Good day and thank you for standing by. Welcome to the Gartner 's Third Quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. [ Operator Instructions] I would now like to turn the conference over to your speaker today, David Cohen, JVP of Investor Relations, please go ahead..

Good morning, everyone. We appreciate your joining us today for Gartner's Third Quarter 2021 earnings call and hope you are well. With me on the call today are Gene Hall, Chief Executive Officer and Craig Safian, Chief Financial Officer. This call will include a discussion of Third Quarter 2021 financial results in Gartner's updated outlook for 2021.

As disclosed in today's earnings release and earnings supplement, both posted to our website, investor.gartner.com. Following comments by June Craig, we will open up the call for your questions. We ask that you limit your questions to 1 and a follow-up.

On the call, unless stated otherwise, all references to EBITDA for adjusted EBITDA with the adjustments as described in our earnings release and supplement. All growth rates in Gene's comments are FX -neutral, unless stated otherwise.

Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the g artner.com website. Finally, all contract values and associated growth rates we discuss are based on 2021 foreign exchange rates, unless stated otherwise.

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

Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the Company's 2020 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents.

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

Good morning and thanks for joining us. Our growth increased again in the third quarter. We're performing well across the business. We delivered strong performances in contract value, revenue, EBITDA, and free cash flow. Total Company revenues were up 15% in Q3 with continued momentum across all three of our business segments.

We also repurchased another $355 million in stock in the quarter. Bringing our year-to-date total through October to $1.6 billion and we're thriving in the current environment. Research continues to be our largest and most profitable segment. Our research segment provides actionable, objective insight to executives and their teams.

Reserve leaders across all major enterprise functions in every industry around the world. Our market opportunity is vast across all sectors, sizes, and geographies. And we're delivering more value than ever. Everywhere around the world, our clients are facing more issues than ever before.

Challenging issues, things like the future of work, cybersecurity, carbon footprint, digital business, diversity, equity inclusion, Cloud and more. Our research is closely aligned to our client's priorities.

We recently launched a new sustainability resource center that provides clients and prospects with actual insights on sustainable business strategy. Total research contract value growth increased to 14% with acceleration in both GTS and GBS driven by strong execution in both retention and new business.

Global Technology Sales or GTS, returned to double-digit growth. GTS contract value growth accelerated to 12%. We expect GTS to deliver long-term, sustained double-digit contract value growth. Global Business Sales or GBS, delivered another outstanding quarter with contract value growth of 22%.

All practices across GBS drove double-digit contract value growth. Across our entire research business, we're driving consistent execution of proven practices. And we continue to see the results of our efforts. Our conferences business also continues to deliver excellent performance. In 2020, we developed an entirely new conferences business model.

This model leverages virtual conferences to deliver extraordinarily valuable insights to our audiences. We delivered a strong performance in conferences. For the third quarter of 2021, conferences revenues were $24 billion. Total attendee numbers were up in Q3, as we are increasing our reach through our valuable content.

There's a large constituency of our clients and prospects who prefer in-person conferences. We've recently held some in-person event in advance which were very well received. As conditions continue to stabilize, we are operationally prepared to return to in-person conferences where and when we can.

We'll continue to leverage our profitable virtual conferences as appropriate. Carter Consulting is an extension of Gartner research. Consulting helps clients execute their most strategic initiatives through deeper, extended project-based work. Consulting is an important complement to our IT research business. Consulting revenues grew 6% in Q3.

So overall, we're performing really well as a Company. We're thriving in our current environments. We're able to serve our clients and sell the prospects very effectively in a virtual environment. Most of our associates appreciate working virtually.

They would like some in-person interactions with their colleagues when that's the best way to engage with each other and get work done. We've created an operating model that supports virtual and in-person interactions. And these gives our associates flexibility, while promoting activities to drive associate engagement.

We've also ramped up our recruiting function to support long-term sustained double-digit growth. We're seeing great success in hiring during one of the toughest labor markets ever. Finally, we're taking steps to make the associate experience at Gartner even better. We're a growth Company.

We're focused on ensuring our associates have clear and compelling career paths. We're helping our managers and leaders have powerful career development conversations with their teams. We continue to improve on our proven practices and we're innovating processes and technology to streamline operations.

In closing, Gartner delivered another strong performance in Q3. We're performing well across all 3 of our business segments. We delivered strong performances in contract value, revenue, EBITDA, and free cash flow. And we repurchased another $355 million of stock in the quarter. We continue to get better, faster, stronger as a Company.

