Gartner, Inc. is a global company that operates through three main business segments: Research, Conferences, and Consulting. The company primarily sells research products through subscription contracts, which are mostly non-cancellable and non-refundable, contributing significantly to its growth and profitability . Gartner also provides opportunities for learning and networking through its Conferences segment and offers custom analysis and support for technology-driven strategic initiatives via its Consulting segment . The company's business model emphasizes recurring revenue, particularly through its Research segment, supporting sustained growth and high free cash flow generation .
- Research - Generates revenue through subscription contracts for research products, recognized ratably over the contract term, with high gross margins and retention rates .
- Conferences - Provides learning, sharing, and networking opportunities through events like the Gartner Symposium/Xpo series, with revenue recognized upon event completion .
- Consulting - Offers custom analysis and support for technology-driven strategic initiatives, with revenues from fixed fee or time and materials engagements, recognized as performance obligations are satisfied .
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What went well
- Gartner delivered financial results ahead of expectations, with 9% contract value growth with enterprise function leaders and accelerating tech vendor contract value growth.
- The company is investing in its sales force to drive sustained double-digit revenue growth over the long term, effectively attracting and retaining high-quality salespeople with low turnover and increasing tenure.
- Gartner has strong pricing power, implementing price increases of about 4% for 2025 to offset wage inflation, maintaining margins and supporting future growth.
What went wrong
- New sales hires take approximately 3 years to reach full productivity, meaning recent sales force expansions will not contribute significantly to revenue growth in the near term.
- The company is not providing guidance for 2025 yet, indicating potential uncertainty about future performance.
- Management expects a significant year-over-year decrease in Q4 non-subscription revenue, which may impact overall financial results.
Q&A Summary
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Tech Vendor Growth Outlook
Q: When will tech vendor CV growth meaningfully improve?
A: New business with tech vendors has rebounded nicely, but some small vendors facing financial challenges are dragging growth. As these challenges pass, we expect continued acceleration, with new sales returning to historical levels. -
2025 Client Budgets
Q: What are clients saying about their 2025 budgets?
A: Clients are expecting a better year in 2025 than in 2024, which is positive for our selling environment next year. -
GBS Contract Value Deceleration
Q: Why is GBS CV growth stepping down sequentially?
A: While our new GxL products in GBS are growing above our 12–16% target range, legacy products are renewing at lower rates due to economic factors, impacting overall GBS growth. -
Consulting Business Variability
Q: What's driving trends in the consulting business?
A: Our consulting helps clients secure better deals on large contracts, but results are variable due to the timing of big deals. This quarter we faced tough comparisons against last year's 98% Q3 growth. -
Expenses and Margin Outlook
Q: Is 2024 a good baseline for adjusted EBITDA margins?
A: Yes, 2024 is a relatively good baseline for operating expenses. However, back-end loaded hiring in GTS and GBS will impact full-year expenses next year as we continue investing in sales force growth. -
Sales Force Retention and Tenure
Q: How are sales force retention and hiring progressing?
A: We attract top talent with 200 applicants per job, have low turnover within our target range, and tenure is rising. We're expanding our sales force to pursue our significant market opportunity. -
Contract Value Recovery Path
Q: Why did you say CV recovery may be uneven?
A: Quarterly CV growth can vary due to the timing of renewals and deals. Even a $3.5 million change can swing results by 10 basis points, but overall, we're pleased with our progress. -
New Business Growth Drivers
Q: What drove new business growth in GTS and GBS?
A: GBS new business grew 10%, and GTS grew 8% year-over-year, driven by our strong value proposition and broad-based performance across practices.
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Given that it takes new salespeople three years to reach full productivity and you've accelerated hiring to support growth in 2025 and beyond, how are you mitigating the short-term impact on sales effectiveness and ensuring these investments translate into near-term revenue growth?
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With approximately 50% of Net Contract Value Increase and 40% of annual new business occurring in the fourth quarter, how are you managing the risks associated with such a significant concentration of business, and what factors give you confidence in meeting your CV growth targets amid market uncertainties?
