the questions. So I think a couple of thoughts there. So I'll start with conferences and consulting first. And so as we look at those two businesses, again, coming off of very strong 2022, if you look at the backlog position in consulting, we actually entered the year in really good shape. We had a very strong delivery quarter in the fourth quarter, but also a very strong bookings quarter. And again, based on the visibility that we have, roughly through the first half of the year, we feel really good about the consulting business and the trending looks good there. And again, I think our client base to Gene’s earlier comments about the tech sector, are still embarking on a lot of -- embarking or continuing on a lot of digital transformation and major tech projects and programs where our consulting team really can't help them get the most value out of that. On the conferences side, again, we had a great year of returning to in-person conferences in 2022 and the team has done a fantastic job of driving forward, what we call, forward bookings, but basically locking up the revenue from the exhibitor side into 2023, and so as Gene mentioned, we've got significantly more than 50% of our pre bookings already under contract. As we head into 2023, and so feel very, very good about the conferences business as well. On the research side, again, our enterprise function leader business is performing very well and we expect that to continue to perform well. We do have -- continue to have tough compares there, but we do -- we're driving great value for our clients and we expect that to continue. We have been thoughtful and prudent about our experience in the fourth quarter with our tech vendor clients and making sure that we don't assume just some magical return to high-teens growth right out of the gate. And so we're trying to be prudent by making sure we use our most recent experience, enrolling that through the four quarters from a research perspective. But again, end user enterprise function leader business again performing very strong, nice double-digit growth rates. The tech vendor business still at high-single-digits. Just down from where we were a year ago.

Gene Hall :

Hey, Heather, it's Gene. So we always train our associates on what are the most important mission critical priorities with our clients and prospects today. One of the issues that's going to be on people's minds in some industries is going to be cost reduction. And so we train our salespeople on, among other things how to help clients with cost reduction. We're a very small proportion of cost for any client. They can't -- they're not going to save a lot of money by cutting our services. On the other hand, we can help them save a whole number of multiples of what they pay for us in their actual ongoing business. In addition to that, as I mentioned earlier, most companies, even in a tough environment [Indiscernible] they want to invest in technology and it's on things, like automation that helps with their own labor situation, their own labor costs, [Indiscernible] other kinds of costs. And again, the continuing transition to more and more digital services that are often in just about every single industry. So we train our new salespeople on both how to sell to clients that value proposition, which is the continuing transition to digital, but also how to save money on their IT purchases, so that they actually get -- they could be more efficient over time. So the combination of those things, and of course, our traditional selling skills where we -- I think, are quite good at training new salespeople in terms of how to sell effectively, you put those things together and it lets new salespeople -- they're not as productive as experienced salespeople, but they're actually quite good in the broad context.

Operato:

Thank you. Our next question comes from Toni Kaplan from Morgan Stanley. Your line is open.

Craig Safian:

Good morning, Toni. Yes, I mean, the way to think about the bridge from 2022 to 2023 is consistent with the way we've been talking about it for the last several quarters. And so, the biggest piece of it is the annualization of all the hiring we did in 2022 and obviously, paying the full load for all those new associates over the course of 2023. So that's by far the biggest piece of it. A lot of our hiring was back-end loaded or second-half loaded, I should say. And so, obviously, there's a pretty significant uplift in the annual cost as we annualize all of those individuals. There's an element of T&E, to your point. And so, we're -- fourth quarter was kind of in line with where we expected to be. But obviously, the first part of 2022, we were still mostly in lockdown and not traveling. And so, there are incremental T&E expense that we expect in 2023, as we get to kind of the new normal of travel post-pandemic. And there's a few other nits here and there, but the two primary ones are really the annualization of the headcount and a little bit more on the T&E side.

Craig Safian:

Yes, absolutely. So in 2022, the bulk of the story is, what, I discussed in my prepared remarks, which is just some invoicing delays coming out as a result of the Hurricane. And we thought we would be able to get all caught up on that in 2022 and a bunch of it did slip into 2023. And actually, through the end of January, we actually are all caught up on that. So we feel good about both the ‘22 finish and getting that all behind us. In terms of 2023, obviously, there can be a lot of variability to the free cash flow numbers. If you look at it on the surface from the guidance, the free cash flow margin is in line with what we'd expect free cash flow as a percent of EBITDA is roughly where we'd expect and the free cash flow conversion as a percent of GAAP net income is in the range as well. And so, I think the free cash flow guidance and the free cash flow expectation is sort of in line with the business performance. I do think there are a couple of things impacting ‘23 that potentially put it a little bit below your expectations, probably, most notably cash taxes. So because of all that extra earnings in 2022, we have more to pay in taxes, and that's obviously reflected into 2023 free cash flow guidance as well.

Operator:

Thank you. Our next question will come from Andrew Nicholas from William Blair. Your line is open.

Gene Hall:

Yes. Hey Andrew. So the -- our strategy is to have conferences for all the major functional areas in our businesses, I think, in IT, HR, finance, et cetera, as well as within -- cybersecurity applications and so forth. And we're far from that now -- and sorry, and also each of those conferences in each of our major geographies. And so, there's a -- it will take us a long time to get to the point where we have the aspiration I just said, which is to have a conference for every major of share count in every major geographic region. And we're at -- because these conferences add so much value to our -- the attendees, our seat holders that actually go and attend these conferences, we really want to expand those as quickly as we can. We're limited by what you do operationally with how fast we can actually hire people and build these conferences. And so, we're going to continue on that path. We did that -- we've had as an as we think we can handle operationally in 2023. If we find during the year, we can have more, we will do that. And certainly, in ‘24, ‘25, ‘26, we expect to have a continuing expansion of these conferences, again, because of the very high value they provide to our attendees, our seat holders and also our prospects.

Gene Hall:

Yes. We had great performance in GBS during 2022, including the fourth quarter. There's tremendous opportunity in GBS. As with the rest of our business, really grow GBS as quickly as we can to capture that enormous opportunity. We had growth in -- across all functional areas, very robust growth, actually. And the areas that were slower, it was more internal operational things that we had. So for example, we might have had one area where we were a little slow in hiring than another area. And so, the places that GBS was a little slower, we believe are more due to more internal operational things that we're working on. But again, the overall performance was very strong, we're very happy with that performance.

Andrew Nicholas:

Thank you. I’ll get back in queue.

Seth Weber:

Hey, good morning, guys. Gene, in an answer to one of the prior questions, you mentioned customers looking to manage costs better. I'm wondering if you're getting any pushback on pricing, less appetite for multiyear contracts? Or can you just talk about the pricing environment and how perceptive customers are? And what you think that might look like in an environment where inflation starts to come down? Thanks.

Seth Weber:

Okay. And is there still appetite for multiyear contracts? Or is that changed …

Craig Safian:

Yes. And on top of that, obviously, their mission-critical priorities are not founded by a contractual term. And so, they want to make sure that they have support and insight to support their mission-critical priorities. And so, we've seen no pushback at all on our ability to sell multiyear contracts.

Craig Safian:

Yes, it's a great question. So actually, significantly greater than 50% is actually the -- what both Gene and I said, we're actually comparable or perhaps even a little bit stronger than we were pre-pandemic on that metric.

Operator:

Thank you. Our next question comes from George Tong from Goldman Sachs. Your line is open.

A - Gene Hal:

Hey, George. So the -- our -- we are a very attractive employer in the marketplace. When we go for talent, we're a place that people want to work. And we -- it's a -- we're actually a tough place to drive into reverse selective as well. We've had no trouble hiring at all, which is why our growth rate in our associate body has accelerated so much as I talked about in my remarks. So again, we're an attractive place to work, people going want to work here. And so, they have a great associate value proposition, so we don't have any trouble hiring people.

George Tong:

Got it. That's helpful. And then as a follow-up, you're guiding to at least 21.5% EBITDA margins in 2023. Under what conditions could you outperform the 21.5% target?

George Tong:

Great. Thanks very much.

Jeff Silber:

Thanks so much. You mentioned the divestiture of the Talentneuron business. Can we get a little bit more color on that? It looks like you own that business for about five or six years. What did it do? Why we sell it now? And should we expect any other kind of divestitures?

Jeff Silber:

All right. Great. Sorry, I got the name mixed up with Jimmy Neutron. In terms of my follow-up, nothing mid take here, you provided a tremendous amount of data. But in looking at wallet retention, it did decline slightly year-over-year. Is there anything to read into it? Are you giving pricing concessions or people pushing back on reordering, et cetera?

Jeff Silber:

Okay. Appreciate the color. Thanks.

Manav Patnaik:

Thank you. Good morning. I just wanted to clarify on the tech lender side again. I think you said it was a quarter of your business. It grew high-single-digits. And did I hear you say that even for ‘23, you assume it's going to be growing high-single-digits? I was just curious if that decel was due to churn or new business and how that's going to come basically?