Gartner is a great place to be for our associates. We deliver extraordinary value to our current clients. We provide outstanding returns for our shareholders. And we're thriving in the current environment. With that, I will hand the call over to our Chief Financial Officer, Craig Safian.

Craig?.

Thank you, Gene. And good morning. Third quarter results were again excellent with acceleration in contract value growth and strength in revenue, EBITDA, and free cash flow. We are increasing our 2021 guidance to reflect our strong Q3 performance. Third quarter revenue was $1.2 billion of 16% year-over-year as reported, and 15% FX-neutral.

In addition, total contribution margin was 69% up more than 200 basis points versus the prior year. EBITDA was $305 million up 82% year-over-year and up 80% FX-neutral. Adjusted EPS was $2.03 and free cash flow in the quarter was $331 million. Research revenue in the third quarter grew 16% year-over-year as reported and 15% on an FX-neutral basis.

We drove both strong retention and new business in the quarter. Third-quarter Research contribution margin was 74%, up over 200 basis points versus 2020. Higher-than-normal contribution margins reflect improved operational effectiveness, continued avoidance of travel expenses, and lower than planned headcount.

Total contract value grew 14% FX-neutral year-over-year to $4 billion at September 30th. Quarterly Net Contract Value Increase or NCVI was a very strong $146 million. Quarterly NCVI is a helpful way to measure contract value performance in the quarter, even though there is notable seasonality in this metric.

Global Technology Sales contract value was $3.2 billion at the end of the third quarter, up almost 12% versus the prior year. GTS CV increased $102 million from the second quarter. CV growth was led by the technology, manufacturing, and retail industries. While retention for GTS was 104% for the quarter, up 490 basis points year-over-year.

GTS new business was up 25% versus last year with strong growth in new logos and expansion with existing client enterprises. GTS quota-bearing headcount increased from the second quarter. We are beginning to see the positive effects of our investments to ramp up recruiting capacity. We continue to be successful recruiting new salespeople.

Turnover among GTS front-line sellers is stable at the modestly elevated range we saw in the second quarter. With increased recruiting capacity and stable turnover, we expect to see continued expansion of the GTS sales team in Q4 and into 2022 and beyond. Our regular full set of metrics can be found in our earnings supplement.

Global business sales contract value was $814 million at the end of the third quarter, up 22% year-over-year, which is above the high-end of our medium-term outlook of 12% to 16%. GBS CV increased $43 million from the second quarter. Broad-based CV growth included particular strength in the healthcare, technology and services industries.

All of our GBS practices achieved double-digit growth rates with the majority growing more than 20% year-over-year. Growth in the third quarter was led by the supply chain, HR, and sales practices. While retention for GBS was 113% for the quarter, up more than 14% points year-over-year.

GBS new business was up 38% compared to last year, reflecting strong growth across the full portfolio. GBS quota-bearing headcount increased sequentially and is up 8% year-over-year. As with GTS, our regular full set of GTS metrics can be found in our earnings supplement.

Conferences revenue for the third quarter was $24 million with reported growth of 92% and 93% FX-neutral. Contribution margin in the quarter was 47%. We held 8 virtual conferences in the quarter. We also held a number of virtual and the meetings. We were able to reintroduce in-person event and meetings in the quarter and plan to ramp those up in Q4.

Attendance is up significantly year-over-year as we've launched more virtual conferences to cover additional roles. Third quarter consulting revenues increased by 6% year-over-year to $95 million, on an FX-neutral basis, revenues were also up 6%.

Consulting contribution margin was 33% in third quarter, up more than 110 basis points versus the prior-year quarter. Labor-based revenues were $78 million, up 5% versus Q3 of last year, and up 4% on an FX-neutral basis. Labor-based billable headcount of 749 was up 2%, utilization was 62% up more than 130 basis points year-over-year.

Backlog at September 30th was $126 million, increasing 27% year-over-year on an FX-neutral basis after another strong bookings quarter. Our contract optimization business was up 13% on a reported basis versus the prior-year quarter and up 12% FX-neutral. As we've detailed in the past, this part of the consulting segment is highly valuable.

Consolidated cost of services increased 9% year-over-year and 8% FX-neutral in the third quarter. SG&A decreased 2% year-over-year and 3% FX during the third quarter. The year-over-year decline is largely related to the timing of certain prior-year expenses.

