The paragraph is an introduction to Gartner's First Quarter 2025 Earnings Call, presented by David Cohen, SVP of Investor Relations. The call will include comments from Gene Hall, Chairman and CEO, and Craig Safian, CFO, discussing the company's Q1 2025 financial results and outlook for the year. All information, including adjusted EBITDA and other financial metrics, is based on 2025 foreign exchange rates, with growth rates presented as FX neutral unless otherwise specified. The paragraph notes that reconciliations for non-GAAP numbers are available online and highlights the inclusion of forward-looking statements, subject to risks in company filings. Gene Hall begins his remarks by mentioning Gartner's resilience, noting a 7% growth in contract value for Q1.

In the first quarter, Gartner exceeded expectations for revenue, EBITDA, EPS, and free cash flow, increasing sales staff by 4%. The company is navigating market challenges with agility, aiming for long-term double-digit growth. Research remains its largest segment, with a 7% growth in contract value, 8% when excluding the U.S. federal business. Global Technology Sales grew 6%, or 7% excluding federal business, and Global Business Sales grew 11%. Gartner Conferences and Consulting showed strong revenue growth at 12% and 5%, respectively, with contract optimization revenue up 38% and consulting backlog up 16%. The company emphasizes delivering valuable insights and disciplined cost management, while continuing to invest in future growth.

The paragraph highlights Gartner's role in helping executives navigate macroeconomic volatility and uncertainty by providing insights, guidance, and tools for mission-critical priorities, such as AI innovation, cost optimization, and risk management. The company leverages its expertise, including AI, to support both end-user enterprises and technology vendors, offering proprietary insights from extensive client interactions. Gartner positions itself as a cost-effective resource for decision-making, emphasizing its ability to help clients save time, money, and manage risks.

Gartner leverages a combination of proprietary research, publicly available data, and insights from 2,500 experts to offer unique and valuable guidance. Their strategy focuses on continuous improvement and innovation to enhance differentiation and capitalize on market opportunities. They employ proven best practices for client service, sales, and consulting. In 2025, they plan to increase sales headcount by mid-single-digits to fuel future growth, while maintaining strong margins and free cash flow. This approach aims to position them well for growth acceleration and EBITDA margin expansion once the economic environment stabilizes.

The paragraph highlights Gartner's diverse client base, with the U.S. federal government accounting for about 4% of its total contract value. Recent policy changes have affected Gartner's U.S. federal business, with contract renewals set for 2025, and they successfully renewed about half of their contracts in Q1. The company is committed to delivering value and supporting federal priorities like cybersecurity and digital transformation. Gartner is also focused on returning value to shareholders through stock buybacks, adopting a strategic and disciplined approach to maximize returns. The company has exceeded financial expectations, with strong tech vendor contract value growth, and remains committed to long-term growth by providing valuable insights to clients, prudent investments, and maintaining disciplined expenses. Gartner expects to achieve double-digit growth, margin expansion, and significant free cash flow. The paragraph concludes with the Chief Financial Officer, Craig Safian, noting that the contract value grew by 7% year-over-year in the first quarter.

The company reported stronger-than-expected financial metrics including revenue, EBITDA, adjusted EPS, and free cash flow amid complex macroeconomic conditions. Despite changes in the U.S. Federal government end market and the broader selling environment, the company updated its guidance to reflect these factors, currency exchange benefits, and expense management. The first quarter saw a 4% year-over-year increase in revenue to $1.5 billion, with a total contribution margin of 69% and a 1% rise in EBITDA. Adjusted EPS rose 2%, while free cash flow was strong at $288 million. Research revenue grew by 4% and subscription revenue by 8% in FX-neutral terms, with a steady research contribution margin. The contract value (CV) reached $5.1 billion, a 7% increase from the previous year. Excluding the federal government impact, CV grew by 8%. The global CV decreased by $63 million compared to Q4 2024, largely due to the federal government market, yet CV growth was broad across various sectors and regions. The company remains committed to opportunistic share repurchases.

