Q3 2020 Gartner Inc Earnings Call

Working with them to create a great experience for both attendees and themselves will exhibit a revenues were lower when compared to our in-person conferences from last year. They exceeded our expectations early on Thursday is great uncertainty as to whether virtual conferences would be viable the results of the seven virtual conferences. We've held to date demonstrate. We can achieve attendance or delivering high-value to both attendees and exhibitors Lounge in the virtual conference journey in each one. We failed has been better than the last we're learning organization will continue to get even better by taking the experience from each conference and improving on the next Thursday is 8 more virtual conferences planned for twenty twenty and if already have more than twenty one thousand attendees registered, so we were extremely module and serving the needs of our clients by adapting our, inhibiting to Virtual conferences. We were just as agile in adapting our operations for the new environment. We went from an in-office to completely remote and we now have achieved the same level of operational effectiveness.

As we had in the office.

We ended early and decisively at the beginning depend demek to optimize our costs and prepare for a wide range of scenarios. We've achieved strong cost savings by working smarter. Not just like get with less. For example, we've established specialized teams that handle some tasks such as background research previously. This was done individually by all our experts rather than specialized teams the choice to do this research and fewer hours and often with higher quality because of the specialization in addition. We have automated some of this work for Technologies such as web money, which further lowers the cost increases the overall quality didn't begin during the pandemic but because of the pandemic would accelerated the pace in addition to cost savings and operational efficiencies. We also took several steps to preserve liquidity page eighteen Financial spring. We now have a capital structure with less maturity risk and more flexibility to accelerated the creation of new highly relevant content for our clients across every function.

We successfully pivoted to Virtual conferences which were well-attended and delivered high value to our clients. Our clients are more engaged than ever be on client engagement. We adapted our operations to work remotely Joseph actively as we do from our offices and we combine this with early and decisive actions to optimize our cost structure and our balance sheet. The combination of these factors has resulted in improvements across most of our operational metrics where it took you to the improvement in our operational metrics intern as a result in improvements in our Q3 Financial metrics and guidance compared to Q2 revenue and even dead or performing better than we expected and free cash flow generation is very strong to provide more details on our financial performance and increase guidance. I'll now turn the call over to our CFO day. Thank you, Jean and good morning. I hope everyone remains safe and well third-quarter results were ahead of our expectations and we raised our full-year guidance to reflect the modestly better demand environment a, New Jersey.

On cost management, we had another successful Bond offering during the quarter and amended and extended our credit facility through 2025 as of September 30th. We have a stronger balance sheet than we did at the start of the month. We have significant liquidity which gives us Financial flexibility. We reduced our maturity risk and our annual interest expense will be lower starting in 2021 as we've gotten more clarity on the economy and jobs their business performance over the past several months. We've resumed targeted spending while we continue to manage our costs carefully. We remain focused on positioning ourselves to rebound strongly as the economy recovers Thursday a revenue is $995 million dollars down 1% both has reported and FX neutral excluding conferences. Our revenues were up 5% year-over-year FX neutral in addition contribution margin was 67% of more than three hundred basis points versus the prior-year ebitda was $168 up 20% year-over-year and up 19% FX neutral adjusted EPS wage.

$0.91 and 4

The cash flow in the quarter was a very strong $229 research revenue in the third quarter grew 6% year-over-year on a reported and FX weekly basis third-quarter research contribution. Margin 72% benefiting apart from the temporary cost avoidance initiatives. We put in place starting in the first quarter as we have seen improvements in the macro-environment. We have resumed growth spending and started to restore some of the compensation and benefits programs which we had put on hold when the pandemic first hit total contract value was three point four billion dollars at September thirtieth, representing FX neutral growth of 5% versus the prior-year global technology sales contract value at the end of the third quarter was two point eight billion dollars of 5% versus the prior-year the more challenging selling environment that began in March continued through the third quarter of an impact on most of our reported metrics client retention for GTS was 80% down about 160 basis points year-over-year, but up modestly from last quarter while retention for GTS was nineteen years.

Sent to the quarter down about six hundred basis points year-over-year GTS new business declined 7% versus last year. We ended the third quarter with Enterprise is down about 3% from last year in a contract value for Enterprise continues to grow it now stands at $227,000 per Enterprise in GTS up 9% year-over-year growth and TV provider price reflects, the combination of upsell increased number of subscriptions and price in addition. We continue to see higher turn among lower spending clients at the end of the third quarter of the number of quarter bearing Associates in GTS was down about 8% year-over-year, we expect to end 2020 with more than 3,100 order barring Associates a slight decline from the end of 2019. We entered this year with a large bench which we have now fully deployed for Thursday. Yes, the year of your contract value increase or ntvi / the beginning. Quarter bearing headcount was $41,000 per salesperson down about 60% versus the third quarter of last year's.