We expect SG&A expenses to increase over time as our hiring across the business continues to ramp. Total operating expenses were lower than planned because conferences continued to be virtual. We are resuming business travel and reopening offices at a very deliberate pace. And we're still ramping up or net growth hiring to our target levels.

EBITDA for the third quarter was $305 million, up 82% year-over-year on a reported basis, and up 80% FX-neutral. Third quarter EBITDA again, reflected revenue above the high-end and cost towards the low-end of our expectations.

Depreciation in the quarter was up about $3 million versus 2020, reflecting real estate and software which went into service since the third quarter of last year. Net interest expense, excluding deferred financing costs in the quarter, was $30 million, up slightly versus the third quarter of 2020 due to an increase in total debt balances.

The Q3 adjusted tax rate, which we use for the calculation of adjusted net income, was 25.2% for the quarter. The tax rate for the items used to adjust that income was 25.4% in the quarter. Adjusted EPS in Q3 was $2.03. Weighted average fully diluted share count for the 3rd quarter was 84.8 million shares.

We exited the quarter with 84.2 million fully diluted shares. Operating cash flow for the quarter was $345 million up 41% compared to last year. Cash flow strength continues to be driven by EBITDA growth and improved collections. Capex for the quarter was $14 million down 5% year-over-year.

Lower capex is largely a function of lower real estate investments. Free cash flow for the quarter was $331 million. Free cash flow growth continues to be an important part of our business model with modest capital expense through needs and upfront client payments.

Free cash flow as a percent of revenue or free cash flow margin was 25% on a rolling four-quarter basis, adjusted for the $150 million of insurance proceeds received in the second quarter. Free cash flow was well in excess of both GAAP and adjusted net income. At the end of the third quarter, we had $766 million of cash.

Our September 30th debt balance was $2.5 billion. Our reported gross debt to trailing 12-month EBITDA was about 2 times. Our expected free cash flow generation and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy, of share of repurchases, and strategic tuck-in M&A.

Through the end of October, we have repurchased more than $1.6 billion in stock this year, including $355 million during the third quarter. Year-to-date, we have repurchased over 7 million shares, reducing our net share count by around 7%.

As of November 1st, we have around $600 million remaining on our repurchase authorization, which we expect the board will refresh as needed. As we continue to repurchase shares, we expect our capital base will shrink.

This is accretive to earnings per share and combined with growing profits also delivers increasing returns on invested capital over time. We are updating our full-year guidance to reflect Q3 performance and an improved and increased outlook for the remainder of the year.

For revenue guidance, we now expect Research revenue of at least $4.07 billion, which is growth of 13%. We now expect Conferences revenue of at least $190 million, which is growth of 58%. We still expect Consulting revenue of at least $400 million, which is growth of 6%.

The result is an outlook for consolidated revenue of at least $4.66 billion, which is growth of 14%. Based on current foreign exchange rates and business mix, the consolidated growth includes an FX -benefit of about 190 basis points. This reflects modest headwinds from FX in the fourth quarter.

For expenses we are investing in expanding our recruiting capacity to drive additional hiring across the entire business, including our sales teams. The additional hiring will continue into 2022 and beyond to support current and future growth. We plan to exit the year with quota-bearing headcount about flat for GTS.

We expect low double-digit growth for GBS by the end of 2021. Additionally, we continue to invest in a number of programs with a focus on improving sales productivity and cost effectiveness. We're also incurring some conference cancellation fees in the fourth quarter and during the process of reopening dozens of offices as well.

We now expect full-year adjusted EBITDA of at least $1.6 billion, which is an increase of about 54% versus 2020 and reflects reported margins of 27%. Consistent with our comments last quarter, we estimate that normalized 2021 margins would be around 19%, if this had been a more typical year.

About 2/3 of the adjustments are headcount related with most of the rest from travel and real estate. We expect our full-year 2021 adjusted net interest expense to be $113 million. Looking out to 2022 as the balance sheet stands today, we expect interest expense to be around $115 million. We expect an adjusted tax rate of around 22% for 2021.

We now expect 2021 adjusted EPS of at least $8.54. For 2021, we now expect free cash flow of at least $1.2 to $5 billion. This includes the $150 million of insurance proceeds received in the second quarter this year. All the details of our full-year guidance are included on our Investor Relations site.

