Corrected Transcript

03-May-2022

Gartner, Inc. (IT)Q1 2022 Earnings Call

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Gartner, Inc. (IT)Corrected Transcript

Q1 2022 Earnings Call

03-May-2022

CORPORATE PARTICIPANTSDavid Cohen

Craig Warren Safian

Senior Vice President-Investor Relations, Gartner, Inc.

Executive Vice President & Chief Financial Officer, Gartner, Inc.

Eugene A. Hall
Chief Executive Officer & Director, Gartner, Inc.
.....................................................................................................................................................................................................................................................................

OTHER PARTICIPANTS
Jeffrey P. Meuler

Trevor Romeo

Analyst, Robert W. Baird & Co., Inc.

Analyst, William Blair & Co. LLC

Toni Kaplan

Ryan Griffin

Analyst, Morgan Stanley & Co. LLC

Analyst, BMO Capital Markets Corp. (Broker)

George K. Tong

Heather Balsky

Analyst, Goldman Sachs & Co. LLC

Analyst, BofA Securities, Inc.

.....................................................................................................................................................................................................................................................................

MANAGEMENT DISCUSSION SECTION
Operator: Good day, and thank you for standing by. Welcome to Gartner's First Quarter 2022 Earnings
Conference Call. At this time, all participants are on a listen-only mode. After the speakers' presentation, there will
be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being
recorded. [Operator Instructions]
I would now like to hand the conference over to your speaker today, David Cohen, Gartner's SVP of Investor
Relations. Please go ahead.
.....................................................................................................................................................................................................................................................................

David Cohen
Senior Vice President-Investor Relations, Gartner, Inc.

Good morning, everyone. We appreciate your joining us today for Gartner's first quarter 2022 earnings call andhope you are well. With me in the call today are Gene Hall, Chief Executive Officer; and Craig Safian, Chief
Financial Officer.
This call will include a discussion of first quarter 2022 financial results and Gartner's updated outlook for 2022 asdisclosed in today's earnings release and earnings supplement, both posted to our website investor.gartner.com.
Following comments by Gene and Craig, we will open up the call for your questions. We ask that you limit yourquestions to one and a follow-up.
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 growth rates in Gene's comments are FX-neutral unlessstated otherwise. Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section

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Gartner, Inc. (IT)Corrected Transcript

Q1 2022 Earnings Call

03-May-2022of the gartner.com website. Finally, all contract values and associated growth rates we discuss are based on 2022
foreign exchange rates unless stated otherwise.
As set forth in more detail in today's earnings release, certain statements made on this call may constituteforward-looking statements. Forward-looking statements can vary materially from actual results and are subject toa number of risks and uncertainties, including those contained in the company's 2021 Annual Report on Form 10K and Quarterly Reports 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 Chief Executive Officer, Gene Hall.
.....................................................................................................................................................................................................................................................................

Eugene A. Hall
Chief Executive Officer & Director, Gartner, Inc.

Good morning and thanks for joining us. Gartner had a great start to 2022. In the first quarter, performance wasstrong across the business. We delivered growth in revenue, EBITDA, EPS, and free cash flow. We drove
acceleration in contract value and our significant share repurchase program has lowered our share count. With astrong Q1 results, we're increasing our 2022 guidance.
Research continues to be our largest and most profitable segment. Gartner Research provides actionableobjective insight to executives and their teams across all major enterprise functions in every industry around theworld. We continue to have a vast market opportunity across all sectors, sizes, and geographies, and we'redelivering more value to our clients than ever before.
There's a high degree of volatility and uncertainty in the world. Our clients are facing more challenging decisions
than ever before. We've been incredibly agile in supporting them through these trying times. We're delivering
more relevant and timely content on current pressing issues, such as successfully operating in a hybrid work
environment, developing strategies to attract and retain talent, and managing supply chain disruptions.
Beyond these issues, we continue to provide unparalleled insight and advice on top priorities, includingtransitioning to digital business, building diverse, equitable, inclusive organizations, managing cybersecurity
threats and much more. Whether our clients are experiencing good times or bad, and regardless of role, wedeliver incredible value to enterprise leaders and their teams and we have strong demand for our services.
Research revenue grew 18% in Q1. Total contract value growth was 16% at the top end of our medium-term
outlook. Within our Research segment, we serve executives and their teams through distinct sales channels.
Global Technology Sales or GTS serves leaders and their teams within IT. GTS contract value grew 14%. Global
Business Sales or GBS serves leaders and their teams beyond IT. This includes HR, supply chain, finance,
marketing, sales, legal and more. GBS contract value grew 24%.
Turning now to our Conferences business. Gartner Conferences delivered extraordinary value to an engaged andhighly-qualified audience. Q1 is a seasonally small quarter for our Conferences business, which performed as
expected in the first quarter. We ran five virtual conferences in Q1. We pushed several conferences thattraditionally occurred in Q1 to later in the year to facilitate running them in-person. We continue to see strong
demand for in-person conferences from our clients and prospects. We're taking a deliberate, phased approach as
we return to in-person experiences.
Next week, we will be hosting our first in-person conference since our pivot to virtual in 2020. The Gartner Data &Analytics Summit will run next week in London. Attendee tickets and exhibitor space has sold out for this summit.