Despite the challenging macro-environment GTS CV grew and nearly all of our 10 largest countries and similar last quarter was up double-digits in Brazil, Japan France and the Netherlands Plaza across all sectors except for transportation and media across our entire GTS sales team. We sold significant amounts of you business in the quarter to both existing and new clients new logos continues to be a significant contributor to our CV ground finally despite some net turn and clients. We continue to see increased spending by retain clients on average. Although not quite enough to offset dollar attrition. This speaks to a compelling client value proposition. We offer in both strong and challenging economic environments overall GTS retention and new business Improvement third quarter as compared to the second quarter Global business contract value is $656 billion dollars at the end of the third quarter. That's about 20% of our total contract value CV growth was 6% year-over-year as reported and 5% under organic wage.

says TV grew up in

The quarter was led by our supply chain and Human Resources teams all practices positively contributed to the 6% TV growth rate for GBS with the exception of marketing GVS new business was strong fourteen percent over last year as we've discussed the last three quarters in the marketing practice. We are transitioning away from some lower-margin products. This is created short-term headwinds, but is expected to improve profitability in a normal environment gxl is now more than 50% of GBS total contract value an important milestone in the past the long-term sustained double-digit growth in GBS off retention 4gbs was eighty 2% of 117 basis points year-over-year while retention 4gbs was 99% for the quarter of two hundred twenty basis points year-over-year. We ended the third quarter with GBS Enterprises down about 9% from last year as we continue to see turn of Legacy clients the average contract value for Enterprise continues to grow it now stands at $140,000 per Enterprise wage.

BS of 16% year-over-year growth in CV per Enterprise reflects up-sell and increased number of subscriptions penetration of new functional areas and price despite. The pandemic routine clients are continuing to spend more with us every year. Although not quite enough to offset power attrition at the end of the third quarter of the number of quarter bearing Associates in GBS was down 7% year-over-year. We expect in 2020 with roughly flat head count to the end of 2019 in GBS 4gbs the year of your contract value increase or ncbi / the beginning. Quota bearing headcount was $38,000 per sales person up from last year. Overall. GBS had a good third-quarter driven by a strong double-digit year-over-year Improvement in new business, as you know, the conference's segment has really impacted by the global pandemic.

We canceled all in-person destination conferences for the remainder of 2020. We pivoted to producing virtual conferences with a focus on maximizing the value. We deliver for our clients. We held to versus conferences in the third quarter after producing pilots in the second quarter. We also held a number of virtual event that meetings shifting these one-day local conferences online due to the pandemic conferences Thursday for the quarter was $13 a combination of the two virtual conferences in a number of virtual events and meetings. We are still in the early stages of all forms of virtual conferences and will continue to leverage the feedback as we develop refined and grow our virtual conference offerings. The revenue mix of our virtual conferences is different from the mix from inverse and conferences first in Q3 off a revenues were split between virtual conferences and virtual events and meetings with a higher mix from event the meetings than last year at n d Revenue at virtual conferences is from two sources tickets that are purchasing

A stand-alone item either online or through our sales teams or entitlement associated with a broader research contract as we detailed in the past a small portion of many research contracts. It's attributed of conferences segment the vast majority of the Q3 and expected to for attending revenue is from subscription contract entitlements. These are entitlements which would have been applied to in-person conferences in 2020 or in some cases in 2021. We continue to refine or exhibitor offerings for virtual conferences. We expect Q4 exhibitor Revenue to be a much smaller part of overall conferences Revenue than past we continue to incur costs both in cost of services and sg&a to support virtual conferences and to be in a position to resume in person conferences when it is safe and permitted lastly a timing of receiving conference cancellation insurance claims remains uncertain so we will not record any covers in expenses incurred until the receipt of the insurance proceeds.

Third-quarter Consulting revenues decreased by 4% year-over-year at $89 on an fx neutral basis revenues declined 6% Consulting contribution. Margin was 32% in the third quarter of

Three hundred basis points versus the prior-year quarter margins were up primarily due to cost reduction actions labor based revenues were $74 down 5% versus 2/3 of last year or 6% on FX neutral basis labor based billable headcount of 737 was down 9% utilization was 60% up about three hundred basis points year-over-year backlog September 30th with $96 down 12% year-over-year on an fx neutral basis or backlog provides us with about four months of solid Revenue coverage as we discussed last quarter. We had a small wage action Consulting business to align our billable headcount with our Revenue outlook for the balance of the Year. Our contract optimization business was found 3% on a reported basis versus the prior-year quarter this compares to a 74% growth rate in the third quarter last year as we have detailed in the past. This part of the Consulting segment is highly valuable sg&a, increased 2% year-over-year in the third quarter and 1% is dead.