We had a strong 3rd quarter with momentum across the business. Contract value growth accelerated, and we had very strong revenue, EBITDA, and free cash flow in the quarter. We've put our capital to work, repurchasing more than $1.6 billion worth of our stock this year through the end of October.

And we've updated our guidance to reflect continuing strength and momentum in the business. Looking out over the medium-term, our financial model and expectations are unchanged. With 12% to 16% research CV growth, we will deliver double-digit revenue growth.

With gross margin expansion, sales cost growing in line with CV growth over time, and G&A leverage, we can modestly expand margins from a normalized 2021 level of around 19%. 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 lower the share count over time and 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?.

Thank you. [Operator Instructions] And our first question comes from Jeff Mueller with Baird. Your line is open..

Yes. Thank you. Good morning. So great to see sales headcount back to growth and fully hear you on the investments you're making in recruiting capacity and the payback you're seeing on that.

I guess my question is, at what point does the sales headcount growth in GTS need to step up meaningfully, or how much capacity is remaining in the system where you can continue to drive this type of growth? Just -- like is it quarters? Is there -- just trying to understand how much leeway you have before you really need to hit the gas on sales headcount..

Hey, Jeff. Gene. So first, the -- we do have a lot of headcounts and 1 of the leverage that we used for growth, but it's not the only lever. We also early are very focused on productivity and we believe there's quite a bit of room for productivity improvements going forward. In parallel with that, as I mentioned on the call and Craig did as well.

We have initiatives underway to ramp up our recruiting capacity and output and refining actually we have a great value proposition, is very attractive markets. And so we're quite optimistic about our ability to ramp up hiring as we need to leverage productivity anytime..

Okay. And then can you help me with some of the GTS metrics? It looks like most of the growth is coming from client enterprise growth, CV per enterprise flattish, despite having a 104% wallet retention.

So I don't know to what extent there's sales head count mix impact -- if there is post-COVID win back -- just help me understand what's going on and is it a good thing that most of the growth is coming from client enterprises, given that you can expand after you land..

Good morning, Jeff. I think there's a couple of ways to look at what's happening under the covers. I think number 1, seeing the pickup in world attention is certainly a very positive trend which we anticipated. And as we've looked at the amount of up sell and expansion that we're driving within existing client enterprises, we're back to normal levels.

While our retention is strongest, not quite back to historical levels, but we feel really good about the level of expansion we're driving within existing enterprises. Again, some of that is when back, some of that is organic growth activities within existing enterprises.

But while it is pretty strong, I think on the enterprise account, enterprise growth, we've seen now few quarters, enterprises expanding. And as you'd expect, when a new enterprise comes in, it comes in at a lower CV level than our overall average.

And so the net enterprise adds that we've been doing will suppress a little bit or mute a little bit the CV for Enterprise that you see.

And what you are seeing actually is both levers working really well for the last several quarters, particularly in the third quarter, with that expansion, with the existing enterprises showing up in a low retention number and the number of enterprises growing nicely as well..

Okay. Thank you..

Thank you. Our next question comes from Gary Bisbee with Bank of America Securities. Your line is open..

Hey, good morning, guys.

I guess if I go back to GTS headcount, what's really kept you from bringing that back more quickly? I know last quarter you talked about having to ramp up recruiting capacity to deliver on that but how much is the tight labor market impacting the pace at which you bring people back and what's the risk in the next 6 months that you continue to have, sort of sluggish additions? How do we think about that? And when would that impact revenue growth in the segment if you don't get that up towards high-single-digits or wherever you're targeting? Thank you..

Hey, Gary. A couple of things going on with GTS headcount. First, it is a highly competitive labor market and sort of the turnover is up modestly. And of course they're within the modestly higher turnover. Their pockets are hired to modest turnover, but overall it's modestly up.

And we recognize that and we have a number of programs in place which we think will actually address that. We have a very good -- and we have a very strong employee value proposition. In fact, we don't have any trouble recruiting people into the Company.

And so the combination of continuing to strengthen our employee value proposition, we believe will get churn of this modest, high turnover back to normal levels in an [Indiscernible] that we are rapidly ramping up are recruiting capacity as I mentioned.

We had just started ramping up recruiting capacity back in May, but obviously what happens is you start -- you've got to hire recruiters. It takes a while to actually get them on the job, and then just like any other job, it takes recruiters some time to get up to full capacity.

