Craig Safian
Executive Vice President & Chief Financial Officer at Gartner
Thank you, Jean, and good morning. 4th-quarter contract value growth accelerated to almost 8%. Revenue, EBITDA, adjusted EPS and free-cash flow were better-than-expected as we continue to execute well in a complex environment. Our financial performance for the full-year 2024 included global contract value growth of 8%, consolidated revenue growth of 6%, EBITDA of $1.6 billion, diluted adjusted EPS of $14.09 and free-cash flow of $1.4 billion. We repurchased more than $735 million of stock through December and remain eager to repurchase shares opportunistically. We are introducing 2025 guidance, which we view as achievable with opportunity for upside 4th-quarter revenue was $1.7 billion, up 8% year-over-year as-reported and FX-neutral. In addition, total contribution margin was 66%. EBITDA was $417 million, up 8% as-reported and 9% FX-neutral. Adjusted EPS was $5.45, up 79% versus Q4 2023. This includes a benefit in the quarter from our tax planning initiatives. And free-cash flow was $311 million, a very strong finish to the year. We ended the quarter with 21,04 associates, up 4% year-over-year. We have a great team across Gartner driven by a very compelling associate value proposition. Moving into 2025, we are in an excellent position from a talent and tenure perspective with a strong hiring plan for the coming year. Research revenue in the 4th-quarter grew 5% year-over-year as-reported and 6% FX-neutral. Subscription revenue grew 8% on an FX-neutral basis. Non-subscription revenue was in-line with our expectations and guidance. 4th-quarter research contribution margin was 74%, consistent with the prior year period. For the full-year 2024, research revenue increased by 5% as-reported and FX-neutral. The gross contribution margin for the year was 74%. Contract value, or CV was $5.3 billion at the end-of-the 4th-quarter, up 8% versus the prior year. Quarterly net contract value increase or NCVI was $220 million. As we've discussed in the past, there is notable seasonality in this metric. For the 4th-quarter, CV from enterprise function leaders across GTS and GBS grew 9%. CV from tech vendors accelerated for the third consecutive quarter. CV growth was broad-based across practices, industry sectors, company sizes and geographic regions. Across our combined practices, the majority of the industry sectors grew at double-digit or high single-digit rates, led by the healthcare, manufacturing and public sectors. We had high single-digit growth across almost all of our enterprise size categories. The small category, which has the largest tech vendor mix grew mid mid-single digits. We also drove double-digit or high single-digit growth in the majority of our top-10 countries. Global technology sales contract value was $4 billion at the end-of-the 4th-quarter, up 7% versus the prior year. TTSCV increased $165 million from the 3rd-quarter. Wallet retention for GTS was 102% for the quarter, reflecting net growth even before the addition of new clients. TTS new business increased 13% versus last year with double-digit growth with both enterprise leaders and tech vendors. BTS quota-bearing headcount increased 4% year-over-year, consistent with our plan. We added 138 net-new sellers in the quarter, the largest sequential increase since Q4 of 2022. We are planning mid-single-digit QBH growth for GTS in 2025. Our regular full set of GTS metrics can be found in the earnings supplement. Global business sales contract value was $1.2 billion at the end-of-the 4th-quarter, up 12% year-over-year. The majority of our GBS practices grew at double-digit rates. Growth was led by finance, sales and legal. DBSCV increased $55 million from the 3rd-quarter. While retention for GBS was 106% for the quarter, reflecting strong net growth with our existing clients. GBS new business was up 15% compared to last year. GBS quota-bearing headcount was up 9% versus the 4th-quarter of 2023. We are planning double-digit QBH growth for GBS in 2025. As with GTS, our regular full set of GBS metrics can be found in our earnings supplement. As we do each year at this time, we've provided quarterly historical contract value data updated to 2025 FX rates in the appendix of the earnings supplement. The dollar strengthened significantly during 2024 against our major currencies. This resulted in a larger-than-normal revaluation. As you build your 2025 models, please remember to use the updated data as the baseline for your forecasting. Conferences revenue for the 4th-quarter was $251 million, up 17% year-over-year. Contribution margin in the quarter was 48%, consistent with typical seasonality. We held 13 destination conferences in the quarter, all-in person. For the full-year 2024, we delivered revenue of $583 million, which was an increase of 15% on a reported and FX-neutral basis. Full-year gross contribution margin was 48%. We made investments during the year for conference launches and the expansion of existing conferences. 