Good morning, everyone. Welcome to Gartner's First Quarter 2025 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 first quarter 2025 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. All contract values and associated growth rates we discuss are based on 2025 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 2024 annual report on Form 10-K and quarterly report 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.

Good morning, and thanks for joining us today. Gartner remains resilient in a complex environment. In Q1, contract value grew 7%. First quarter revenue, EBITDA, EPS, and free cash flow were ahead of our expectations. We increased headcount across our sales organizations by 4%. As we navigate another year of volatility, uncertainty, complexity, and ambiguity, we'll continue to be agile, and we'll target our investments to support long-term sustained double-digit growth. Research continues to be our largest and most profitable segment. Research contract value grew 7%. Excluding The U.S. federal business, contract value grew 8%. Within research, we serve executives and their teams through distinct sales channels. Global technology sales or GTS serves leaders in their teams within IT. GTS contract value grew 6%. Excluding The U.S. federal business, contract value grew 7%. Contract value with tech vendor clients improved for the fourth consecutive quarter. Global business sales or GBS serves leaders and their teams beyond IT. This includes HR, supply chain, finance, marketing, legal, sales, and more. GBS contract value increased 11%. Gartner conferences deliver extraordinarily valuable insights to engaged and qualified audience. On the same conference basis, revenue grew 12%. Gartner Consulting is an extension of Gartner Research. Consulting helps clients execute their most strategic initiatives through deeper project-based work. Consulting's an important complement to our IT research business. Consulting revenue grew 5% against a strong compare from Q1 2024. Revenue from contract optimization grew robust 38%, and consulting backlog grew 16%. Overall, our Q1 financial results were ahead of expectations. Gartner has a unique client value proposition. We deliver actionable, objective insight, guidance, and tools that help our clients succeed with their mission-critical priorities. We practice disciplined cost management while remaining agile and prudently investing for future growth. We generate free cash flow well in excess of…

Thank you, Gene, and good morning. First quarter contract value or CV grew 7% year-over-year. Revenue, EBITDA, adjusted EPS and free cash flow were better than expected as we continue to execute well in an increasingly complex environment. We were resilient in a quarter affected by macro factors. Since we reported Q4 2024 results in early February, there were notable changes in U.S. Federal government end market. The broader selling environment also shifted during the quarter as many company decision makers started to adjust to the evolving global macro economy. We are updating our guidance to reflect Q1 performance, the new macro landscape, the benefit from the move in FX rates and our own expense agility. We repurchased $163 million of stock in the quarter, maintaining flexibility as the market digests the changes in the macro landscape. We remain eager to repurchase shares, which we will do opportunistically. First quarter revenue was $1.5 billion, up 4% year-over-year as reported and 6% FX neutral. In addition, total contribution margin was 69%, up 20 basis points from last year. EBITDA was $385 million, up 1% as reported and 3% FX neutral versus the first quarter of 2024. Adjusted EPS was $2.98, up 2% from Q1 of last year. And free cash flow was $288 million, a very strong performance for our first quarter. Research revenue in the quarter grew 4% year-over-year as reported and 6% FX neutral. Subscription revenue grew 8% FX neutral. Non-subscription research revenue was in line with our expectations. First quarter research contribution margin was 74%, consistent with last year. Contract value was $5.1 billion at the end of the first quarter, up 7% versus the prior year. Contract value and CV growth are FX neutral. Excluding the U.S. Federal government, CV grew 8%. Contract value growth with tech…

[Operator Instructions]. Our first question comes from the line of Jeff Meuler with Baird. Your line is open.

Thank you, good morning. So what percentage of the contract value base are you following the directly impacted areas? And how are you managing sales headcount, I guess, for U.S. federal government agency prospects or the more meaningfully other directly impacted areas in terms of are you reassigning it to other opportunities? Or are you kind of preserving some of that capacity, including to position for like win-back opportunities?

Jeff, good morning, thanks for the question. I'll start, and then Gene will finish up on your question. So -- from a directly impacted area perspective, it is largely U.S. federal that we're talking about now. And so obviously, we're not looking to grow our QBH there, but we wanted to make sure it was really clear that outside of that directly impacted area, we were actually targeting to continue to grow the number of headcount, number of territories for both GTS and GBS in the mid-single digits.

Yes. Basically, Jeff, as Craig said, the largest impacted area is by far is the U.S. federal government. And there, what we're planning to do is we're not backfilling, and we're basically making sure we're controlling our head out there very carefully. The rest of the business, but not impact carries, as I said, rent to grow in mid-single digits this year.

But you're not reassigning the U.S. federal government headcount, you're keeping them there for now.