In the first quarter, most industry sectors, except for two, experienced high single-digit growth, particularly in energy, health care, and manufacturing. Contract value (CV) grew across all enterprise sizes except small ones. The U.S. federal contracts will see significant renewals in 2025, with 40% transacting in Q1. U.S. federal CV was $225 million, while global technology sales (GTS) CV reached $3.9 billion, up 6% year-over-year, excluding U.S. federal government influence. Retention for GTS was 101%, although new GTS business decreased by 4%. Global business sales (GBS) CV was $1.2 billion, an 11% increase year-over-year, boosted by sales, finance, and legal practices, despite a $5 million dip compared to Q4. Wallet retention for GBS was 105%, notwithstanding a 3% drop in new business. GTS and GBS quota-bearing headcounts rose by 3% and 9% respectively. Detailed GTS and GBS metrics are available in the earnings supplement.

In the first quarter, the conference's revenue rose to $73 million, marking a 5% FX-neutral increase compared to Q1 2024, and a 12% increase when adjusted for conferences shifted to Q2. Both conference and consulting contribution margins held steady at 38%. Consulting revenue rose to $140 million, while labor-based revenue declined to $104 million. The backlog as of March 31 grew 16% year-over-year driven by multiyear contracts. Contract Optimization revenue surged by 36%. Service costs rose due to higher compensation costs, and SG&A expenses increased due to headcount growth. EBITDA was $385 million, showing modest growth from last year through revenue gains, effective expense management, and cautious guidance. Depreciation increased, while net interest expense favorably decreased by $5 million due to higher interest income.

In the first quarter, the company maintained a solid financial position with fully hedged floating rate debt through Q3 2025. The adjusted tax rate rose to 21% from 19% last year. Adjusted EPS increased by 2% to $2.98, supported by an improvement in shares outstanding. Operating cash flow rose 66% to $314 million, with free cash flow up 73% to $288 million. The company ended the quarter with $2.1 billion in cash and $2.5 billion in debt. Strong liquidity of $2.8 billion allows for strategic capital allocation, including share repurchases and tuck-in acquisitions. The company repurchased $163 million in stock during the quarter.

In the article's tenth paragraph, the company reports an $870 million share repurchase authorization at the end of Q1 and expects this to enhance earnings per share over time. The firm is adjusting its full-year guidance due to recent performance and market dynamics, focusing on client needs and maintaining flexibility in cost management while investing for growth. It plans to increase selling capacity outside directly impacted regions to sustain double-digit growth. With a significant weakening of the U.S. dollar, the firm anticipates a favorable currency impact on revenue and EBITDA growth in 2025. Roughly a third of revenue and expenses are in foreign currencies. The guidance assumes ongoing trends in new business and retention for this year and factors in U.S. federal spending decisions. The firm is cautiously optimistic amid current uncertainties and has factored in recent trends for non-subscription research revenue and expects results from 53 planned in-person conferences.

The company has strong visibility into its current year revenue, with most already under contract, and projections remain steady despite macroeconomic changes. While taking a cautious approach in labor-based business segments, they aim to manage expenses wisely while investing in future growth. Sales headcount in unaffected areas is expected to grow, and as the market stabilizes, productivity improvements are anticipated. For 2025, they project research revenue of at least $5.34 billion, conference revenue of $625 million, and consulting revenue of $575 million. This results in an overall consolidated revenue outlook of at least $6.535 billion, representing a 4% FX-neutral growth.

The company has updated its financial guidance, expecting a full-year EBITDA of at least $1.535 billion and a 2025 adjusted EPS of at least $11.70, along with a free cash flow of at least $1.145 billion, reflecting a 137% conversion from GAAP net income. The guidance is based on 78 million fully diluted shares. For Q2, adjusted EBITDA is projected to be at least $400 million, with expectations boosted by favorable FX rates and strong Q1 performance. The company is focused on maintaining operational excellence, expanding sales capacity, managing expenses, and utilizing cash flow for stock repurchases and strategic acquisitions. Despite navigating challenging macro conditions, the company anticipates double-digit revenue growth driven by research CV growth and expects to achieve modest EBITDA margin expansions due to operating leverage, gross margin improvements, and controlled sales and G&A expenses.

