Gartner(US:IT)2023-11-03 15:38Financial Data and Key Metrics Changes - Gartner reported third quarter revenue of $1.4 billion, up 6% year-over-year as reported and 5% FX neutral [20] - Adjusted EBITDA was $333 million, in line with last year, and adjusted EPS was $2.56, up 6% from Q3 of last year [21][30] - Free cash flow for the quarter was $302 million, with a free cash flow conversion from GAAP net income of 122% [32][39] Business Line Data and Key Metrics Changes - Research revenue grew 6% year-over-year as reported and 5% on an FX neutral basis, with subscription revenue growing 8% on an organic basis [21][10] - Consulting revenue increased by 23% year-over-year to $133 million, with a contribution margin of 37% [28] - Global Technology Sales (GTS) contract value grew 7%, while Global Business Sales (GBS) contract value grew 14% year-over-year [11][26] Market Data and Key Metrics Changes - Contract value (CV) for enterprise function leaders grew at double-digit rates, while CV from tech vendors grew low single-digits [22][24] - GTS wallet retention was 102% for the quarter, down from 107% in the prior year [24] - GBS retention was 108%, slightly down from 114% in the prior year [26][54] Company Strategy and Development Direction - Gartner aims for long-term, sustained double-digit revenue growth, with plans to return significant capital to shareholders through share repurchases [17][40] - The company is focused on expanding its salesforce to capture market opportunities, particularly in the tech vendor market [43][46] - Gartner's consulting segment is seen as a valuable complement to its research business, helping clients execute strategic initiatives [15][28] Management's Comments on Operating Environment and Future Outlook - The external environment remains volatile, with challenges in the tech sector and rising interest rates impacting demand [7][8] - Management expressed confidence in returning to normal growth rates in the tech vendor market over the next 12 to 18 months [12][96] - The company has increased its 2023 guidance for revenue, EBITDA, and free cash flow based on strong Q3 performance [15][39] Other Important Information - Gartner's total contribution margin was 68%, slightly down from 69% in the prior year [20] - The company repurchased $209 million of stock during the third quarter and has about $1 billion available for future repurchases [34][40] - The updated 2023 guidance includes expectations for research revenue of at least $4.875 billion and consulting revenue of at least $550 million [37][38] Q&A Session Summary Question: Thoughts on expense management for next year - Management believes they can win back tech vendor sales with the existing salesforce and will continue to grow capacity over time [43][45] Question: Metrics on current average tenure of salespeople - The salesforce is expected to have a more normal tenure as they roll into 2024, with a significant portion of new hires gaining experience [52][53] Question: Client retention initiatives - Client retention rates are impacted by tech vendor dynamics, but overall retention remains above historical levels [54][56] Question: Future expense considerations - Operating expenses are expected to normalize, with a significant step up in Q4 due to conference-related activities [60][61] Question: Pricing environment for next year - Management expects the pricing environment to remain stable, with no significant pushback from clients [62][101] Question: Tech vendor trends and guidance assumptions - The tech vendor environment remains stable, with no signs of significant change, and guidance reflects this stabilization [96][97]