Yes, great question. So basically, we have some very strong public sector sales people going to make sure we retain them, and those really strong salespeople, where we can reassign them, we are absolutely resigned because we have plenty of sales opportunities. In some cases, it makes sense; in other cases, it doesn't. And wherever we can, we, of course, are retaining our great sales.

Got it. And then what is -- where there's early cancels for convenience among U.S. federal government agency contracts what is the rev rec treatment? And what is the contract value treatment? And can you just give us any sense of if that's a meaningful percentage of the attrition versus just non-renewal as a contract naturally comes due?

Yes, Jeff, it's a great question. So actually, we've got details on that in the Q, but let me just summarize for the benefit of everyone on the call. So, as it stands right now, we've got about $30 million worth of termination notices related to contracts that are set to expire later in the year. One way to think about it is it's sort of just normal course. We've just been notified ahead that those things will not be renewing or they will or would have the termination notice in hand. That $30 million remains in contract value because we are continuing to recognize the revenue on it. But in the grand scheme of not only the U.S. federal business, but actually on total CV, it's a relatively small amount, but that's how we're handling it. And there's a little bit more detail in the Q, I think, on Page 25, if you want to search it out.

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

Thanks so much. I was hoping to get just maybe a little bit more color on the guidance. I know you talked about on the slide and in the remarks that the guidance reflects 1Q new business and retention trends. I know you mentioned that there was a little bit of a change during the quarter, maybe a slower like back half of the quarter. So, I wanted to sort of understand, does the guidance reflect like the complete 1Q, which was maybe a little bit better or more weighted towards like the more recent, like slower experience that you've seen?

Yes. Toni, it's great question. So, when we were together in early February, talking about Q4 commentary at that point through the month of January is we hadn't really seen a change in the selling environment and that was the case. Clearly, things started to change mid-February into early March. I would say, from a metric perspective, though, since we are so dominated by the third month of every quarter, what we saw in the back half of February and March, in particular, in March, is reflective of the quarter. And again, we've taken that experience and rolled it forward across Q2, Q3 and Q4 to drive that update on the revenue guidance. So, while January was normal, it's really small, and the bulk of the volume in Q1 actually happened during the month of March.

Got it. And then wanted to ask, I know U.S. federal government was sort of the big impact for what has changed on the government side. wanted to, though broaden it out to are you seeing anything at the state and local level or international government level that is similar to U.S. Federal and also maybe just opportunity for win back would be, as Jeff sort of alluded to as well, is there an opportunity there this year, too?

So, Toni, first on the win-back side. So, we believe we provide a lot of value to our clients, including our U.S. federal government clients on helping -- we help things like having strong cybersecurity capabilities, cost optimization, use of AI, which are priorities for every enterprise, including pulp-integrated prices. And so, we believe we provide a lot of value there and will, over time, continue to provide a lot of value to the federal governments. If you look at the state and local governments in the United States, there wasn't much change in Q1 compared to what we've seen in previous quarters. The same is true for governments around the world outside of the U.S., whether it's at the federal level or at the provincial or state and local government level.

Our next question comes from the line of George Tong with Goldman Sachs. Your line is open.

Your business outlook for 2025 research revenue was downwardly revised by $135 million. Can you elaborate on how much of this reflects updated views on federal contract renewals versus updated views on other customer segments like tech vendors and enterprise functional leaders?

Yes. George, I would say that the guidance is reflective of everything we've seen and everything we know. And so obviously, the biggest thing or the largest impact that we saw that was sort of off trend in Q1 was related to the U.S. federal government, which we just talked about with Jeff and Toni. But in terms of what we're seeing more broadly, macroeconomically, that has been factored into the updated guidance. So, I think what I'd say is from an update on the guidance perspective, and this applies to all the revenue lines, but research, in particular, is we took our Q1 experience and we flowed that through across our contract expirations for the balance of the year. We took what we knew specifically about U.S. federal government. We modeled in the new FX rates. And as always, we try and take a prudent approach to how we approach our guidance for the full year. So, I'd say those are the four things that factored into the update of all the guidance lines and the research line in particular.

Got it. And can you talk a little bit more about what you're seeing with tech vendors and enterprise functional leaders. Would you say that those trends are holding up better than what you're seeing with federal contract renewals?

So, what I say with tech vendors, the market continues to improve. Our business there is accelerating, particularly larger vendors. The smaller vendors are accelerating just at a slower pace than the larger vendors. So that business is, I think, quite healthy. With enterprise functional leaders, again, sort of you can separate into the federal government, which we talked about and then all the other enterprise functional or business case, which I think is more in trend with global matters.

