Craig Safian
Chief Financial Officer at Gartner
Thank you Gene, and good morning. Second quarter contract value grew 7% year over year, accelerating about 50 basis points from Q1. We believe the first quarter marked the bottom for CV growth this cycle barring a meaningful shift in the macro or geopolitical environment. Growth may vary from quarter to quarter, but we expect the overall trend will be higher from the 6.9% we delivered in the first quarter.
Over the medium term, we expect both GTS and GBS to grow 12% to 16%. Second quarter revenue EBITDA and EPS all came in ahead of our expectations. We are updating our guidance based on the Q2 results, FX, and a change in non subscription research revenue. We have repurchased $565 million of stock through June and remain eager to buy back stock opportunistically. Second quarter revenue was $1.6 billion, up 6% year over year as reported and 7% FX neutral.
In addition, total contribution margin was 68%, about in line with last year. EBITDA was $416 million, up 8% as reported, and 10% FX neutral versus second quarter 2023. Adjusted EPS was $3.22, up 13% from Q2 of last year, and free cash flow was $341 million. Research revenue in the second quarter grew 5% year over year as reported and 6% on an FX neutral basis. Subscription revenue grew 7% FX neutral. The year over year change in non subscription revenue was similar to Q1 2024. Second quarter research contribution margin was 74% consistent with last year.
Contract value was $4.9 billion at the end of the second quarter, up 7% versus the prior year and up about $67 million from the first quarter. CV from enterprise function leaders across GTS and GBS grew 10%. Contract value and CV growth are FX neutral. CV growth was broad-based across practices, industry sectors, company sizes, and geographic regions. Across our combined practices, the majority of industry sectors grew at double digit or high single digit rates led by the energy, manufacturing, and public sectors. CV grew double digit or high single digit rates across all enterprise sizes except small, which has the largest tech vendor mix.
We also drove double digit or high single digit growth in the majority of our top ten countries. Global technology sales contract value was $3.8 billion at the end of the second quarter, up 6% versus the prior year. GTS enterprise leader CV increased high single digits. Tech vendor CV returned to growth in the quarter. GTS CV increased $40 million from the first quarter. While retention for GTS was 101% for the quarter, up from Q1. Enterprise leader wallet retention was consistent with historical levels. GTS new business was up 8% compared to last year. GTS quarter bearing headcount was down 2% year over year as we managed tech vendor-focused sales territories in response to near-term industry dynamics.
Across GTS, we continue to aggressively optimize our territories to align with where we have the best growth opportunities and we are investing for future growth. We continue to expect mid single digit QBH growth by the end of the year. We have the headcount we need to meet our commitments for this year. Our regular full set of GTS metrics can be found in our earnings supplement. Global business sales contract value was $1.1 billion at the end of the second quarter, up 12% year over year.
All of our GBS practices grew at double digit or high single digit rates other than marketing which grew mid single digits. Growth was led by the finance, legal, and supply chain practices. GBS CV increased $27 million from the first quarter. Wallet retention for GBS was 106% for the quarter, which compares to 109% in the prior year. GBS new business was up 16% compared to last year. GBS quarter bearing headcount was up 6% year over year and we continue to target high single digit growth for 2024.
As with GTS, our regular full set of GBS metrics can be found in our earnings supplement. Conferences revenue for the second quarter was $186 million, increasing 10% as reported and 11% FX neutral compared to Q2 of 2023. Adjusting for the movement of conferences across the year revenue increased about 15% in the quarter. Contribution margin was 58%. Q2 is our seasonally strongest margin quarter of the year. We held 16 destination conferences.
Second quarter consulting revenue increased by 13% year over year to $143 million. On an FX neutral basis revenue was up 15%. Consulting contribution margin was 38% in the second quarter. Labor based revenue was $107 million up 3% versus Q2 of last year as reported and 5% on an FX neutral basis. Backlog at June 30 was $199 million, increasing 16% year over year on an FX neutral basis with continued booking strength. In contract optimization, we delivered $36 million of revenue in the quarter, up 62% versus the prior year. Our contract optimization business is highly variable.
Consolidated cost of services increased 5% year over year in the second quarter as reported and 6% on an FX neutral basis. The biggest driver of the increase was higher compensation costs. SG&A increased 5% year over year in the second quarter as reported and on an FX neutral basis. SG&A increased in the quarter as a result of headcount growth, which contributed to higher compensation costs. EBITDA for the second quarter was $416 million, up 8% from last year as reported and up 10% FX neutral. We outperformed in the second quarter through effective expense management and a prudent approach to guidance.
