Q1 2024 Gartner Inc Earnings Call
Okay.
Operator: Ladies and gentlemen, please stand by. Your conference call will begin momentarily. Thank you for your patience, and please stand by.
Speaker Change: Ladies and gentlemen, please standby your conference call will begin momentarily. Thank you for your patience and please standby.
David Cohen: Good morning, everyone. Welcome to Gartner's first quarter 2024 earnings call. I'm David Cohen, SVP of Investor Relations. At this time, all participants are in a listen-only mode.
[music].
David Cohen: 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 2024 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 or adjusted EBITDA with the adjustments as described in our earnings release and supplement, all contract values and associated growth rates we discuss are based on 2024 foreign exchange All references to share counts are for fully diluted weighted average share counts unless stated otherwise.
David Cohen: 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 2, quarterly reports on Form 10-Q, as well as 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. Good morning, and thanks for joining us today.
Speaker Change: Yeah.
Eugene A. Hall: Gartner remains resilient in a complex environment. In Q1, contract value grew in high single digits, and 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 ethics-neutral basis. The world continues to experience broad geopolitical and economic uncertainty. Higher interest rates and an uncertain outlook continue to affect banks. Federal and local governments are struggling with shifting priorities.
Speaker Change: Good morning, everyone welcome to Carter's first quarter 2024 earnings call and David Cowan SVP of Investor Relations.
David Cohen: At this time all participants are in a listen only mode. After comments by Gene Hall, Gardner, Chief Executive Officer, and Craig Safian Gardner Chief Financial Officer, there'll be a question and answer session.
David Cohen: Please be advised that today's conference is being recorded.
David Cohen: This call will include a discussion of first quarter 2024 financial results at Garters outlook for 2024 as disclosed in today's earnings release and earnings supplement posted to our website investor Doc Gartner Dot com.
Eugene A. Hall: Inflation remains challenging for companies in many sectors, such as health care. Supply chains continue to be strained. We continue to see big shifts in where people work, which is affecting the real estate sector. Cybersecurity continues to be a global and universal threat, and enterprise leaders are just beginning to understand how to leverage artificial intelligence in their organization.
David Cohen: 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 contract values and associated growth rates. We discuss are based on 2024 foreign exchange rates, while growth rates in gene's comments are FX neutral unless stated otherwise all references to share counts.
David Cohen: Our fully diluted weighted average share counts unless stated otherwise.
Eugene A. Hall: Enterprise leaders and their teams know they need help, and I know Gartner is the best source for that help. We provide the insights, tools, and advice to drive smarter decisions and achieve stronger performance on their mission-critical priorities. Our insights often make the difference between success and failure for the leaders we work with and the enterprises they serve. Gartner helps the leaders who shape the world.
David Cohen: Conciliations for all non-GAAP numbers, we use are available in the Investor Relations section of the Gartner Dot Com website.
David Cohen: As set forth in more detail 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 and work toward on Form 10-K quarterly reports on Form 10-Q, as well as in other filings with the SEC.
Eugene A. Hall: Research continues to be our largest and most profitable segment. Our research business serves enterprises across all major functions in every industry and every geography. Our market opportunity is vast. We deliver unparalleled value to our clients, whether they're thriving, struggling, or anywhere in between. In Q1, our clients experienced more challenging macroeconomic conditions, which led to a tougher selling environment.
David Cohen: Encourage all of you to review the risk factors listed in these documents.
David Cohen: Now I will turn the call over to Garner Chief Executive Officer Gene Hall.
Eugene A. Hall: Good morning, and thanks for joining us today.
Eugene A. Hall: Jordan remains resilient in a complex environment.
In Q1 contract value grew high single digits.
Eugene A. Hall: The annual results for the quarter were ahead of expectations.
Eugene A. Hall: Because of the incredible value we deliver, contract value in our enterprise functional leader business grew 10%. Our tech vendor clients continue to be affected by sizable layoffs, as well as reductions and shifts in venture capital investment. In addition, we had higher than normal levels of tech vendor contracts up for renewal in Q1, as expected. We guided clients through a wide range of challenging topics, including cybersecurity.
Eugene A. Hall: We delivered strong profitability and free cash flow.
Eugene A. Hall: And we increased our guidance for 2024 on an FX neutral basis.
Eugene A. Hall: No.
Eugene A. Hall: The world continues to experience broad geopolitical and economic uncertainty.
Eugene A. Hall: Higher interest rates and uncertain outlook continued to affect banks.
Eugene A. Hall: Federal and local governments are struggling and shifting priorities.
Eugene A. Hall: Inflation remains challenging for companies in many sectors, such as health care.
Eugene A. Hall: Supply Chain Optimization. Data Analytics. Leader and Manager Development. Managing Emerging Ribs
Eugene A. Hall: Supply chains continue to be strained.
Eugene A. Hall: We continue to see big shifts in where people work, which is affecting the real estate sector.
Eugene A. Hall: Cost Optimization, and more. Artificial intelligence was a topic with a high level of interest across every business function we serve. Gartner serves executives and their teams through distinct sales channels. Global Technology Sales, or GTS, serves leaders and their teams within IT. GTS also serves leaders at technology vendors, including CEOs, chief marketing officers, and senior product leaders. GTS contracts are valued at 5%.
Eugene A. Hall: Cyber security continues to be a global and universal threats.
Eugene A. Hall: And enterprise leaders are just beginning to understand how to leverage artificial intelligence in their organizations.
Eugene A. Hall: Enterprise leaders and their teams know they need help.
Eugene A. Hall: And then O Gartner is the best source for that help.
Eugene A. Hall: We provide the insights tools and advice to drive smarter decisions.
Eugene A. Hall: And as she is stronger performance on their mission critical priorities.
Eugene A. Hall: Our insights often make the difference between success and failure for the leaders, we work with and the enterprises they serve.
Eugene A. Hall: GTS contract value with enterprise function leaders grew at high single digits. Global Business Sales, or GBS, serves leaders of their teams beyond IT. This includes HR, supply chain, finance, marketing, legal, sales, and more.
Gartner guides the leaders reshaped the world.
Eugene A. Hall: Research continues to be our largest and most profitable segments.
Eugene A. Hall: Our research business serves enterprises across all major functions in every industry in every geography.
Eugene A. Hall: Our market opportunity is vast.
Eugene A. Hall: We deliver unparalleled value to our clients, whether they're thriving struggling or anywhere in between.
Eugene A. Hall: GBS contract value grew 12%. Gartner Conferences deliver valuable insights to a highly engaged audience. We had a great start to the year, including the launch of two new conferences. The demand for conferences remains strong.
Eugene A. Hall: In Q1, our clients experienced more challenging macroeconomic conditions, which led to a tougher selling environment.
Eugene A. Hall: Because of the incredible value, we deliver contract value in our enterprise functional leader business grew 10%.
Eugene A. Hall: Gartner Consulting is the extension of Gartner Research. Consulting helps clients execute their most strategic initiatives through deeper project-based work. Consulting is an important complement to our IT research business. Consulting revenue Group was up 7%. Labor-based revenue was up 13%. We drove a strong performance in contract optimization against a tough compare. People are at the heart of our business.
Eugene A. Hall: Our tech vendor clients continued to be affected by sizeable layoffs as well as reductions in shifts and venture capital investments.
Eugene A. Hall: In addition, we had higher than normal levels of tech vendor contracts up for renewal in Q1 as expected.
Eugene A. Hall: We got it clients through a wide range of challenging topics, including cyber security.
Eugene A. Hall: I just returned from our sales recognition events, where I spent time with some of our top performers. Our sales teams are enthusiastic about our prospects for growth in 2024. They love Gartner's strategy, culture, and ability to innovate. Gartner is a place where associates build lifelong careers in sales and beyond.
Eugene A. Hall: <unk> optimization.
Eugene A. Hall: Data analytics leader and manager developments.
Eugene A. Hall: Managing emerging risks.
Eugene A. Hall: Cost optimization and more.
Eugene A. Hall: Artificial intelligence was a topic with a high level of interest across every business function we serve.
Gartner says executives and their teams through distinct sales channels.
Eugene A. Hall: Global technology sales or GTS serves leaders and their teams within it.
Eugene A. Hall: Looking ahead, we updated our guidance for the stronger dollar and increased revenue, EBITDA, EPS, and free cash flow on an FX-neutral basis. In closing, Gartner delivered financial results ahead of expectations and 10% contract value growth with enterprise function leaders. Gartner is well positioned for contract value growth to accelerate as we move through the year. Our client value proposition and addressable market opportunity will allow us to drive long-term, sustained, double-digit revenue growth. We will continue to create value for our shareholders by providing actionable, objective insight to our clients.
Eugene A. Hall: GTS also searched leaders, a technology vendors, including Ceos, chief marketing officers and senior product leaders.
Eugene A. Hall: GTS contract value grew 5%.
Eugene A. Hall: GTS contract value with enterprise function leaders grew at high single digits.
Eugene A. Hall: Global business sales or GBS serves leaders and their teams beyond I T.
Eugene A. Hall: This includes HR supply chain finance marketing legal sales and more.
Eugene A. Hall: GBS contract value grew 12%.
Eugene A. Hall: Gartner conferences deliver valuable insights to a highly engaged audience.
Eugene A. Hall: Grudgingly investing for future growth and returning capital to our shareholders through our share refurbishment program. We take margins; we'll expand modestly over time, and will continue to generate significant pre-cash flow, well in excess of net income. All of this and more positions us to continue our sustained record of success far into the future. With that, I'll hand the call over to our Chief Financial Officer, Craig Safian. Thank you, Gene, and good morning.
Eugene A. Hall: We had a great start to the year, including the launch of two new conferences.
Eugene A. Hall: The outlook for conferences remained strong.
Eugene A. Hall: Gartner consulting is an extension of Gartner research.
Eugene A. Hall: Consulting helps clients execute their most strategic initiatives through deeper project based work.
Eugene A. Hall: The associated as an important complement to our I T research business.
Eugene A. Hall: Consulting revenue grew 7%.
Eugene A. Hall: Labor based revenue was up 13%.
Eugene A. Hall: We drove a strong performance in contract optimization against a tough compare.
Craig W. Safian: 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 in 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 purchases and remain eager to buy back stock opportunistically.
Eugene A. Hall: People are at the heart of our business.
I just returned from our sales recognition events, where I spent time with some of our top performers.
Eugene A. Hall: Our sales teams are enthusiastic about our prospects for growth in 2024.
Eugene A. Hall: They loved Gartner strategy culture and ability to innovate.