Got it. Very helpful, Thank you.

Our next question comes from the line of Josh Chan with UBS. Your line is open.

Good morning. Thanks for taking my question. I was wondering if you could talk about the selling environment outside of federal. It seems like you're saying that the environment became more volatile. But I guess if I add back the impact that you gave for the federal government. It seems like the CV ex-federal was fairly similar to what you had in Q4. So, just trying to triangulate the comment about volatility and then the relatively good ex federal CV growth?

Josh, so the selling environment because of the federal government we talked about, and that was the main thing that impacted our results in Q1. Outside of the federal government, it's not completely uniform in terms of the impact. So, there are some companies that are more impacted, for example, by tariffs than others. By the way, both U.S. as well as non-U.S. companies. And so, the companies that don't have a lot of tariff impact or other kinds of impact for policy changes, it's kind of business as usual in terms of decision-making. The ones that are more directly impacted decision-making has slowed. They're still buying. They're still renewing, but decision cycles have extended compared to what they were, say, Q4 of last year. So, we still see the value. Our pipeline is actually very robust, but decisions are taking longer to get than they would get in Q4 or last year basically.

Okay. That's a -- and then I guess, how are you thinking about your cost structure going forward because you clearly raised the guidance despite lowering the revenues. So, could you kind of talk to, I guess, how the lower revenue, but then offset by your more prudent cost management is factoring into your increased margin guidance for the year?

Yes, Josh. So, I mean, the way to think about that is we've proven over the last several years, given all the things Gene outlined in his prepared remarks about the craziness in the macro and geopolitical environment and just how challenging it has been, that we've been very agile in managing our expenses. And what I'd say now is given the U.S. Fed results and the impact that's having on the contract value growth and then some of the things Gene just outlined as well in terms of longer selling cycles and things like that, we're taking the opportunity to make sure that we are managing our operating expense base super prudently and super carefully. But also making sure that we're investing in areas that we know support and drive future growth. We're in a period right now where our CV is growing, call it, mid- to high single digits. Obviously, we firmly believe that we can be a 12% to 16% growth on the research business at a double-digit grow on the overall top line, and we want to make sure that we don't do anything that damages or impedes our ability to get back there when the economic situation is more "normal". And so, what we're doing is, I'd call it like a slight belt tightening across the board as we're seeing a little bit of pressure in some areas, but also making sure that we're growing our selling capacity because we know that's a key ingredient going forward. So, we're not chop in anything. We're not slamming on the brakes on anything. We're just being thoughtful and prudent and careful and also making sure that we're investing in areas that we know drive and support future growth.

That makes a lot of sense. Thank you both for the time and the color.

Our next question comes from the line of Faiza Alwy with Deutsche Bank. Your line is open.

Thank you. I wanted to talk about the clients that you mentioned are anticipated or impacted by tariffs, for example, where you've seen slower decision-making -- how have you seen that play out historically? Because I would think that, as you mentioned in your script, like these clients can certainly benefit from Gartner Insights during this time. And so, is there this initial sort of period where folks are evaluating the situation? And are you sort of leaning in harder with these clients to expand your value proposition? And so, how should we think about those clients going forward?

Faiza, great question. So basically, what we've seen historically is when there's a lot of uncertainty, clients slow their decision-making. And then after a few months, they then say, well, we're in this world, we upside what to do Carter's big health and then we actually have a versus from that. We continue to maintain relationships and continue to build pipeline and clients know the value. But when there's this kind of sort of shock of uncertainty, the first reaction from some companies is to sort of say, let's slow or stop decision for a period of time. And then -- but that period of time goes by, and then they know they need help with cybersecurity. They need help with AI, can you help the cost optimization, all the things that are software selection. So, all those things that are our sweet spots are things that they know they need. And so, there's a sort of that picks up over time is the historical pattern.

Understood. And then just on capital allocation and share buyback, I know you mentioned sort of your eagerness to buy back shares a couple of times. Is there any other perspective around that, just given what's happened with the stock and the market overall? How are you viewing the opportunity to buy back stock? And could we expect a more elevated level of share repurchases this year just given the amount of cash that you have on the balance sheet?

