00:02 Good day, and thank you for standing by. Welcome to the Gartner’s First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] 00:25 I would now like to hand the conference over to your speaker today, David Cohen, Gartner's SVP of Investor Relations. Please go ahead.

00:41 Good morning, everyone. We appreciate you joining us today for Gartner's first quarter 2022 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 first quarter 2022 financial results and Gartner's updated outlook for 2022 as disclosed in today's earnings release and earnings supplement, both posted to our website, investor.gartner.com. 01:07 Following comments by Gene and Craig, we will open up the call for your questions. We ask that you limit your questions to one and a follow-up. On the call, unless stated otherwise, all references to EBITDA are for adjusted EBITDA, but the adjustments is described in our earnings release and the supplement. All growth rates in Gene's comments are FX-neutral, unless stated otherwise. 01:27 Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of the gartner.com website. Finally, all contract values and associated growth rates we discuss are based on 2021 foreign exchange rates unless stated otherwise. 01:41 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 2021 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. 02:04 Now, I will turn the call over to Gartner's Chief Executive Officer, Gene Hall.

02:09 Good morning, and thanks for joining us. Gartner had a great start to 2022. In the first quarter, performance was strong across the business. We delivered growth in revenue, EBITDA, EPS, and free cash flow. We drove acceleration in contract value and our significant share repurchase program has lowered our share count. 02:29 With our strong Q1 results, we’re increasing our 2022 guidance. Research continues to be our largest and most profitable segment. Gartner research provides actionable objective insight to executives and their teams across all major enterprise functions in every industry around the world. 02:46 We continue to have a vast market opportunity across all structures, sizes, and geographies. And we are delivering more value to our clients than ever before. It was a high degree of volatility and uncertainty in the world. Our clients are facing more challenging decisions than ever before. We’ve been incredible agile in supporting them through these trying times. 03:07 We’re delivering more relevant and timely content on current pressing issues such as, successfully operating in a hybrid work environment, developing strategies to attract and retain talent, and managing supply chain disruptions. Beyond these issues, we continue to provide unparalleled insight and advise on top priorities, including transitioning to digital business, [within] [ph] diverse, equitable, and inclusive organizations, managing cyber security threats and much more. 03:36 Whether our clients are experiencing good times or bad, and regardless of role, we deliver incredible value to enterprise leaders and their teams and we have strong demand for our services. Research revenue grew 18% in Q1. Total contract value growth was 16% at the top end of our medium-term outlook. 03:56 Within our research segment, we serve executives and their teams through distinct sales channels. Global technology sales or GTS, serves leaders and their teams within…

07:36 Thank you, Gene, and good morning. First quarter results were strong with acceleration in contract value growth and strength in revenue, EBITDA, and free cash flow. EPS was particularly strong as the benefit of share buybacks reduced our share count. With results above our expectations, we are increasing our 2022 guidance. The improved outlook reflects the better than expected first quarter top line results and increased revenue from conferences we now expect to hold in-person. 08:03 First quarter revenue was $1.3 billion, up 14% year-over-year as reported and 16% FX neutral. In addition, total contribution margin was 70%, up 44 basis points versus the prior year. EBITDA was $329 million, up 3% year-over-year and up 5% FX neutral. Adjusted EPS was $2.33, up 17% and free cash flow in the quarter was $150 million, up 4% year-over-year. 08:31 Adjusting for insurance proceeds received last year, free cash flow was up 17% on a rolling four quarter basis. Research revenue in the first quarter grew 16% year-over-year as reported and 18% on an FX neutral basis. Retention was very strong again and new business continued to increase. 08:49 First quarter research contribution margin was 75%, up 81 basis points versus 2021. Higher than normal contribution margins reflect improved operational effectiveness, increased scale and continued temporary avoidance of travel expenses. We've been increasing our headcount, which we expect continue as we move through the year. 09:09 Contract Value or CV was $4.2 billion at the end of the first quarter, up 16% versus the prior year. This includes our decision to exit the Russian market, which reduced CV by about $14 million. Quarterly net Contract Value Increase or NCVI was $80 million net of the impact of Russia CV just noted. 09:32 Quarterly NCVI is a helpful way to measure Contract…

21:42 Thank you. [Operator Instructions] Our first question comes from Jeff Meuler with Baird. Your line is open.

22:03 Yes. Thank you, and great quarter. So, you already gave me 15 talking points on this, but I'm going to ask about it anyway. Just a quota-bearing sales headcount being flat, so, just so I understand reconciling what you gave us to that metric, so the turnover is seasonally higher in Q1, but turnover for quota-bearing headcount is actually getting better year-over-year and then Q1 is also seasonally high for promotions and given the planned growth, there's more promotions this year than there were last year, but hiring is performing to plan and is actually the best since before the pandemic, are those the right reconciliation points to explain while QBH is still flat sequentially?

