Good morning, everyone. Welcome to Gartner's Fourth Quarter 2024 Earnings Call. I'm David Cohen, SVP of Investor Relations. At this time, all participants are in a listen-only mode.

After comments by Gene Hall, Gartner's Chairman and Chief Executive Officer; and Craig Safian, Gartner's Chief Financial Officer, there will be a question-and-answer session. Please be advised that today's conference is being recorded.

This call will include a discussion of fourth quarter 2024 financial results and Gartner's outlook for 2025, as disclosed in today's earnings release and earnings supplement both posted to our website, investor.gartner.com.

On the call, unless stated otherwise, all references to EBITDA are for adjusted EBITDA with the adjustments as described in our earnings release and supplement. Our contract values and associated growth rates we discuss are based on 2024 foreign exchange rates. All growth rates in Gene's comments are FX-neutral unless stated otherwise.

All references to share counts are for fully diluted weighted average share counts unless stated otherwise. Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website.

As set forth in more detail in today's earnings release, certain statements made on this call may constitute forward-looking statements.

Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties including those contained in the company's 2023 annual report on Form 10-K and quarterly reports on Form 10-Q as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents.

Now, I will turn the call over to Gartner's Chairman and Chief Executive Officer, Gene Hall..

first, an unrelenting focus on globally consistent execution of Gartner best practices; second, a company-wide commitment to continuous improvement and innovation; and third, our vibrant culture which inspires associates to operate and win as a global team. In closing, Gartner delivered financial results ahead of expectations.

Tech vendor CV growth continued to accelerate. We have a powerful client value proposition and a vast addressable market opportunity.

We will continue to create value for our shareholders by providing actionable objective insight, guidance and tools to our clients; prudently investing for future growth; and returning capital to our shareholders through our share repurchase program.

We expect to deliver modest margin expansion over time and we'll continue to generate significant free cash flow well in excess of net income. All of this and more positions us to drive long-term double-digit revenue growth and sustain our track record of success far into the future.

With that, I'll hand the call over to our Chief Financial Officer, Craig Safian..

We expect Research revenue of at least $5.365 billion which is FX-neutral growth of about 6%. The guidance reflects FX-neutral research subscription revenue growth near 8%, consistent with 2024 CV growth. We expect Conferences revenue of at least $625 million which is FX-neutral growth of about 10%.

We expect Consulting revenue of at least $565 million which is FX-neutral growth of about 2%. The result is an outlook for consolidated revenue of at least $6.555 billion which is FX-neutral growth of 6%. We expect full year EBITDA of at least $1.51 billion. On a reported basis, we expect an EBITDA margin of at least 23%.

Compared with 2024 margins, this factors in FX, 2024 headcount additions, 2025 growth hiring and a prudent approach to the plan. We expect 2025 adjusted EPS of at least $11.45 per share. For 2025, we expect free cash flow of at least $1.14 billion. This reflects a conversion from GAAP net income of about 140%.

Our guidance is based on 78 million shares which only assumes repurchases to offset dilution. Finally, for the first quarter of 2025, we expect to deliver EBITDA of at least $345 million. We performed well in 2024 despite continuing global macro uncertainty and a dynamic tech vendor market. We finished the year with high single-digit CV growth.

Revenue, EBITDA, EPS and free cash flow performance exceeded our expectations and the guidance we set a year ago. We repurchased about $735 million in stock during 2024 and more than $4 billion over the past 4 years. We remain eager to return excess capital to our shareholders. We will continue to be price sensitive, opportunistic and disciplined.

Looking out over the medium term, our financial model and expectations are unchanged. With 12% to 16% Research CV growth, we 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 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 Instructions] And our first question will come from Jeff Meuler from Robert W. Baird..

You gave us a lot of perspective but I'm still trying to tie some of the things you gave us together. A 7.8% Q4 CV exit rate with Research subscription constant currency growth only landing near 8%, especially when you have an easier comp to begin the year and that flows through while the revenue of CV does well then.