Manav Patnaik:

Okay. Got it. And then just on the sales -- the question around the sales force growth. You said 4 points to 5 points below CV. I guess -- and I think you said lowest level of open position. So does that mean this year's growth is going to be less than the kind of -- maybe even much less than the kind of 10% we were used to historically?

Manav Patnaik:

Got it. Thank you.

Gene Hall:

Here's what I'd like you to take away from today's call. In the fourth quarter of 2022, we again saw strong growth across the business. Gartner delivers incredible value to enterprises that are thriving, struggling or anywhere in between. By being exceptionally agile and adaptive to a changing world, we've delivered a sustained record of success. We're well prepared as we enter 2023. We've carefully aligned staffing levels with demand and with the lowest percentage of open positions ever. Our content is today's mission-critical priorities. And we know the right things to do to be successful in any environment. Looking ahead, we're well positioned to drive growth far into the future. And even as we invest for future growth, we expect margin to increase modestly over time. We generate significant free cash flow well in excess of net income. We'll return capital to our shareholders through buybacks, which reduced shares outstanding and increases returns over time. Thanks for joining us today, and we look forward to updating you again next quarter.

Operator:

Good morning everyone. Welcome to Gartner’s Third Quarter 2022 Earnings Call. I am David of Investor Relations. At this time, all participants are in a listen-only mode. After comments by Gene Hall, Gartner’s Chief Executive Officer; and Craig Safian, Gartner’s Chief Financial Officer there will be a question-and-answer session. Please be advised that today’s conference is being recorded. This call will include a discussion of third quarter 2022 financial results. And Gartner’s updated outlook for 2022 as disclosed in today’s earnings release and earnings supplement both posted to our website, investor.gartner.com. On the call unless stated otherwise all references to EBITDA are for adjusted EBITDA, but the adjustments is described in our earnings release and the supplement. All growth rates in Gene’s comments are FX-neutral, unless stated otherwise. All references to share counts are for fully diluted weighted average share counts, unless stated otherwise. Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website. Finally, all contract values and associated growth rates we discuss are based on 2022 foreign exchange rates unless stated otherwise. As set forth in more detail in today’s earnings release, certain statements made on this call may constitute forward-looking statements. Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the company’s 2021 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents. Now, I will turn the call over to Gartner’s Chief Executive Officer, Gene Hall.

Craig Safian:

Thank you Gene and good morning. Third quarter results were strong with double digit growth and contract value revenue and adjusted EPS. FX neutral growth was even stronger than our reported results. We also delivered better than planned EBITDA margins, reflecting the strong third quarter, enthusiastic demand for our in person conferences and continued success in balancing cost discipline with investing for future growth we are again increasing our 2022 guidance. Third quarter revenue was $1.3 billion up 15% year-over-year as reported and 20% FX neutral. In addition, total contribution margin was 69% down 20 basis points versus the prior year. EBITDA was $332 million up 9% year-over-year and up 15% FX neutral. Adjusted EPS was $2.41 up 19% and free cash flow in the quarter was $283 million. Research revenue in the third quarter grew 11% year-over-year as reported and 15% on an FX neutral basis driven by our strong contract value growth. Third quarter research contribution margin was 74% modestly below last year. The continued higher than normal contribution margin reflects improved operational effectiveness, increased scale, travel expenses still modestly below our post pandemic expectations and research related headcount with a bit more catch up still to go. Contract value or CV was $4.5 billion at the end of the third quarter up 14.5% versus the prior year. CV growth is always FX neutral. Excluding the impact of exiting Russia, growth for Q3 would have been 14.9%. Quarterly net contract value increase or NCBI was $128 million. Quarterly NCBI is a helpful way to measure contracts value performance in the quarter even though there is notable seasonality in this metric. The sequential increase in CV of $128 million was driven by the combination of continued strong retention rates and near record new business of almost $250 million similar to the second quarter of this year and the third quarter of 2021. The 14.9% contract value growth was broad based across practices, industry sectors, company sizes, and geographic regions. Our technology practice grew 13% and all of our business practices led by HR and supply chain grew at double digit growth rates. All industry sectors including technology grew at double digit rates, with the fastest growth in transportation, retail and manufacturing. We had double digit growth across all of our enterprise size categories with our medium category growing the fastest. In the small category, the technology sector continued to grow at double digit rates. We also drove double digit growth across all of our top 10 countries other than China, where we saw continued single digit growth. Across our North America and Europe, Middle East and Africa regions, all industry sectors had double digit growth rates. Global Technology sales contract value was $3.5 billion at the end of the third quarter up 13% versus the prior year. GTS had quarterly NCBI of $88 million driven by strong retention and near record levels of new business for a third quarter. While retention for GTS was again strong at 107% for the quarter up about 310 basis points year-over-year. GTS new business was down 5% versus last year up against another tough compare. The two year compound annual growth rate was about 9%. GTS quota bearing headcount was up 16% compared to September of last year. Our continued investments in our sales teams will drive long term sustained double digit growth. Our regular full set of GTS metrics can be found in the appendix of our earnings supplement. Global Business sales contract value was $977 million at the end of the third quarter of 21% year-over-year which is above the high end of our medium term outlook of 12 to 16% GBS. CV increased $40 million from the second quarter, while retention for GBS was 114% for the quarter, up about 120 basis points year-over-year. GBS new business was up 1% compared to last year against the strong compare. The two year compound annual growth rate for new business was 18%. GBS quarter bearing headcount increased 19% year-over-year. Headcount we hire in 2022 will help to position us for sustained double digit growth in the future. As with GTS our regular full set of GBS metrics can be found in the appendix of our earnings supplement. Conferences revenue for the third quarter was $77 million ahead of our expectations as attendees and exhibitors were excited to get back to the in person experience. Contribution margin in the quarter was 52%. We held 10 in person conferences and three virtual conferences in the quarter. We held meetings in both virtual and in person formats. We plan to run nine in person destination conferences in the fourth quarter and have updated our guidance to reflect the strong demand we are seeing. Third quarter consulting revenues increased by 13% year-over-year to $107 million. On an FX neutral basis revenues were up 21%. Consulting contribution margin was 35% in the third quarter up 210 basis points versus the prior year with better than expected revenue and higher utilization rates. Labor base revenues were $90 million up 16% versus Q3 of last year and up 26% on an FX neutral basis. Backlog at September 30 was $162 million increasing 33% year-over-year on an FX basis with another strong bookings quarter. The inclusion of multiyear contracts in our backlog calculation, a change we described earlier in the year contributed about 11 percentage points to the year-over-year growth rate. Our contract optimization business declined three percentage reported and 1% on an FX neutral basis versus the prior year. As we have detailed in the past, this part of the consulting segment is highly variable. Consolidated cost of services increased 16% year-over-year in the third quarter as reported and 21% on an FX neutral basis. The biggest drivers of the increase were higher headcount to support our continued strong growth and the return to in person destination conferences. SG&A increased 20% year-over-year in the third quarter as reported, and 24% on an FX neutral basis. SG&A increased in the quarter as a result of added headcount for sales and G&A functions and higher commissions following a strong CV growth in 2021. We expect SG&A expenses to increase as a percentage of revenue over the near term as our catch up hiring continues. EBITDA for the third quarter was $332 million, up 9% year-over-year on a reported basis and up 15% FX neutral. Third quarter EBITDA upside for guidance reflected revenue exceeding our forecasts and expenses at the low end of our expectations. Depreciation in the third quarter of $23 million was down modestly versus 2021. Net interest expense excluding deferred financing costs in the quarter was $29 million, done a little over $1 million versus the third quarter of 2021 mainly due to lower interest rate swaps costs. The modest floating rate debt we have is fully hedged through maturity. The Q3 adjusted tax rate which we use for the calculation of adjusted net income was 24.7% for the quarter. The tax rate for the items used to adjust that income was 20.2% for the quarter. Adjusted EPS in Q3 was $2.41 growth of 19% year-over-year. The average share count for the third quarter was 80 million shares. This is a reduction of about 4.7 million shares or about 5.6% year-over-year. We exited the third quarter with about 80 million shares outstanding on an un-weighted basis. Operating cash flow for the quarter was $315 million down 9% compared to last year. CapEx for the quarter was $32 million up about $18 million year-over-year led by increases in capitalized technology labor costs and catch up laptop spend. Free cash flow for the quarter was $283 million. Free cash flow growth continues to be an important part of our business model with modest CapEx needs and upfront client payments. As many of -- we generate free cash flow well in excess of net income. Our conversion from EBITDA is very strong with the differences between cash interest, cash taxes and modest CapEx partially offset by strong working capital cash inflows. Adjusting for the insurance proceeds we received last year free cash flow as a percent of revenue or free cash flow margin was 19% on a rolling four quarter basis. On the same basis free cash flow is 76% of EBITDA and 137% of GAAP net income. At the end of the third quarter we had $529 million of cash. Our September 30 debt balance was $2.5 billion. Our reported gross debt for trailing 12 month EBITDA was under two times. Our expected free cash flow generation, unused revolver and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy of share repurchases and strategic tuck in M&A. Our balance sheet is very strong with $1.5 billion of liquidity, low levels of leverage and effectively fixed interest rates. We repurchased more than $1 billion worth of stock through the end of the third quarter. We had about $600 million remaining on our authorization at the end of September, which we expect the board will continue to refresh as needed going forward. Since the end of 2020 through the end of this September, we’ve reduced our shares outstanding by 10 million shares. This is a reduction of 11%. As we continue to repurchase shares, we expect our capital base will shrink. This is a creative to earnings per share, and combined with growing profits also delivers increasing returns on invested capital over time. We are increasing our full year guidance to reflect strong Q3 performance and an improved outlook for the fourth quarter despite incremental FX headwinds. We now expect an FX impact or full year revenue growth rates of about 420 basis points for the full year. This is up from 370 basis points based on rates when we guided in August. As we discussed the last three quarters 2021 research performance benefited from several factors including QBH tenure mix, NCVI phasing within the quarters and year, record retention rates and strong non-subscription growth. The growth compares will continue to be challenging for a few more quarters. We continue to take a measured approach based on historical trends and patterns, which we’ve reflected in the updated guidance. For conferences we assume we will be able to run all nine in person conferences as planned. Consistent with our commentary the past couple of quarters, our assumptions for consolidated expenses continue to reflect significant headcount increases during the fourth quarter to support current and future growth. We continue to model higher labor costs and T&E teeny well above 2021 levels as we’ve previously indicated. We also have higher commission expense during 2022 due to the exceptional performance we delivered in 2021. Finally, we continue to invest in our tech, both client facing and internal applications as part of our innovation and continuous improvement programs. Our updated guidance for 2022 is as follows. We expect research revenue of at least $4.58 billion, which is FX neutral growth of about 16%. The FX neutral growth is up about 60 basis points from our prior guidance due to strong NCVI performance in the third quarter. We expect conferences revenue of at least $375 million, which is growth of about 84% FX neutral. We expect consulting revenue of at least $450 million, which is growth about 14% FX neutral. The result is an outlet for consolidated revenue of at least $5.40 billion, which is FX neutral growth of almost 19%. The FX neutral growth is up about 180 basis points from our prior guidance due to strong performance in third quarter and improved outlook for Q4. Without the strengthening U.S. dollar since August, our revenue outlook would have been about $85 million higher than previous guidance. We now expect full year EBITDA of at least $1.36 billion, up $125 million from our prior guidance and an increase in our margin outlook as well. Without the strengthening U.S. dollar since August, our EBITDA guidance would have been about $136 million higher than previous guidance. We now expect 2022 adjusted EPS at least $10.06 per share. For 2022 we now expect free cash flow at least 1.0 to $5 billion. Our EPS guidance is based on 81 million shares, which reflects year-to-date repurchases. As a result, we expect to deliver at least $310 million of EBITDA in the fourth quarter of 2022. All the details of our full year guidance are included on our Investor Relations site. Our strong performance in 2022 continued in the third quarter with momentum across the business. Contract value grew 14%. Adjusted EPS increased 19% fueled in part by the significant reduction of shares over the past year. We are adding associates across the business to keep up with our growth and to position us well heading into 2023. Our continued investments in our teams will drive long term sustained double digit growth. We repurchase more than $1 billion in stock this year through September and remain committed to returning excess capital to our shareholders over time. Looking out over the medium term, our financial model and expectations are unchanged. With 12% to 16% research CV growth, we will deliver double digit revenue growth with gross margin expansion sales cost growing in line with CV growth and G&A leverage, we can modestly expand margins. We can grow free cash flow at least as fast as EBITDA because of our modest CapEx needs and the benefits of our clients paying us upfront and we will continue to deploy our capital on share repurchases, which will lower the share count over time and on strategic value enhancing tuck in M&A. With that, I’ll turn the call back over to the operator and we’ll be happy to take your questions. Operator?