4th-quarter consulting revenue of $153 million increased 19% compared with the 4th-quarter of 2023. Consulting contribution margin was 35% in the 4th-quarter. Labor-based revenue was $104 million, up 4% versus Q4 of last year as-reported and on an FX-neutral basis. Backlog at December 31 was $192 million, increasing 17% year-over-year on an FX-neutral basis on strength in multi-year contracts. We delivered $50 million of contract optimization revenue in Q4. The quarter was very strong with more and larger deals compared with last year. About $8 million were pulled forward from the first-quarter of 2025. Our contract optimization revenue is highly variable. Full-year consulting revenue was up 9% on a reported and FX-neutral basis. Gross contribution margin was 36% compared to 35% in 2023. Consolidated cost of services increased 9% year-over-year in the 4th-quarter as-reported and 8% on an FX-neutral basis. The biggest driver of the increase was higher headcount to support our future growth. SG&A increased 10% year-over-year in the 4th-quarter as-reported and on an FX-neutral basis. SG&A increased in the quarter as a result of headcount growth, mostly in sales. EBITDA for the 4th-quarter was $417 million, an increase of 8% as-reported and 9% on an FX-neutral basis. 4th-quarter EBITDA upside to our guidance primarily reflected stronger-than-expected revenue performance. EBITDA for the full-year was almost $1.6 billion, a 5% increase over 2023 on a reported basis and up 6% FX-neutral. Depreciation in the quarter of $29 million was up 10% compared to 2023 and similar to Q3. Net interest expense, excluding deferred financing costs in the quarter was $11 million. This was an improvement of $8 million versus the 4th-quarter of 2023 due to higher interest income on our cash balances. The Q4 adjusted tax-rate, which we use for the calculation of adjusted net income was a benefit of 25% for the quarter as a result of favorable tax planning, which took place during the quarter. The tax-rate for the items used to adjust net income was 32% in Q4. The full-year tax-rate for the calculation of adjusted net income was 10%, again as a result of the favorable tax planning in the 4th-quarter. Adjusted EPS in Q4 was $5.45, up 79% versus Q4 2023. If the adjusted tax-rate had been 23%, adjusted EPS in the quarter would have been $3.37. We had 78 million shares outstanding in the 4th-quarter. This is a reduction of about 1 million shares or about 1% year-over-year. We exited the 4th-quarter with just under 78 million shares on an unweighted basis. For the full-year, adjusted EPS was $14.09, up 24% from 2023. If the adjusted tax-rate had been 23%, adjusted EPS for the year would have been $11.99. Operating cash-flow for the quarter was $335 million, up 50% compared to last year with a working capital timing benefit in the quarter. Net capex for Q4 was $24 million, about $4 million less than the prior year. Free-cash flow for the quarter was $311 million, up 59% compared to last year. Free-cash flow for the full-year was almost $1.4 billion, a 31% increase versus 2023. There were several items affecting net income and free-cash flow during 2024, including after-tax insurance proceeds, our real-estate lease termination payment and tax planning benefits. Adjusting for these items, free-cash flow for 2024 was 18% of revenue, 74% of EBITDA and 140% of GAAP net income. Our free-cash flow conversion is generally higher when CV growth is accelerating. At the end-of-the 4th-quarter, we had about $1.9 billion of cash. Our December 31st debt balance was about $2.5 billion. Our reported gross debt to trailing 12-month EBITDA was under 2 times. Our expected free-cash flow generation, available revolver and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy of share repurchases and strategic tuck-in M&A. Our balance sheet is very strong with $2.6 billion of liquidity, low levels of leverage and effectively fixed interest rates. We repurchased $102 million of stock during the 4th-quarter and more than $735 million for the full-year. At the end of December, we had more than $900 million of authorization for repurchases remaining, and we expect the Board will continue to refresh the repurchase authorization going-forward. As we continue to repurchase shares, our capital base will shrink. Over-time, this is accretive to earnings per share and combined with growing profits, also delivers increasing returns on invested capital. Before providing the 2025 guidance details, I want to discuss our base level assumptions and planning philosophy for 2025. As you know, the US dollar has strengthened significantly. We expect FX will be around a 2 percentage point headwind to revenue and EBITDA growth for the full-year. For research, we continue to innovate and provide a very compelling value proposition for clients and prospects. The outlook for 2025 research revenue growth is a function of three primary factors: first, 2024 ending contract value; second, the timing and slope of the continued CV acceleration; and third, the performance of non-subscription revenue. Starting with research subscription revenue, which was 77% of 2024 consolidated revenue. Our guidance reflects CV continuing to accelerate during 2025. First-quarter and first-half NCVI are important inputs to calendar 2025 revenue growth. We have taken a prudent view of NCVI phasing because Q1 is a seasonally important quarter for renewals. With the US federal government, we