Just are you seeing anything from the renewal risk heat map perspective? Or are you hearing things from the U.S.

Federal Government salespeople or seeing something in those renewal trends on the ground yet? Or just anything you're trying to signal beyond the prudence in the guidance assumptions to tie those figures together?.

So the biggest driver of forward year subscription revenue growth is going to be the end of year prior year CV growth. And that sort of determines, call it, 80% to 85% of how much revenue actually flows through into the following year.

The other important part which we talked about a little bit during the prepared remarks, is the phasing of our NCVI quarter-to-quarter-to-quarter. And as we mentioned, we -- Q1 is a heavy renewal quarter or a little bit heavier than average and it is our lowest new business quarter.

And so we generally take a pretty prudent approach to how we plan for Q1 and Q2 in CVI. And those -- Q1 and Q2 are the quarters that can materially move the revenue up or down depending on the performance.

And so what you're looking at is sort of I would characterize as sort of a normal flow of ending contract value growth flowing into 2025 and then our "normal" expectations for first half NCVI rolling into that around 8% constant currency subscription revenue growth for 2025..

Got it. And then on 2025 margin guidance, I hear you an opportunity for upside.

But should we be thinking that wherever 2025 margin lands will be the fully rebased year to expand modestly from over time, consistent with the medium-term framework? And I ask because it sounds like you're still reaccelerating sales headcount, still reimplementing growth investment and you're not going to be fully back to the medium-term growth framework for GTS quota-bearing headcount in terms of the growth rate yet in 2025? So are we still likely going to be talking about I guess, needing to annualize that spend a year from now? Or is 2025 kind of the final margin reset?.

Thanks, Jeff. So I'd like to say, yes. I don't know what the year has in store for us in terms of the dynamism of the environment that we're operating in. But one way to sort of step back and think about it is the implied operating expense growth that we have baked into our 2025 plan and guide is around 9% year-over-year operating expense growth.

And that encompasses the growth we brought on board in 2024, particularly from a QBH perspective but across the company and the growth we have planned for 2025 with more normal phasing of that hiring. And so if revenue -- and again and we have modeled in our CV growth rate accelerating over the course of 2025.

And so if 2025 ends up being a more again, normal year, yes, I would say 2025 could be the new baseline. But again, given the dynamic world in which we operate, it's hard to call that right this moment..

Our next question will come from Toni Kaplan from Morgan Stanley..

I caught the part in the prepared remarks where tech vendor growth continued to accelerate in the quarter.

I know last year, we had that first quarter dynamic but I wanted to understand, are we in a place where a tech vendor is a nonissue now for this year and should we expect to see accelerating growth throughout the year?.

So the tech vendor market has recovered nicely and we are as well. So we expect it to return to a more normalized state over the next several quarters. And so I think it's -- we expect it to continue to accelerate for the year..

Great. And then I think one of the questions that people have been asking recently is on the buyback. So Craig, could you just remind us what goes into your decision-making process on that? And any thoughts about -- I know you mentioned in the guide, you're only really contemplating buying back for dilution.

But to the extent that you have a lot of excess cash on the balance sheet, your leverage level is below where your target is.

Just want to understand whether we could see upside to that buyback guide?.

Thank you, Toni. So I'll start.

Philosophically, we want to make sure that we deploy our capital on shareholder value-enhancing initiatives, one of those initiatives that we know delivers great returns over the long term is returning capital to our shareholders through our buyback programs and we remain committed to deploying our capital in smart ways, whether it be through the buyback program or through strategic value-enhancing tuck-in M&A.

On the buyback side, again, just zooming back for a moment, we bought back north of $700 million in 2024. Over the past 4 years, it's been over $4 billion. And so I think we've proven that, yes, we are more than willing to put our money to work and capital to work and free cash flow to work on behalf of our shareholders.