Eugene A. Hall: Gartner is a place where our associates build lifelong careers in sales and beyond.
Eugene A. Hall: Looking ahead, we updated our guidance for the stronger dollar and increased revenue EBITDA EPS and free cash flow on an FX neutral basis.
Craig W. Safian: First quarter revenue was $1.5 billion, up 5% year-over-year as reported and FX-neutral. In addition, total contribution margin was 69%, about in line with last year. EBITDA was $382 million, ahead of our guidance and up modestly from the first quarter of 2023. Adjusted EPS was $2.93, up 2% from Q1 of last year, and free cash flow was $166 million. Research revenue in the first quarter grew 4% year-over-year as reported and on an FX-neutral basis.
Eugene A. Hall: In closing Gartner delivered financial results ahead of expectations, and 10% contract value growth with enterprise function leaders.
Eugene A. Hall: Partners, well positioned for contract value growth to accelerate as we go through the year.
Eugene A. Hall: Our client value proposition and addressable market opportunity will allow us to drive long term sustained double digit revenue growth.
Eugene A. Hall: We will continue to create value for our shareholders by providing actionable objective insight to our clients.
Eugene A. Hall: Certainly investing for future growth.
Eugene A. Hall: And returning capital to our shareholders through our share repurchase program.
Craig W. Safian: Subscription revenue grew 6% FX-neutral. Non-subscription revenue was similar to Q4 2023 following changes we made during the fourth quarter, which we discussed in February. First quarter research contribution margin was 74%, consistent with last year. Contract value, or CV, was $4.9 billion at the end of the first quarter, up 7% versus the prior year and down about $10 million from the fourth quarter of 2023. The NCBI results reflect the higher-than-normal level of tech vendor contracts up for renewal, which we discussed in February. In addition, Q1 is our seasonally smallest quarter for new business.
Eugene A. Hall: We expect margins will expand modestly over time.
Eugene A. Hall: And we will continue to generate significant free cash flow well in excess of net income.
Eugene A. Hall: All of this and more positions us to continue our sustained record of success far into the future.
Eugene A. Hall: With that I'll hand, the call over to our Chief Financial Officer, Craig Safian.
Craig W. Safian: Thank you gene and good morning.
Craig W. Safian: First quarter financial results were better than planned with particular strength in profitability and free cash flow.
Craig W. Safian: We remain well positioned for the global CV growth rate to accelerate from the first or second quarter of this year.
Craig W. Safian: We are increasing our revenue profit and free cash flow guidance on an operating basis and updating for the stronger U S. Dollar.
Craig W. Safian: CVs from enterprise function leaders across GTS and GBS grew 10%. TV growth is FX-neutral. CV growth outside of our tech vendor client base 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. TV grew double-digit or high single-digit rates across all enterprise sizes except small, which was about flat, and had the largest tech-trender mix.
Craig W. Safian: We have a lot of capacity for share repurchases and remain eager to buy back stock Opportunistically.
Craig W. Safian: First quarter revenue was $1.5 billion up 5% year over year as reported and FX neutral.
Craig W. Safian: In addition, total contribution margin was 69% about in line with last year.
Craig W. Safian: EBITDA was $382 million ahead of our guidance and up modestly from first quarter 2023.
Adjusted EPS was $2 93 sets up 2% from Q1 of last year and free cash flow was $166 million.
Craig W. Safian: 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 first quarter, up 5% versus the prior year. GTS enterprise leaders' CV increased in high single digits, while Tech Vendor CV was down slightly year over year. GTSCV was $22 million lower than the fourth quarter. Wallet retention for GTS was 101% for the quarter, which compares to 104% in the prior year. Enterprise leader wallet retention was consistent with historical levels.
Craig W. Safian: Research revenue in the first quarter grew 4% year over year as reported and on an FX neutral basis subscription revenue grew 6% FX neutral.
Craig W. Safian: Non subscription revenue was similar to Q4 2023 following changes we made during the fourth quarter, which we discussed in February.
Craig W. Safian: First quarter research contribution margin was 74% consistent with last year.
Craig W. Safian: Contract value or CV was $4.9 billion at the end of the first quarter up 7% versus the prior year and down about $10 million from the fourth quarter 2023.
The N CVI results reflect the higher than normal level of tech vendor contracts up for renewal, which we discussed in February and.
Craig W. Safian: In addition, Q1 is our seasonally smallest quarter for new business.
Craig W. Safian: As expected, tech vendors were the key driver of the change year over year. GTS new business was 1% lower than last year, even as enterprise leader new business increased year over year. GTS quota-bearing headcount was down 2% year over year.
Craig W. Safian: C V from enterprise function leaders across GTS and GBS grew 10%.
Craig W. Safian: CV growth is FX neutral.
Craig W. Safian: CV growth outside of our tech vendor client base was broad based across practices industry sectors company sizes and geographic regions.
Craig W. Safian: We continue to expect mid single-digit QBH growth by the end of the year. The near-term hiring focus is on the enterprise leader portion of the business. Our 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 first quarter, up 12% year-over-year. All of our GBS practices grew at double-digit or high single-digit rates other than sales, which grew mid-single-digit. Growth was led by finance, legal, and supply chain.
Craig W. Safian: 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.
Craig W. Safian: C V grew double digit or high single digit rates across all enterprise sizes, except small which was about flat and has the largest tech vendor mix.
Craig W. Safian: We also drove double digit or high single digit growth in the majority of our top 10 countries.
Craig W. Safian: Global technology sales contract value was $3 $8 billion at the end of the first quarter up 5% versus the prior year.
Craig W. Safian: GBS CV increased $12 million from the fourth quarter, while retention for GBS was 107% for the quarter, which compares to 110% in the prior year. TBS New Business was up 7% compared to last year, and TBS quota-bearing headcount was also up 7% year over year.
Craig W. Safian: T T S enterprise leaders CV increased high single digits.
Craig W. Safian: Tech vendor C V was down slightly year over year.
Craig W. Safian: G T S. C V was $22 million lower than the fourth quarter.
Craig W. Safian: Wallet retention for GTS was 101% for the quarter, which compares to 104% in the prior year.
Craig W. Safian: As with GTS, our regular full set of GBS metrics can be found in our earnings supplement. Conference's revenue for the first quarter was $70 million, modestly ahead of our expectations during a seasonally small period. We had two successful launches in the quarter, our CFO and Finance Executive Conference in Australia and our Data and Analytics Summit in Brazil. Contribution margin in the quarter was 33%, consistent with typical seasonality and reflecting investments for future growth. We held 12 destination conferences in the quarter.
Craig W. Safian: Enterprise leader wallet retention was consistent with historical levels as.
Craig W. Safian: As expected tech vendors were the key driver of that change year over year.
Craig W. Safian: GTS, new business was 1% lower than last year, even as enterprise leader new business increased year over year.
Craig W. Safian: T T S quota bearing head count was down 2% year over year, we continue to expect mid single digit QB age growth by the end of the year. The near term hiring focus is in the enterprise leader portion of the business.
Craig W. Safian: Our regular full set of G. T S metrics can be found in our earnings supplement.
Craig W. Safian: Global business sales contract value was $1.1 billion at the end of the first quarter up 12% year over year.
Craig W. Safian: First quarter consulting revenues increased by 6% year-over-year to $135 million. On an FX-neutral basis, revenues were up 7%. Consulting contribution margin was 40% in the first quarter. Labor-based revenues were $109 million, up 12% versus Q1 of last year's reported, and 13% on an FX-neutral basis. Backlog at March 31st was $188 million, increasing 17% year-over-year on an FX-neutral basis with continued booking strength. Our contract optimization business is highly variable.
Craig W. Safian: All of our G. B S practices grew at double digit or high single digit rates other than sales, which grew mid single digits.
Craig W. Safian: Growth was led by finance legal and supply chain.
Craig W. Safian: C. B S. T V increased $12 million from the fourth quarter wallet retention for GBS was 107% for the quarter, which compares to 110% in the prior year.
Craig W. Safian: GBS, new business was up 7% compared to last year.
Craig W. Safian: G B S quota bearing head count was also up 7% year over year.
Craig W. Safian: As with G. T S. Our regular full set of GBS metrics can be found in our earnings supplement.
Craig W. Safian: Conferences revenue for the first quarter was $70 million modestly ahead of our expectations during our seasonally small period we.
Craig W. Safian: We delivered $26 million of revenue in a quarter against a tough prior year comparison. Consolidated cost of services increased 6% year-over-year in the first quarter, as reported, and 5% on an FX-neutral basis. The biggest driver of the increase was higher compensation costs.
Craig W. Safian: We had two successful launches in the quarter, our CFO and finance Executive conference in Australia, and our data and analytics summit in Brazil.
Craig W. Safian: Contribution margin in the quarter was 33% consistent with typical seasonality and reflecting investments for future growth.
Craig W. Safian: We held 12 destination conferences in the quarter.
Craig W. Safian: SG&A increased 5% year-over-year in the first quarter, as reported, and on an FX-neutral basis. SG&A increased in the quarter as a result of headcount growth and higher compensation costs. EBITDA for the first quarter was $382 million, up modestly from last year. First quarter strength compared to our guidance reflected modest revenue upside, effective expense management, and a prudent approach to our initial guidance. Depreciation in the quarter of $26 million was up about 10% compared to 2023. Net interest expense excluding deferred financing costs in the quarter was $18 million.
Craig W. Safian: First quarter consulting revenues increased by 6% year over year to $135 million.
Craig W. Safian: On an FX neutral basis revenues were up 7% <unk>.
Craig W. Safian: Consulting contribution margin was 40% in the first quarter.
Craig W. Safian: <unk> based revenues were $109 million up 12% versus Q1 of last year as reported and 13% on an FX neutral basis.
Craig W. Safian: Backlog at March 31 was $188 million, increasing 17% year over year on an FX neutral basis with continued booking strength.
Craig W. Safian: Our contract optimization business is highly variable, we delivered $26 million of revenue in the quarter against a tough prior year compare.
Craig W. Safian: Consolidated cost of services increased 6% year over year in the first quarter as reported and 5% on an FX neutral basis.
Craig W. Safian: This is favorable by $9 million versus the first quarter of 2023 due to higher interest income on our cash balance. The modest floating rate that we have is fully hedged through the third quarter of 2025. The Q1 adjusted tax rate, which we used for the calculation of adjusted net income, was 20% for the quarter. The tax rate for the items used to adjust that income was 25% for the quarter.
Craig W. Safian: Biggest driver of the increase was higher compensation costs.
Craig W. Safian: SG&A increased 5% year over year in the first quarter as reported and on an FX neutral basis.