In this paragraph, the company discusses its strategic focus on share repurchases and value-enhancing mergers and acquisitions. During a Q&A session, Jeffrey Meuler from Baird asks about the company's management of sales headcount in directly impacted areas, particularly the U.S. federal government segment. Craig Safian and Gene Hall respond, explaining that the U.S. federal government is the most affected area, and they do not intend to grow their contract value base (QBH) there. Instead, they are controlling headcount in that segment without reassigning staff, while planning to increase headcount in other business areas at a mid-single-digit rate.

The paragraph involves a discussion about handling early cancellations in U.S. federal government agency contracts. Jeffrey Meuler inquires about the revenue recognition and contract value treatment when such cancellations occur. Craig Safian responds by noting that there are approximately $30 million in termination notices for contracts set to expire within the year. Despite these cancellations, the contract value remains, as revenue continues to be recognized. He emphasizes that this amount is minor relative to the overall U.S. federal business and total contract value. Additionally, further details can be found in a specific section of their Q report. The exchange is part of a larger conversation, with Toni Kaplan from Morgan Stanley asking about the guidance informed by first-quarter new business and retention trends.

The paragraph discusses a change in the company's sales environment during the first quarter, particularly in February and March, which impacted their revenue guidance for future quarters. Although January sales were normal, March accounted for most of the quarter's activity. The discussion also touches on the U.S. federal government's impact on the company's performance and questions whether similar trends are being observed at state, local, or international government levels. Additionally, there's mention of potential opportunities to win back government clients by offering value in areas such as cybersecurity, cost optimization, and AI.

The paragraph discusses a downward revision in the company's 2025 research revenue outlook by $135 million, attributed largely to the U.S. federal government sector. Craig Safian explains that the revision reflects the company's Q1 experience and broader macroeconomic factors, including the U.S. federal government contract renewals, new foreign exchange rates, and a prudent guidance approach. George Tong inquires about the impact on other segments like tech vendors and enterprise functional leaders, but the paragraph doesn't provide a specific response to that part of the question.

In this discussion, Gene Hall highlights that the tech vendor market is improving, particularly among larger vendors, while smaller vendors are growing more slowly. He notes that enterprise functional leaders have varying trends, with the federal government sector being distinct from other enterprise areas, which align more with global trends. Joshua Chan asks about the volatile selling environment outside of federal impacts. Hall explains that outside the federal sphere, companies experience varying impacts, such as tariffs affecting both U.S. and non-U.S. companies. Those less impacted by tariffs or policy changes maintain regular decision-making processes, while those more affected face longer decision cycles compared to Q4 of the previous year, though they continue to buy and renew contracts.

The paragraph discusses the company's approach to cost management and growth strategies amid challenging economic conditions. Despite longer decision-making cycles and lower revenues, the company has raised its margin guidance due to prudent expense management. This involves careful control of operating expenses while continuing to invest in areas that drive future growth. The company is experiencing moderate growth in contract value and aims to eventually achieve higher growth rates. To prepare for a return to more favorable economic conditions, the company is slightly tightening expenses overall but is still expanding its sales capacity, ensuring it remains well-positioned for future growth.

The paragraph discusses the impact of tariffs and uncertainty on clients' decision-making processes. Initially, clients tend to slow down their decisions in response to uncertainty. However, over time, they recognize the need for guidance, especially in areas like cybersecurity, AI, and cost optimization, which are strengths of Gartner. As a result, there is often a rebound in demand for Gartner's insights and services after the initial period of hesitation.