And so when we started ramping up recruiting capacity back in May, it takes a little time before that definitely kicks in. As Craig mentioned on the script, on his prepared remarks. We're already seeing that we're back to kind of the levels of hiring that we were back in 2019. Again, we expect that to continue to go up.

So we expect a combination of improved employee turnover from the programs we have in place, combined with higher recruiting capacity to really address this issue..

Okay. That's helpful. And then on GBS, outstanding productivity there, I guess on the back of outstanding new business over the last four quarters or five quarters now.

How should we think about productivity? And I'm not asking Q4 or even next year like over the next few years, the LTM right now is way ahead of what, it's ever been in GTS, I guess one could argue you've got multiple franchises that you're selling there, and so it could be higher. But there's also a lot of factors have improved.

Would it be reasonable to think that it gravitates back towards where GTS has been historically, or do you believe you can keep this level of productivity or at least higher just because of the number of shots on goal you've got with the different practice areas are selling? Thank you..

In GTS, like GBS have a great value proposition. We provide actual insights to our clients on their toughest issues. So we start -- I think what we start with is we have a really great high proposition. As we talked about, we invested in making sure we had the content, sales training, a number of experts, etc.

over the last really 2 or 3 years to make sure that we had all the pieces in place to have to be able deliver that incredible value proposition. And now we're seeing the benefits of that. We're going to continue to keep investing in those areas and so I'd expect our value proposition which is very strong.

And also get our ability to execute on sales will continue to be very strong as well..

The other thing I know carriers in that net productivity number you're seeing it's as you called out. Really strong new business growth, but we've also seen meaningful improvements in the retention rates. And that obviously flows through to the NCVI per quota-bearing head as well.

So it underscores [Indiscernible] points around the value proposition being super strong. So not only are we getting lots of shots on goal, as you say across the franchises, we're going those levels. I guess if I said the metaphor and keeping those seat holders in the franchise with stronger retention rates..

Great. Thank you..

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

Thank you. Actually, just want to ask a follow-up on the last topic. So on GBS, you mentioned how you're seeing growth driven by supply chain and HR and sales practices. No surprise there. Those have been the topics really impacting many companies right now.

Are these really new clients subscriptions or add - ons from existing clients for the most part and do you view any of that as temporary, so like, if supply issues are the -- like supply chain issues are doing, for example, would those clients still stay on or could you see a little bit of a higher turnover of those clients?.

Good morning, Toni. It's Craig. I think across all the GBS practices, as we mentioned, all of them are at double-digit growth rates on a year-over-year basis in the third quarter and more than half of them are north of 20% year-over-year growth.

So we highlighted the top 3 which are performing really strongly, but that's not -- those aren't the only ones that are even north of 20% and again, to underscore the point, all of them are at double-digit growth rates.

I think what we're seeing, and you can see this through a combination of metrics is we are selling a lot of new functions within existing enterprises. Which is why you've seen a wild retention rate move up as nicely as it has.

And so just because the client is purchasing supply chain subscription, selling into their finance team or their HR team with our legal team is a brand new sale for us. And we're doing really, really well there and in addition to you bringing on brand new enterprises into the GBS franchise as well.

It's a combination of those two factors really driving that GBS growth. On cyclical versus secular. I think I go back to James' points earlier. We have a really, really strong value proposition in each of these functional areas that we are selling into.

We've invested a lot over the last several years to make sure that we've got the right content and the right analysts and advisors, and the right service capacity in the right selling capacity. And so we feel good about each of these opportunities.

Again, if you scan back, I mean these are enormous market opportunities for us and we're in the really, really, really innings on going after that market opportunity..

That's great. Wanted to ask about the pace of expenses returning things the way that I'm sort of thinking about it is. You have T&E and hiring that are going to make up probably some of the bigger buckets of returning costs and I know you talked about hiring a lot, so I'll skip that one, but just on T&E, I guess.

How far back are you at this point versus what is fully back and versus pre - COVID? Like is the level sort of lower? And maybe the easier way to ask it is you talked about the 19% baseline for adjusted EBITDA margin this year.

So modest growth off of that next year, is that how we should be thinking about '22 or could you see costs more gradually come back and we sort of are stuck in a situation like -- we had this year where you're a little bit over earning on the margin next year..