ended 2024 with around $270 million of CV, which is 5% of the total. Our contracts are spread widely across agencies and departments. Around 85% of US federal CV is in GTS. Almost all the US federal contracts are put one year with renewals spread across the year. We offer a very compelling value proposition for our public sector clients. As Jean discussed, we help government function leaders address their mission-critical priorities. Potential government changes may affect our business in the short-term. We will continue to provide great sales, service and research levels to our clients. This will position us to drive strong growth over-time. The non-subscription part of the Research segment was about 5% of consolidated revenue in 2024. We built into the guidance a continuation of second-half traffic trends. If the underlying fundamentals of this portion of the segment improve, we'll be able to increase the full-year outlook. For conferences, which was about 9% of 2024 revenue, we are basing our guidance on the 53 in-person destination conferences we have planned for 2025. We expect similar seasonality to what we saw in 2024 with Q4 the largest quarter followed by Q2. We expect gross margins in the second-quarter to be the highest of the year for the Conferences segment. We have very good visibility into 2025 revenue with a majority of what we've guided already under contract. This is consistent with last year. For Consulting, which was also about 9% of 2024 revenue, we have more visibility into the first-half based on the composition of our backlog and pipeline as usual. Contract optimization has had several very strong years. It's seasonally slower in the first-quarter. We pulled forward about $8 million into Q4 and the business remains highly variable. We've incorporated a prudent outlook for this part of the segment. Our base level assumptions for consolidated expenses reflect the run-rate from the second-half 2024 hiring and the growth hiring we have planned for 2025. Beyond the hiring factors, we recommend thinking about expenses sequentially with notable seasonality driven by the conferences calendar and annual merit increases. Our plan for mid to-high single-digit sales headcount growth for 2025 reflects our commitment to invest for future growth while delivering strong margins and free-cash flow. For TTS, we expect mid-single-digit QBH growth again in 2025. We have the capacity we need for the tech vendor part of the business for now, and we're going to be thoughtful about our public sector hiring in the short-term. For GBS, we plan to grow QBH double-digits this year. We have the recruiting capacity to go faster depending on how the year plays out. The most important way we invest for long-term sustained double-digit growth is by increasing our sales headcount. This is an essential part of our 2025 operating plan. Our guidance for 2025 is as follows: we expect research revenue of at least $5.365 billion, which is FX-neutral growth of about 6%. The guidance reflects FX-neutral research subscription revenue growth near 8%, consistent with 2024 CV growth. We expect conferences revenue of at least $625 million, which is FX-neutral growth of about 10%. We expect consulting revenue of at least $565 million, which is FX-neutral growth of about 2%. The result is an outlook for consolidated revenue of at least $6.55 billion, which is FX-neutral growth of 6%. We expect full-year EBITDA of at least $1.51 billion. On a reported basis, we expect an EBITDA margin of at least 23%. Compared with 2024 margins, this factors in FX, 2024 headcount additions, 2025 growth hiring and a prudent approach to the plan. We expect 2025 adjusted EPS of at least $11.45 per share. For 2025, we expect free-cash flow of at least $1.14 billion. This reflects a conversion from GAAP net income of about 140%. Our guidance is based on 78 million shares, which only assumes repurchases to offset dilution. Finally, for the first-quarter of 2025, we expect to deliver EBITDA of at least $345 million. We performed well in 2024 despite continuing global macro uncertainty and a dynamic tech vendor market. We finished the year with high single-digit CV growth. Revenue, EBITDA, EPS and free-cash flow performance exceeded our expectations and the guidance we set a year-ago. We repurchased about $735 million in-stock during 2024 and more than $4 billion over the past four years. We remain eager to return excess capital to our shareholders. We will continue to be price-sensitive, opportunistic and disciplined. Looking out over the medium-term, our financial model and expectations are unchanged. With 12% to 16% research CV growth, we will deliver double-digit revenue growth. With gross margin expansion, sales costs growing about in-line with CV growth and G&A leverage, we will expand EBITDA margins modestly over-time. We can grow free-cash flow at least assess as EBITDA because of our modest capex needs and the benefits of our clients paying us upfront. And we'll continue to deploy our capital on share repurchases, which will lower the share count over-time and on strategic value-enhancing tuck-in M&A. With that, I'll turn the call-back over to the operator, and we'll be happy to take your questions. Operator,