Craig W. Safian: SG&A increased in the quarter as a result of head count growth and higher compensation costs.
Craig W. Safian: EBITDA for the first quarter was $382 million up modestly from last year.
Craig W. Safian: First quarter strength compared to our guidance reflected modest revenue upside effective expense management and a prudent approach to our initial guidance.
Craig W. Safian: Depreciation in the quarter of $26 million was up about 10% compared to 2023.
Craig W. Safian: Adjusted EPS in Q1 was $2.93, up 2% compared with last year. We had 79 million shares outstanding in the first quarter, a reduction of close to 1 million shares or about 2% year over year. We exited the first quarter with about 79 million shares on an unweighted basis.
Craig W. Safian: Net interest expense, excluding deferred financing costs in the quarter was $18 million.
Craig W. Safian: This is favorable by $9 million versus the first quarter of 2023 due to higher interest income on our cash balances.
Craig W. Safian: The modest floating rate debt, we have is fully hedged through the third quarter of 2025.
Craig W. Safian: The Q1 adjusted tax rate, which we use for the calculation of adjusted net income was 20% for the quarter.
Craig W. Safian: Operating cash flow for the quarter was $189 million, up 15% compared to last year. CapEx for the quarter was $23 million, up modestly year over year. Free cash flow for the quarter was $166 million.
Craig W. Safian: The tax rate for the items used to adjust net income was 25% for the quarter.
Adjusted EPS in Q1 was $2 93 sets up 2% compared with last year.
Craig W. Safian: Free cash flow as a percent of revenue on a rolling four-quarter basis was 18% of revenue and 72% of EBITDA. Free cash flow conversion from Gap Net Income was 135%. Our free cash flow conversion is generally higher when CV growth is accelerating. For example, at the end of the first quarter, we had about $1.2 billion of cash. Our March 31st debt balance was about $2.5 billion. During the quarter, we closed on a new five-year, $1 billion unsecured revolving credit facility. Outstanding borrowings from the existing credit agreement were rolled over into the new unsecured revolver, and the amount drawn remains fully hedged.
Craig W. Safian: We had 79 million shares outstanding in the first quarter.
Craig W. Safian: This is a reduction of close to 1 million shares or about 2% year over year.
We exited the first quarter with about 79 million shares on an unweighted basis.
Craig W. Safian: Operating cash flow for the quarter was $189 million up 15% compared to last year.
Craig W. Safian: Capex for the quarter was $23 million up modestly year over year.
Craig W. Safian: Free cash flow for the quarter was $166 million.
Craig W. Safian: Free cash flow as a percent of revenue on a rolling four quarter basis was 18% of revenue and 72% of EBITDA.
Craig W. Safian: Free cash flow conversion from GAAP net income was 135%.
Craig W. Safian: Our capital structure is now 100% unsecured. After Moody's upgraded our credit in April, we now have three investment grade ratings from Fitch, S&P, and Moody's. The 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 purchases and strategic token M&A. Our balance sheet is very strong, with $1.9 billion of liquidity, low levels of leverage, and effectively fixed interest rates.
Our free cash flow conversion is generally higher when CV growth is accelerating.
Craig W. Safian: At the end of the first quarter, we had about $1.2 billion of cash our March 31st debt balance was about $2.5 billion.
Craig W. Safian: During the quarter, we closed on a new five year 1 billion dollar unsecured revolving credit facility outstanding.
Craig W. Safian: Outstanding borrowings from the existing credit agreement were rolled over into the new unsecured revolver.
Craig W. Safian: The amount drawn remains fully hedged.
Craig W. Safian: Our capital structure is now 100% unsecured.
Craig W. Safian: After Moody's upgraded our credit in April we now have three investment grade ratings from Fitch S&P and Moody's.
Craig W. Safian: 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.
Craig W. Safian: We repurchased $225 million of our stock during the first quarter. We expect the board will continue to refresh the repurchase authorization as needed going forward. At the end of March, we had about $830 million authorized for repurchases. As we continue to repurchase shares, our capital base will shrink.
Craig W. Safian: Our balance sheet is very strong with $1.9 billion of liquidity low levels of leverage and effectively fixed interest rates.
Craig W. Safian: We repurchased $225 million of our stock during the first quarter.
Craig W. Safian: Over time, this is accretive to earnings per share and, combined with growing profits, also delivers increasing returns on invested capital. We are reasoning our full year guidance on an FX-neutral basis to reflect Q1 performance. The dollar has gotten stronger since we reported in February, which is also incorporated into the guidance. 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.
Craig W. Safian: We expect the board will continue to refresh the repurchase authorization as needed going forward.
Craig W. Safian: At the end of March we had about $830 million authorized for repurchases.
Craig W. Safian: 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.
Craig W. Safian: We are raising our full year guidance on an FX neutral basis to reflect Q1 performance. The dollar has gotten stronger since we reported in February which is also incorporated into the guidance.
Craig W. Safian: For research, we continue to innovate and provide a very compelling value proposition for clients and prospects.
Craig W. Safian: Executives and their teams face uncertainty and challenges and they recognize how gartner can help regardless of the economic environment.
Craig W. Safian: For research revenue, based on Q1 results and our outlook for the balance of the year, our guidance on an FX-neutral basis is unchanged. The guidance also reflects a CV growth rate reacceleration this year, new business strength and improvements in retention would lead to upside for our guys, and research subscription revenue growth will likely lag CV growth reacceleration by about a quarter or two on an FX-neutral basis. The non-subscription revenue outlook continues to reflect the shift to higher quality traffic sources we discussed last quarter. We saw pricing stabilizing over the past few months, and improvement in pricing would represent upside to the guide. The first quarter for conferences is seasonally small.
Craig W. Safian: For research revenue based on Q1 results and our outlook for the balance of the year our guidance on an FX neutral basis is unchanged.
Craig W. Safian: The guidance also reflects our CV growth rate Reaccelerate this year.
Craig W. Safian: New business strength and improvements in retention would lead to upside to our guidance.
Craig W. Safian: And research subscription revenue growth will likely lag CV growth reacceleration by about a quarter or two on an FX neutral basis.
Craig W. Safian: The non subscription revenue outlook continues to reflect the shift to higher quality traffic sources, we discussed last quarter.
Craig W. Safian: We saw pricing stabilizing over the past few months and improvement in pricing would represent upside to the guidance.
Craig W. Safian: The first quarter for conferences is seasonally small we continue to expect strong performance for the full year.
Craig W. Safian: We continue to expect strong performance for the full year. We expect similar seasonality to what we saw in 2023, with Q4 the largest quarter, followed by Q2. For consulting, we continue to see demand for our labor-based services in areas like digital transformation and cost optimization. Contract optimization has had several very strong years and is highly variable.
Craig W. Safian: We expect similar seasonality to what we saw in 2023 with Q4, the largest quarter followed by Q2.
Craig W. Safian: For consulting we continue to see demand on our labor based services in areas like digital transformation and cost optimization.
Craig W. Safian: Contract optimization has had several very strong years and is highly variable.
Craig W. Safian: We've incorporated a prudent outlook for this part of the segment. For Consolidated Expenses, we are investing for future growth even as we have taken a balanced view of the timing of revenue flowing into the P&L. We recommend thinking about expenses sequentially, with notable seasonality driven by the conference's calendar and merit increases.
We've incorporated a prudent outlook for this part of the segment.
Craig W. Safian: For consolidated expenses, we are investing for future growth, even as we have taken a balanced view of the timing of revenue flowing into the P&L.
Craig W. Safian: We recommend thinking about expenses sequentially with notable seasonality driven by the conferences calendar and merit increases.
Craig W. Safian: As a reminder, about one-third of our revenue and operating expenses are denominated in currencies other than U.S. dollars. With the strengthening dollar, we now expect FX-neutral growth to be higher than reported growth by about half of a point for revenue and around the full point for EBITDA for the full year. Our updated 2024 guidance is as follows. We expect research revenue of at least $5.115 billion, which is FX-neutral growth of about 5%. First quarter results were about in line with our expectations, although we adjusted for the stronger dollar.
Craig W. Safian: As a reminder, about one third of our revenue and operating expenses are denominated in currencies other than U S. Dollar.
Craig W. Safian: With the strengthening dollar we now expect FX neutral growth to be higher than reported growth by about half a point for revenue and around a full point for EBITDA for the full year.
Craig W. Safian: Our updated 2024 guidance is as follows we expect research revenue of at least $5.115 billion, which is FX neutral growth of about 5%.
Craig W. Safian: First quarter results were about in line with our expectations, we updated for the stronger dollar.
Craig W. Safian: We expect conference revenue of at least $560 million, which is FX-neutral growth of about 11%. We expect consulting revenue of at least $525 billion, which is growth of about 3% 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 $1.455 billion, up $35 million from our prior guidance, before the effect of the stronger dollar. We expect typical operating expense seasonality to continue through the rest of the year.
Craig W. Safian: We expect conferences revenue of at least $560 million, which is FX neutral growth of about 11%.
Craig W. Safian: We expect consulting revenue of at least $525 million, which is growth of about 3% FX neutral.
Craig W. Safian: 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 $1.455 billion up $35 million from our GAAP prior guidance before the effect of a stronger dollar.
Craig W. Safian: We expect typical operating expense seasonality to continue through the rest of the year.
Craig W. Safian: We now expect 2024 adjusted EPS of at least $10.90. For 2024, we now expect free cash flow of at least $1.08 billion, up $15 million from our prior guidance. The Hire Free Cash Flow reflects a conversion from Gartner Income of 139%.
Craig W. Safian: We now expect 2024, adjusted EPS of at least $10.90.
Craig W. Safian: For 'twenty 'twenty four we now expect free cash flow of at least $1.08 billion up $15 million from our prior guidance.
Craig W. Safian: The higher free cash flow reflects a conversion from GAAP net income of 139%.
Craig W. Safian: Our guidance is based on 79 million fully diluted weighted average shares outstanding, which reflects the repurchases made through the end of March. And finally, for the second quarter, we expect adjusted EBITDA of at least $390 million. Our financial performance started the year ahead of our plan, despite continuing global macro uncertainty and a dynamic tech vendor market. CV grew by high single digits in the quarter, and we expect CV growth to reaccelerate in the first or second quarter of this year.
Craig W. Safian: Our guidance is based on 79 million fully diluted weighted average shares outstanding which reflects the repurchases made through the end of March.
And finally for the second quarter, we expect adjusted EBITDA of at least $390 million.