Jeff Meuler:

Yes, thank you just maybe if I could better understand the messaging on where you are in terms of catch up hiring. I thought for Jene, you talked about 80% associate growth and having the capacity you need and being caught up on hiring but then it seemed like in Craig’s comments, you’re still calling up some areas where you’re still in the process of doing catch up hiring and you’re maintaining the low 20s underlying margin target despite seemingly run rating above that on a seasonally adjusted basis. So just if I could better understand where you are in that process.

Jeff Meuler:

And then, obviously notable, the big step up in GTS quota bears, I guess, just to what extent, are you seeing signs of unmet demand that you’re fulfilling, and I don’t know if that’s showing up in the new business sold metric with GTS which also has the tough comp, just trying to understand to what extent maybe the 12%, or 12.5% whatever was CV growth in GTS has been governed down because of some sales capacity constraints that you’re addressing versus to what extent this is about getting out ahead of demand and building capacity into what’s still a good demand momentum environment.

Operator:

Our next question comes from the line of Toni Kaplan with Morgan Stanley. Your line is now open.

Craig Safian:

Good morning, Toni. Thanks for the question. So, it’s been great to return to in person conferences. And as we’ve said the past few quarters and Gene referenced some large October conferences as well. We’ve had exhibitors and attendees really enthusiastically returned, which is awesome. And the conferences are hugely valuable to everyone who goes and its super valuable to the entire Gartner franchise. As we look towards 2023 and again, we’ll give guidance in February around the full calendar of ‘23 conferences, etc. We’re not going to be anywhere near the 70 conferences, destination conferences that we delivered in 2019. We are carefully building back up. Our goal over the long term is to have a conference for every major function that we cover in every major geography in which we do business. But we can’t just snap our fingers and be there. It takes time to build those up and to re-launch that. And so we are taking a measured approach to doing that. We’re going to be as aggressive as we can, but we’re going to be nowhere near the 70 conferences that we ran in 2019 pre-pandemic.

Gene Hall:

Hey Toni, it’s Gene. So our new business was at an all time high. So just to be clear, wasn’t like it was not a good compared to business acumen for dollars was at an all time high, it was near an all time high. Secondly, the fact that it’s impacting new business the most that Craig talked about in terms of the proportion of our sales force, it is tenured versus non-tenured. Last year, we had, as Craig mentioned, the highest proportion of tenured salespeople that we have on record. This year, because of promotions and growth hiring, we had among the lowest proportion of tenured salespeople on record. And a tenured salesperson sells whole number multiples higher, more in new business than a non-tenured salesperson. The productivity accelerates rapidly during the salespersons first three years. And that’s the primary factor that impacted our business in Q3.

Andrew Nicholas:

Hi, good morning. I wanted to start just with a question on sales activity levels. As the quarter progressed, and maybe into October, did you notice any and it’s seems like double digit growth across every practice, every industry, every region, every client size, but was there any kind of distinguishing change over the course of the quarter? Or are those conversations and the length of contract cycles relatively consistent with what you’ve seen year-to-date?

Andrew Nicholas:

And then you talked quite a bit about the catch up hiring and the sales force growth. What about on the kind of T&E side. Where do you sit relative to kind of pre-pandemic levels and where you would ultimately expect those expenses to level off? I think last quarter, you talked about the second half of the year being more indicative of normal travel. So just wondering if that’s in the third quarter number, if there’s still some more increases to expect there as well. Thank you.

Operator:

Thank you. Our next question comes from the line of Seth Weber with Wells Fargo. Your line is now open.

Craig Safian:

Good morning Seth it’s Craig. So I agree with your assertion on the pricing. So rolling into this year, we were a little bit more aggressive than we normally have been. So we’ve typically been in the 3% to 4% range this year thinking the five-ish to 6% range, in terms of overall price increase, similar rolling into next year. Price increase actually went effective today for most of our clients and sellers around the world. And we haven’t seen much friction or pushback from clients on that. Obviously, it is a more inflationary environment. Our costs are going up roughly in that range and we’re roughly pricing to offset that. In terms of the multiyear comment I think our sales teams do a fantastic job of articulating the value that we can deliver over the short term, over the medium term and over the long term. And they’ve done a fantastic job of continuing to get our clients to sign up for multiyear contracts. So we haven’t really seen a step back in that from clients either.

Craig Safian:

No, I wouldn’t read anything into it. I’d say on a year-to-day basis, we’re over a billion dollars in share repurchases over the last seven quarters, it’s 2.6-ish billion dollars of share repurchases, it remains our primary use of capital going forward and we’ll bump up or bump down from time to time from quarter to quarter. But over the long over the last seven quarters, we’ve obviously returned a lot of capital to shareholders through our repurchase programs. And moving forward, we expect return a lot of capital for our shareholders or repurchase programs.

George Tong:

You had a big step up in sales headcount in 3Q notably in GTS. Was there any pull forward in hiring from 4Q? Or do you expect to continue to see healthy increases in headcount in 4Q on a quarter-over-quarter basis?