Exclusive basis sg&a is a percentage of Revenue increased in the quarter as we restored certain compensation and benefits costs ebitda for the third quarter was $168 up 20% year-over-year on a recorded basis and up 19% FX neutral as I mentioned earlier. We had stronger-than-expected top-line performance and continue our disciplined focus on expenses. We also continued not meaningful benefit from significantly lower than normal travel costs depreciation in the quarter was up approximately two million dollars from last year, although flat with the second quarter as a result of additional office space. I've gone into service before the pandemic hit amortization was about flat sequentially that interest expense excluding deferred financing costs. And the quarter was $29 million dollars up from twenty two million dollars in the third quarter of 2019 that interest expenses up because our interest rate swaps at higher fixed rates in the ones which expired last year the Q3 adjust. The tax rate would be used for the calculation of adjusted net income was twelve

Sent for the quarter tax rate for the items used to adjust that income was 26.4% in the quarter adjusted EPs and to $3.91 operating cash flow for the quarter $144 compared to $220 last year. The increase in operating cash flow is primarily driven by cost of what initiatives partially offset by an earlier interest payment due to the office answering capex for the quarter was $15 down 59% Year-over-year lower capex is largely a function of lower real estate expansion needs due to the pan dammit. We Define free cash flow of cash provided by operating activities less Capital expenditures free cash flow for the quarter was $229, which is up 25% versus the prior-year. This includes outflows about ten million dollars of acquisition integration and other non-recurring items free cash flow is a percent of Revenue or free cash flow margin was 15% on a rolling 4-quarter basis continuing the Improvement. We've been making of birth

Last few years free cash flows are percent of gaap. Net income was about 285% free cash flow benefited from continued strong collections combined with reductions and outflows from across the board initiatives Capital expenditures and lower cash taxes and deferrals of certain tax payments while we've seen timing benefits to our free cash flow margin from significantly lower capex in our ability to fir certain tax payments, even excluding these LTM free cash flow. Margin. You still have about two hundred basis points versus the prior-year during the quarter. We took advantage of historically attractive high yield Bond pricing and issued $800 a month. You ten years senior unsecured notes with a 3.75% coupon. We use the proceeds from this new issuance to extinguish our 2025 bonds, which carry a 508% coupon off also amended and extended our credit facility to September 2025 with attractive financial terms increase flexibility and fewer less restrictive covenants the overall impact of a financing app

these resulted in a 50 basis-point

Introduction to total cost of borrowing the combination of the capital markets activities in the past six months has extended our debt maturity profile to nearly eight years versus less than three years free pandemic Arthur's or 30th that balance was $2 billion dollars or reported gross debt trailing-twelve-month even dies about two point. Five times are total modified net debt Covenant leverage ratio was 2.30 times at the end of the third quarter. Well within the five times company limit at the end of the third quarter, we had five hundred fifty-four million dollars of cash after pausing share repurchases at the start of the pandemic. We are in a position to resume our normal Capital allocation programs going forward. We will deploy excess cash for share repurchases and strategic tuck-in Acquisitions at the end of the quarter we had about 1 billion dollars over capacity and have around $680 remaining on our share repurchase authorization. We are updating our full-year Outlook to reflect Q3 performance a modestly better demand environment including the secong.

Launch a virtual conferences and cost restoration plans last quarter went updating guidance. We were cautious because we had only been through one full quarter of the pandemic and we had two quarters remaining in the year off or experience better performance and more visibility. You have updated our guidance accordingly. We now forecast research revenue of at least three point five seven billion dollars for the full year. This is growth of almost 6% wage 2019 and reflects a continuation of third-quarter a new business and retention trends for the conference's segment. We are generating revenue from a virtual conferences. We now expect revenue of $100,000 for the full-year this reflects our initial success in launching virtual conferences and virtual events and meetings the majority of the incremental Revenue. We expect and conferences is from entitlement included in some of or description contracts as we discussed earlier. We now forecast Consulting revenue of at least $370 for the full year or decline of about 6% the Consulting Outlook continues to contemplate job.

Down in labor based the man the timing of Revenue in the contract optimization business can be highly variable. As you know, overall we expect Consolidated revenue of at least four point zero five billion dollars. I reported the client of that 5% versus 2019 excluding conferences. We expect Revenue growth of at least 4.5% versus 2019 on a reported basis the cost of avoidance programs. We put in place in March have a loudest Tech profitability and conserve cash. We started to resume certain spending late in the second quarter as the operating environment appears to at least stabilize we want to ensure we are well-positioned for an economic normalization. We expect full-year adjusted ebitda 5740 million dollars. That's fully your margins of about 18.3% up from the 16.1% margins. We had a 2018 we expect a full year 2020 net interest expense to be 160 million dollars. We continue to expect an adjusted tax rate of around 22% for 2020 this dog.

apply a higher fourth-quarter rate than we

Seeds route 2020 consistent with our experience in recent years. We expect 2020 adjusted EPS of at least $4.07 for 2020. We expect free cash flow of at least six hundred twenty-five million dollars a free cash flow guidance reflects both the piano Outlet. We just discussed strong capex management and better than previously forecasted collections all the details of our full-year guidance office included on our investor relations site in summary, despite a very uncertain economic environment. We delivered better than plans Financial results in third-quarter, which is allowed us to update our full-year Outlook favorably mobile operating metrics improving the quarter we were able to successfully launched and monetize virtual conferences and virtual events and meetings cash flow is outstanding and we have taken a number of measures to increase our financial flexibility reduce maturity risk and ensure we have ample liquidity. We will continue to balance cost avoidance programs with targeted Investments and restoration of certain expenses to ensure we are well-positioned.