Craig W. Safian: Our financial performance started the year ahead of our plan, despite continuing global macro uncertainty and a dynamic tech venture market.
Craig W. Safian: CV grew high single digits in the quarter, and we expect CV growth to Reaccelerate from the first or second quarter of this year.
Craig W. Safian: Revenue and EBITDA performance exceeded our expectations, and we increased our operating guidance and incorporated the stronger U.S. dollar into the outlook. Free cash flow was strong in the quarter, and we increased our guidance for the full year. We repurchased about $225 million in stock here through through March 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.
Craig W. Safian: Revenue and EBITDA performance exceeded our expectations, we increased our operating guidance and incorporated the stronger U S dollar into the outlook.
Free cash flow was strong in the quarter and we increased the guidance for the full year.
Craig W. Safian: We repurchased about $225 million in stock year to date through March and remain eager to return excess capital to our shareholders.
Craig W. Safian: We will continue to be price sensitive opportunistic and disciplined.
Craig W. Safian: Looking out over the medium term, our financial model and expectations are unchanged.
Craig W. Safian: With 12 to 16% research CV growth, we will deliver double-digit revenue growth. With gross margin expansion, sales costs growing about in line with CV growth, and G&A leverage, we will expand 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 paying us up front. And we'll continue to deploy our capital on share purchases, which will lower the share count over time, and on strategic value-enhancing token M&A. With that, I'll turn the call back over to the operator, and we'll be happy to take your questions. Operator?
Craig W. Safian: With 12% to 16% research CV growth, we will deliver double digit revenue growth.
Craig W. Safian: With gross margin expansion sales costs growing about in line with CV growth and G&A leverage we will expand EBITDA margins modestly over time.
Craig W. Safian: 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.
Operator: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. And our first question will come from Jeff Mueller from Baird. Your line is now open. Please check that your line is not on mute.
Speaker Change: Thank you.
A reminder to ask a question. Please press star one on your telephone and wait for your name to be announced till the <unk>. Your question. Please press star one again.
Speaker Change: And our first question will come from Jeff Mueller from Baird. Your line is now open.
Speaker Change: Please check that your line is not on mute.
Jeffrey P. Meuler: Hello.
Operator: Yes, sir, we can hear you now. Yeah. Thank you. Sorry about that.
Jeffrey P. Meuler: Hello can you hear me.
Jeffrey P. Meuler: Yes, Sir we can hear me now.
Jeffrey P. Meuler: I was hoping you could give more perspective on GTS new business sold trends. And I'm obviously keying in on the year over year being a bit weaker this quarter than last. And I think that was one of the factors that you were pointing to for confidence in the CV reacceleration during 2024. So any perspective, did it soften at all later in the quarter? Was it consistent with your plan?
Jeffrey P. Meuler: Thank you sorry about that I was hoping you could give more perspective on GTS, new business sold trends minimum obviously keying in on the year over year being a bit weaker this quarter than last.
Speaker Change: And I think that was one of the factors that.
You were pointing to for confidence in the CD re acceleration during 2024, so just any perspective did it soften at all later in the quarter was it consistent with your plan. Thanks.
Craig W. Safian: Thanks. Hey, good morning, Jeff. It's Craig.
Craig W. Safian: Thank you for the question. You know, on the new business side, again, you need to really differentiate between what we're seeing from a tech vendor perspective and what we're seeing on the enterprise function leader portion of the GTS business. And, you know, what we saw was GTS new business for enterprise function leaders was up low single digits year over year in the quarter, and it was down a little bit year over year on the tech vendor side. And so, you know, those two dynamics are really what hit us in the first quarter.
Speaker Change: Hey, good morning, Jeff It's Greg. Thank you for the question.
Greg: On the new business side.
Hey, guys you need to really differentiate between what we're seeing from tech vendor perspective, and what we're seeing.
Speaker Change: On the enterprise function meter portion of the.
Speaker Change: The GTS business.
Speaker Change: And what we saw was GTS new business.
Speaker Change: This.
For enterprise function leaders.
Was up low single digits year over year in the quarter.
Speaker Change: And it was down a little bit year over year on the tech vendors side and so those.
Speaker Change: Those two dynamics are really what hit us in the first quarter I would say just on the tech vendors side and I'm sure. We'll talk about this quite a bit as we as we worked through.
Craig W. Safian: You know, I would say just on the tech vendor side, and I'm sure we'll talk about this quite a bit as we work through the questions, that we highlighted in February that we had a larger than normal amount of contracts coming up for renewal on the tech vendor side, and those were typically two or three-year deals. And so they hadn't been touched in a few years.
Speaker Change: Questions.
Speaker Change: Yes that we highlighted in February that we had a larger than normal amount.
Speaker Change: Contracts coming up for renewal on the tech vendor side those were typically two or three year deals and so they hadn't been touched in a few years and obviously the tech market is very different today than it was a few years ago and.
Eugene A. Hall: And obviously, you know, the tech market is very different today than it was a few years ago. And, generally, what we're seeing, particularly with our medium to larger-sized tech clients, is that they are staying with us, but there is still some recalibration. And what that means is there's less new business than normal on those renewals. Out over the medium term and long term, we expect our tech vendor business to be a 12 to 16% grower, but we're still, and again, you guys can read the headlines as well as we can, we're still in a pretty challenging tech vendor and market.
Speaker Change: Generally what we're seeing particularly with our medium to larger sized.
Speaker Change: Clients is they are staying with us, but there is some still some recalibration and what that means is there is less new business than normal on those renewals out over the medium term and long term, we expect our tech vendor business to be a 12% to 16% grower, but we're still in again.
Speaker Change: You guys get all read the headlines as well as we can we're still in a pretty challenging tech vendor end market.
Eugene A. Hall: The other thing I'd add is that our sales to new logos in tech vendors have been strong. And so what Craig reflected is that it's not the new logos that are actually strong. It's the, when we have a renewal, how much, and how many additional seats they are OK.
Speaker Change: Yes, I would add is that our sales to new logos in tech vendors has been strong and so what we're what Craig.
Speaker Change: Reflected is that something new.
Speaker Change: That's actually been strong hits me when we have the renewal how much how many additional seats.
Jeffrey P. Meuler: Okay, and then just on retention, obviously, we have your publicly reported metrics and just want to recognize that you've previously called out the outsized renewals for tech vendor this quarter. So the question I guess is, like, if I if you isolate just the business that comes up for renewal in a period is the are the renewal rates now largely stable kind of like quarter to quarter at this point and you just needed to get through the tail of those uh renewals i'm just trying to i guess just figure out how stable it is on what's coming up for renewal Yeah, I think, I think, Jeff, it's a great question.
Speaker Change: Goodbye.
Speaker Change: 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 outsize renewals for tech vendor. This quarter. So the question I guess is like.
If I if you isolate just the business that comes up for renewal in a period.
Speaker Change: Is the are the renewal rates now largely stable kind of like quarter to quarter. At this point that you just needed to get through the tail of those.
Speaker Change: Renewals I'm just trying to I guess just figure out how stable. It is on what's coming up for renewal.
Jeffrey P. Meuler: You know, we have seen some stability in retention rates. And, you know, generally, if you look at our NCBI in any given quarter, it's a combination of what we renew and how much new business we sell. And, you know, with Q1 being a seasonally very small new business quarter, historically, it's always been that way, coupled with the disproportionate amount of tech vendor contracts we had coming up for renewal. You know, the reason we highlighted that in February is because that makes for tough math, if you will, on NCBI in a given quarter. We are seeing retention rates stabilize, and we do see strong pipeline across the board in both GTS and GBS.
Speaker Change: Yes, I think I think Jeff that's a great question.
<unk> seen some stability in the retention rates and generally if you look at our NCI in any given quarter. It's a combination of what did we renew and at how much new business, we sold and with Q1 being a seasonally very small new business forward.
Speaker Change: Historically, it's always been that way coupled with the disproportionate amount of.
Tech vendor contracts, we had coming up for renewal.
The reason, we highlighted that in February because that makes for a tough math if you will.
Speaker Change: And CPI in a given quarter.
Speaker Change: We are seeing retention rates stabilize we do see.
Speaker Change: <unk> pipeline across the board in both GTS and GBS and so again, we firmly believe that contract value growth is going to Reaccelerate. This year as we indicated in our prepared remarks and.
Jeffrey P. Meuler: And so again, you know, we firmly believe that contract value growth is going to reaccelerate this year, as we indicated in our prepared remarks, and, you know, stable retention rates will certainly be an ingredient in that reacceleration.
Speaker Change: Stable retention rates will certainly be an ingredient in that reacceleration.
Craig W. Safian: And our next question will come from Toni Kaplan from Morgan Stanley. Your line is open.
Speaker Change: Got it thank you.
Speaker Change: Thank you.
Speaker Change: And our next question will come from Toni Kaplan from Morgan Stanley. Your line is open.
Toni Michele Kaplan: Hey, thanks so much. I was hoping you could just comment on that, 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? And basically, if you could give sort of an outlook on how you think the tech vendor trends will go from here and what percent of business is related to tech vendors at this point, you probably gave it. I just missed that.
Toni Michele Kaplan: Hey, Thanks, so much I was hoping you could just comment on that.
Toni Michele Kaplan: First part of <unk>.
Toni Michele Kaplan: Last question, the Recalibration and seats.
Toni Michele Kaplan: As contracts come up for renewal.
Toni Michele Kaplan: Are you seeing the large enterprise clients, reducing seats or was that more of a comment around the tech vendor and basically if it sort.
Toni Michele Kaplan: With an outlook on how you think the tech vendors trends go from here and what percent of businesses related to tech vendor at this point you probably gave it I just missed it.
Eugene A. Hall: So, hey Toni, it's Gene. There are a couple of things going on. One is in the small end of the market, the companies that got funding two or three years ago that are now coming for renewal; many of those companies are having difficulty getting funding for two reasons. One is that the interest rates are higher. The second is there's been a big shift. And then you have the large end of the market, where you have different problems going on, where they're laying off tens of thousands of people.
Speaker Change: Hey, Tony I've seen there's a couple of things going on one is in the small end of the market.
Speaker Change:
Speaker Change: The companies they've got funding two or three years ago that are now counts renewal. Many of those companies are having difficulty getting funding for two reasons one is that the inter.
Speaker Change: Interest rates are higher the second is there's been a big shift.
Speaker Change: We're venture Capitals, one fund, that's frankly, AI startups compared the softer start there they were funding two years ago, and so we're seeing kind of as those come up for renewal the ones that aren't getting funding don't do as well and that's why new logos through wealth or selling to the AI startups and then you have the large end of the market, we are different from where they're laying off tens of thousands of people and.