22:56 Yeah, It’s Gene. So, [Technical Difficulty] is going to plan and we're on track for the year [Technical Difficulty] double-digit headcount in our [Technical Difficulty] headcount. As you have more [portions] [ph] at the January [Technical Difficulty] year we've done this for long period of [Technical Difficulty]. 23:25 So, we will be [Technical Difficulty] January to your point, we [Technical Difficulty] backlog [Technical Difficulty] because of the pandemic than we've had in the [Technical Difficulty] pandemic were. So, that's [Technical Difficulty] bigger drain on quota-bearing headcount.

23:52 Okay. I don't know if you can hear me…

23:56 Yes, Jeff, let me just repeat what Gene said, we're just having a little bit of trouble in his microphone. So, a couple points…

24:14 I don't know if it's just me. I'm also having trouble hearing you.

24:21 All right. So hopefully now you can hear me?

24:24 Yes.

24:26 Okay, great. So, we'll work through the problem with Gene’s mic, but he was saying, as we've seen improving attrition really starting in the second half of last year and continuing through this year, which is very, very positive. We do almost all of our promotions in the beginning of the year in January, and so because of the really strong growth and bounce back in GTS, we had more promotions than we normally have in the first quarter, and obviously, we fill them generally with our best performing frontline associates. It’s the next step in the promotional ladder that our frontline sellers take. 25:14 As Gene and I both mentioned in our prepared remarks, very strong recruitment and hiring across the organization and in particular in GTS. And then the one other thing I would add, it had a modest impact, but was also the exiting of Russia had a small impact on the sequential QBH reported number as well.

25:37 Got it. Very helpful. And then on conferences, so I can under understand kind of the business performance and the assumptions, for the Q2 conferences that you have better line of sight to, I heard that at least some of them look like record attendance or sold out attendance. Are those conferences, are you monetizing them above the pre-pandemic level at this point and the full-year guidance being below the pre-pandemic level is about the risk-adjusting the conferences assumptions for later in the year, plus fewer conferences, just wondering conference monetization of those that are happening with good line of sight relative to pre-pandemic?

26:23 Yes, Jeff, it's a great question and Gene will follow on here as well. So, a few thoughts there. So, as we noted, we are transitioning 24 that had previously been planned as virtual to run in-person over the balance of the year. And clearly, we have more visibility into ones that are running next week, as Gene noted than ones that are running in the fourth quarter. 26:50 From a monetization perspective, just a couple of thoughts there. So, one is, we're planning on having fewer – in some cases, fewer attendees in each of the conferences than we had historically to be mindful of being able to social distance and not feel like we are packing everyone in shoulder-to-shoulder given the environment. 27:15 And so in some cases, we will have fewer attendees than we had in pre-pandemic. In some cases as the conferences have been building, we'll have more attendees than we had pre-pandemic. And so, the revenues will not bounce back immediately to pre-pandemic levels predominantly because we want to make sure that we can keep people say healthy and feeling safe and healthy at the conferences by just moderating the attendance.

27:47 Got it. Thank you.

27:51 Thank you. Our next question comes from Toni Kaplan with Morgan Stanley. Your line is open.

27:56 Thanks so much. I wanted to ask about pricing, are you able to increase prices more this year compared to prior years just given the inflationary environment and have customers been generally understanding about it, if that’s the case?

28:25 Hi Toni. Thanks for the question. So, we are being a little more aggressive on pricing this year, and the way we're basically thinking about it is, you know as we're dealing with and have modeled in more wage inflation or cost inflation on our people, we are making sure that we at least match that from a pricing perspective so that we can protect our margins. And I say, generally speaking, so far this year our clients are understanding of the price increases. Again, as we've talked about in the past, our – the spending with us at most of our clients represents a pretty small ticket item and modest price increase our clients are generally understanding, and of course, we've been significantly improving our products and insights along the way as well.

29:24 Great. I wanted to also ask about the EBITDA margin guidance you raised the margin to 21.5% for the year from 20%. And I think the results in the quarter and the FX impact based on my estimates that drove sort of about [half the raise] [ph], but maybe you could have had different forecast than I did, but anything outside of the first quarter be in the FX that really drove, sort of the higher margin for the year, that’d be helpful? Thanks.