That said, we don't want to just be in the market buying blindly. We have a philosophy of being price-sensitive, opportunistic and disciplined. And when we see an opportunity to go big when there is a disruption either in the market or in the share price or in the sector or whatever it may be, we are ready to go big.

We were able to repurchase over $700 million of stock last year at attractive prices because we follow that philosophy.

And so going forward, as I mentioned on Jeff's question, the world is a pretty dynamic place and volatile place and so that should give us opportunities to get into the market and be more aggressive but we're not going to deviate from our overall philosophy of being price-sensitive, opportunistic and disciplined..

Our next question will come from Faiza Alwy from Deutsche Bank..

First, I wanted to ask about the public sector. You said that you are going to be thoughtful about public sector hiring in the short term. And I know you've talked about the value proposition for the public sector. Obviously, there's been a lot in the news.

Just give us a bit more color -- and thank you for the quantification there but give us a bit more color about how you're tactically approaching the public sector just in light of the dynamic environment there?.

So let me start. First, -- for the public sector for us, encompasses federal governments, state governments, local governments in 74 countries around the world. So when it comes to public sector, we're actually incredibly diversified in terms of where public sector comes from.

And we help among the most advanced governments in the world with their service, delivering better services to their citizens and we're an essential service for them. And so we're going to continue doing that. And so as we look at the public sector, if you think about it as being not just like U.S.

Government but being actually 74 countries and federal, state, local, all of whom technology is just as important as for the commercial sector. And so we see it as a very vibrant sector for us overall that we expect to continue to do very well with us..

Okay. Understood. And then you talked about 1Q being like a higher renewal quarter for you.

Give us some perspective on how much -- is that across the board? Is that -- were you talking specifically about tech lenders or GTS or is it across the board?.

Yes. Faiza, it's Craig. So our renewals are phased pretty evenly throughout the year but it's not 25, 25, 25, 25. And so Q1 happens to be a little bit higher than the 25% mark. And as I mentioned earlier, it's our lowest new business quarter.

Fourth quarter is our largest new business quarter, we have our most conferences, we build the most pipelines and we sell the most new business. And as we roll into Q1, it tends to be our lightest new business quarter.

So it's really the dynamic of slightly higher-than-average amount of renewals in the quarter and seasonally our lowest new business quarter that causes us to make sure that we're thoughtful about the Q1 NCVI that we build into our revenue plan..

Our next question will come from Andrew Nicholas from William Blair..

First question, I just kind of wanted to circle back on the government piece. I understand it's not a massive part of the business and you're optimistic about the opportunity in medium and long term.

But can you just clarify, like are you already getting feedback from that part of your business that the renewal cycle will be choppy? I think you mentioned those are generally 1-year contracts or is it just kind of reacting to news flow and being a bit more cautious? Just not sure if it's tangible to this point or goes back to a typically conservative approach?.

So, if I look -- again, if I look at our total business, the 74 countries in federal, state, local are highly diversified. No change there. If I zoom in just on the U.S. public sector, I'd say, we're seeing the same -- the trends we're seeing now are the same trends we saw in Q4. There's no change.

And that could change in the future but as we sit here today, there's no trends -- no difference from what we saw in Q4..

Great. And then for my follow-up, I just wanted to ask about generative AI broadly. It seems like every day we get a new release from one of the major players there in terms of new models, new capabilities.

Any update to how you're thinking about your ability to leverage that technology within your business, become more efficient, generate more content, whatever it may be. Any updated thoughts there would be great..

So AI is fantastic for us. If I start with our clients and I'll come back to us but if I start with our clients, it's the -- it's one of the biggest areas of uncertainty. There's a lot of expectation, it can provide a lot of productivity growth in the future for our clients.

And we're best positioned in the world to help our clients to sort this out, both on the enterprise function leader side as well as on the tech vendor side. Within Gartner, in particular, we have in the range of tens of different kinds of initiatives where we're applying AI, generative AI but other kinds of AI as well.