Eugene A. Hall: And so it's a tougher selling environment than it has been in the past. As Craig mentioned, Q1 is our worst quarter in terms of just looking at the skew of renewals in terms of the largest number of those contracts coming up. And so we expect it to get better through the year. And then, Toni, just for context, the tech vendor CV is a little less than 25% of total CV. It's pretty consistent with where we have been over the last several quarters.
Speaker Change: So there, it's a tougher selling environment than it has been in the past as Craig mentioned Q1 was our worst quarter in terms of as we look at the skew of renewals in terms of the most of.
Speaker Change: The largest number of those rules coming up and so we expect to get better through the year and then Tony just for context.
Speaker Change: The tech vendors CV is a little less than 25% of.
Speaker Change: Total CV, it's pretty consistent.
Speaker Change: With where we've been over the last several quarters.
Toni Michele Kaplan: Yep, okay, great. And then I wanted to ask you about AI. You've said in the past that it hasn't generated extra demand and that it's just sort of another topic that clients are interested in. I guess, why shouldn't you see increased demand, you know, for additional seats across both GTS and GBS? It seems like it's a topic that more people within the organization would probably need to learn more about. And so, you know, and then maybe any ways you've been able to utilize AI for efficiency or selling purposes? So, Toni, there's a broad...
Yep, Okay great.
Speaker Change: And then wanted to ask on AI.
Speaker Change: <unk> said in the past that it hasn't generated extra demand and that is just sort of another topic that clients are interested in.
Speaker Change: I guess why shouldn't you see increased demand for additional seats across both GTS and GBS. It seems like it's a topic that more people within the organization.
<unk>.
Speaker Change: And our need to learn more about and so yeah.
Speaker Change: Yeah.
And then maybe any ways, you've been able to utilize AI for efficiency or selling purposes.
Eugene A. Hall: So, Toni, there's a broad level of interest in AI across each of our functional areas. So whether it's IT, marketing, sales, finance, legal, every single function has a very high interest in AI. And we have a large research team that is focused on making sure we understand the applications of AI in each of those functional areas. And so we have a large installed base of existing clients. Most of those clients, the existing clients, are looking at our AI research. When we sell a new client, they also, that's a very hot topic; they want to talk to us about it. And it is a good reason to close a sale.
So certainly there is a broad level of interest in AI across each of our functional areas. So whether it's.
Speaker Change: Marketing sales finance legal every single function has a very high interest in AI and we have a large research team that is focused on making sure we understand the applications in AI in each of those functional areas and so we have a large installed base of existing clients.
Speaker Change: No.
Most of those clients are the existing clients are looking at our AI research and using it when.
Speaker Change: When we sell a new client and they also that's a very hot topic I want to talk to us about it and it is a good reason to close the sale. If I contrast, it though like two years ago body with cloud computing that was.
Toni Michele Kaplan: If I contrast it, though, like two years ago, about cloud computing, that was, you know, AI wasn't the hot topic; cloud computing was. And so the topic has shifted, and it's at a very high level of interest, just as cloud computing was two or three years ago. And so it's not like we didn't have demand; this all of a sudden increased demand has kind of taken the place of things that were in the past.
Speaker Change: The hot topic of cloud computing was and so the topic has shifted and its a very high level of interest just as cloud computing was two or three years ago and so it's not like that we didn't have demand is all of a sudden increase in demand. It kind of has supply is kind of taking the place of things that were in the past.
Toni Michele Kaplan: And again, as we and the other thing I'd say is, companies are now just kind of trying to figure out whether it's relevant, what the trade-offs are, what the cost is. And I think that this could gather momentum over time as they sort these kinds of things out. It's good for us no matter how you look at it, but it's not like we had no business, and this is going to go into a step change.
Speaker Change: And the other thing I'd say is companies are now just kind of trying to figure out whether it's relevant what the trade offs are what the cost is.
Speaker Change: Think that this could gathered momentum over time as they sort these kinds of things.
Speaker Change: It's good for US no matter, how you look at it but it's not like we had no business go into electric step change it's more like.
Toni Michele Kaplan: It's more like it's substituting other things that we were helping with. Again, I think on the margin, over time, it will be a net plus. And with regard to internal usage, we have a number of internal uses that we are using, you know, mainly with data analytics, having very sophisticated machine learning algorithms and neural networks, in terms of understanding our business. That's one of the big applications we have.
Speaker Change: Substitute other things that we were helping with again I think on the margin over time, it will be a net plus and with regard to internal usage, where a number of internal uses that we are.
Speaker Change: Using mainly with data analytics, having very sophisticated machine learning algorithms and neural networks in terms of understanding our business. That's one of the big applications we have.
Speaker Change: Okay, great. Thanks.
Heather Nicole Balsky: Our next question comes from Heather Balsky from Bank of America. Your line is now open.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Heather Bosky from Bank of America. Your line is now open.
Heather Nicole Balsky: Hi, thank you for taking my question. 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 an inflection? And also, just kind of, was there anything in the first quarter that was kind of a positive sign in your view, realizing that 1Q is kind of a lighter quarter generally in your business, but just just help us get the conviction you have in the inflection. Thanks.
Heather Nicole Balsky: Hi, Thank you for taking my question.
Heather Nicole Balsky: I'd love to touch on your.
Heather Nicole Balsky: I guess I'll call. It guidance that you still think CV you should start to accelerate either go after this quarter or after next quarter.
Heather Nicole Balsky: It sounds like the selling environment got tougher, we're still seeing layoffs in the tech industry.
Speaker Change: I'm just curious.
Speaker Change: What you're seeing right now.
Speaker Change: Still gives you confidence that this is the year, we see the inflection.
Speaker Change: And also just kind of.
Speaker Change: Was there anything in the first quarter that kind of was a positive sign in your view.
Speaker Change: <unk> is kind of a lighter quarter generally in your business, but just help us get the conviction you have in the inflection. Thanks.
Eugene A. Hall: Hey Heather, let me start. So in Q1, our Enterprise Function Leaders CV grew 10%. So it was a little tougher economic environment. Decisions got pushed a little.
Speaker Change: Hey, Andrew let me start so.
Speaker Change: Q1, our enterprise function leaders CV grew 10%. So it was a little tougher economic environment decisions got pushed we still grew 10% and that kind of environment.
Eugene A. Hall: We still grew 10% in that kind of environment. The second thing is that we talked with the tech sector. We had a particularly, we had a lot more renewals from tourism years ago coming up than we see later in the year. And the third thing is, if we look at our go forward sales pipeline, our go forward sales pipeline is very robust. And so those are the kinds of things that give us confidence that, you know, the outlook we gave is very accurate.
Speaker Change: Second thing is we talked with the tech sector, we had a particularly as we had.
Speaker Change: A lot more renewables for two or three years ago coming out later in the year and the third thing is we look at our go forward sales pipeline. Our go forward sales pipeline is very robust and so those are the kinds of things that give us.
Speaker Change: Confidence that.
Craig W. Safian: Well, I think, and just to add to that, Heather, our sales force continues to come up the tenure curve. And so, you know, every day they're a little bit more experienced and a little bit more tenured. And, you know, that gives us confidence around the re-acceleration. And I think also, you know, we are a learning company that is very agile. And, you know, even in a tougher environment, we are always working on ways to perform better in that tougher environment.
The outlook, we gave is very accurate.
Speaker Change: And just to add to that Heather.
Speaker Change: Our sales force continues to come up with 10 year curve and so every day there are a little bit more experienced than a little bit more tenured and that gives us confidence around the reacceleration and I think also we are.
Speaker Change: A a learning company that are are very agile and.
Speaker Change: Even in a tougher environment, we're always working for ways to perform better in that tougher environment.
Craig W. Safian: And, you know, we learned a lot from prior dislocations. We've learned a lot even from the last, you know, couple of quarters, and we are applying those things. And we believe that actually has had a positive impact and helped fuel that re-acceleration as well.
Speaker Change: We learned a lot from prior dislocations, we've learned a lot even from the last couple of quarters and we are applying those things and we can.
Speaker Change: That actually will have a positive impact.
Speaker Change: It helped fuel that reacceleration as well.
Heather Nicole Balsky: Thank you. And another question we got, you talked about the heavy renewals in the quarter, and you'd warned us about that. As you think about the renewals coming from, I guess, the sort of peak period for the tech vendor space,
Speaker Change: Thank you and another question, we got you talked about the heavy renewals in the quarter and yet you had warned us about that as you think about the renewals coming from the I guess, the sort of peak period for the tech vendor space.
Craig W. Safian: Yeah, 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 it's much more even over the balance of the year and again that's another reason that that gives us confidence so if you look at the way the renewals work and the way our new business ramps over the course of the year that's what gives us confidence.
How does the rest of the year luck in terms of.
There were no wells coming out.
Speaker Change: Yes.
Speaker Change: So obviously.
Speaker Change: Got it adds up to a 100% over the course of the year and so we were a little over weighted.
Speaker Change: In the first quarter on those tech vendor renewals and it's it's much more even over the balance of the year.
Speaker Change: Yes.
Speaker Change: Another reason that gives us confidence so if you look at the way the renewals work and the way our new business ramps over the course of the year.
That's what gives us confidence that either are coming off of Q1 or Q2, you will see the reacceleration in total contract value growth rate.
Andrew Owen Nicholas: And our next question will come from Andrew Nicholas of William Blair. Your line is open.
Craig W. Safian: Hi, good morning. Thanks for taking my questions. I wanted to first ask about operating expenses, a pretty significant upside to your adjusted EBITDA outlook for Q1. Just wondering where the major drivers were relative to your expectations in terms of spend, any areas in particular where you're getting a bit more efficiency than you had expected, and maybe what that means for operating expenses going through the rest of this year.
Speaker Change: Alright, thank you.
Speaker Change: Yes.
Speaker Change: Thank you.
Our next question will come from Andrew Nicholas from William Blair. Your line is open.
Andrew Owen Nicholas: Hi, good morning, Thanks for taking my questions.
Andrew Owen Nicholas: I wanted to first ask on operating expenses.
Pretty significant upside to your adjusted EBITDA outlook on Q1, just wondering were the major drivers were relative to your expectations in terms of spend any areas in particular, where youre getting a bit more.
Andrew Owen Nicholas: <unk> C than you had expected and maybe what that means for operating expense.