George Tong:

And then with respect to EBITDA margins, your outlook continues to move higher. Can you just at a high level frame for us your evolving views around normalized EBITDA margins and how your investment activity so far this year are on pace to get you back to what normalized spending should be?

Operator:

Thank you. Our next question comes from the line of Jeff Silber with BMO Capital Markets. Your line is now open.

Gene Hall:

So Jeff, good morning. No, not really. I think we lead with multiyear contracts as sort of the de facto standard. That’s generally what our clients want, because they’re missing critical priorities, are not bounded by a 12 month contract or something like that. And so we’ve seen real no change in the selling environment, or the selling motion around the price increase we’ve talked about earlier as well as our contracted vehicles.

Jeff Silber:

And I know in your prepared comments, you talked about the strength in your research business being broad based. I just was wondering, we can parse down a little bit if there’s specific end markets that are doing better, or worse than others, and I’m specifically interested in Europe versus the U.S. Thanks.

Craig Safian:

And we saw, and it was broad, based across Europe and North America from an industry and size perspective. So there’s really nothing to point to in terms of softness. It’s the average growth for GTS and overall for GTS is around 13%, and overall, around 14%. And when you peel back the onion, it’s pretty close to that at lower levels, whether you live regionally industry, by size, etc.

Manav Patnaik:

Thank you. Good morning. Gene and Craig and I guess historically, I think you guys just talk about how to do it up two to three points about sales force growth. And now on the call, I’ve heard you say four, five and six. So in that context, I guess, should we still expect Gartner to keep going that sales force 10% to 15% year-over-year like use methods in the past?

Manav Patnaik:

Got it. And then, in the core you made comments around SG&A being elevated. Was that a fourth quarter specific comment or more longer term? And also, just to clarify you talked about the Q3 and Q4 runway kind of being where you want it to be. But that was specific to T&E I believe we just talked about from an overall margin perspective, how we should think about today numbers below 20, to talk about.

Operator:

Our next question comes from the line of Stephanie Moore with Jefferies. Your line is open.

Gene Hall:

Hey, good morning, Stephanie. We had a little trouble hearing you. I think what you asked was just provide a little bit more color around our hiring trends and where we may be seeing more pronounced wage inflation? Is that was the question was?

Craig Safian:

So I think and Gene will hop in here too, I think we have a great associated brand out in the market, especially for sellers, but broadly as well. Sellers know the Gartner brand. Sellers know that Gartner is a very sales focused organization. And so we’re able to really recruit pretty well are very well, I should say, in the market, and we have no problems meeting our needs, and the supply is there for us to be able to keep hiring. I think the wage inflation is just what we’re seeing when we look at our, our competitors for talent. And we do lots of surveys and we have a lot of market data. And we’re basically just keeping track with the market or keeping pace with the market to make sure that in addition to the great associated value proposition that we have, that we’re actually paying our people at market as well as. Gene you want to add anything?

Stephanie Moore:

Understood, and I guess if we take that further given kind of a step up in hiring, that this certainly this year, does that mean that we should expect potentially a step up and kind of pricing as you look at your contract so the next coming years, understanding that they are multi year just to make up for kind of the investments made this year? Or am I thinking about it incorrectly?

Stephanie Moore:

Understood, and then maybe taking more of a medium term and long term, longer term question here. And I appreciate the color that you gave on the underlying EBITDA margin improving over time just efficiency of an or leverage of the hiring. Could you maybe talk about other investments we might see from just an overall sales force productivity standpoint as we kind of look over the next several years?

Operator:

Thank you. I am showing no further questions at this time. I’d like to hand the call back over to Gene Hall for closing remarks.

Operator:

This concludes today’s conference call. Thank you for participating. You may now disconnect.

Operator:

Welcome to Gartner's Second Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After comments by Gene Hall, Gartner's Chief Executive Officer; and Craig Safian, Gartner's Chief Financial Officer. There will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] This call will include a discussion of second quarter 2022 financial results. And Gartner's updated outlook for 2022 as disclosed in today's earnings release and earnings supplement both posted to our website, investor.gartner.com. On the call unless stated otherwise all references to EBITDA are for adjusted EBITDA, but the adjustments is described in our earnings release and the supplement. All growth rates in Gene's comments are FX-neutral, unless stated otherwise. All references to share counts are for fully diluted weighted average share counts, unless stated otherwise. Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website. Finally, all contract values and associated growth rates we discuss are based on 2022 foreign exchange rates unless stated otherwise. As set forth in more detail in today's earnings release, certain statements made on this call may constitute forward-looking statements. Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the company's 2021 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents. Now, I will turn the call over to Gartner's Chief Executive Officer, Gene Hall.

Craig Safian:

Thank you, Gene, and good morning. Second quarter results were strong with double-digit growth in contract value, revenue and adjusted EPS. With results above our expectations, we are again increasing our 2022 guidance. The improved outlook reflects the better than expected second quarter top line results, strong demand for second half conferences and a successful balance between cost discipline and investing for future growth. Second quarter revenue was $1.4 billion, up 18% year-over-year as reported and 22% FX neutral. In addition, total contribution margin was 69%, down 70 basis points versus the prior year as costs returned towards normal. EBITDA was $389 million, up 10% year-over-year and up 14% FX neutral. Adjusted EPS was $2.85, up 27% and free cash flow in the quarter was $395 million. Adjusting for insurance proceeds received last year, free cash flow was down 2% year-over-year for the quarter and up 5% on a rolling full quarter basis. Research revenue in the second quarter grew 14% year-over-year as reported and 17% on an FX neutral basis, driven by our strong contract value growth. Second quarter research contribution margin was 74% about in line with 2021. Higher than normal contribution margins reflect improved operational effectiveness, increased scale, continued temporary avoidance of travel expenses and continuing to catch up on headcount to support the research business. Contract value or CV was $4.3 billion at the end of the second quarter, up 15% versus the prior year. As we discussed previously, CV reflects our decision to exit the Russian market, which contributed about $13 million in the second quarter 2021 number. This reduced the headline growth by about 40 basis points. Quarterly net contract value increased or NCVI was $97 million. Quarterly NCVI is a helpful way to measure contract value performance in the quarter, even though there is notable seasonality in this metric. The sequential increase in CV of $97 million was driven by the combination of continued strong retention rates and near record new business of close to $250 million. We saw a broad based CV growth across all of our practices. Our technology practice grew 14% and all of our business practices grew at double-digit growth rates with many of them growing more than 20% year-over-year. From an industry perspective, retail, media and manufacturing led our CV growth. Global technology sales contract value was $3.4 billion at the end of the second quarter, up 14% versus the prior year. GTS had quarterly NCVI of $60 million, driven by strong retention and near record levels of new business for a second quarter. While retention for GTS was 107% for the quarter, up about 530 basis points year-over-year and near record levels. GTS new business was down 1% versus last year up, against the very tough compare. The two-year compound annual growth rate was about 16%. GTS quota-bearing headcount was up 9% year-over-year. We are on track to get to double-digit growth by the end of 2022, as we have successfully brought turnover down and/or investments in recruiting are delivering results. We will continue to invest in our sales team to drive long-term sustained double-digit growth while also delivering strong margins. Our regular full set of GTS metrics can be found in the appendix of our earnings supplement. Global business sales contract value was $936 million at the end of the second quarter, up 23% year-over-year, which is above the high end of our medium term outlook of 12% to 16%. GBS CV increased $37 million from the first quarter. While retention for GBS was 115% for the quarter, up about five percentage points year-over-year. GBS new business was up 3% compared to last year, reflecting robust growth across the full portfolio and against the very strong compare. The two-year compound annual growth rate for new business was 35%. GBS quota-bearing headcount increased 17% year-over-year, headcount we hire in 2022 will help to position us for sustained double-digit growth in the future. As with GTS, our regular full set of GBS metrics can be found in the appendix of our earnings supplement. Conferences revenue for the second quarter was $114 million, ahead of our expectations as attendees and exhibitors enthusiastically return to in-person. Contribution margin in the quarter was 65%. We held six in-person conferences and eight virtual conferences in the quarter. We held event meetings in both virtual and in-person formats. We planned to run 19 in-person conferences for the balance of the year. Second quarter consulting revenues increased by 14% year-over-year to $121 million, on an FX neutral basis revenues were up 20%. Consulting contribution margin was 42% in the second quarter up 120 basis points versus the prior year with better than expected revenue, higher utilization rates and a mixed benefit from strong growth in contract optimization. Labor-based revenues were $95 million up 11% versus Q2 of last year and up 18% on an FX neutral basis. Backlog at June 30th was $152 million, increasing 45% year-over-year on an FX neutral basis with another strong bookings quarter. The inclusion of multi-year contracts, a change we described last quarter contributed about 12 percentage points the year-over-year growth rate. Our contract optimization business was up 28% as reported and 31% on an FX neutral basis versus the prior year. As we have detailed in the past, this part of the consulting segment is highly valuable. Consolidated cost of services increased 21% year-over-year in the second quarter as reported and 25% on an FX neutral basis. The biggest driver of the increase was higher headcount to support our continued strong growth and the return to in-person destination conferences SG&A increased 24% year-over-year in the second quarter as reported and 27% on an FX neutral basis. SG&A increased in the quarter as a result of increased hiring in sales and G&A functions, higher commission expense, following strong CV growth in 2021 and a $12 million one-time real estate charge. We expect SG&A expenses to increase as a percentage of revenue over the near term as our catch up hiring continues. EBITDA for the second quarter was $389 million up 10% year-over-year on a reported basis and up 14% FX neutral. Second quarter EBITDA upside to our guidance reflected revenue exceeding our forecast and expenses at the low -end of our expectations. Depreciation in the quarter of $23 million was down modestly versus 2021. Net interest expense excluding deferred financing costs in the quarter was $29 million up $2 million versus the second quarter of 2021 due to an increase in total debt balances. The Q2 adjusted tax rate which we used for the calculation of adjusted net income was 25.7% for the quarter. The tax rate for the items used to adjust net income was 25% for the quarter. Adjusted EPS in Q2 was $2.85, growth of 27% year-over-year. The average share count for the second quarter was 81 million shares. This is a reduction of about $5.6 million shares or about 6.5% year-over-year. We exited the second quarter with about 80 million shares outstanding on an unweighted basis. Operating cash flow for the quarter was $416 million. Adjusting for the insurance proceeds we received in the second quarter of 2021, operating cash flow was down 2% compared to last year. CapEx for the quarter was $21 million up 76% year-over-year as a result of an increase in capitalized software, laptops and other infrastructure. Free cash flow for the quarter was $395 million. Free cash flow growth continues to be an important part of our business model with modest CapEx needs and upfront client payments. As many of you know, we generate free cash flow well in excess of net income, our conversion from EBITDA is very strong with the differences being cash interest, cash taxes and modest CapEx, partially offset by strong working capital cash inflows. Adjusting for the insurance proceeds we received last year, free cash flow as a percent of revenue or free cash flow margin was 21% on a rolling four quarter basis. On the same basis, free cash flow was 81% of EBITDA and 146% of GAAP net income. At the end of the second quarter, we had $360 million of cash. Our June 30th debt balance was $2.5 billion. Our reported gross debt to trailing 12 month EBITDA was under two times. Our expected free cash flow generation, unused revolver and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy of share repurchases and strategic tuck-in M&A. We repurchased around 930 million of stock through the first half of this year. We had about 700 million remaining on our authorization at the end of June. We expect the board to continue to refresh the repurchase authorization as needed going forward. Since the end of 2020 through the end of this June, we have reduced our shares outstanding by 9 million shares. This is a reduction of 11%. As we continue to repurchase shares, we expect our capital base will shrink. This is accretive to earnings per share and combining with growing profits also delivers increasing returns on invested capital over time. Our medium-term outlook is for double digit revenue growth, while margins have been very strong the past two years we are continuing to catch up hiring and to resume travel spending. We estimate our underlying margins to be in the low twenties, well above pre-pandemic levels, and we expect them to increase modestly over time. We will give 2023 specific guidance in February consistent with our usual practice. Strong top line growth, modest margin expansion, low capital intensity, and working capital as a source of cash will allow us to deliver strong free cash flow now and in the future. We are increasing our full year guidance to reflect strong Q2 performance and an improved outlook for the second half despite incremental FX headwinds. We now expect an FX impact to our revenue growth rates of above 370 basis points for the full year. This is up from 260 basis points based on rates when we guided in May. As we discussed the last two quarters, 2021 research performance benefited from several factors, including QBH tenure mix, NCVI phasing within the quarters and the year, record retention rates and strong non-subscription growth. We continue to assume that those benefits do not persist at the same levels through 2022. The growth compares will continue to be challenging as we move through the year. We continue to take a measured approach based on historical trends and patterns, which we've reflected in the updated guidance. For conferences, we assume we will be able to run all the in-person conferences as planned. Consistent with our commentary the past couple of quarters, our assumptions for consolidated expenses continue to reflect significant headcount increases during the year to support current and future growth. We have modeled higher labor costs, T&E well above 2021 levels as we've previously indicated. We also have higher commission expense during 2022 due to the very good selling performance we delivered in 2021. Finally, we continue to invest in our tech, both client facing and internal applications as part of our innovation and continuous improvement programs. Our updated guidance for 2022 is as follows. We expect research revenue of at least $4.575 billion, which is FX neutral growth of about 15%. The FX neutral growth is up about 120 basis points from our prior guidance due to strong NCVI performance in the second quarter. We expect conferences revenue of at least $335 million, which is growth of about 63% FX neutral. We expect consulting revenue of at least $440 million, which is growth of about 11% FX neutral. The result is an outlook for consolidated revenue of at least $5.35 billion, which is FX neutral growth of almost 17%. The FX neutral growth is up about 290 basis points from our prior guidance due to strong performance in the second quarter. Without the strengthening U.S. dollars since May, our revenue guidance would've been about $138 million than previous guidance. We now expect full year EBITDA of at least $1.235 billion up $100 million from our prior guidance and an increase in our margin outlook as well. Without the strengthening U.S. dollar since May, our EBITDA guidance would've been about $120 million higher than previous guidance. We now expect 2022 adjusted EPS of at least $8.85. For 2022 we now expect free cash flow of at least $985 million. Our guidance is based on 81 million shares outstanding, which reflects year-to-date repurchases. All the details of our full year guidance are included on our investor relations site. Finally, for the third quarter of 2022, we expect to deliver at least $255 million of EBITDA. Our strong performance in 2022 continued in the second quarter with momentum across the business. Contract value growth was very strong at 15%. Adjusted EPS grew 27% fueled by the significant reduction in shares over the past year. We repurchased around $930 million in stock this year through June and remain committed to returning excess capital to our shareholders. Looking out over the medium-term, our financial model and expectations are unchanged. With 12% to 16% research CV growth, we will deliver double digit revenue growth. With gross margin expansion, sales cost growing in line with CV growth and G&A leverage we can modestly expand margins. We can grow free cash flow at least as fast as EBITDA because of our modest CapEx needs and the benefits of our clients paying us up front. And we'll continue to deploy our capital on share repurchases, which will lower the share count over time and on strategic value enhancing tuck in M&A. With that I'll turn the call back over to the operator and we'll be happy to take your questions. Operator?

Jeff Meuler:

Yeah, thanks. Just first a clarifying question on the underlying margin. So when you say low twenties, could that include like 21% or 22%, you're not saying like low 20.X% and if we will have a recession at some point, would you expect to be able to at least maintain those underlying margins through a recession again as well?

Jeff Meuler:

Yeah. I was just going to say, including maintain at least that margin in a recession.

Jeff Meuler:

Got it. And then I think you're being anticipatory on the commentary around the new business, giving us the two year CAGRs and such, but just any comments on what you're seeing in real time from a macro perspective, whether it's pipeline build and conversion in June and July or the topics of client content demand, just any other business kind of metrics just given the “near-record” when we – I guess, used to fresh records from the growth company that Gartner is?

Craig Safian:

And Jeff, I would just echo having read briefly your report earlier this morning the compares are super tough in Q2 and they remain pretty tough throughout the balance of the year. We're still growing CV at a great growth rate. You heard some of the other metrics around their underlying businesses in conferences and consulting as well and so very tough compares for the balance of this year, but still feel good about the momentum of the business.

Operator:

Thank you. Our next question comes from Heather Balsky with Bank of America. Your line is now open.