Depreciation in the quarter of $28 million was up 16% compared to 2023. Net interest expense, excluding deferred financing costs in the quarter was $19 million. This is favorable by $4 million versus second quarter of 2023 due to higher interest income on our cash balances. The modest floating rate debt we have is fully hedged through the third quarter of 2025. The Q2 adjusted tax rate, which we used for the calculation of adjusted net income, was 24% for the quarter. The tax rate for the items used to adjust that income was 25% for the quarter.
Adjusted EPS in Q2 was $3.22, up 13% compared with last year. We had 78 million shares outstanding in the second quarter. This is a reduction of more than 1.5 million shares, or about 2% year over year. We exited the second quarter with about 78 million shares on an unweighted basis. Operating cash flow for the quarter was $370 million compared with $436 million in Q2 of 2023. The change reflects working capital timing, which we expect to reverse in the second half. Capex for the quarter was $29 million in line with our expectations. Free cash flow for the quarter was $341 million. Free cash flow on a rolling four quarter basis was 17% of revenue and 66% of EBITDA.
Free cash flow conversion from GAAP net income was 121%. Our free cash flow conversion is generally higher when CV growth is accelerating. At the end of the second quarter we had about $1.2 billion of cash. Our June 30 debt balance was about $2.5 billion. Our reported gross debt to trailing twelve month EBITDA was under 2x. 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 purchases and strategic tuck in M&A. Our balance sheet is very strong with $1.9 billion of liquidity, low levels of leverage and effectively fixed interest rates.
We repurchased $340 million of our stock during the second quarter. We have more than $1 billion of repurchase capacity after the board recently increased our share buyback authorization by $600 million. 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. We are updating our full year guidance to reflect recent performance and trends. The outlook for subscription research is higher based on the latest FX rates. We increased the outlook for conferences and consulting, and our EBITDA guidance primarily reflects Q2 upside partially offset by our updated non-subscription research outlook.
For subscription research, which was about 76% of revenue in 2023 we continue to innovate and provide a very compelling value proposition for clients and prospects. Executives and their teams face uncertainty and challenges, and they recognize how Gartner can help regardless of the economic environment. For subscription research revenue based on Q2 results and our outlook for the balance of the year, our FX neutral guidance is unchanged. We have very high visibility into the subscription research revenue at this point in the year. For non subscription research, which was about 6% of 2023 revenue, we help small businesses find the right software.
We've updated our outlook for this portion of the segment given the most recent trends. We now expect non subscription revenue of about $305 million for 2024. As a reminder, about one third of our revenue and operating expenses are denominated in currencies other than the US dollar. Based on recent FX rates, we expect currency to be roughly neutral in the back half of the year, with a modest benefit in Q4. Our updated 2024 guidance is as follows. We expect research revenue of at least $5.105 billion, which is FX neutral growth of about 5%. This reflects subscription research revenue growth of about 7%. We expect conferences revenue of at least $565 million, which is FX neutral growth of about 12%.
We expect consulting revenue of at least $530 million, which is growth of about 4% FX neutral. The result is an outlook for consolidated revenue of at least $6.2 billion, which is FX neutral growth of 5%. We now expect full year EBITDA of at least $1.460 billion, up $5 million from our prior guidance. We expect 2024 adjusted EPS of at least $11.05. For 2024, we expect free cash flow of at least $1.08 billion consistent with our prior guidance. This reflects a conversion from GAAP net income of 138%. After the second quarter ended, we reached the settlement related to pandemic era event cancellation insurance.
We expect pretax proceeds of $300 million during the third quarter. This is not yet included in the cash flow or GAAP EPS guidance. Our guidance is based on 78 million fully diluted weighted average shares outstanding, which reflects the repurchases made through the end of June. And finally, for the third quarter, we expect adjusted EBITDA of at least $295 million. Our financial results through the first half have been ahead of our plan despite continuing global macro uncertainty. CV grew high single digits in the quarter and we believe Q1 was the bottom for CV growth in this cycle. We repurchased $565 million in stock year to date through June, and 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've delivered double digit revenue growth. With gross margin expansion, sales costs growing about in line with CV growth and G&A leverage we will deliver modest EBITDA margin expansion over time. 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 purchases, 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?