Andrew Owen Nicholas: Yeah, Andrew, good morning. I'd say the Op Act favorability was pretty broad-based. It wasn't any one particular area where we you know harvested significant savings. You know, I would say the FX rate actually helped a little bit there too. It obviously hurts revenue but helps on expenses, and so you know we have dialed in the savings in the areas that we saw in Q1. Some of that's timing, some of that we're going to catch up on, and some of that is real savings, so the new guidance reflects what we learned from Q1 from an OpEx perspective, but don't overlook the foreign exchange.
Andrew Owen Nicholas: Going through the rest of this year.
Speaker Change: Yeah, Andrew good morning.
Speaker Change: I would say.
The opex.
Speaker Change: Favorability was pretty broad based it wasn't any one particular area.
Speaker Change: Where are we.
Harvested significant savings I would say the FX rate actually.
Speaker Change: Helped a little bit there too obviously hurts on revenue, but helps on <unk>.
Speaker Change: Expenses and so we have dialed in the savings in the areas that we saw in Q1. Some of that is timing some of that we're going to catch up on and some of that is real savings and so the new the new guidance reflects what we learned from from Q1 from an opex perspective, but I don't.
Speaker Change: Overlook the foreign exchange as we've talked about the dollar has strengthened quite a bit and about a third of our operating expenses are denominated in currencies outside of the U S dollar and so those pretty large movements can actually impact the reported opex and revenue pretty significantly.
Andrew Owen Nicholas: You know, as we talked about, the dollar has strengthened quite a bit, and about a third of our operating expenses are denominated in currencies outside of the US dollar, and so those pretty large movements can actually impact the reported OpEx and revenue pretty significantly, but again, all reflected now in a new guide.
Speaker Change: But again all reflected now in the new guide.
Craig W. Safian: Got it. That's helpful.
Andrew Owen Nicholas: And then I wanted to ask about conferences. I think you said you added two new conferences in the first quarter. Can you just kind of talk about where you sit in terms of your plans for the conference build out front? I know you had hoped to have, at some point in the future, a conference in every single region for every single kind of GBS and GTS seat. So if you could just kind of update us on that progress and momentum and building that,
Speaker Change: Got it that's helpful. And then I wanted to ask about competences I think you said you added two new conferences in the first quarter can you just kind of talk about where you sit in terms of your plans on the conference build out front I know you had hoped to have at some point in the future.
Speaker Change: Our confidence in every single region for every single kind of.
Speaker Change: GBS and GTS seat. So if you could just kind of update us on that progress and the momentum in building at that point.
Craig W. Safian: Yeah, so that is still the plan, right? Strategy is for us to have a destination conference for every major constituency that we serve, role that we serve, in every major region or geography in which we operate, and I think, you know, the two launches in the first quarter, while small, are indicative of that. And so, we've expanded our finance, our CFO conferences to Australia in the first quarter, again, sort of building out that portfolio, and we brought back a data and analytics summit in Brazil, again, because we've got a large business in Brazil, and there's demand for data and analytics.
Speaker Change: Yes, so that is still the plan right strategy is for us to have a destination comprehends for every major constituency that we serve role that we serve in every major region or geography in which we operate in I think two launches in the first quarter, while small are indicative of that and so.
Speaker Change: We've expanded our finance.
CFO conferences to Australia in the first quarter again sort of building out that portfolio and we brought back.
Speaker Change: Data and analytics summit in Brazil, again, because we've got a large business in Brazil, and there is demand for data and analytics.
Craig W. Safian: This year, in 2024, you know, we're going from 47 conferences last year to 51 in 2024. I would expect us to have a similar sort of growth over the next several years as we continue to build out the conference portfolio to support the research business. The other thing we're doing, Andrew, too, is for some of the existing conferences, we're moving to larger venues so that we can actually accommodate the incremental demand that we're seeing, which is substantial.
This year or in 2024.
Speaker Change: We're going from 47 conferences last year to 51, and 2024 I would expect us to have a similar sort of build over the next several years as we continue to build out the conferences portfolio to support the research business. The other thing we're doing Andrew choice for some of the existing conferences, we're moving to larger venues.
Speaker Change: So that we actually can accommodate the incremental demand that we're seeing which is substantial.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Joshua K. Chan: And our next question will come from Josh Chan from UBS. Your line is open.
Speaker Change: And our next question will come from Josh Chan from UBS. Your line is open.
Joshua K. Chan: Hi, good morning, Gene and Craig. Thanks for taking my question. Is there a way to estimate how much the elevated renewals in Q1 impacted your CV growth? And, relatedly, you know, 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?
Joshua K. Chan: Hi, Good morning, Jane and Craig Thanks for taking my question.
Joshua K. Chan: Is there a way to estimate how much the elevated renewals in Q1 impact that Youre CV growth.
Joshua K. Chan: And I guess relatedly absent this elevated renewal impact in Q2.
Joshua K. Chan: How should we think about the <unk> in Q2 as compared to last year, which should theoretically be a pretty easy comparison I think.
Craig W. Safian: Thanks, good morning, Josh. So, you know, again, I think the combination, as we talked about, of more than normal contracts coming up for renewal against our smallest new business quarter is really, and the continued tech vendor challenges are really the story around the Q1 NCBI and the Q1 CV growth. As you think about moving through the year, the simple way that I think about whether CV growth accelerates or not is just comparing an expectation to your point on what the quarterly NICV is going to be this year compared to what the NICV was last year.
Speaker Change: Thanks, Jay and good morning, Josh.
Speaker Change: So.
Speaker Change: Again, I think the combination as we talked about.
Speaker Change: More than normal contracts coming up for renewal.
Speaker Change: Against our smallest new business quarter is really and the continued tech vendor challenges is really the story around the Q1.
Speaker Change: And CVI.
Speaker Change: Q1 <unk>.
Speaker Change: CV growth.
Speaker Change: As you think about moving through the year, the simple way that I think about whether CV growth accelerates or not is just comparing an expectation to your point.
Speaker Change: And what the quarter, Nick is going to be in this year compared to what the next city wise last year. So roughly speaking last year in the second quarter, we did around $40 million worth of NCI across GTS and GBS for the contract value growth to Reaccelerate in Q2, we'd have to do.
Craig W. Safian: And so, roughly speaking, last year in the second quarter, we did around $40 million worth of NCBI across GTS and GBS. For the contract value growth to reaccelerate in Q2, we'd have to do modestly more than that on a dollar basis year over year. Again, you could look at the same number for Q3, where I think in Q3 of last year we did an order of magnitude around $100 million for NCBI in the third quarter.
Speaker Change: Modestly more than that on a dollar basis year over year and again you could look at the same number for Q3, where I think Q3 of last year, we did order magnitude around $100 million of.
Craig W. Safian: We would have to do modestly more than that in the third quarter of 2024 to continue the reacceleration. So again, as we've talked about when we think the reacceleration is going to happen, clearly, the renewal mix or the contracts coming up for renewal mix coupled with our new business, normal expectations coupled with looking at our pipeline, looking at conversion rates, looking at pipeline velocity, et cetera, that gives us confidence that we will see a reacceleration coming off of either the Q1 or the Q2 number.
<unk> in the third quarter, we'd have to do modestly more than that in the third quarter of.
Speaker Change: 2024 to continue that re acceleration and so again as we as we've talked about sort of when we think the re acceleration is going to happen clearly the renewal mix or the contracts coming up for renewal mix, coupled with our new business normal expectations, coupled with <unk>.
Speaker Change: At our pipeline looking at conversion rates looking at pipeline velocity et cetera, that's what gives us confidence that we will see a re acceleration coming off of either Q1 or Q2 number.
Joshua K. Chan: Great. Thanks for the call, Craig. And I guess on my follow-up question about your Salesforce tenure, how do you think about the idea of the tenure improving at a time when the environment is not yet fully robust? Do you have to work harder on retaining so that you can fully take advantage of Salesforce when the environment does cooperate? How do you think about that?
Paragon: Great. Thanks for that color Paragon.
Speaker Change: My follow up on your on your sales force tenure, how do you think about the idea of the tenure improving.
Speaker Change: Into a time when the environment is not yet fully robust.
Speaker Change: Have to work harder on retaining so that you can fully take advantage of the sales force when the environment does cooperate how you think about that.
Craig W. Safian: Yeah, it's a great question. So obviously, you know, when we talk about average productivity and what we've seen historically, those are generally measured in more, quote unquote, normal operating environments. And so clearly, you know, 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. We also measure the inputs that go into sales.
Speaker Change: Yes, it's a great question.
Speaker Change: So obviously.
Speaker Change: When we talk about average productivity and what we've seen historically those are generally measured in more quote unquote normal operating environment and so clearly.
Yes, 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 we also measure.
Craig W. Safian: And so how many opportunities are being added? How quickly are those things advancing through the pipeline? How often are salespeople and service people interacting, you know, with their clients? How many prospects are we getting to, you know, webinars or conferences and things like that? So there are other measures beyond just the pure NCBI measure, which is sort of the ultimate measure. But there are other measures that we can look at that give us confidence that, you know, our sellers are getting better at that and more experience and are coming up the tenure curve. And then, you know, when the economy does stabilize or, you know, perhaps even improve, we should be able to see the benefits from that. Great.
Speaker Change: The inputs that go into sales and so how many opportunities are being added and how quickly are those things advancing through the pipeline, how often are salespeople and service people interacting with their clients.
Speaker Change: Any prospects or are we getting to webinars or to compensate the things like that so there are other measures beyond just the pure and CVI measure, which is sort of the ultimate measure, but there are other measures that we can look at that give us confidence that our sellers are getting more at bats, and more experience and are coming up the 10 year curve.
Speaker Change: And then when the economy does stabilize or perhaps even improve we should be able to see the benefits from that.
Joshua K. Chan: Great, thank you for the color and thanks for the time.
Speaker Change: Great. Thank you for the color and thanks for the time.
Manav Shiv Patnaik: Thank you. Our next question comes from Manav Patnaik from Barclays. Your line is open.
Speaker Change: Thank you. Our next question comes from Manav Patnaik from Barclays. Your line is open.
Craig W. Safian: Thank you. Good morning, Craig. In your prepared remarks, you made a comment about pricing stabilization, but there could be upside to guidance that could improve. So I was just hoping you could give a little bit more detail on, you know, what the
Manav Shiv Patnaik: Thank you and good morning, Craig in your prepared remarks, you made a comment around pricing stabilized, but it could be upside to guidance. If it improves. So I was just hoping you could just give a little bit more detail on.
Manav Shiv Patnaik: Hey, good morning, Manav. Just for clarity's sake, the pricing stabilization comment was really specifically about the non-subscription part of our research business, and so, you know, as you recall, coming out of last year, you know, on our February call, we talked a lot about focusing on higher-quality traffic, and, you know, by doing that over the medium to long term, we would expect to see improvements in pricing, and so what we saw in the first quarter is some stabilization to pricing, which, again, you know, we view as positive.