29:58 Yeah, of course. That's great question. The way to think about it is probably two or three things. So, number one, the NCVI performance in the first quarter exceeded our expectations, and obviously that benefited Q1, but it also flows through into the balance of the year and generally flows through pretty nicely from an incremental margin perspective. 30:25 Second thing is obviously the pivot to in-person conferences and that incremental $70 million of revenue does flow through with some decent incremental margins there. And then third, there are some SG&A savings, predominantly G&A savings that we’re able to dial through P&L as well and most notably, we did take as you would know a charge for real estate in the quarter and we dialed in the 2022 expense benefit from that facility chart. So, it's really a combination of those three things that are driving both the revenue and EBITDA side and translating into modestly higher EBITDA margins for the full-year.

31:12 Terrific. Thanks again. Congrats on the quarter.

31:16 Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is open.

31:21 Hi, thanks. Good morning. GTS and GBS productivity both increased pretty significantly in the quarter, can you elaborate on the factors driving improvement and productivity and how much further improvement you see in both of the segments?

31:37 Hey it's Gene, I'll try again. Hopefully my line works this time. So, basically, we're very focused on improving productivity for both GTS and GBS. It's been [indiscernible] one period of time, and we have a lot of programs we talked about from time-to-time on improvement productivity. It includes things like our recruiting programs, our training programs, the tools we give our salespeople people and our processes. And what you're seeing I think, it also includes become our content to making sure on the most important issues. And I think all those things are coming together driving productivity. 32:11 In addition to that, because of our slower growth in headcount last year, we have an higher average tenure than we would have, it kind of normal time to call it pre-pandemic times. 32:22 So, those are the key factors that drive productivity. The operational changes we're making and modestly higher tenure, compared with pre-pandemic times?

32:31 Got it. That's helpful. And then you're guiding to double digit growth in headcount this year, can you elaborate on how much headcount growth you're expecting in GTS, compared to GBS over the remainder of this year?

32:46 Yes. Yes, we're expecting both to grow double-digit rates because of the faster contracts I’ve roughly seen from GBS. We’d expect that double-digit headcount to be modestly higher than GTS.

32:58 Very helpful. Thank you.

33:03 Thank you. Our next question comes from Andrew Nicholas with William Blair. Your line is open.

33:08 Hi, good morning. This is actually Trevor Romeo in for Andrew. Thanks so much for taking the questions. First, I was kind of just wondering if you could call out any drivers of the consulting strength with 20% FX neutral growth and what look like record backlog, any new kind of service offerings or changes that clients have been particularly receptive to there?

33:30 Hey, Trevor, we always make improvements to our processes and we've been making substantial improvements to our consulting processes, but is fundamentally the strategy we have, which is consulting is an extension of our research business and we're helping clients with the same difficult issues that we do in our research business, but it led to us work with clients in a more in-depth way for those clients that prefer that. And so it's really a combination of operational changes with fundamental demand.

33:55 Okay, great.

33:57 Sorry, Trevor. I would just add. The growth in the quarter was both across labor base and contract optimization. So, 14% year-over-year reported growth are our labor based revenue and 29% reported growth on the contract optimization business.

34:17 Yes. Understood. Thank you. And then just kind of a follow-up on the margin outlook, looks like now 2022, the guide implies about 21%, 22% margins, has you're thinking around kind of the normalized margin run rate for the business going forward kind of also increased? Is this kind of a good baseline to build on?

34:39 Hey, Trevor. Great question. So, the implied margin of the outlook right now is about 21.5%. The way we continue to think about it is, our normalized margin is around 20 as we think about it. We are still seeing some benefits and we are still catching up to some extent on a number of items whether it be headcount, travel, and a few other things. And so the way to think about the normalized margins moving forward is around 20%.

35:17 Okay great. Thank very much very. Very helpful.

35:21 Thank you. Our next question comes from Jeff Silber with BMO Capital Markets. Your line is open.

35:28 Hi. Good morning. This is [Ryan] [ph] on for Jeff. Just had a follow-up question on the conferences. Given the move to in-person conferences this year, how does that affect the financial model from both a margin percentage in margin dollar basis?

35:43 Hey, good morning. So, yes, as you saw we’re – we flow through an incremental $70 million of revenues. And guys important to remember that we're pivoting from virtual where there was revenue expectations in-person where there was just a higher revenue expectation. So, it's not going from zero to something, it's going from a smaller number based on a virtual conference to a larger number based on an in-person conference. 36:13 As I mentioned earlier, I forgot who’s question it was – it was about, it was Jeff's question about the scale of the conferences. We are running them at a little bit lower scale than we had pre-pandemic, and so our expectation on the margin flow through is not as high as it would have been pre-pandemic. That said, the margin dollar flow through is obviously more than it would be had we been running virtual. 36:46 So, the way to think about it is, we're probably in the 20% to 30% incremental margin flow through on the shift from virtual to in-person conferences is that hurts the margin percentage, but it’s obviously [helpful] [ph] in terms of generating nicely more margin dollars for us going through to the bottom line.