I think that's a great question. A couple ways to think about it. So one, the biggest bucket by far is headcount related. And as we talked about, we are making progress there.

We've increased recruiting capacity as Gene talked about, we're growing both sales forces now sequentially and we intend to do that not only with sales, but across the rest of the Company as needed as well. That is by far the biggest piece of it I think as I mentioned.

I've prepared remarks about two-thirds of the quote and quote normalizing adjustments relate to headcount. On the travel front, we are still almost at zero. And so there is still a long way to bounce back from that. When we were sitting here in May, we thought, second half of the year, it would start to bounce back.

When we were sitting here in August, we saw in the fourth quarter, it would bounce back. It is reopening a little bit, but we are still at a tiny fraction of where we were historically. And as we roll into 2022, we do think it will rebound to reset at a new normal level. Will that be all the way back to 2019? Perhaps not.

Perhaps there are things we can do a little more efficiently and effectively, but it's still going to be a pretty significant step-up from what we spent in 2021, which is virtually nothing, back to a new normal level in 2022..

Super helpful, thank you..

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

Hi, thanks. Good morning. I wanted to stay on GBS productivity. GBS and CPI, a $176,000 really come significantly above what we're seeing in GBS even before COVID and you mentioned strong new business growth, and an improved retention is drivers.

Were there any unusual tailwinds to put activity or seasonality factors to consider in the quarter? How sustainable are current levels of productivity?.

Good morning, George. Productivity, it is an [Indiscernible] measure and so we're trying to even out or take out seasonality from the measure. There are some structural differences that we've talked about in the past -- in looking at GBS compared to GTS. And again, based on where we are in the journey on these two businesses.

And so on GBS side, because we are, as I mentioned earlier in the really early innings of going after this really enormous market opportunity. We have a racer mix of what we call business developers or hunters whose sole job is to go out and find new business. And they're performing really, really well, and have been. And we've been building to that.

It wasn't just a 1 quarter phenomenon, let's say, several quarter multi-year phenomenon that we've been experiencing there. And so again, they are performing really well, the retention levels are helping a lot on the types of quota-bearing hires or AEs that managed CV and drive growth through expansion. So it's really a combination of those 2 things.

As we look at the future, is this the right level to think about? We will see, I mean, there is -- we do believe there was a little bit of pent-up demand out there in the market coming through the pandemic last year. But we feel like we're in a really good place with GBS achieving strong growth rates.

And again, through a combination of really strong new business and improving retention rates as well..

That's helpful. You mentioned normalized EBITDA margins are running at 19% and this is a little bit improved from previously, it was running at 18% to 19%. Can you discuss where in the business you're seeing improved cost profiles..

Yes, George, it's actually a combination of improved spread revenue outlook and performance and some improved cost profiles as well, is really driving both the modest adjustment from 18% to 19% to where we are now which is around 19%.

But I guess, generally, the way to think about a normalized margin of around 19% is, it is how our P&L would look at a more typical year with sales headcount growing a few points lower than CV, offices opened for the full year, normal travel levels as we just discussed on Toni question, and growth investment to support all the growth that we're driving across the business.

And so a modest change. But again, I'd say a combination of the revenue performing a little bit better than expected as we've talked about each quarter. And some tightening or more efficiency on the cost side as well..

Thank you..

Thank you. Our next question comes from Andrew Nicholas with William Blair. Your line is open..

Hi, good morning. And thank you for taking my questions. I'll start with conferences. I realized that you are only in the early stages of reintroducing in-person conferences and events. But I'm wondering if you have an updated view on the long-term mix of conferences between in-person and virtual particularly as we start to plan for 2022.

And then given even more experience today than the past couple of quarters with the virtual format, whether you have any additional clarity on the profitability of that model, the hybrid model, longer-term relative to pre -pandemic levels..

Hey, Andrew, great question. Conferences are important part of our business. And we have -- with the pandemic, developed quite good virtual conferences that have a lot of value to our clients and our [Indiscernible] received.

Having said that, a lot of our clients want to, in particular, used to go to in-person conference, as we do our customer research, there is strong interest and desire for us to provide them with in-person conferences as well.

So the look of future, right now, the way we are thinking is we would -- whether it is safe to do so that allowed in each geographic area range for environment. We will -- we plan to hold in-person conferences because it does provide tremendous value to our clients.