To rebound when the economy recovers with that. I'll turn the call back over to the operator and we'll be happy to take your questions operator.

Add reminder ladies and gentlemen to ask a question. You will need to press star one on your telephone to withdraw your question. Press the pound key. Please stand by while we compiled the Q&A roster month.

Our first question comes from the line of Jeff Mueller from Baird your line is now open. Yeah. Thank you. Good morning. So I always find your sales productivity metric. You should be getting a a little bit challenging during periods of a lot of acceleration or deceleration. One of the things that jumped out to me today was the year-over-year trends in new business sold relative to the year of Trends in sales headcount for each of the segments curious. If you use that as an internal metric and then just what should kind of say about that Trend in anything in house managing sales headcount between the 0 c v folks and the people that have a book of existing business that are looking to expand it things page Gene. Is it first we definitely look at new business for sales person as one of our key metrics, you know at the end of the day the reason we look at Nick fee for sales persons because that what dead

Net-results and growth but we managed the pieces of it which are you know, retention of our clients and the new business and so we absolutely managed to do business per salesperson and the trend there has been you know has improved significantly took you two or three as the numbers you saw from Craig and anything you'd say in terms of how you're managing head count in terms of the zero contract valid of you Associates and those that have a book of business. Like are there any big ships occurring among those so it varies depending on the specific ticket and we tailor it to the market and so in markets where we have not that much contract value because it's relatively immature Market we'd have more business developers people that have zero contract bank accounts been in a much more mature market like the United States for you know, especially for GTS 4gbs across the board. We have a lot more business developers because those markets are so dead.

ultimately under-penetrated, so you don't need as many people that are we call account managers that have existing clients just because

Business is so much smaller in each of the disciplines. Okay, and then anything else you can say about what avoided costs are still left to be brought back and in the past you made some comments about expecting 21 margins to be down year-over-year. Do you still expect them to be down relative to the implied margins from the the prior guidance or am now using the Baseline of this 18.1% or 18.3% Margin this year to be down from and similar question on free cash flow. Obviously, as you said outstanding this year long, should that step back next year? Thanks. So let me get started in Craig can fill-in so, you know prior to twenty we were going through an investment. We were investing really to position GPS to have a great future growth and we ended that investment. 2019. We came in to 2020 before the pandemic wage.

Hitch focused on improving our margins overtime and part of the reason the margins are better in 2020 compared to 2019 are is that we were already focusing on Thursday. We get the return on the Investments that we put in place or the previous three years. We're still going to be focused on that going to the Future having said that there are some expenses in 2020 that are lower than they might be a year and the biggest example, my mind is travel expenses where you know, we basically have very low travel expenses compared to a normal year and I can imagine in once the pandemic is over we can travel again are traveling wage will be uh, I wouldn't say go back to where it was before cuz they we've learned how to work more efficiently, but sort would be larger than it would be a year like, uh, twenty twenty and gray out if you want to fill in yeah, good morning Jeff off the only a few things I would add our that, you know, in terms of the the cost of avoidance, you know, we were very aggressive in the early days of the pandemic when we really didn't know what the the wage.

Come was going to look like as we stabilized. We obviously started turning certain expenses back on particularly related to you know, compensation and benefits expenses former Associates as well as backfilling open roles and actually sprinkling sprinkling in a little bit of headcount growth in in in the GTS and GBS sales force. And so, you know, we we were first focused on just making sure that we could preserve profitability. And then once we we had I line to that or eyesight to that we we started off selectively turning certain expenses back on to jeans point, you know, 20/20 is hardly a normal year by by any definition and suck, you know the way we've been managing the business and and again we have been restoring a lot of costs and the back half of the year and we were able to you know, get virtual conferences launched a m.

And and monetized that's obviously playing a large role in in.

The margin profile for for for 2020, you know as we look forward the way we sort of think about it from a medium term perspective is that way we can absolutely Drive double-digit top-line growth and modestly expand margins, you know over at least the medium-term. We we will expand margins from the 2019 levels which is you know, or or less normal your benchmark if you will and and to the point being made, you know, we're very committed to maintaining tight cost control be like you've seen from this this year. We will have to turn certain things back on but things like travel we will have to travel more we will have more expense there, but it will probably not run all the way back up to what we did in 2019 similarly with facilities, you know, we've obviously, uh had a lot of operational benefits this year from not having to dead

T and cool and and run a facilities as we've been working from home. Hopefully, we will be back in facilities at some point and those expenses will come back. Although I will say that as we move forward we probably won't need to expand our facilities footprint at the same Pace that we did in the past. And so there's a lot of moving Parts there, but I think the key point is that over the medium-term, you know, we believe that we can drive double-digit top-line growth and mostly expand our margins.

Thank you both.