Gene Hall:

Hi, Heather, it’s Gene. So we're very cognizant, always of the environment around us, and we try to make sure that we're as a business prepared for where the world is going and clearly being concerned about a macroeconomic downturn, one of those things. And first thing is, at any given point in time, we have clients that are growing clients that are shrinking and clients in between. So we always have clients that are struggling. What we see in a macroeconomic downturn is just more of those clients, but we do it all the time. Now, as I mentioned earlier, we've constantly adjust to try and make sure we are prepared for whatever economic environment comes. And we do this in a number of ways. One of them is we actually do surveys for our clients to understand kind of where their mindset is, what they're concerned about. In fact, in July, we did a survey of more than 150 Chief Financial Officers of our clients to see what was on their mind and therefore how she respond. And they have three priorities. One was securing talent, they're still seeing that it's hard to hire talent, and they're concerned about the wages for those talent. The second one is they want to keep accelerating digital, even in downturn. In fact, we asked these CFOs, what are they going to do in the downturn? 69% said, they're going to continue to increase spending on technology to downturn, 28% said they're going to maintain it and 3% said, they're going to decrease it. So this continued investment technology to prove the economics of business continues on. And the third priority was to manage spending on things like operations, real estate, travel, to pay to hire people and pay higher wages as well as to do these investments in digital. So what we're doing is we're taking our research content and line it with those kinds of priorities, help the clients, making sure they secure talent and manage with inflation, making sure they can continue to accelerate the digital impact on their business. And thirdly, most important maybe helping them to manage spend that's a big part of our business all the time. And we recently updated our, what we call cost optimization work to make sure we can help them with it. So we've updated our research based on, and I gave you the CFO survey. We do surveys all three level executives understand what their individual priorities are. We then update our research, make sure it's on those most construing topics. And then in fact, in July we introduced trainings all our sales people and our service people in terms of what are the most important issues today with clients like the things I just mentioned and how has our research changed so that we can match those fees. And then, we'll continue to do that going forward. And so this wasn't kind of a one-time thing we do once, we do this on an ongoing basis. So part of our strategy is to make sure our content is always on the topics people find important. Now, clearly one of those things is going to be how to manage costs and we will help them with that. But then making sure that all of our sales and service people are equipped to have conversations with senior executives on how we can help them with those priorities. And if this agility is the core part of our business, we also do structural things in our business. Like, if you – the share of both of your contracts we have is quite high and we first strategy to grow that over time. And so it is those two things making sure our content is great, our sales group preferred and making sure the underlying structural factors we can control are also there. That is, if you look over time, we perform better and better at each downturn. And we're certainly aware it might be a downturn and are preparing for it.

Gene Hall:

So I'd say we haven't seen longer contracting cycles. I would say we see escalations it's more likely that a contract would be reviewed by a CFO than it was a year ago. Because we train our sales people, should that that's likely to happen and to be prepared for it. And to both prepare our meeting client who might be like the Chief HR Executive and Chief Information Officer that they might have to go to their CFO and review it and make sure they have what we call a CFO ready packet.

Operator:

Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is now open.

Gene Hall:

Yeah. Hey George. I think it reflects the investments that we've made more than anything else. So you go back in fact, go back five years ago, we began investing pretty heavily in areas outside of IT. So I think marketing, supply chain, finance, HR, legal, sales those were areas that hadn't traditionally been strong for us. We were in a couple of them, we hadn’t been strong. We after investments significantly both buying [indiscernible] and then after bought CEB with investments and what we're seeing in the accelerated growth rate in GBS now is the outcome of those investments. We kind of invested up front there's a lot of discussion about it at the time. And we increased sales capacity, increased research capacity, service capacity, developed a lot of content, and we're seeing the benefits of those. And so I think that's the first piece. The second piece is one of the major factors to grow our business. Clearly with this huge market opportunity is growing our sales head count. And while we increase sales productivity, we've had some good increase in productivity. Growing sales headcount is essential. And so the fact that we've grown our GBS head sales headcount faster over time, not with this quarter, but if you look at like over the last since 2019, we've grown our GBS sales headcount at compound growth rate of about 60% a year, I'm sorry about 5% a year. And that is which is faster than GTS, which is about flat. And so that's allowed the growth to be a lot higher in GBS. So those two things, the combination of the investments and the growth in Salesforce is what's really powered the faster CV growth.

George Tong:

Got it. That's helpful. Last quarter you increased your normalized EBITDA margin targets from 19% and 20% to 20%. And now you're saying underlying margins will be in the low-twenties. So just going back to clarify, are you increasing your underlying margin target over the medium term or are you reiterating it from the prior quarter?

George Tong:

Got it. That's helpful. Thank you.

Greg Parrish:

Hey, this is Greg Parrish for Toni. Thanks for taking our question and congrats on the strong quarter. Just wanted talk about margin. You ramped up hiring in the quarter a lot margins went up and understand a lot of those probably weren't in the expense space yeah, but just really Craig, if you could kind of help us bridge on how you get to the margin in the back half given the sort of implied step down.

Greg Parrish:

Great. Thanks for the color there. And I guess just a quick follow-up on pricing, I think last quarter, Craig, you talked about getting more this year, given the inflationary environment, I guess, the broad macro is a little bit different than it was three months ago. Are you still expecting sort of above normal pricing this year?

Greg Parrish:

Okay. Thank you.

Andrew Nicholas:

Hi, good morning. Wanted to ask a question first on the headcount growth, really solid quarter recorder increase there, I think in your prepared remarks, you touched on it briefly, but I was hoping you could spend a bit more time on attrition trends, how that's kind of coming in relative to your expectations and the successful recruiting efforts. Just a little bit more color there, because it does sound like you're still pretty happy with where that's trending and your goals for the full year?

Andrew Nicholas:

Great. Thank you. And then for my follow up, I wanted to ask about strength in the U.S. versus internationally. Obviously, seems like there's pretty broad based growth across the practices and across the industries, but is there any difference in CV growth or how you're kind of able to sell in EMEA for example, given the geopolitical uncertainty or anything to call out there in the court?

Craig Safian:

Yes, and Andrew, when we say broad based growth, it is broad based. So we look at it across our top 10 geographies, they're all growing at nice growth rates. When we look across industry cuts, they're all growing at nice growth rates. And so, yes, there are always pockets where there may be a little bit of a challenge for us, but generally those are either like super micro challenges or our own operational challenges. But the growth has remained pretty broad based. The biggest indicator where we've been growing and not growing is where a headcount, our sales headcount has grown faster or slower.

Operator:

Thank you. Our next question comes from Seth Weber with Wells Fargo. Your line is now open.

Craig Safian:

Yes, Seth. Good morning. It's a good question. So I think the second half of the year will be more indicative of “normal travel”, starting off the year, this year, given where we were with the pandemic, it was a little light in the first three or four months of the year and has started to pick back up. And so, yes, second half is probably more indicative. I think the way we're thinking about it is as compared to the last “normal year” back in 2019 where we expect to spend probably at least 50% less than we did in 2019. And again, we just think that the company and our associate base has embraced and thrived, operating virtually. We still do need to travel, but we don't need to travel at the same volume that we did back in 2019.

Craig Safian:

Yes, Seth, I think it just reflects that our clients had challenges that our clients had challenges that they need help with and then our content and the way we deliver the content was through consulting conferences or research is really helpful in helping them solve the problems. And so I think it's indicative, but we have a great value proposition, just kind of what's going on.

Craig Safian:

Yes Seth. It is we had a really strong year on that line last year. So tough compares there, which again, we did model into our initial guidance and our updated guides as well, but to Gene's point, the products and offerings we have there offer a very strong and compelling value proposition in good times or rougher times. And so we still expect it to be a nice strong grower for us, but again, super tough compare against the 2021 performance.

Operator:

Thank you. Our next question comes from Jeff Silber with BMO Capital Markets. Your line is now open.

Gene Hall:

Great question, Ryan, what I read in the press and what I see with a lot of other companies is a lot of challenges. I go to the CFO survey. One of the biggest concerns that CFOs have is their ability to hire talent. We've actually found that we've had no trouble hiring talent. Again, our employee value proposition is very strong. We have a great brand with associates and so we've had no trouble hiring people at all. And that's reflected in the hiring results that you saw.

Gene Hall:

No, I don't think so. I mean, it's a relatively small line and it can be a little volatile. Again, I think as we look across, I would look broadly across the business for leading indicators, not one of the smallest revenue lines that we actually have out there. So now I would guide you to look at consulting, look at conferences and look at our research CV growth as leading indicators.

Operator:

Thank you. Our next question comes from Manav Patnaik with Barclays. Your line is now open.

Gene Hall:

Hey Brendan, it's a great question. I mean our business grew really rapidly last year and more rapidly we've expected and so we had a lot of hiring to catch up on, including in GTS. And so we want to get that catch up hiring so that we can properly service our clients and also be prepared to sell more clients. And over time we expect to grow our GTS sales force and GBS’ by the way, take three to five percentage points slower than our CV growth. So CV growth is 15%, you'd expect to see over time our target would be headcount growth of 12% – 10% to 12% growth.

Unidentified Analyst:

Okay. And just another question here, but moving over to the conferences, is the guidance increase really, is it just like better attendance than you expected? Are the conferences all full? Is that kind – is that what it is or is there something else driving that higher?

Craig Safian:

Yes. So I think, Brendan, obviously the second quarter, where our first in-person destination conferences in a few years and so we were pretty cautious about our expectations around the number of exhibitors and number of attendees that would want to come, would be able to come. And as you heard in our comments, I think both groups enthusiastically returned in the second quarter. And as Gene mentioned, earlier our bookings leading through our Q3 events and even the advanced bookings on Q4 conferences, look very strong as well. And so the update, the outlook is really just around some caution upfront because we hadn't delivered anything in person in essentially three – almost three years. And we saw an enthusiastic return from both revenue streams, attendees and our exhibitors.

Operator:

Thank you. [Operator Instructions] Our next question comes from Hamzah Mazari with Jefferies. Your line is open.