And having said that, we also plan to continue with virtual conferences for those clients that either don't want to travel or can't travel, given when we have our in-person conferences. And so our long-term strategy, our long-term plan is to have a mix of both in-person conferences and virtual conferences.

Going back to kind of the great success we had with the in-person ones combined with what we learned in the pandemic for the virtual conferences..

Got it. Thank you.

Is there anything you can say about the profitability differences between those 2 or what the profitability of that hybrid model looks like?.

You know Andrew, it's hard to say now. Just we've been operating a little bit in between the 2 models as we've -- as you know we were preparing to run a portion of our conferences this year in-person. And so we add staff onboard to be able to do that.

And then obviously, we had to cancel those in-person conferences in the fourth quarter and relaunched our virtual -- And so again, I think the way we think about it is, the contribution margin will look similar to the way it looked pre -pandemic for the overall conferences business. I do think and again, we'll provide guidance on 25 in February.

We're working through our operational plans now. But we -- and again, we've talked about this in the past, we are not going to be in a position to relaunch the 70 inverse definition conferences that we had in 2019, run them at the exact same profile economic and otherwise in 2022 it's going to takes some time to build back into those.

And so again, as we think about it, the combined operating margin for conferences looks pretty similar to the way it looks a lot prior to the pandemic, as it stands right now..

That's really helpful. Thank you. And then for my follow-up, it looks like it looking at the Q that United States and Canada are growing a little bit faster than EMEA and the rest of the international business. Although it's certainly a small gap. Just wondering if you could speak to the different market dynamics in the U.S. versus internationally.

And if there's anything specific, whether it's the selling motion or the receptiveness to the new products that you would call out between those regions. Thank you..

So let me start on that, Andrew. So the first thing is GBS is largely weighted to the U.S. And so most of the GBS growth just because of it is much less mature outside U.S., even in the U.S., it's going to be we're heavily U.S. weighted. It's going well outside the U.S.

as well but it's just a share of business, our share of salespeople are overwhelming U.S. Over time, just as we've done GTS, we expect to have our international markets and GBS be just strongly staff as we have GTS today. As we keep debt and salespeople over time. And so that's one of the factors to drives the U.S. markets.

In terms of actual our value proposition is very strong in the U.S., is very strong in Europe, very strong in Asia. And so it's equally effective there. Sometimes the mix of industries affects particular geography or particular market where one set of industries might not be doing as well and so it's a little tougher selling apartment.

But again, overall, our [Indiscernible] crops are strong at all those markets, and it's more specific things like that that would have impacted it. And as I said that our mix of sales people, particularly in the GBS..

Great, thanks so much..

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

Thanks so much. Just a couple of follow-up questions. First, going back to the whole issue about labor supply, I'm just wondering what the Impact of these tight labor markets has been on wage inflation, both for the sales force and for your associates broadly without -- throughout the Company? Hi, Jeff. Good morning.

With labor markets as you've identified, everyone has been dealing with -- yes, we've seen a little bit of wage inflation. It's totally within a manageable level as what we've basically seen. But there has been some wage inflation both from -- as we look at externally and also as we want to make sure that we are retaining our associates as well.

But all within manageable levels at this point..

What we found is the biggest issue is that we have a lot of associates and they are big pockets, where we didn't realize we might not a great couple of competitive. And now, we know we were competitive in those pockets. And so I think that's been the biggest source of, what you might call, wage inflation..

Okay. That's helpful. And then shifting over to Conferences, I know there's a lot of the issues in deciding whether to hold a conference remotely or hold it live. But I'm just curious and I know this may vary across your major conferences. How much lead time is needed if you decide to go -- you're going to hold it remote and then decided to go live.

How quickly can you ramp that up?.

So if we were planning to be virtual, which in July takes a long time because you got to reserve venues. You have to sell exhibitors, things like that. It's easier to go the other way around, meaning, a plan for live and go virtual. Because you have all the pieces in place already.

And so typically, like we, as you know, this year, we plan to go live for some of our conferences and then to conclude it, it was not either allowed or was not safe to do so. And so we didn't. But it's easier that way once you have an in-person conference, plans go virtual because you don't have to worry about the venue and things like that.

If you have a reserve, those venues, trying to get them at the right time and then, etc., is pretty tough to do..

Okay. So we're talking months. I wouldn't say years but if you decide to do something for next year, you would have to start looking at it right now..