Manav Shiv Patnaik: The pricing I guess year over year growth is today and listen to historical.
Manav Shiv Patnaik: Were you implying that you guys might.
Manav Shiv Patnaik: Be raising prices here again.
Speaker Change: Hey, good morning Manav.
Speaker Change: Just for clarity sake.
The pricing stabilization comment was really specifically about the non subscription part.
Speaker Change: Our research business and so.
As you recall coming out of last year.
Speaker Change: On our February call, we talked a lot about <unk>.
Speaker Change: Focusing on higher quality traffic.
Speaker Change: And.
Speaker Change: By doing that over the medium to long term, we would expect to see improvements in pricing and so what we saw in the first quarter is some stabilization to pricing, which again, we view as positive and as we continue to focus on that higher quality traffic if it does convert into.
Craig W. Safian: Okay, guys, and just one quick one, you know, 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 expectations, can you just remind us again of your hiring plans for the quota-bearing Salesforce?
Speaker Change: Better pricing, there that would reflect upside to the existing guidance about the pricing in our subscription business has been completely stable. So there's been no issue there.
Speaker Change: Okay got it and then just one quick one and I think the enterprise count is down about 4% year over year I'm guessing a lot of that was <unk>.
Speaker Change: Challenging you talked about.
Speaker Change: In context of your CD acceleration that you're expecting can you just remind us again, if your hiring plans for their quota bearing sales force yes.
Manav Shiv Patnaik: Yeah, sure, Manav. Happy to provide that color.
Speaker Change: Yes sure.
Craig W. Safian: So, on the enterprise count, your hypothesis is spot on. It's more, and Gene alluded to this earlier in our prepared remarks, it's just more churn in the small tech space. And again, to Gene's point, we are adding new logos in the small tech space, and we're actually doing pretty well there and holding up pretty well, but it's not offsetting the losses. And again, as Gene laid out, the challenges that a lot of these clients had where they had funding two years ago, you know, when they signed the contract, and obviously may not today.
Speaker Change: Happy to provide that color. So on the enterprise count your hypothesis is spot on.
Speaker Change: And Jane alluded to this earlier era prepared.
Speaker Change: Prepared remarks, it just more churn in the small tech space and again to <unk> point, we are adding new logos and the small tech space, and we're actually doing pretty well, there and holding up pretty well, but it's not offsetting the losses and again as Jim laid out the challenges that a lot of these clients had where they had funding two years ago.
Speaker Change: When they sign the contract and obviously may not today and so that's really the prime story.
Craig W. Safian: And so, that's really the prime story, you know, in the small tech space. On the enterprise count, on headcount growth, you know, we continue to target mid to high single-digit QBH growth by the end of this year. And again, the combination of, you know, the size of the Army we had entering the year, people coming up the 10-year curve, and that mid to high single-digit growth in QBH should set us up, or will set us up, to, you know, continue to accelerate contract value growth rolling into 2025.
Speaker Change: On the.
On the enterprise count.
Speaker Change: On head count growth, we continue to target mid to high single digit <unk> growth by the end of this year.
Speaker Change: And again the combination of that.
Speaker Change: The size of the Army, we had entering the year people coming out of the 10 year curve and that mid to high <unk>.
Speaker Change: Growth in <unk>.
Speaker Change: Should set us up but will set us up.
Speaker Change: To accelerate our contract value growth rolling into 2025.
Speaker Change: Thank you.
Surinder Singh Thind: And our next question comes from Surinder Thind from Jeffrey's. Your line is now open.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Surinder <unk> from Jefferies. Your line is now open.
Surinder Singh Thind: Thank you.
Craig W. Safian: on some of the tech vendor questions here, on an absolute dollar basis for CV for tech vendors, is the idea that we're close to stabilizing at this point? Or how should we think about the trajectory over the course of the year as you think about, you know, CV growth reaccelerating? So is the primary determinant of that where a CV for a tech vendor ends up? Or how should we think about that? Good morning, Surinder.
Surinder: Thank you.
Surinder: Just following up on some of the Tech Ben your question here.
Surinder: Absolute dollar basis for CV for Tech vendor is the idea that.
Surinder: We are close to stabilizing at this point or how should we think about the trajectory over the course of the year as you think about.
Surinder: CV growth re accelerating so.
Surinder: The primary determinant of that.
Surinder: We're CV for tech vendor ends up or how should we think about that.
Craig W. Safian: You know, I think, I think it's a combination across the portfolio that will fuel the reacceleration for CV. I mean, clearly, you know, the tech vendor needs to be a piece of that. It's about 25% of total CV.
Hey, good morning surrender.
Speaker Change: I think it's a combination across the portfolio that will.
Speaker Change: Fuel.
Speaker Change: The Reacceleration for Steve CV, I mean, clearly tech vendor needs to be a piece of that it's about 25% of total CV.
Craig W. Safian: But we also see opportunity for, you know, acceleration across the enterprise function leader portion of our business as well. As Gene highlighted, that continues to grow at around 10% combined. So pretty, pretty strong growth in a challenging environment.
Speaker Change: But we also see opportunity for acceleration across the enterprise function leader portion of our business as well as gene highlighted that continues to grow at around 10% combined a pretty pretty strong growth in a challenging environment, but essentially I think we believe.
Surinder Singh Thind: But essentially, I think we believe the, well, I shouldn't say the tide will lift all three businesses, but all three, all three portions of the CV base should see improvement that leads to the reacceleration of growth. But as a clarification, is CV for tech vendors assumed to be positive at any point in your guidance at this point? Surinder, we generally don't guide around contract value, and so yeah, I can't answer that you know 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. Got it.
Speaker Change: The well I shouldn't say the tide to lift all three businesses operate all three portions.
Speaker Change: Of the CV base should see improvement that leads to the reacceleration of growth.
Speaker Change: Okay, but it's the clarification is CB protect vendor.
Speaker Change: The assumed to inflict positive at any point in your guidance at this point.
Speaker Change: Sundar, we generally don't guide around contract value and so.
Speaker Change: Yeah, I can't answer that specifically.
Speaker Change: Specifically.
Speaker Change: All I would say is from either Q1 or Q2 point, we expect total CV to begin to Reaccelerate and certainly tech vendors CV will will contribute there.
Craig W. Safian: And then just a quick follow-up on the non-subscription pricing stabilization. It sounds like it stabilized fairly quickly or in the last few months. Is that a fair characterization?
Speaker Change: Got it and then just a quick follow up on the non subscription pricing stabilization. It sounds like it stabilized fairly quickly over the last few months is that a fair characterization and then it.
Surinder Singh Thind: And then, Could the opposite also happen? How quickly could you potentially see improvement? Is that something that, you know, we could start to see in the back half of the year or so? How should we think about the potential for when pricing may reaccelerate? We are one.
Speaker Change: Could be opposite also happened is how quickly could you potentially see improvement is that something that we could start to see in the back half of the year or.
Speaker Change: How should we think about the potential for when pricing may reaccelerate.
Craig W. Safian: Yeah, that's sort of a great question. So the pricing is based on what we call the quality of the leads, which is basically the proportion of leads that we send that turn into actual clients. And so, in analyzing it, you know, we've determined that, you know, increasing that proportion actually increases prices. But what happens is you send the vendor the lead, and they have to actually close the deals. And so there's a lag time between when you send a better lead and when the price goes up.
Speaker Change: Normal.
Speaker Change: Yes, it's really a great question.
Speaker Change: The pricing is based on the.
Speaker Change: Calling the quality of the lease which is basically the proportion of leads that we send that turn into actual clients and so in analyzing that.
Speaker Change: Your own debt, increasing that proportion actually increases prices, but what happens is you send.
Speaker Change: The lead they may have to actually close the deals and so theres a lag time between when you spend the better leads and when the pricing goes up and so we certainly we bill.
Craig W. Safian: And so we certainly believe the price will go up as we increase the quality of leads. Exactly when that happens is hard to predict because of the dynamic I just talked about. Companies actually have to get the leads, close them, realize that they have that business, and then reflect that in their pricing.
Speaker Change: The pricing will go up as we've increased quality leads exactly when that happens is hard to predict because of the dynamic I just talked about the <unk> got to get the leads close but realize that they've got that business and then reflect that in their pricing.
Speaker Change: Thank you.
Keen Fai Tong: Our next question will come from George Tong of Goldman Sachs. Your line is open.
Speaker Change: Thank you.
Our next question will come from George Tong from Goldman Sachs. Your line is open.
Keen Fai Tong: Hi, thanks. Good morning.
Craig W. Safian: Can you discuss how tech vendor trends performed moving through the quarter and in the month of April? Are trends still trying to find the bottom? Have you seen any stabilization, or are you seeing early signs of a positive inflection?
Keen Fai Tong: Alright, thanks, good morning.
Can you discuss how tech vendor trends performed moving through the quarter.
Keen Fai Tong: The month of April our trends.
Trends still trying to find the bottom have you seen any stabilization or are you seeing early signs of a positive inflection.
Keen Fai Tong: Hey, George, good morning. 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 a quarter. And so it's hard to draw inferences or conclusions from Jan to Feb to March, et cetera. I guess, you know, all I'd say is we expect that total CV will re-accelerate coming off of either Q1 or Q2. And again, as we just discussed with Surinder, you know, TechVendor will be a piece of that re-acceleration.
Keen Fai Tong: Hey, George good morning.
George: I don't think there's anything really to call out month to month I mean, our business as you know it tends to be very heavily weighted towards the last month of the quarter and so it's hard.
Draw inferences or conclusions from Jan fat to March et cetera.
All I'd say is we expect that total CV will reaccelerate coming off of either Q1, or Q2 and again as we just discussed with surrender tech than vendor will be.
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 since expenses are stable.
George: Peace of that Reacceleration.
Speaker Change: Okay got it.
Speaker Change: 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 since expenses are stable at this point.
Speaker Change: So what's driving your improved margin outlook and what are your latest thoughts on what normalized EBITDA margin should be.
Craig W. Safian: Yeah, George, great, great question. So, you know, spot on on your assessment. I guess I would say a couple things.
Speaker Change: Yes, sure it's great great questions. So.
Speaker Change: Spot on your assessment I guess I would say a couple of things. So one is that clearly our margins are structurally higher today than they were in 2016 or 2019.