Gene Hall:

Hey Stephanie, great question. So tenure is an important determinant of productivity. When we hire new salesperson, it takes some time to fully get up to speed. And so a more tenure sales person is more productive. We're very focused on both hiring people to get up to speed quickly, as well as having internal training and other systems that help those new sales people get up to speed even faster. If you look at it, because we hired fewer people during the pandemic, the average tenure sales force last year was pretty high. The highest it's been in recent memory, as we ramped up our hiring, in Q2, it was more towards a normal tenure level as we keep hiring, we expect that to drop a bit for the rest of the year again during 2023.

Craig Safian:

Hey Stephanie, good morning. From an M&A perspective, obviously, we've got a team that is actively out there looking at opportunities and staying in touch with a few hundred companies and actually tracking well more than that. I think our strategy as we've articulated is number one, we're an organic growth company and we believe we can achieve our medium term objectives of the double-digit growth and modest margin expansion organically. And so it does not require M&A to get there. That said, we do like to do M&A, when it can fill a gap or catalyze us or add an asset or capability or things like that. So I think as we look at the radar screen, we are looking at things that can catalyze us or fill in gaps or add assets to our portfolio that can help us over the long-term. I think there obviously over the last two or three quarters just like the equity markets has been a recalibration around valuations. I'm not sure every seller has completely recalibrated yet either. But again, we'll continue to be on the lookout for strong strategic value enhancing tuck-in opportunities that again can either catalyze growth, fill in a gap or add important assets for us.

Operator:

Thank you. And I'm currently showing no further questions at this time. I'd like to turn the call back over to Gene Hall for closing remarks.

Operator:

This concludes today's conference call. Thank you for participating. You may now disconnect.

Disclaimer*:

This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.:

David Cohen:

00:41 Good morning, everyone. We appreciate you joining us today for Gartner's first quarter 2022 earnings call and hope you are well. With me on the call today are Gene Hall, Chief Executive Officer; and Craig Safian, Chief Financial Officer. This call will include a discussion of first quarter 2022 financial results and Gartner's updated outlook for 2022 as disclosed in today's earnings release and earnings supplement, both posted to our website, investor.gartner.com. 01:07 Following comments by Gene and Craig, we will open up the call for your questions. We ask that you limit your questions to one and a follow-up. On the call, unless stated otherwise, all references to EBITDA are for adjusted EBITDA, but the adjustments is described in our earnings release and the supplement. All growth rates in Gene's comments are FX-neutral, unless stated otherwise. 01:27 Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website. Finally, all contract values and associated growth rates we discuss are based on 2021 foreign exchange rates unless stated otherwise. 01:41 As set forth in more detail in today's earnings release, certain statements made on this call may constitute forward-looking statements. Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the company's 2021 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents. 02:04 Now, I will turn the call over to Gartner's Chief Executive Officer, Gene Hall.

Craig Safian:

07:36 Thank you, Gene, and good morning. First quarter results were strong with acceleration in contract value growth and strength in revenue, EBITDA, and free cash flow. EPS was particularly strong as the benefit of share buybacks reduced our share count. With results above our expectations, we are increasing our 2022 guidance. The improved outlook reflects the better than expected first quarter top line results and increased revenue from conferences we now expect to hold in-person. 08:03 First quarter revenue was $1.3 billion, up 14% year-over-year as reported and 16% FX neutral. In addition, total contribution margin was 70%, up 44 basis points versus the prior year. EBITDA was $329 million, up 3% year-over-year and up 5% FX neutral. Adjusted EPS was $2.33, up 17% and free cash flow in the quarter was $150 million, up 4% year-over-year. 08:31 Adjusting for insurance proceeds received last year, free cash flow was up 17% on a rolling four quarter basis. Research revenue in the first quarter grew 16% year-over-year as reported and 18% on an FX neutral basis. Retention was very strong again and new business continued to increase. 08:49 First quarter research contribution margin was 75%, up 81 basis points versus 2021. Higher than normal contribution margins reflect improved operational effectiveness, increased scale and continued temporary avoidance of travel expenses. We've been increasing our headcount, which we expect continue as we move through the year. 09:09 Contract Value or CV was $4.2 billion at the end of the first quarter, up 16% versus the prior year. This includes our decision to exit the Russian market, which reduced CV by about $14 million. Quarterly net Contract Value Increase or NCVI was $80 million net of the impact of Russia CV just noted. 09:32 Quarterly NCVI is a helpful way to measure Contract Value performance in the quarter, even though there is notable seasonality in this metric. We saw broad-based CV growth across all of our practices. Our technology practice grew 14% and all of our other business practices grew at double-digit growth rates with the majority of them growing more than 20% year-over-year. 09:54 From an industry perspective, retail, manufacturing, and services led our CV growth. Global Technology Sales Contract Value was $3.3 billion at end of the first quarter, up 14% versus the prior year. GTS had quarterly NCVI of $46 million in the quarter. Again, net of the impact of exiting Russia, while retention for GTS was 107% for the quarter, up about 900 basis points year-over-year. 10:20 GTS new business was up 6% versus last year when very strong new business benefited from a post-pandemic [bounce] [ph], including modestly higher than normal win backs. GTS quota-bearing headcount was up slightly year-over-year. In the first quarter, we promoted a higher than normal level of frontline sellers to sales manager roles. This reflected our strong CV performance and sets us up for future growth. This March was our best hiring month since the start of the pandemic. 10:46 Our net hiring is in-line with our plan, turnover is improving, and we remain on track to achieve double-digit QBH growth this year. Our regular full set of GTS metrics can be found in the appendix of our earnings supplement. 10:59 Global Business Sales Contract Value was $899 million at the end of the first quarter, up 24% year-over-year, which is above the high-end of our medium-term outlook of 12% to 16%. GBS CV increased $34 million from the fourth quarter, while retention for GBS was 115% for the quarter, up about 11 percentage points year-over-year. GBS new business was up 18%, compared to last year, reflecting robust growth across the full portfolio and against a strong compare. 11:30 GBS quota-bearing headcount increased sequentially and is up 15% year-over-year. We remain on track to grow GBS headcount at double digit rates in 2022. As with GTS, our regular full set of GBS metrics can be found in the appendix of our earnings supplement. 11:47 Conferences revenue for the first quarter was $10 million in-line with our expectations. The first quarter is always a seasonally small quarter and we pushed several conferences to later in the year to increase the likelihood of running them in-person. Contribution margin in the quarter was negative 28% given the seasonality in revenue and normal quarterly costs. We held five virtual conferences in the quarter. 12:09 We held Avanta meetings in both virtual and in-person formats. As we look to the rest of the year, we plan to run 24 in person conferences. We will continue to run a mix of in-person and virtual conferences as a part of our go-forward strategy for the business. I will detail our updated annual outlook for conferences shortly. 12:28 First quarter consulting revenues increased by 17% year-over-year to $116 million. On an FX neutral basis, revenues were up 20%. Consulting contribution margin was 44% in the first quarter, up almost 5 percentage points versus the prior year with better than expected revenue and a mixed benefit from strong growth in contract optimization. 12:49 Labor based revenues were $96 million, up 14% versus Q1 of last year and up 18% on an FX neutral basis. Backlog at March 31 was $147 million, increasing 30% year-over-year on an FX neutral basis with another strong bookings quarter. 13:06 We revised our backlog methodology to include the expected revenue from the out years of multi-year agreements. This change contributed about 7 percentage points to the backlog growth rate in the quarter. 13:17 Our contract optimization business was up 29% as reported and 30% on an FX neutral basis versus the prior year. As we've detailed in the past, this part of the consulting segment is highly [valuable] [ph]. 13:29 Consolidated cost of services increased 13% year-over-year in the first quarter as reported and 14% on an FX neutral basis. The biggest driver of the increase was higher headcount to support our continued strong growth. SG&A increased 27% year-over-year in the first quarter as reported and 29% on an FX neutral basis. SG&A increased in the quarter as a result of a $24 million non-recurring real estate charge, higher commission expense, following strong CV growth in 2021, and increased hiring in sales and G&A functions. 14:01 SG&A without the facilities related charge would have increased 22% year-over-year and would have been 47% of revenue in the quarter. We expect SG&A expenses to increase over time as our hiring continues. EBITDA for the first quarter was $329 million, up 3% year-over-year on a reported basis and up 5% FX neutral. 14:22 First quarter EBITDA upside to our guidance primarily reflected revenue exceeding our forecasts. Depreciation in the quarter of $23 million was down modestly versus 2021. Net interest expense, excluding deferred financing costs in the quarter was $30 million, up $5 million versus the first quarter of 2021, due to an increase in total debt balances. The Q1 adjusted tax rate, which we used for the calculation of adjusted net income was 20.3% for the quarter. The tax rate for the items used to adjust net income was 24% for the quarter. 14:55 Adjusted EPS in Q1 was $2.33, growth of 17% year-over-year. The weighted average fully diluted share count for the first quarter was 83 million. This is a reduction of more than 6 million shares or about 7% year-over-year. We exited the first quarter with about 82 million fully diluted shares. 15:15 Operating cash flow for the quarter was $168 million, up 7% compared to last year. CapEx for the quarter was $17 million, up 38% year-over-year as a result of an increase in capitalized software. Free cash flow for the quarter was $150 million. Free cash flow growth continues to be an important part of our business model with modest CapEx needs and upfront client payments. 15:39 As many of you know, we generate free cash flow well in excess of net income. Our conversion from EBITDA is very strong with the differences being cash interest, cash taxes, and modest CapEx, partially offset by strong working capital cash inflows. Adjusting for the insurance proceeds we received last year, free cash flow is a percent of revenue or free cash flow margin was 22% on a rolling four quarter basis. 16:04 On the same basis, free cash flow was 84% of EBITDA and 159% of GAAP net income. At the end of the first quarter, we had $456 million of cash. Our March 31 debt balance was $2.5 billion. Our reported gross debt to trailing 12-month EBITDA was under 2x. 16:23 Our expected free cash flow generation, unused revolver, and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy of share repurchases and strategic tuck-in M&A. We repurchased around $450 million of stock during the first quarter and about $630 million through the end of April. 16:43 Last week, the Board increased the repurchase authorization by $500 million bringing us to a total of about $1 billion available for open market buybacks. We expect the Board to continue to refresh the repurchase authorization as needed going forward. Since the end of 2020 through the end of this April, we’ve reduced our shares outstanding by 8 million shares. This is a reduction of 9% from the end of 2020. 17:07 As we continue to repurchase shares, we expect our capital base will shrink. This is accretive to earnings per share and combined with growing profits also delivers increasing returns on invested capital over time. We are increasing our full-year guidance to reflect strong Q1 performance and the return of in-person conferences. 17:24 We also updated guidance to reflect a stronger U.S. dollar. We now expect an FX impact to our revenue growth rates of about 260 basis points for the full-year. This is up from 150 basis points based on rates when we guided in February. As we detailed last quarter, 2021 research performance benefited from several factors, including QBH tenure mix, NCVI phasing within the quarters and the year, record retention rates and strong non-subscription growth. We continue to assume that those benefits do not persist at the same levels through 2022. 17:58 The growth compares also get harder as we move through the year. We were taking a balanced approach based on historical trends and patterns, which we've reflected in the updated guidance. We are updating our guidance for the incremental revenue from 24 planned in-person conferences with significantly more visibility into the second quarter. We will continue to update our outlook as we have more visibility. 18:20 For our local one day Avanta events, we expect to run most of them in-person while continuing to run some virtually. We expect about one-third of our full-year conferences revenue in the second quarter this year. 18:32 Consistent with our commentary last quarter, our base level assumptions for consolidated expenses continue to reflect significant headcount increases during the year to support current and future growth. 18:43 We have modeled higher labor costs and [T&E] [ph] well above 2021 levels as we’ve previously indicated. We will also have higher commissions during 2022 due to the very good selling performance we delivered in 2021. Finally, we continue to invest in our tech, both client facing and internal applications as part of our innovation and continuous improvement programs. 19:04 Our updated guidance for 2022 is as follows