37:16 Got it. Thank you. And then just a modeling question. When should we think about normalized T&E expense base returning this year?

37:28 Yes. It's slowly building. Q1 given the environment and given the fact that we weren't running too many conferences or any in-person conferences was very late. We would expect second half of the year to look more like “normal”. That said, though, we are still rebuilding our conferences portfolios as we roll into years beyond 2022, there may be more travel associated with delivering those. But second half of the year, we expect to be back at a semi-normal rate of travel. But again, I think we won't get back to true normal travel levels until our conference portfolio has fully come back.

38:30 Thank you. [Operator Instructions] Our next question comes from Heather Balsky with Bank of America. Your line is open.

38:40 Hi, thank you. First, just a follow-up question on the normalized margin outlook you talked about, you still think it's 20%, I guess, given that you exceeded plan thus far this year and you raised your guidance, I'm curious then when you think about the 150 basis points of margin improvement in your guide, how much of that, kind of is a go forward, sustainable benefit or [indiscernible]? And how much of it, I guess how much shifted into next year? I'm just curious given that you be planned why – why a margin outlook would stay at 20%?

39:19 Hey, good morning, Heather. I think it's a few things. So, one, given the really strong growth that we delivered last year, we are still to an extent catching up on all the people we need on staff to really deliver to our clients and drive future growth. And so, while we're hiring at a furious cases, as Gene highlighted and we are on our operational plan, we are still playing catch up in some areas. And so that would be a little bit of, some of the bridge between the 21.5 and the normalized level of 20. 40:09 We just talked about one of the other levers, which is travel, which again has not fully come back yet. We actually were under a plan in travel expense in the first quarter. We do expect it to build, but as I just discussed, it's not back to full “normalized levels” yet and we'll get there over time. 40:32 Those are probably the two biggest ones and then obviously also making sure that we are making all the right investments so that we can drive repeatable, sustained top-line, double-digit growth. Again, that means growing GTS and GBS at those double-digit growth rates and continuing to do that. And I think those are the three big factors as we think about the current guide, and then the normalized level of margins.

41:03 Got it. And your second comment, I guess brings me to my follow-up question, which is, as we think of the rest of the year, if you were to exceed on your sales plan, I think you talked in the past about what your [flow through on] [ph] the gross margin side is? I'm curious how much, how should we think about incremental investment for kind of any [sales beats] [ph] that you – they might see as the year progresses?

41:31 Yes. I mean, I think we are – we built a real solid operational plan at beginning of the year that had the sales hiring and expert hiring and service hiring that we need to deliver on 2022 and also to make sure that we're set up to continue to drive really strong growth rates into 2023 and beyond. 42:02 If CV growth is a little faster than we had expected, there would probably be incremental sellers, incremental experts, and incremental service people. Again, to make sure that we keep our clients really, really happy and keep delivering great value and can continue to grow. So, as we move through the year, I'd say right now, we feel good about our investment plans and hiring plans. 42:28 If the performance is starting to look higher or lower than our current expectations, we will obviously adjust as necessary. So, if we see stronger growth, we would probably do more hiring; if we see softer growth, we would potentially slow down a little bit, but from where we sit today, we feel like we've got a really strong hiring plan that will allow us to deliver on 2022 and also set us up for continuing to grow into the future.

42:58 Great. Thank you for your help.

43:01 Thank you. And I'm currently showing no further questions at this time. I'd like to turn to call back over to Gene Hall for closing remarks.

43:08 So summarizing today's call, we started 2022 with strong performances. We have great momentum across the business. With our clients who are experiencing good times or bad, and regardless of role, we can deliver incredible value to enterprise leaders and their teams. 43:23 We have strong demand for our services. We have a vast untapped market opportunity. We generate significant free cash flow and excess net income. Looking ahead, we're well positioned to drive strong top line growth with modest margin expansion. 43:38 As we invest for future growth, we’ll continue to return significant levels of excess capital to our shareholders. This reduces our shares outstanding and increases returns on capital over time, and with our strong results we’re increasing our 2022 guidance. 43:52 Thanks for joining us today. And we look forward to updating you again next quarter.

43:57 This concludes today's conference call. Thank you for participating. You may now disconnect.