Thank you. Our next question comes from the line of Tony Kaplan for Morgan Stanley. Your line is now open. It's great. Thank you. Can you mention higher demand that you're seeing clients? You just dive a little bit more into that within research, you know, which regions have been strong and basically when regions have either, you know, somewhat recovered from COVID-19 start to open up. I'm thinking maybe China or even in the US over the summer when when things were a little bit better, you know how quickly can the business office found, you know, or should we be viewing this more as a a slow recovery. Just wanted to get some color on the strengthening demand that you mentioned. Thanks. Hi Tony. Um, I don't know. I don't know how fast the pace of recovery will be but we certainly saw meaningful improvements between you know, Q2 and Q3 in terms of demand as the numbers that Craig went through into

Like new business and and so forth. Um, if you hit Chinese Chinese interesting because they have recovered relatively quickly like the uh, you know, the wrong business growth in Japan and China in China has been quite good Japan's same thing actually. And so if the rest of the world kind of goes the way of China Japan, then we'll have a relatively quick recovery for us.

And wanted to ask also about the GTS hiring strategy think read much in the 3100 expected by year-end in general. I guess are you thinking about hiring ahead of CV growth turning around or or in a little bit more of a wait and see kind of pattern just trying to understand on their strategy of hiring through the rest of the year and maybe through next year in terms of how you're thinking about it grew in our sales force is an important part of our strategy and so over time we expect to grow our sales force and kind of in line with our contract value growth. And so that's kind of the long-term strategy we came into this year. So at the end of last year, we took a substantial amount of head count as we came to this year for to allow our growth during 20/20 now, obviously the pandemic it and we haven't realized that gross. We actually have a lot of sales capacity that we think as the market in place.

Will give us good uplift and then you know, so we're going to use that and leverage that will also then grow our sales headcount and you think about in line with Stevie as we go forward to support your breath off. The the one of those thing I had told me is you just think about that the capacity we've invested in building over the last several years in both GTS and and and GBS Home is pretty substantial. And so with that selling capacity you again if we can approach 2019 productivity levels or call back half the the gap between jobs where we are today and 2019 productivity levels. We we can actually drive really nice CV growth just from that capacity and is Gene mentioned our strategy because of the the market opportunity we have is to continue to grow the sales force, which we will do to go capture that opportunity. But you again we always look at really two levers to drive the CV growth over the the medium-term or long-term.

It's growing sales headcount to capture the market opportunity and driving productivity improvements at the same time.

Thanks so much.

Thank you. Our next question comes from the line of Gary busy from Bank of America Securities. Your line is now open. Good morning. I guess I wanted to start by asking about the month GBS contract value growth in in, you know, new bookings really no deceleration sequentially and the bookings were strong. Can you give us any more any more color on sort of what the average drivers are where where you really succeeding? And and I know you didn't give the gxl break out anymore. As you said you wouldn't but you know, when you look at those metal sort of passed that inflection point where the gxl is meaningfully enough bigger that that's really you know, the key driver from here and it's always a great thing off. Yeah. Hey, it's Jean. The gxl is clearly the key driver in GPS going forward. We we crossed the threshold with 10,000 seats in GBS, which internally was a birth.

Major Milestone the GPS do business is being driven by the fact that you know what we talked about all along. It's basically in each of the functions around the business.

Is um, the executives have Mission critical priorities, they need help with and they see gardeners be able to help them and our sales person has been extremely effective and reaching out to prospects explained how may help and the prospects of responded and that's fundamentally what's driving the new business growth and in fact the uh, it's really, uh, we're seeing the benefit of it now even during the pandemic but we talked about the earlier the adjustments we made over the last two or three years before 2020. It's really straight to get the path from all those investments in GPS.

And and and Gary good morning. I was just add you know as I mentioned in my remarks GBS now gxl now represents more than 50% of the contract value within a b s. So it really is a you know gxl story going forward that is the you know, predominant amount of of of contract value within the portfolio. And then the other nice thing I would add is that we're seeing really good contribution across the across the GBS practice portfolio. So it's not just supply chain or it's not just in each are we're still seeing really good contribution in finance in HR in supply chain in sales Etc. And so that you know, it's not just one story there. It's it's across the portfolio.

And and just as a follow-up if I could dig into that a tiny bit more, you know, do you is there any way to tell how much of the Improvement there in the in in the TV holding up quite well is sarja easy comps because you pushed so much change in over the last couple of years. So it's sort of the maturity of the sales force and and improved productivity. Is there more used to selling gxl off his hand market dynamics and really what I'm trying to get at is is that are those two factors strong enough to continue that you know continue to drive outperformance if if the economic environment does remain, you know week and and choppy in the near-term. Thank you. Yeah, I'll start then and then Gene if I miss anything you can fill in the blanks, you know, I think that if you look back at the the the GBS performance, we really started seeing nice acceleration in the business in Q3 of last year. And so it's not the easiest compare birth.

We've had for sure, you know, I think there's definitely a benefit to having a more tenured sales force and having them have significant experience with selling the the standard set of products we have and so that is absolutely benefit. But I really do believe in Echo. You know what Gene said earlier it's really about the valve that we're providing to to the end users in each of these markets as opposed to an easy comp or or more experience. And so those things help but I think ultimately it's because we may we provide a a great value and help Business Leaders across each of those Enterprise functions really solve and and win on their mission critical priorities.

the only other areas that the

We also took a while to roll out all the gxl products and then the sales teams had to learn how to sell those products. And so I think they're now getting to the you know, the good part of that curve.