Jeff Meuler:

22:03 Yes. Thank you, and great quarter. So, you already gave me 15 talking points on this, but I'm going to ask about it anyway. Just a quota-bearing sales headcount being flat, so, just so I understand reconciling what you gave us to that metric, so the turnover is seasonally higher in Q1, but turnover for quota-bearing headcount is actually getting better year-over-year and then Q1 is also seasonally high for promotions and given the planned growth, there's more promotions this year than there were last year, but hiring is performing to plan and is actually the best since before the pandemic, are those the right reconciliation points to explain while QBH is still flat sequentially?

Jeff Meuler:

23:52 Okay. I don't know if you can hear me…

Jeff Meuler:

24:14 I don't know if it's just me. I'm also having trouble hearing you.

Jeff Meuler:

24:24 Yes.

Jeff Meuler:

25:37 Got it. Very helpful. And then on conferences, so I can under understand kind of the business performance and the assumptions, for the Q2 conferences that you have better line of sight to, I heard that at least some of them look like record attendance or sold out attendance. Are those conferences, are you monetizing them above the pre-pandemic level at this point and the full-year guidance being below the pre-pandemic level is about the risk-adjusting the conferences assumptions for later in the year, plus fewer conferences, just wondering conference monetization of those that are happening with good line of sight relative to pre-pandemic?

Jeff Meuler:

27:47 Got it. Thank you.

Toni Kaplan:

27:56 Thanks so much. I wanted to ask about pricing, are you able to increase prices more this year compared to prior years just given the inflationary environment and have customers been generally understanding about it, if that’s the case?

Toni Kaplan:

29:24 Great. I wanted to also ask about the EBITDA margin guidance you raised the margin to 21.5% for the year from 20%. And I think the results in the quarter and the FX impact based on my estimates that drove sort of about [half the raise] [ph], but maybe you could have had different forecast than I did, but anything outside of the first quarter be in the FX that really drove, sort of the higher margin for the year, that’d be helpful? Thanks.

Toni Kaplan:

31:12 Terrific. Thanks again. Congrats on the quarter.

George Tong:

31:21 Hi, thanks. Good morning. GTS and GBS productivity both increased pretty significantly in the quarter, can you elaborate on the factors driving improvement and productivity and how much further improvement you see in both of the segments?

George Tong:

32:31 Got it. That's helpful. And then you're guiding to double digit growth in headcount this year, can you elaborate on how much headcount growth you're expecting in GTS, compared to GBS over the remainder of this year?

George Tong:

32:58 Very helpful. Thank you.

Trevor Romeo:

33:08 Hi, good morning. This is actually Trevor Romeo in for Andrew. Thanks so much for taking the questions. First, I was kind of just wondering if you could call out any drivers of the consulting strength with 20% FX neutral growth and what look like record backlog, any new kind of service offerings or changes that clients have been particularly receptive to there?

Trevor Romeo:

33:55 Okay, great.

Trevor Romeo:

34:17 Yes. Understood. Thank you. And then just kind of a follow-up on the margin outlook, looks like now 2022, the guide implies about 21%, 22% margins, has you're thinking around kind of the normalized margin run rate for the business going forward kind of also increased? Is this kind of a good baseline to build on?

Trevor Romeo:

35:17 Okay great. Thank very much very. Very helpful.

Unidentified Analyst:

35:28 Hi. Good morning. This is [Ryan] [ph] on for Jeff. Just had a follow-up question on the conferences. Given the move to in-person conferences this year, how does that affect the financial model from both a margin percentage in margin dollar basis?

Unidentified Analyst:

37:16 Got it. Thank you. And then just a modeling question. When should we think about normalized T&E expense base returning this year?

Operator:

38:30 Thank you. [Operator Instructions] Our next question comes from Heather Balsky with Bank of America. Your line is open.

Craig Safian :

39:19 Hey, good morning, Heather. I think it's a few things. So, one, given the really strong growth that we delivered last year, we are still to an extent catching up on all the people we need on staff to really deliver to our clients and drive future growth. And so, while we're hiring at a furious cases, as Gene highlighted and we are on our operational plan, we are still playing catch up in some areas. And so that would be a little bit of, some of the bridge between the 21.5 and the normalized level of 20. 40:09 We just talked about one of the other levers, which is travel, which again has not fully come back yet. We actually were under a plan in travel expense in the first quarter. We do expect it to build, but as I just discussed, it's not back to full “normalized levels” yet and we'll get there over time. 40:32 Those are probably the two biggest ones and then obviously also making sure that we are making all the right investments so that we can drive repeatable, sustained top-line, double-digit growth. Again, that means growing GTS and GBS at those double-digit growth rates and continuing to do that. And I think those are the three big factors as we think about the current guide, and then the normalized level of margins.

Craig Safian :

41:31 Yes. I mean, I think we are – we built a real solid operational plan at beginning of the year that had the sales hiring and expert hiring and service hiring that we need to deliver on 2022 and also to make sure that we're set up to continue to drive really strong growth rates into 2023 and beyond. 42:02 If CV growth is a little faster than we had expected, there would probably be incremental sellers, incremental experts, and incremental service people. Again, to make sure that we keep our clients really, really happy and keep delivering great value and can continue to grow. So, as we move through the year, I'd say right now, we feel good about our investment plans and hiring plans. 42:28 If the performance is starting to look higher or lower than our current expectations, we will obviously adjust as necessary. So, if we see stronger growth, we would probably do more hiring; if we see softer growth, we would potentially slow down a little bit, but from where we sit today, we feel like we've got a really strong hiring plan that will allow us to deliver on 2022 and also set us up for continuing to grow into the future.