And it ranges from advanced statistical techniques with some types of AI to using generative AI for things like training as well as in some of our client facing, doing things like translations and things like that. And so we've got like many tens of applications were using. No single application is going to be like improve productivity 50%.

Each of these are going to be like small little things. Some will work out and be great and maybe great, meaning like they'll give us a 5% productivity improvement. And some we will try and we'll find actually if they don't have a big impact and move on to the next one.

And so we're seeing it as -- so we have a strategy of continuous improvement and continuous innovation. AI and generative AI both are just another piece of our continuous innovation, continuous improvement strategy. So again, it will be -- will be transformational but it will help us continue to improve our effectiveness over time, both with clients.

But the big advantage for us is not on the internal side, it's really about helping clients figure out how to use in their business which is the rate change is so high that there's -- there are a few things that have been in business history have so much uncertainty which is great for us..

Our next question will come from Manav Patnaik from Barclays..

Gene, I was just wondering in terms of GTS, right, I think you talked about in your prepared remarks how sales growth is very important to your long-term double-digit growth and you're doing that in GBS.

I was just wondering in GTS, why only mid-single digits? What kind of environment or what does it take for you to get back to the double-digit sales force growth on the GTS side?.

So the -- if I look at GTS, we believe that there is room to improve productivity in GTS in addition to growing headcount.

And so the reason we're growing GTS headcount modestly slower than we wanted to over the medium term is that we believe we can get growth out of productivity, particularly on the tech vendor side of our business, we think we can do both, improve productivity and grow headcount..

Okay, fair enough. And then, Craig, just in terms of being opportunistic on the buybacks, is it really just the -- I guess, your interpretation if the stock is cheap or not.

But just besides that, is there any deal pipeline or anything of that nature that might be part of why you're holding back as well?.

Manav, we're in a position where because of our excess cash we have on the balance sheet, balance sheet flexibility and the $1 billion-plus of free cash flow that we generate each year, it's an and question not an or question for us in terms of buybacks or M&A.

So I would not read anything into our opportunism and discipline around our buyback program and M&A pipeline. Again and I think the other thing I would just highlight is the bulk or virtually all of our M&A targets, I would characterize as small to medium kind of tuck-in acquisitions, nothing big transformational like we did 8 years ago..

Our next question will come from Surinder Thind from Jefferies LLC..

Gene, a big picture question here.

As you think about tech vendor and maybe the cyclicality in that part of the business, how do you think about that on a go-forward basis in the sense of how unusual do you think this cycle has been? And if I interpret your comments correctly, it sounds like tech vendor should be back to normalized growth by the end of 2025.

And if so, what does normalized growth for that business look like?.

So, I think the period that we've been through over the last 3 or 4 years has been pretty extraordinary in the tech sector. There was a -- if you look at venture capital funding, during that time period, it went up a whole number of multiples, I think 3 to 4 times.

And so there was a -- in my view, an unusually large, I'll call it, bubble, of venture capital spending which then drove a kind of bubble with all those tech companies. I can't recall that happening and I don't see that happening again. Anything could happen but I do think that was very unusual.

If you look at the 20 years prior to that, we didn't see that. We saw ups and downs but not anything like that. And so I would expect it to be anywhere near as cyclical as it has been. The other thing that happened then, too, is it wasn't just cyclical. There was a shift in what the venture capital firms were investing in that happened simultaneously.

So a lot of the investments they made that were not in AI and now there's a big focus in venture capital in AI. And so there's a big shift going on from companies that used to get funding 4 years ago or 3 years ago that today can't get funding, a different set of companies now that are getting those funding.

That's all, I think, a very -- that's not a usual event if you look back over the last 20-plus years..

And 2 other thoughts there, Surinder. So one, when we think about our medium-term objective for research and CV growth, it's 12% to 16% and that's across the entire GTS and GBS portfolio, inclusive of tech vendor. And if you go back historically, tech vendor has grown in that range year after year after year after year.