Great glad to see it. Thanks.

Thank you. Our next question comes from the line of Andrew Nicholas from William Blair. Your line is now open. Hi, good morning with a few more months under your belt. And what I thought was was a solid third-quarter results. If you feel like you have a better sense for her house TV might Trend over the next couple of quarters. And is there any change how you're thinking about the potential trough wage growth across both GTS and GBS both in terms of of timing and and magnitude? Yeah, good. Good morning Andrew, you know with CV being a a rolling 4-quarter metric. We do still expect some deceleration in the contract value growth after they'd probably over the next, you know quarter or two predominantly because it's going up against a a tough compare quarter in fourth quarter of last year. And so if you you look bath

Fourth quarter of last year, you know, we drove significant growth and then CVI in both ups and GBS and given the the the environment are correct and and extrapolating what we've seen in Q3 and and marched through the end of Q2 as well. We do not expect as much new business or or or similar renewal race. And so we do expect some continued deceleration, you know the trough if you think about it just based on on on looking at it. That way is probably took one of of of next year. Um again, we we could outrun that if the economy improves significantly or if there is a vaccine and and people go back to the office and everything like that, but we still remain cautious and are using really our last three months performance as a guide as we think about what what TV can do and and how we're building our operational plans for the end of the month.

And for next year. That's helpful. Thank you. And then just wanted to switch over to to conferences if I look at at guidance or implied guys charge you for it. Looks like you're guiding to about eighty eighty-five million of of conference Revenue versus about 218 or somewhere around there last year. If I do the math Thursdays are it looks like about 40% or so. I know there's two less conferences versus last year, but I guess I'm just wondering is that 40% number or reasonable ratio for us to use and we're thinking about Revenue age 20 21 in the instance that that in-person conferences haven't returned or the other factors that I'm not not thinking about that that I should. Yeah, it's it's hard. It's hard to say Andrew predominately because you know, we have moved a number of conferences that you know, we would have wage.

produced in person

Earlier in the year into the fourth quarter. And so we we've obviously trimmed the portfolio and we've gone with you know series of very important very impactful conferences pagli and you know, in addition if you look at the the Q4 implied guide you have to also keep in mind that there's a hunk of avanta virtual meetings in there as well, you know, which which are pretty nice contributor to the to the overall number, you know, I think that as we roll into we're in the process of building out 20 21. And under a number of scenarios for for for next year. It was G mentioned and I mentioned as well we're getting better and smarter with each phone conference that we actually deliver and the next one, you know gets better and better and better and we're we're still really working on that exhibitor value proposition as well as imege.

And you know, we expect the exhibitor contribution in the fourth quarter to be significantly lower than what you would see historically and obviously we want to work really hard to improve and and deliver value to both our attendees, you know, who did value from being exposed to the exhibitors and the exhibitors who who who get the corresponding value. So I I wouldn't plug in a formulaic 40% yet. We're still working through all those scenarios. And again, there are you know, a number of different scenarios where we could be in person later in the year virtual for beginning there could be virtually all year long. You know when we moved in we guide for for twenty twenty one in February will be very clear about what our assumptions including will really be driven by you know what the environment allows us to do.

Makes sense. Thank you.

Thank you. Our next question comes in the line of Jeff silver from BMO Capital markets your lines now open. Thanks so much in your prepared remarks you talked about some of the palm of the growth. They both g p b s and GTS was pricing related. I'm just curious, you know, what kind of price increases have been able to put through in terms of renewal and if there's been pressure or push back from clients on that thinks. Yeah. Hey, good morning Jeff. So, you know, we for most of our most of the world we do our price increase in November actually yesterday the first day of November, you know, as we went through the renewal cycle leading up to them, you know, this November, obviously, we were dealing with our our standard price increase, you know in this environment there was probably there's definitely a little bit more push back than we historically see birth.

Our you know our price increase as you know ranges has ranged in in the three to four percent range historically and it's typically not big dollars for the client and we are all these improving our products and and our experienced this year given the environment. We were a little more modest on the price increase the wage, you know around, you know between 2 and 1/2 and 3% price increase again was just went into effect now, you know, we generally our clients understand that we are improving the product you should hear the people that deliver the service their cost go up every year and so generally speaking we haven't seen the kind of push back on the pricing but definitely in this environment it it's a little more challenging than than what we normally see but generally speaking that it's it's modest dollars that were were pushing through

Okay, great.

It's helpful. If I could shift over to conferences, you know, in terms of the shifter virtual. I'm just also wondering from a price perspective. What do you charge at? NBS relative to the in-person conference? I know I'm I'm entitled went there in the same thing on the exhibitors side. I'm just curious on a relative basis what the Delta is things.

