Craig Safian
Executive Vice President & Chief Financial Officer at Gartner
Thank you, Gene, and good morning. Third quarter contract value grew 7% year-over-year, another good performance in a still complex environment. Third quarter revenue, EBITDA and EPS all came in ahead of our expectations. We are updating our guidance based on the Q3 results and an improved outlook for the fourth quarter. Also during the third quarter, we received $300 million before taxes related to conference cancellation insurance for the conferences affected by the pandemic. We have repurchased more than $630 million of stock through September and remain eager to repurchase shares opportunistically.
Third quarter revenue was $1.5 billion, up 5% year-over-year as reported and 6% FX-neutral. In addition, total contribution margin was 68%, consistent with last year. EBITDA was $340 million, up 2% as reported and 3% FX-neutral versus the third quarter of 2023. Adjusted EPS was $2.50 compared with $2.56 in Q3 of last year, and free cash flow, including the insurance-related proceeds was $565 million.
Research revenue in the third quarter grew 5% year-over-year as reported and FX-neutral. Subscription revenue grew 7% FX-neutral. Non-subscription research revenue was in-line with our expectations. Third quarter research contribution margin was 74%, consistent with last year. Contract value was $5 billion at the end of the third quarter, up 7% versus the prior year and up about $104 million from the second quarter. CV from enterprise function leaders across GTS and GBS grew 9%. Contract value and CV growth are FX-neutral.
CV growth was broad-based across practices, industry sectors, company sizes and geographic regions. Tech vendor contract value has turned the corner with strong new business and continued contract value acceleration in Q3. Across our combined practices, half of the industry sectors grew at double-digit or high single-digit rates, led by the energy, healthcare and manufacturing sectors. CV grew at high single-digit rates across all enterprise sizes except small, which grew low-single digits and has the largest tech vendor mix. We also drove double-digit or high single-digit growth in the majority of our top-10 countries.
Global Technology sales contract value was $3.9 billion at the end of the third quarter, up 6% versus the prior year. GTS enterprise leader CV increased high single-digits. Tech vendor CV growth improved from Q2 as the positive shift which began last quarter continued. GTS CV increased $67 million from the second quarter, while retention for GTS was 101% for the quarter, similar to Q2. Enterprise leader wallet retention was consistent with historical levels. GTS new business was up 8% compared to last year. GTS quota-bearing headcount was up 1% year-over-year. We added more than 90 sellers in the quarter, the largest sequential increase since Q4 of 2022. This sets us up to deliver on mid-single-digit QBH growth for GTS by the end of the year. Our regular full set of GTS metrics can be found in our earnings supplement.
Global business sales contract value was $1.2 billion at the end of the third quarter, up 12% year-over-year. All of our GBS practices grew at double-digit rates other than marketing and sales, which grew mid single digits. Growth was led by the finance, legal and supply chain practices. GBS CV increased $37 million from the second quarter. While retention for GBS was 106% for the quarter, which compares to 108% in the prior year, GBS new business was up 10% compared to last year. GBS quota-bearing headcount was up 8% 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 third quarter was $76 million, increasing 32% as reported and 30% FX-neutral compared to Q3 of 2023. Contribution margin was 40%, consistent with typical Q3 seasonality. We held 10 destination conferences in the third quarter. Third quarter consulting revenue was $128 million compared with $133 million in the year-ago period. Consulting contribution margin was 33% in the third quarter. Labor-based revenue was $101 million, up 2% versus Q3 of last year as reported and FX-neutral. Backlog at September 30th was $218 million, increasing 21% year-over-year on an FX-neutral basis with continued bookings strength.
In contract optimization, we delivered $26 million of revenue in the quarter with a very tough compare from Q3 of last year. Our contract optimization revenue is highly variable. Consolidated cost of services increased 5% year-over-year in the third quarter as reported and FX-neutral. The biggest driver of the increase was higher compensation costs.
SG&A increased 8% year-over-year in the third 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 third quarter was $340 million, up 2% from last year's reported and up 3% FX-neutral. We outperformed in the third quarter through revenue upside, effective expense management and a prudent approach to guidance.
Depreciation in the quarter of $29 million was up 18% compared to 2023. Net interest expense, excluding deferred financing costs in the quarter was $17 million. This is favorable by $4 million versus the third 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 Q3 adjusted tax rate which we use for the calculation of adjusted net income was 26% for the quarter. This compares to last year's rate of 22%. The tax rate for the items used to adjust net income was 17% for the quarter. Adjusted EPS in Q3 was $2.50 compared with $2.56 last year. We had 78 million shares outstanding in the third quarter. This is an improvement of close to 1.6 million shares or about 2% year-over-year. We exited the third quarter with about 78 million shares on an unweighted basis.
Operating cash flow for the quarter was $591 million compared with $331 million in Q3 of 2023. This includes $300 million of insurance-related proceeds we received in the quarter. We expect to pay the associated taxes during Q4. Capex for the quarter was $26 million, in-line with our expectations. Free cash flow for the quarter was $565 million, including the insurance-related proceeds. Free-cash flow on a rolling four-quarter basis was 119% of GAAP net income. Excluding the insurance-related proceeds, free cash flow was 16% of revenue and 63% of EBITDA. Our free cash flow conversion is generally higher when CV growth is accelerating.
At the end of the third quarter, we had about $1.8 billion of cash. Our September 30th 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 disciplined share repurchases and strategic tuck-in M&A. Our balance sheet is very strong with $2.5 billion of liquidity, low levels of leverage and effectively fixed interest rates.
We repurchased $69 million of stock during the third quarter. As of the end of Q3, our share repurchase authorization is more than $1 billion. 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. We increased the outlook for all three segments: Research, Conferences and Consulting. And our EBITDA guidance reflects Q3 upside and an increased outlook for Q4.
As a reminder, about one-third of our revenue and operating expenses are denominated in currencies other than the U.S. dollar. Based on recent FX rates, we expect currency to be a modest benefit in Q4.
Our updated 2024 guidance is as follows: we expect research revenue of at least $5.11 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 $580 million, which is FX-neutral growth of about 15%. We expect consulting revenue of at least $535 million, which is growth of about 5% FX-neutral. The result is an outlook for consolidated revenue of at least $6.225 billion, which is FX-neutral growth of 6%. We now expect full-year EBITDA of at least $1.52 billion, up $60 million from our prior guidance. We expect 2024 adjusted EPS of at least $11.75.
For 2024, we expect free cash flow of at least $1.35 billion. The increase from prior guidance reflects several items. First, improved operating performance. Second, the insurance-related proceeds we received in August net of estimated taxes. And third, a non-recurring payment related to our ongoing real estate planning. The guidance reflects a conversion from GAAP net income of 126%.
Our guidance is based on 78 million fully-diluted weighted-average shares outstanding, which reflects the repurchases made through the end of the third quarter. Our financial results through September have been ahead of our plan despite continuing global macro uncertainty. CV grew high single digits in the quarter and we believe the first quarter of 2024 was the bottom for CV growth in this cycle. We repurchased more than $630 million of stock year-to-date through September 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 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 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 repurchases, which 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?