And so I do think the most recent cycle has been abnormal or atypical. The other thing, just to clarify, I think what Gene said is returning to normal growth over the next several quarters. He wasn't pegging end of year or anything like that. And so we expect our tech vendor CV to continue to accelerate.

It has accelerated these past 3 quarters and we'll continue to accelerate into '26 and beyond..

That's helpful. And then maybe just on the non-subscription lead gen part of the business.

Can you maybe talk about where you believe you are in that part of this strategic shift, maybe how demand pricing has evolved versus the expectations over the last year and where you think it's going to head to or what's in the assumptions for 2025?.

So, I'll start with kind of where the business is. So the business went through -- in fact, it was impacted by the same things we just like earlier with this, what I will call tech bubble. And we're kind of, I think, getting -- working our way through all of those.

And I think the business will then normalize and be back to kind of normal where both traffic, conversion traffic and pricing then stabilizes again over the next few quarters..

Our next question will come from Josh Chan from UBS..

I was wondering if you could talk about the selling environment. I noticed that the GTS wallet retention improved nicely this quarter.

So I wonder if any change you've noticed there in terms of selling and renewals?.

So, I would say the selling environment is unchanged but our level of execution continues to improve. So I think the improvement you're seeing across the business is due to improved execution on our part..

Okay, that's great color. And then on your comment about the Q1 renewal prudence. I think last year, you had slightly negative NCVI in Q1 but that was because tech vendors were in a much tougher spot.

And so I guess with tech vendors seemingly getting better this year, can we roll out negative NCVI in Q1? I guess, would you care to comment on that?.

Yes. It's we're -- we don't guide on CV and we're not going to guide on Q1 and we're only 1 month into the cycle, I would just emphasize that the world is a very dynamic place. We have planned what we consider to be appropriately and prudently for Q1 NCVI and we are fighting for every new business win and every renewal rate, like we always do.

We are executing better, as Gene mentioned, then we had 4 quarters ago, 6 quarters ago, 8 quarters ago and we'll continue to do that. We'll update you on Q1 in April or early May..

Great. And good luck in the Q1..

Thank you..

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

Just sort of built on the prior question but you talked about taking a prudent view of NCVI phasing since 1Q is a heavier renewal quarter and lower new business quarter.

Can you talk about some of the top internal or external swing factors that you're watching that could affect how NCVI comes in?.

It's the normal stuff, George. So obviously, we have a global business that operates with the largest companies in the world down to smaller companies. We've got small tech vendor baked in there. We obviously have our public sector business and some level of U.S. Fed renewals in the first quarter. So there's always large swing factors.

Last year was a bit unique in that we had several very large tech vendor renewals where we knew the situations were going to be challenging. So they're either like large M&A closing and us having to deal with the ramifications of that or large layoffs announced in the throes of us going through the renewal process.

So we don't have that to the same extent that we did last year. But we're talking about thousands and thousands of deals that our teams are working both from a research perspective, a service perspective, a renewal perspective and a growth perspective over the course of the quarter.

And so any of those underneath the covers can drive the overall NCVI and CV growth up or down a little bit..

Got it. That's helpful context. And then you're planning to increase sales headcount mid-single digits in GTS, in double digits in GBS this year.

Can you talk about the phasing of this hiring? If it's going to be front-end loaded or back-end loaded or perhaps evenly distributed across the year?.

Yes, it's a great question, George. So I think in 2024, almost all of our growth hiring or the net increase in quota-bearing headcount was back-end loaded. In 2025, current plan is for it to be more evenly spread throughout the year. The one thing I would note, though, is the number can bounce around a little bit quarter-to-quarter.

We're not necessarily hiring to a deadline of we must have you on board by midnight on March 31, so we can hit our numbers. We are much more pragmatic about how we run the business. So there can be a little bit of noise in the numbers from quarter-to-quarter.

The other thing I'd say is Q1 can often be a lighter net growth quarter, not hiring quarter but net growth quarter because that's when we do all our promotions and then we backfill them. We often backfill a lot of them in advance in the fourth quarter.