Faiza, I think our long-term capital allocation strategy is using our balance sheet or cash flow and excess cash to return capital to shareholders through our buyback programs and also to look for strategic value-enhancing, tuck-in M&A. And we continue to believe that we can do both of those things with our balance sheet and our capital allocation. From a buyback perspective, as we've talked about historically, our strategy is to be price sensitive, opportunistic and disciplined. And we're looking to optimize returns on our buybacks, not in a quarter or two, but over the long term. And so, we are always looking at combinations of what's happening with the price of the stock, what are -- what's happening with overall multiples, what's happening with the market, what's happening with our stock individually, what is intrinsic value. All of those things are inputs into how we look to be price-sensitive, opportunistic and disciplined. You rightly point out that we have $2.1 billion of cash on our balance sheet. We expect to generate another order of magnitude $800 million, of free cash flow over the course of this year. And then we'd expect to generate well over $1 billion of free cash flow each and every year. So, what that means is we have a lot of capital that we can put to use on behalf of our shareholders behind either buybacks or strategic tuck-in M&A. And we continue to monitor the situation very closely but we're going to stick to our guns and our sort of approach of being price-sensitive, opportunistic and disciplined with a real focus on optimizing returns over the long term.

Thank you.

Our next question comes from the line of Jason Haas with Wells Fargo. Your line is open.

Good morning. Thank you for taking my questions. I believe previously, you were guiding the GBS quarter earned head count to grow double digits this year. And I believe you said that you're now expecting it to grow mid-single digits. Can you just talk about what's the reason for the reduction in that segment specifically?

Yes, I think it's part of our sort of normal agile planning around the business. Obviously, we do have U.S. federal footprint with our GBS business as well, and that has been impacted in the first quarter, as we described in our prepared remarks. We're also dealing with a more challenging macro environment, gene reference, lumber sales cycles, things of that nature. And so, we're always tweaking what we want and expect from a quarter bearing head count growth perspective over the course of the year. What I would say is we've got dialed into our outlook right now is mid-single-digit growth in both GTS and GBS. But if the end market improves or the demand environment improves or sales cycles reduce, we have plenty of recruiting capacity to be able to go faster if we want to. But essentially, right now, just a reflection of what we're seeing in the market and modest tapping of the brakes there just to make sure that we keep our cost structure in line with our CB growth expectations and our revenue and CV growth expectations rolling forward in '26 and '27.

Got it. That's helpful. And then as a follow-up, I appreciate the commentary on how you're leveraging AI. I'm curious if you put any thought to rolling out any sort of like chat functionality driven by AI, if that's something that your customers are asking for? Or if there's any potential to use that to maybe make it a little bit easier for your customers to access and utilize all the primary insights from your research?

Jason, as I mentioned in my remarks, we're really experts on AI. We know it really well. we use AI internally. So, we have an application much like you described, where internally, our associates can use AI to help navigate through our very large content base. We're planning to release that to clients. But because of the problems like hallucinations and things like that, we want to make sure that we get the fund work out. So, our clients comes not to have any hallucinations and things like that, that can happen with AI. So, we've developed it. We're using it internally. You can see about it as piloting it, but it's very broad among thousands of our associates. And it's working very well, but we want to make sure that it is bulletproof before we roll it out to clients. Our plans understand that. They know we understand that they want it will improve.

Got it. That makes sense. Thanks.

Our next question comes from the line of Andrew Nicholas with William Blair. Your line is open.

Hi, good morning. Thanks for taking my questions. First on the government side, just curious if you could provide any additional color on the timing of renewals throughout the remainder of this year. I believe I caught 40% in the first quarter, but just curious if there's anything unique about kind of cadence throughout the rest of the year. And relatedly, I think you said half or roughly half of those contracts were renewed. Is there any reason for us to think that renewal rates will get better or worse from that level as the year goes on, maybe as you get more comfortable selling back into that group or anything like that, that I'm not thinking of?

Yes, Andrew, thanks. So, over the next three quarters, Q1 was the largest, as we mentioned and you referenced. Q2 Is less than half of what we saw in Q1. in Q3, which aligns with the U.S. Fed fiscal is our next largest quarter, but it's probably three quarters size of what we saw in Q1. And so -- and then Q4 is really small in terms of the expirations there. So, bulk is actually in Q3, which again, aligns with the U.S. Federal fiscal. In terms of what we've modeled in is what you highlighted essentially, what we experienced during the first quarter, which is nearly half dollar retention around 50%. We've modeled that forward I do think, and Gene made this point earlier as well, we're intent on making sure and really helping our U.S. federal clients achieve their most important mission-critical priorities. And so, we're not just abandoning our clients if the contract doesn't renew, we are there, and we want to make sure that we are there when they already to buy again, which we have a high degree of confidence that if they are still there, they will want to buy our services because we provide so much value. That's not baked in because again, we haven't seen it yet. And so, our philosophy generally is not build forecasts, plans and outlooks based on what we hope is going to happen, but more along what we've seen but that is certainly a possibility. And again, we're organizing our teams to make sure we take advantage of that, probably more of a '26 and '27 dynamic than a '25 dynamic. But if we are able to get people back and turned on during 2025, great, and that would be that upside to what we're looking at.