Craig W. Safian: One is that, you know, clearly, our margins are structurally higher today than they were in 2016 or 2019. As you know, there are a lot of factors that can influence margins on a quarter to quarter basis or, you know, over the course of a year. You know, it spans right now with, you know, coming out of Q1, sort of putting aside foreign exchange for a little bit. You know, we modestly outperformed our expectations or our operating plan on revenue and then had modest upside from an OPEX perspective as well. We have carried that through the balance of the year.
Speaker Change: As you know there are a lot of factors that can influence margins on a quarter to quarter basis or.
Speaker Change: Over the course of the year.
Speaker Change: As it stands right now with coming out of Q1.
Speaker Change: Yes sort of.
Speaker Change: Putting aside foreign exchange for a little bit.
Speaker Change: We modestly outperformed our expectations, our operating plan on revenue and that had modest upside from an opex perspective is while we have flowed that through the balance of the year and what you see is the guidance that implies a 23, 5%.
Craig W. Safian: And, you know, what you see is guidance that implies a 23.5% EBITDA margin for the year 2024. In terms of how to think about future years, you know, we're only one quarter into 2024. We'll give 2025 guidance in February.
Speaker Change: EBITDA margin.
Speaker Change: For the year for 2024.
In terms of how to think about future years, we're only one quarter into 2024.
Speaker Change: We'll give 2025 guidance in February.
Craig W. Safian: of 2025, but again, a framework or a way to sort of think about it is.
Speaker Change: 2025, but again, a framework or a way to sort of think about it is.
Craig W. Safian: Again, a framework or a way to sort of think about it is, you know, with the QBH growth that we've got baked into the 2024 plan, we're growing our expenses in the high single digits. And, you know, that's obviously consistent with our medium-term framework on how we want to run this over the long term to drive, you know, long-term sustained double-digit top-line growth. Obviously, today with decelerating CV, that puts a little bit of pressure on the margins, as, you know, revenue growth is not as great as expense growth.
Speaker Change: The <unk> growth that we're we've got baked into the 2024 plan.
Speaker Change: Growing our expenses in high single digits.
Speaker Change: And that's obviously consistent with our medium term framework on how we want to run this over the long term to drive long term sustained double digit top line growth, obviously today with decelerating CV that puts a little bit of pressure.
Speaker Change: On the margins.
Speaker Change: As the revenue growth is not as great as the expense growth.
Craig W. Safian: That said, you know, we're really disciplined about where we're spending and how we manage our expenses, and we're finding that balance between delivering on, you know, our margin expectations and making sure that we are investing appropriately to drive future growth. And then, you know, the last thing I'd say is that, over the medium to long term, there is operating leverage in the business, and we expect to modestly expand our margins, you know, each and every year.
Speaker Change: That said.
Speaker Change: We're really disciplined around where we're spending and how we manage our expenses and we're finding that balance between delivering on our margin expectations and making sure that we are investing appropriately to drive future growth and then the last thing I'd say is.
Speaker Change: Over the medium to long term there is operating leverage in the business and we expect to modestly expand our margins every year.
Speaker Change: Over the medium to long term.
Jeffrey Marc Silber: Thank you. And we will take our last question from Jeff Silber from BMO Capital Markets. Your line is now open.
Speaker Change: Very helpful. Thank you.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: We will take our last question from Jeff Silber from BMO capital markets. Your line is now open.
Ryan Christopher Griffin: Hey, thanks a lot. Just Ryan on for Jeff. On the renewal activity over the past couple of quarters, can you compare the terms of those renewals to all the new business you signed two, three years ago? In particular, are you seeing a greater preference for longer contracts, and then what sort of price escalators are typically embedded in there, if anything worth calling out? Hey, good morning, Ryan.
Jeffrey Marc Silber: Hey, Thanks, a lot just Ryan on for Jeff on the renewal activity over the past couple of quarters can you compare the terms of those renewals to all the new business you signed two or three years ago. In particular are you seeing greater preference for longer contracts and then what sort of price escalators are typically embedded in there if anything worth calling.
Speaker Change: Net.
Speaker Change: Hey, good morning, Ryan.
Craig W. Safian: I'd say it's been pretty stable and normal. So, you know, our standard contract is essentially a two-year contract. You know, I think somewhere around 70% of our contract value is multi-year contracts, two or three years, but the bulk of them are actually two years. To your point, we do build price escalators into those multi-year contracts, which sort of aligns with what our pricing expectation is when we sign the contract.
Speaker Change: Say.
Speaker Change: It's been pretty.
Speaker Change: Stable and normal so our standard contract is essentially a two year contract.
Speaker Change: I think somewhere around 70% of our contract value are multiyear contracts, two or three years, but the.
Speaker Change: Bulk of them are actually two year.
Speaker Change: To your point, we do build price escalators into those multiyear contracts and sort of aligns with what our pricing expectation is.
Craig W. Safian: So, I think, you know, an escalator of between 3% and 5% on the anniversary of those contracts. And I'd say, in this environment, we're selling roughly the same amount of multi-year contracts that we sold 12 months ago or 18 months ago. The team is very focused on continuing to improve that number. It's just, it's great for our economy, and it's actually great for our clients as well because their challenges are not bound by a 12-month timeframe.
Speaker Change: When we signed the contract so think an escalator of between three and 5%.
Speaker Change: On the anniversary of those contracts and I would say in this environment.
Speaker Change: We're selling roughly same amount of multi year contracts that we sold 12 months ago or 18 months ago. The team is very focused on continuing to improve that number.
Speaker Change: Great for our economics, and it's actually great for our clients as well because there are challenges are not bounded by a 12 month timeframe. There are bigger than that so signing 24 month contracts or 36 month contracts makes sense, both from our business model perspective, but almost as importantly, or more importantly from a from a client.
Craig W. Safian: They're bigger than that. So, signing 24-month contracts or 36-month contracts makes sense both from our business model perspective, but, you know, almost as importantly or more importantly, from a client perspective. And that has... Got it. Thank you. 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? So, let me start.
Speaker Change: Active and that Hasnt really changed.
Speaker Change: Got it. Thank you 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.
Ryan Christopher Griffin: So let me start with the tech talent market. So our turnover is very, very low. It's, you know, near record lows.
Speaker Change: So let me start with the tech talent market. So our turnover is very very low.
Eugene A. Hall: And so that's really good for us because it helps increase tenure. On the hiring side, we have a great associate value proposition and a great recruiting team that does an incredible job communicating that value proposition. And so we get a lot of demand. Just to give you a flavor for it, we get approximately 200 applicants for every single job. If you benchmark that, that is way off the charts.
Speaker Change: Near record lows.
Speaker Change: So that's really good for us because helped increased tenure on the hiring side, we have a great associate value proposition and a great recruiting team it doesn't incredible job communicating that value proposition.
Speaker Change: And so we get.
Speaker Change: A lot of demand just came to play report we get approximately 200 applicants for every single job. If you benchmark that that is way off the charts and so we are very very attractive employer and that looks that this combination of being a very attractive employer, let's just hire great people and then once we're here we retain them, which is why we are.
Craig W. Safian: And so we're a very, very attractive employer. And that combination of being a very attractive employer allows us to hire great people. And then once we're here, we retain them, which is why we have such low turnover. And we work this issue on both the recruiting side and the retention side of our associates. And so that's getting better and better over time, which is one of the things that's driving associate tenure up, which in turn drives productivity up.
Speaker Change: The float turnover.
Speaker Change: And we work this issue on both the recruiting side and the retention side of our associates and so let's give you any better and better over time, which is one of the things thats driving <unk>.
Speaker Change: Europe, which in turn over time drives productivity up and then Ryan on the on the timing of the phasing.
Craig W. Safian: And then Ryan, on the timing or the phasing, you know, hiring dates can be, you know, they can happen on June 29th, and they're in the second quarter number, or they could happen on July 1st, and then they're in the third quarter number. We're very focused on making sure that we hire the right number of people over the course of this year so that we enter 2025 with the right number of sellers ready to go.
Speaker Change: Hiring dates can be yes.
Speaker Change: They can happen.
Speaker Change: 29th in there in the second quarter number or they could have been on July one and then they are 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.
Craig W. Safian: And so when we talk about the mid to high single-digit year over year growth in quarter-bearing hires across GTS and GBS, that's really a December to December measure. But that's really the most important measure because the people we hire over the course of 2024 don't have a huge impact on 2024. But if we have MNCs and trains with a little bit of experience rolling into 2025, they can actually have a meaningful impact on 2025 and 2026 and beyond. So, as you think about the QBH growth of mid to high single digits, that's really where we want to end the year 2024 so that we're very well positioned as we start 2025.
Speaker Change: Sellers are ready to go and so when we talk about the.
Speaker Change: The mid to high single digit year over year growth in quota bearing hires across GTS and GBS. That's really a December to December measure, but that's really the most important measure because the people we hire over the course of 2024 don't have a huge impact on 2024, but if we have mid C and train.
Speaker Change: With a little bit of experience rolling into 2025, they can actually have a meaningful impact on 2025, and 26 and beyond so as you think about the <unk> growth of mid to high single digits, that's really where we want to end the year 2024, so that we're very well positioned as we start 2025.
Eugene A. Hall: Thank you. And that does conclude our question and answer session for today's conference, and I'll turn the call back over to Gene Hall for any closing remarks.
Speaker Change: Great. Thank you.
Speaker Change: Thank you and that does conclude our question and answer session for todays conference I will now turn the call back over to Gene Hall for any closing remarks.
Eugene A. 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 fast, addressable market opportunity with a strong value proposition. Looking ahead, we're well positioned to continue our sustained record of success far into the future. We'll continue to create value for our shareholders by providing actual objective insight to our clients. Prudently Investing for Future Growth Generating free cash flow while in excess of net income and returning capital to our shareholders through our repurchase program. Thanks for joining us today, and we look forward to updating you again next quarter.
Eugene A. Hall: Well, here's what I'd like you to take away from today's call Gartner.
Eugene A. Hall: Gartner delivered financial results ahead of expectations, and 10% contract value growth with enterprise function leaders, we have a vast addressable market opportunity with a strong value proposition looking.
Eugene A. Hall: Looking ahead, we're well positioned to continue our sustained record of success far into the future.
Eugene A. Hall: We will continue to create value for our shareholders shareholders by providing actual objective insights for our clients prudently investing for future growth.
Eugene A. Hall: Generating free cash flow well in excess of net income and returning capital to our shareholders through our repurchase program.
Speaker Change: Thanks for joining us today, and we look forward to updating you again next quarter.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: So.
Speaker Change: Dan.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Good.
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: Okay.
Speaker Change: [music].