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Despite indicating a robust pipeline for GTS enterprise leaders, growth in this segment appears to have decelerated; can you elaborate on the specific challenges impacting GTS and the strategies you're implementing to return to 12%-16% growth over the medium term?
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Considering the variability and lumpiness in your contract optimization consulting business, particularly after a 98% growth in Q3 last year, how do you plan to achieve more consistent growth, and what measures are you taking to mitigate quarterly volatility?
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With your pricing strategy focused on offsetting wage inflation through price increases of under 4%, how are you balancing margin preservation with client retention, and is there potential to adopt a more aggressive pricing approach without adversely affecting renewals?
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: FY 2024
- Guidance:
- Research Revenue: At least $5.11 billion, FX-neutral growth of about 5%. Subscription research revenue growth expected to be about 7% .
- Conferences Revenue: At least $580 million, FX-neutral growth of about 15% .
- Consulting Revenue: At least $535 million, FX-neutral growth of about 5% .
- Consolidated Revenue: At least $6.225 billion, FX-neutral growth of 6% .
- EBITDA: At least $1.52 billion, an increase of $60 million from prior guidance .
- Adjusted EPS: At least $11.75 .
- Free Cash Flow: At least $1.35 billion .
- Fully Diluted Weighted Average Shares Outstanding: Based on 78 million shares .
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: FY 2024
- Guidance:
- Research Revenue: At least $5.105 billion, FX-neutral growth of about 5%. Subscription research revenue growth expected to be about 7% .
- Conferences Revenue: At least $565 million, FX-neutral growth of about 12% .
- Consulting Revenue: At least $530 million, FX-neutral growth of about 4% .
- Consolidated Revenue: At least $6.2 billion, FX-neutral growth of 5% .
- EBITDA: At least $1.460 billion, up $5 million from prior guidance .
- Adjusted EPS: At least $11.05 .
- Free Cash Flow: At least $1.08 billion, consistent with prior guidance .
- Adjusted EBITDA for Q3: At least $295 million .
- Share Count: Guidance based on 78 million fully diluted weighted average shares outstanding .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024
- Guidance:
- Research Revenue: At least $5.115 billion, FX-neutral growth of about 5% .
- Conferences Revenue: At least $560 million, FX-neutral growth of about 11% .
- Consulting Revenue: At least $525 million, FX-neutral growth of about 3% .
- Consolidated Revenue: At least $6.2 billion, FX-neutral growth of 5% .
- EBITDA: At least $1.455 billion, up $35 million from prior guidance before the effect of a stronger dollar .
- Adjusted EPS: At least $10.90 .
- Free Cash Flow: At least $1.08 billion, up $15 million from prior guidance, reflecting a conversion from GAAP net income of 139% .
- Second Quarter Adjusted EBITDA: At least $390 million .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Research Revenue: At least $5.15 billion, FX-neutral growth of about 5% .
- Conferences Revenue: At least $560 million, FX-neutral growth of about 10% .
- Consulting Revenue: At least $530 million, growth of about 3% FX-neutral .
- Consolidated Revenue: At least $6.24 billion, FX-neutral growth of 5% .
- EBITDA: At least $1.435 billion, resulting in an EBITDA margin of at least 23% .
- Adjusted EPS: At least $10.55 per share .
- Free Cash Flow: At least $1.065 billion, reflecting a conversion from GAAP net income of above 140% .
- Shares: Guidance based on 79 million shares, assuming repurchases to offset dilution .
- First Quarter 2024 EBITDA: At least $335 million .
Recent developments and announcements about IT.
Corporate Leadership
Leadership Change
Who is leaving: Mr. Alwyn Dawkins, Executive Vice President, Global Business Sales at Gartner, Inc., is stepping down effective January 6, 2025, due to his retirement. He will remain with the company until at least March 31, 2025, to ensure a smooth transition.
Why: His departure is connected to his retirement, and there is no disagreement with the company regarding strategy, financials, or business practices.
Who is stepping up: The document does not specify who will take over Mr. Dawkins' responsibilities at this time.
Board Change
James Smith has retired from the Board of Directors of Gartner, Inc. effective December 2, 2024. He has been a member since 2002 and his retirement is not due to any disagreement with the company .