So the -- yes, basically, it can take months -- it can take years because if you sort of those proper venues, get booked up literally a couple of years in advance. And so if you're trying to book, it's departure venue, trying to book at the last second can be very tough. So yes, the planning actually can take years..

Okay. Makes sense. Thanks so much..

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

Thank you. Gene, you talked about beefing up the recruiting efforts and making changes. I'm just curious, you guys were always good on that front. Just curious.

What needs to change in the new, I guess hybrid world I suppose?.

Hey, Manav. Good question. One of the things in the Hybrid world we need to focus on, and we always focus on this to a degree, but we have to talk about it typically, which is our employee value proposition. And why should associate want to come work in Gartner? The talent market we compete in is a very, very competitive market.

We're very attractive employer. We have to make sure that our candidates understand that and understand what's different in a virtual environment. It might have been when it was up to your office station environments. That's kind of the key change..

Okay. Got it. And just curious on, you've done one I guess [Indiscernible] deal this year. That sounds like things are going well across the front, balance sheet is healthy.

Just curious if M and E is something we should see higher up on the agenda or just more of the same?.

Yeah. Good morning Manav. I'd say, again, our capital allocation strategy remains unchanged. We're focused on returning capital to shareholders through our buyback programs, which you guys, you've seen, we've been very aggressive with over the course of this year and then also hunting out on strategic value enhancing tuck-in M&A.

The priority -- 1 A and 1 B from a priority perspective, we continue to scour the market for assets that makes sense for us. We are an organic grower, we don't need to do M&A to support our medium-term objectives. And so we can be very, very, very disciplined on the M&A front. We'll remain very disciplined on that front..

Alright. Thank you..

Thank you. Our next question comes from [Indiscernible] with Jefferies, your line is open..

Hi. This is Mario Cortellacci filling in for [Indiscernible]. First question is just around conversion rate and just could you help us maybe think about how we should think about the conversion rate and research business from those in-person conferences versus virtual.

As you get more back to the in-person conferences, should we expect a larger uplift in that conversion and even better growth in research?.

Hey, Mario. Good morning. As you highlight, your Conferences are an important piece of overall portfolio, and really support our research business in a variety of ways. One of those is in getting prospects there and having that experience. Gartner. Gartner. Gartner inside. And then converting them.

We also, obviously, have the benefit of engagement with existing clients and so there is positive benefit on retention as well. When we did pivot to virtual, we were very focused on making sure that we maintain those levels of engagement both in terms of engaging and existing seat holders to,.

to help with retention rates and also getting lots of prospects. Through so, we've been very focused on the fourth quarter of last year when we really ran our virtual conference portfolio and RS. And we did really good job on both fronts. And we're seeing the benefit of that from a retention rate perspective.

This year it's certainly helping and it's also a big contributing nicely to our overall new business growth rates on research as well. And as we roll forward, Gene talked about it in this sort of hybrid world of running in-person where we can and where it is safe to do so. We're going to take advantage of that from a research perspective.

And when we run virtual, we intend to make sure we get the benefits of that on the research side as well. Whatever format we run in, it's a great business but it's, it's really an extension of our research business and that's why we will continue to run it, whether it's in-person or virtual..

Got it.

And then in terms of consulting, can you just talk about what practices are faring better than others? And maybe you can update us on which verticals or adjacencies that you may be underpenetrated in?.

Yes, Mario. On the consulting side, we've continued to have irrelatively strong performance there. We're seeing obviously a lot of work with are the major trends in technology, digital transformation, Cloud optimization, cybersecurity, things of those nature, those are really the big ones for us.

As you know, we tend to focus our Consulting business on our largest, most complex clients. And they have those issues in earnest that do -- a lot of our other sized clients as well. But we've seen really good performance for all the -- geographically and spread nicely across those couple of areas.

And I would throw in strategic sourcing and cost optimization and into that Consulting mix as well. That is a strong practice for us..

Great. Thank you very much..

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

As you've heard us say in this call, we once again delivered strong performances in Q3. And we performed well across all three of our businesses, research, consulting, and conferences. Delivered strong performances in contract value, revenue, EBITDA, and free cash flow. And we repurchased another $355 million of stock in the quarter.

We continued to get better, faster, and strong as a Company. Gartner is a great place for associates. We provide outstanding returns for our shareholders and we're thriving in the current environment. Thanks for joining us today and we look forward to updating you again next quarter..

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