Understood. And then kind of changing gears for my follow-up. I just wanted to ask about the conservatism of the OpEx guide. I understand and you gave some great reminders on the flexibility of the cost base and how you're kind of thinking about the cost structure. But you've also, over the past several years, given a pretty prudent outlook in terms of spend. So just wondering if some of the cost actions that you've started to take and tightening of the belt over the past month plus maybe lower some of the conservatism on that front? Or if we should think about it being relatively consistent with previous approaches.

Yes, it's a great question. I mean the environment is dynamic, as we discussed. And so, we are rolling with that dynamism and attempting to have as much agility around our operating expense base as possible. The reality is, we're obviously managing the 25 P&L to make sure that we're investing for the future and protecting profitability and free cash flow -- but in reality, as you know, we run this business for the long term, and we're making sure that our OpEx base is rightsized for '26 that we're investing in the right areas during 2025, so that we can reaccelerate CV into the future. And so, I wouldn't characterize the guidance as sort of the OpEx guidance as any more prudent or conservative than normal. I would say it's sort of our normal approach to how we build our outlook and how we build our guidance. And as we mentioned earlier, we're prepared to invest more if we see positive changes in the environment, and we're prepared to tighten the belt maybe one more notch if we have to as well. And so, we're very focused on making sure we're doing the right things for the business over the long term. But we're also going to make the right decisions in the short term as well to make sure that we are, again, making the right investments, but also profitability and free cash flow.

Understood. Thank you.

Our next question comes from the line of Jeff Silber with BMO Capital Markets. Your line is now open.

Thanks, so much. I just wanted to go back to some of the mechanics regarding cancellation of contracts. I know on the federal government side, most of your contracts, if not all of them, are one year, but I think you have a number of multiyear contracts outside of that. can a client -- let's say I have a 2-year contract, can we, as a client, cancel ahead of that? How much notice do I have to give you? Does it have to be around the anniversary date? Some of the specifics around that, if you can provide, would be great.

Yes. Generally, Jeff, a multiyear contract is a multiyear commitment. -- with no out clauses or term for convenience rights within that contract. And so, our multiyear contracts are true multiyear contracts. They can be 2 years, 3 years or even 5 years at some point, but the bulk of them are actually 2-year contracts. And so, when a client -- and again, your point is right, the U.S. federal contracts are almost exclusively 1-year contracts. But our multiyear contracts are multiyear with no true out clauses in them. And again, we've been very focused on continuing to increase the proportion of multiyear contracts in our contract value base specifically for challenging macroeconomic times. And again, that's part of the resilience we baked into our business or engineered into our business so that short-term challenges from a macro perspective have a more muted impact on our overall results because of a focus on operational best practices like selling multiyear contracts.

Okay. That's helpful. And then you were kind enough to give us kind of the seasonality on renewals for the federal government. Can we get some similarity for the nonfederal government contracts? I know they vary, but any helpful would be great.

So, I'd say, again, you can kind of see this in the external metrics as well. So, Client retention is holding up really well and looks pretty good. And will look even better or modestly better if we excluded U.S. Federal from it. So, retention rates broadly continue to look pretty good. I think the challenge and Gene alluded to this earlier, is our sales cycles from both a new logo perspective and also from an upsell perspective, have lengthened and that impacts the wallet retention numbers. And so, you're seeing a little bit of that new business velocity impacting the lot retention numbers, but overall, the retention numbers are holding up pretty well. And again, you can see that in both the GTS and GBS client and wallet retention numbers.

And is there a specific quarter where most of these contracts renewed.

Our two biggest quarters are Q1 and Q4 from an exploration perspective; Q2 and Q3 tend to be later quarters. But one of our practices is to when we have the opportunity to early renew things. And so that can move things around. But if you just look at the pure contract term dates or end dates, over weighted to Q1 and Q4, I think like 26% or 27% and then a little underweighted in Q2 and Q3, think in the 22% to 23% of total range.

Thanks, very helpful. Thanks so much.

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

Well, here's what would like to take away for today's call. Gartner delivered financial results ahead of expectations. Our tech vendor CV growth continues to accelerate. We have a vast addressable market opportunity. We have a strong and compelling client 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 in tools to our clients, by prudently invested for future growth, by generating free cash flow well in excess of net income, and by returning capital to our shareholders through our repurchase program. Thanks for joining us today. We look forward to updating you again next quarter.

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