We often tend to see a little bit higher turnover in the first quarter because if people didn't earn money in 2024, they often opt out and leave and look for greener pass-through somewhere else in the first quarter.

So there can be a little bit of volatility in the numbers for all those reasons but we would anticipate not being nearly as back-end loaded in 2025 as we were in 2024..

And our next question will come from Jeff Silber from BMO Capital Markets..

I wanted to ask about pricing. If I remember correctly, you take price increases in the beginning of November and I think you said it was roughly 4%.

Is that across the board? Is it different by product and geography? And I'm just wondering, did you get any pushback this year greater than normal?.

Jeff, so the price increase for the most part goes into effect, as you said, on November 1. On average, it was a little bit below 4%. But we don't paint it with a broad paint brush. We actually look at it specifically by product and by geography. And so in markets that are more inflationary, we will be more aggressive on pricing.

And again, one of the key inputs that we look at is wage inflation in the given markets as well because as we've talked about, philosophically, we want to make sure that our pricing at least offsets what our expectation is from a wage inflation perspective, so it is not a broad paint brush, we're actually very laser-focused on making sure that we're taking the pricing up the right amount, in the right places, in the right currencies.

And then in terms of pushback, it's been the standard price increase, so nothing of note related to pushback. I think we're very focused on making sure that we are constantly improving our delivery and our products and that justifies the very modest price increase that we put on top for our clients each year..

Right. That's really helpful. If I could shift gears, maybe just talk about some different geographies.

I think you said that the growth was broad-based but I'm really curious specifically in Europe and China, what the trends were there?.

Yes. So it's Europe -- the selling environment in Europe has basically been pretty consistent from what we saw in the second half of 2024, so nothing or no news to report there. On the China side, has been pretty challenging, especially with larger clients there in China.

What I would say is we've had some success and seen some improvement in selling to like a tier below that over the second half of the year but it's been largely consistent our performance over the course of 2024..

Our next question will come from Jason Haas from Wells Fargo..

I saw the GTS productivity improved from 3Q to 4Q, despite the fact that you increased headcount which you know can be difficult to drive and then you made some comments earlier about better execution.

So I was curious if you could provide some more color on that in terms of what changes you've made and how you've been able to drive that?.

So Jason, it's basically the normal stuff which is we're very focused on making sure we hire the right people. And when we get the right people, then we give them right training and so we're constantly improving our recruiting processes. We also are constantly improving our training, a big focus on training.

And then again, if I look at like the tools we provide our sales force, we're always innovating those tools, those are always taken to another level literally quarter-by-quarter. And so it's basically who we recruit, how we train them and the tools we give our salespeople..

Got it. That's helpful. And then there's also a comment earlier about an expectation. I know you don't guide to CV but there's a comment about an expectation that CV growth would continue to accelerate. So I was hoping you could put a finer point on that.

Are you saying that the 7.8% that you reported in 4Q, is that expected to be the bottom here and each quarter should be above that? Or could it potentially be more sort of rough path from here?.

Yes. Jason, I think the comment is more that over the course of 2025 and when we exit 2025, we would expect to be higher than 7.8%. As we've talked about in the past, the CV growth rate may not go up in a precisely straight line or that the slope may not be precisely straight, more so that the trend will be that it will exit 2025 higher than 7.8%.

And again and with a goal towards continuing to accelerate to first double digit and then to our medium-term objective of 12% to 16%..

And I am showing no further questions from our phone lines. I'd now like to turn the call back over to Gene Hall for any closing remarks..

So here's what I'd like you to take away from today's call. Gartner delivered financial results ahead of expectations. Tech vendor CV growth continues to accelerate. We have a vast addressable market opportunity. We have a strong and compelling value proposition.

Looking ahead, we're well positioned to drive sustained double-digit revenue growth over the long term.

We'll continue to create value for our shareholders by providing actual objective insight guidance and tools to our clients, prudently investing for future growth, generating free cash flow well 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..

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day..