Yes, if you if you take a look at the you can see list pricing online. The the attendee pricing is about 40% of thumb what we would get from an in-person conference ticket. So think about in roughly that range in terms of the you know, if you're buying a Cash ticket as a home alone item again, either online or or through one of our sales teams on on the exhibitor side as as we've mentioned. It's still really early days and am working through all that and so there's really not an apples-to-apples comparison from an exhibitor perspective.

Okay. Thanks for the color.

Thank you. Our next question comes from the line of Manoj from Barclays. Your line is now open. Thank you. Good morning. I was just hoping you could give me some color back maybe sticking to GPS in terms of you know, the client, uh, you know reaction, you know with the wallet attention and the extraction comes down just some color they're around. You know, how much that is, you know number of seats being cut for those that are still at your clients and you know in this new wave of lockdown during school quota in order for you if you anticipate any problems, though,

Yeah. Hey man, I'll get started with it. So first the biggest change in the wall of attention was that our existing clients are buying fewer additional fees. And so it's actually less that people are reducing seats than it is in normal times a substantial portion are grown comes from existing clients adding more seats. We see existing clients in GTS particularly adding fewer seats than they they're still hadn't seats but having fewer seats that they would do in a normal year and that's kind of the biggest piece of crap. Well retention of creepy want anything to that. No, I think that's right again, and it's, you know, a combination and and Eugene went to detail of this last quarter in June and actually, you know, as we rolled into Q3 each of these measures actually improved and so, you know, the the point on fewer clients increasing or increasing it lower wage.

That Trend continued into Q3 but it was definitely better than what we experienced in in in Q2 and the same could be said around clients that were reducing their spending. So we still saw that Trend happen in Q3, but it was much less pronounced than what we experienced with energy to

That is empty just on the events. I'd be willing to share what the event today but usually, you know your expectation on that you call that a big chunk of change in the fourth quarter.

Yeah, I mean historically if you go back to the the last normal year we had event of revenues were in the roughly 15% of total revenue range you suck this year given what's happening the running closer to you know around a quarter of the of the conference Revenue just to put it in in rough perspective.

I thank you guys.

Thank you. Our next question comes to the line of George Tom from Goldman Sachs. Your line is now open. All right, thanks. Good morning. I wanted to drill into the demand environment which noted is stronger than previously expected. Can you elaborate on which specific client segments you see the upside in GTS and GBS and what specific macro or shut down assumptions are embedded in your for your home.

So let me get started on it, you know as Greg mentioned in his remarks that and GTS CD grew and nearly all of our 10 largest countries and double-digit Raziel, Japan France and the Netherlands and CD grew across all sectors except for transportation and media and it grew across every size Enterprise. And so that kind of gives you a flavor for for a Dodge Jeep e s in GBS we found we had growth basically contributions from all the practice areas being like HR supply chain sales et cetera except marketing and his cock his remarks the marketing piece. We have some products that were just continuing which pulled that piece down, but the rest was quite strong.

And George, you know, in terms of the the Outlook, you know, it's been choppy all along and it it varies by region ography in terms of lock downs and and Andre lockdowns and and things of that nature and so, you know, we've the good news for you know for a business like ours is the the hunk of the revenue on the research line is is is baked based on where we finished Q3. And so, you know, the guide doesn't really have that doesn't get impacted all that significantly from whether you know, there there are new lockdowns or otherwise, obviously, you know, it could have an impact on next year but I think our sales teams are are really focused on working through this they've proven they can work through it, you know lock down or or non lockdown environment and and we'll just continue, you know working through the the selling cycles and renewal Cycles wage.

As we close the year at the book as much ncbi and as much contract value growth as as possible George action with regard to the lockdowns. We've you know with our sales teams. We've had a discussion on Iraq. You know, what what what impact does it have like in certain European countries now, they're going back just wonder lockdowns at least our sales teams perspective on it. Is that both we and our clients have learned to work in a lockdown environment choice. They don't anticipate the increase lockdowns you're seeing like in Europe having an impact on our bookings time will tell but that's the sales team's perspective.

Got it. That's helpful you.

You got into full-year ebitda margins of slightly over 18% That's up from 16% last year. Can you discuss how incremental margins made Trend over the next two to four quarters as summer like TV in Salesforce hiring come back.

Yeah, George, you know a lot of it will be dependent on you know, where we finish this year from a contract value growth perspective is that has a Serial or very material impact on the revenue run out for for for next year. You know, we have you know started to restore a lot of exchange. It says related to compensation and benefits, you know, which continue to run um, you know consistently and so there won't be a hurt or or should be significant a one-time hurt. When when when we flipped those those back on, you know, I think you know, well obviously provide full color on a 2021 guidance in February, when when when we get there, but for now, you know, we're just really focused on making sure that we we finish the year strong, you know, obviously we have been able to take up our guidance on on just about

Every count you know, pretty pretty nicely and the teams are just focused on making sure we finish the year strong and we'll we'll address what what they've rental margins look like and what the overall Outlook looks like Thursday in in fact work in Georgia had that uh, you know, we made a bunch of Investments coming into twenty-twenty and you know sort of the 17 18 19. And the 19th is reflected that we came into twenty-twenty focused on getting return on those Investments and having type cost controls and we expect to keep getting you know, getting return on those Investments for the next few years as I mentioned earlier and we intend to keep type cost controls as well. And so we're very focused on managing our margins in future years as well.