The paragraph discusses the company's capital allocation strategy, particularly focusing on share buybacks and strategic mergers and acquisitions (M&A). Craig Safian explains that the company aims to use its cash reserves and cash flow to return capital to shareholders through buybacks while also pursuing strategic, value-enhancing M&A opportunities. The buyback strategy is described as price-sensitive, opportunistic, and disciplined, with a long-term focus on optimizing returns. With $2.1 billion in cash and expected free cash flow generation, the company has significant capital to invest in buybacks or tuck-in M&A activities.

In the paragraph, the speaker discusses a change in the projected growth rate for the GBS quarter's headcount, which was initially expected to grow in double digits but is now anticipated to grow at mid-single digits. This adjustment is part of their agile business planning in response to a challenging macro environment, including factors like U.S. federal footprint impacts and slower sales cycles. They emphasize maintaining cost alignment with growth expectations. While growth is currently set at mid-single digits, potential improvements in market demand could accelerate hiring. Additionally, they mention leveraging AI, although specific details on this are not provided in the paragraph.

In the paragraph, Gene Hall discusses the company's use of AI for internal chat functionality that helps associates navigate their extensive content base. They plan to release this technology to clients but are ensuring it is free from issues like AI hallucinations before doing so. Hall explains that they are piloting the system internally with thousands of associates and it is functioning well, but they want it to be reliable before sharing it with clients. Following this, Andrew Nicholas from William Blair asks about the timing and specifics of government contract renewals for the remainder of the year. Hall mentions that 40% of renewals occurred in the first quarter and roughly half of those contracts have been renewed, but does not provide further details on future timing.

In the paragraph, Craig Safian discusses the company's renewal rate expectations over the next few quarters. He notes that Q1 had the largest renewal activity, while Q2 will have less than half of Q1’s volume. Q3 will be the next largest, aligned with the U.S. Federal fiscal quarter, but still only about three-quarters of Q1's size, and Q4 will be very small. The company has modeled for a 50% retention rate based on Q1's experience and emphasizes its commitment to assisting U.S. federal clients with their critical needs. The company aims to maintain connections with clients even if contracts don't immediately renew, as they believe clients will return due to the value provided. This approach is expected to impact more significantly in 2026 and 2027 rather than 2025, though early renewals in 2025 would offer additional benefits.

The discussion revolves around the company's approach to managing operating expenses (OpEx) amid a dynamic environment. Craig Safian emphasizes that the company aims to maintain flexibility and agility with its cost structure to ensure long-term growth, while also protecting short-term profitability and free cash flow. He notes that their OpEx guidance is consistent with past approaches and isn't more conservative than usual. The company is prepared to adjust spending if environmental conditions improve or worsen, balancing investments with operational efficiency to support future growth.

The paragraph is a conversation between Jeff Silber from BMO Capital Markets and Craig Safian, discussing the mechanics of contract cancellations. Craig explains that multiyear contracts outside of U.S. federal government agreements are true commitments without out clauses, typically lasting 2 to 5 years, with most being 2-year contracts. These contracts provide business resilience during economic challenges. Jeff asks about the seasonality of renewals for nonfederal contracts, and Craig implies that this information can be observed through external metrics.

The paragraph discusses the positive state of client retention, which is performing well despite some challenges with elongated sales cycles affecting wallet retention numbers. The impact is minor, and overall retention remains strong, particularly in the GTS and GBS sectors. Contract renewals are most common in Q1 and Q4, though the company practices early renewals when possible. Regarding financial performance, Gartner has exceeded expectations, with accelerating tech vendor CV growth and a promising market opportunity. Gene Hall concludes that Gartner is well-positioned for sustained long-term double-digit revenue growth.

The company plans to enhance shareholder value by offering insightful tools to clients, strategically investing for growth, generating significant free cash flow, and returning capital through a share repurchase program. The call concludes with an invitation to join the next quarterly update.

This summary was generated with AI and may contain some inaccuracies.