Very helpful. Thank you.

Thank you. Our next question comes from the line of handsome mazari from Jefferies. Your line is now open. Hey, hey, good morning. My my first question is just on Salesforce productivity. Maybe if you could just talk about, you know, getting back to 2019 levels on productivity what what sort of under your control what what's not under your control and off. What kind of time frame is realistic to get there. I know you talked about CV Crossing in q1, so maybe you could just give you a best guess on, you know when Salesforce productivity trade-offs.

So the it's hard to forecast exactly what salesperson Chevy is going to try as we've mentioned couple times to the call. We've certainly seen this year between Q2 and Q3 off improving all the kind of underline in virtuality underlined operational metrics that drive sales productivity. I talked about one of them like plan engagement which ultimately drives retention a new business performed better than in Q3 than in Q2. And so those are things that are going to kind of drive it over time. I think we are learning how to sell in the pandemic has a factor and so that will continue to get better think also obviously the more companies that go out of business and can't buy our products because they're out of business that has an impact on our productivity as well. So it's those kinds of factors and and and hands I would I would just add that, you know, it's going to really correlate, you know, very very tightly to see growth and so, you know again, it's sort of an output of birth.

poor, you know if you're running that the other way and input into the overall CV growth, but even that we have gotten disciplined around much more disciplined around the headcount growth and

Headcount Investments and jeans Point getting yield on those Investments and that, you know will start having quote unquote easier Compares in Q2, you know that the CV growth trough and the productivity should be aligned guarded very helpful. And just my follow-up question is just two quick ones one is the territory optimization kind of behind you or is that sort of an ongoing process and and then just on the research side anything to call out on the non-subscription peace how that Trend may I know it's small a 10% or so of research, but just on those two points anything to add. Thanks so much.

Yeah, the territory optimization is really important to us because different territories have different structural characteristics that make them better or worse. I kind of simple and it varies over time. It's simple example is a territory selling to restaurants in this day, you know today doesn't have as much upside potential as a chocolate or he's selling to tech companies and so off we real-time shift our territories around to the territories that are away from the ones that are less potential of the ones that have a lot of more potential. So it's not one time thing. It's it we just implemented kind of the most sophisticated versions of our territory playing this year. And it's something we're going to do an ongoing basis as the economy around us changes and it's an important driver of sales productivity and and then on the nonsubscribers piece the it's actually holding up pretty well. It was down 3% year-over-year in in the quarter which is better than we had initially forecasted. So the non suck.

Is your point relatively small piece, but it's holding up better than we had initially thought down 3% year-over-year. Great. Thank you.

Thank you. Our next question comes in the line of Jake Williams from Wells Fargo. Your line is now open. Thank you and good morning, everyone.

Can you share some of the lessons that you've learned from hosting virtual conferences so far? And if you think there are any opportunities to expand the the reach of the Breath of Life or conferences through a hybrid in person virtual model?

Hey Jake is Jean. So we've heard a lot of lessons personal conferences is Craig mentioned we started with some pilots and Q2 and then I have held our virtual equivalent of our large part of our larger conferences this year. Same things true actually have the advantage conferences when the past were in person in person and now are all virtual and we've learned things about like what technologies to use of some technologies work better than others. And each time. We have, you know, uh, things didn't work as well as we plan we fix those technology problems. We've been experimenting with things like how long each session should be, you know, because in a virtual environment people who different section links we experimented with how long the conference itself should be should it be two days four days for the for the longer conferences and getting customer feedback or tweaking the link to the conferences. Um, the content is pretty much the same and production values are very similar to go to any of our conferences and that has worked pretty well. So those are kind of birth.

the key learnings website, I mean in terms of opportunity to expand, you know, the way we're looking at it is if there's demand going forward when in person conferences return if there's still demand for personal conferences

Really really well positioned to do that and we will certainly do it. If demand is there and my you know, what I believe is to ban will be there, but we're going to be flexible based on what the market says.

Thank you very much.

Thank you at this time. I'm showing no further questions. I would like to turn the call back over to mr. Paul closing remarks.

So summarizing what you heard in today's call. We accelerated the creation of new highly relevant content for our clients across every function. We successfully pivoted to Virtual conferences, which were well-attended and delivered back to our clients. Our clients are more engaged than ever be on client engagement. We adapted our operations to work remotely just effectively as we do from our offices and the combine this with early and decisive actions to optimize our cost structure. The combination of these factors has resulted improvements across most of our operational metrics compared to Q2 the improving. Our operational metrics in turn has resulted in improvement in our Q3 Financial metrics and wage compared to Q2 revenue and even offering better than we expected in free cash flow generation is very strong. Thanks for joining us and I look forward to updating you again later again in the new year.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.