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Gartner, Inc. (IT)Q1 2022 Earnings Call

Corrected Transcript
03-May-2022

Our clients, prospects, analysts and sales teams are eager to come together. As we return to in-person
conferences, we'll continue to leverage our profitable virtual conferences as a complement to our in-person
conferences.
Gartner Consulting is an extension of Gartner Research. Consulting helps clients execute their most strategic
initiatives through deeper, extended project-based work. Consulting is an important complement to our IT
Research business. Consulting revenue grew very strong 20% in the first quarter. So, we had a great start to theyear. To sustain our success over the long-term, we made targeted investments in hiring and retaining top talentthat are paying off.
Across the company, turnover has stabilized. We expanded our recruiting capacity last year and are adding new
associates at a strong pace. In Q1, we had our highest number of new hires ever. We grew head count 4%
sequentially, achieving our quarterly hiring target. We're on pace to achieve our hiring goals for 2022. The worldcontinues to face significant challenges. Beyond the unrelenting COVID-19 pandemic, Russia's invasion of
Ukraine is a terrible humanitarian crisis. Our thoughts are with all those who continue to be impacted.
Gartner is exiting the Russian market. In addition, we have established a free resource center to help leaders
address a range of business issues that have emerged as a result of this crisis.
In closing, we started 2022 with strong performances, we have great momentum across the business, whether
our clients are experiencing good times or bad, and regardless of role, we deliver incredible value to enterpriseleaders and their teams, and we have strong demand for our services.
We have a vast untapped market opportunity. We generate significant free cash flow in excess of net income.
Looking ahead, we're well-positioned to drive strong top-line growth with modest margin expansion.
As we invest for future growth, we'll continue to return significant levels of excess capital to our shareholders. This
reduces our shares outstanding and increases returns on capital over time. With our strong Q1 results, we're
increasing our 2022 guidance.
With that, I'll hand the call over to our Chief Financial Officer, Craig Safian, who will give you more detail. Craig?
.....................................................................................................................................................................................................................................................................

Craig Warren Safian
Executive Vice President & Chief Financial Officer, Gartner, Inc.

Thank you, Gene, and good morning. The first quarter results were strong, with acceleration in contract value
growth and strength in revenue, EBITDA, and free cash flow. EPS was particularly strong as the benefit of sharebuybacks reduced our share count.
With results above our expectations, we are increasing our 2022 guidance. The improved outlook reflects thebetter-than-expected first quarter top-line results and increased revenue from conferences, we now expect to holdin-person.
First quarter revenue was $1.3 billion, up 14% year-over-year as reported and 16% FX-neutral. In addition, total
contribution margin was 70%, up 44 basis points versus the prior year. EBITDA was $329 million, up 3% yearover-year and up 5% FX-neutral. Adjusted EPS was $2.33, up 17%, and free cash flow in the quarter was $150
million, up 4% year-over-year.

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Gartner, Inc. (IT)Q1 2022 Earnings Call

Corrected Transcript
03-May-2022

Adjusting for insurance proceeds received last year, free cash flow was up 17% on a rolling four-quarter basis.
Research revenue in the first quarter grew 16% year-over-year as reported and 18% on an FX-neutral basis.
Retention was very strong again and new business continued to increase.
First quarter Research contribution margin was 75%, up 81 basis points versus 2021. Higher-than-normal
contribution margins reflect improved operational effectiveness, increased scale, and continued temporary
avoidance of travel expenses. We've been increasing our head count, which we expect to continue as we movethrough the year.
Contract value or CV was $4.2 billion at the end of the first quarter, up 16% versus the prior year. This includes
our decision to exit the Russian market, which reduced CV by about $14 million. Quarterly net contract value
increase or NCVI was $80 million net of the impact of Russia CV just noted. Quarterly NCVI is a helpful way tomeasure contract value performance in the quarter, even though there is notable seasonality in this metric. We
saw broad base CV growth across all of our practices. Our technology practice grew 14% and all of our otherbusiness practices grew at double-digit growth rates with the majority of them growing more than 20% year-overyear.
From an industry perspective, retail, manufacturing and services led our CV growth. Global Technology Sales
contract value was $3.3 billion at the end of the first quarter, up 14% versus the prior year. GTS had quarterly
NCVI of $46 million in the quarter, again, net of the impact of exiting Russia. While retention for GTS was 107%
for the quarter, up about 900 basis points year-over-year.
GTS new business was up 6% versus last year when very strong new business benefited from a post-pandemic
bounce, including modestly higher-than-normal win-backs. GTS quota-bearing head count was up slightly yearover-year. In the first quarter, we promoted a higher-than-normal level of frontline sellers to sales manager roles.
This reflected our strong CV performance and sets us up for future growth.
This March was our best hiring month since the start of the pandemic. Our net hiring is in line with our plan,turnover is improving, and we remain on track to achieve double-digit QBH growth this year. Our regular full set of
GTS metrics can be found in the appendix of our earnings supplement.
Global Business Sales contract value was $899 million at the end of the first quarter, up 24% year-over-year,
which is above the high-end of our medium-term outlook of 12% to 16%. GBS CV increased $34 million from thefourth quarter, while retention for GBS was 115% for the quarter, up about 11 percentage points year-over-year.
GBS new business was up 18% compared to last year, reflecting robust growth across the full portfolio andagainst a strong compare. GBS quota-bearing head count increased sequentially and is up 15% year-over-year.
We remain on track to grow GBS head count at double-digit rates in 2022. As with GTS, our regular full set of
GBS metrics can be found in the appendix of our earnings supplement.
Conferences revenue for the first quarter was $10 million, in line with our expectations. The first quarter is always
a seasonally small quarter and we pushed several conferences to later in the year to increase the likelihood of
running them in-person.
Contribution margin in the quarter was negative 28% given the seasonality in revenue and normal quarterly costs.
We held five virtual conferences in the quarter. We held Evanta meetings in both virtual and in-person formats.

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Gartner, Inc. (IT)Q1 2022 Earnings Call

Corrected Transcript
03-May-2022

As we look to the rest of the year, we plan to run 24 in-person conferences. We will continue to run a mix of inperson and virtual conferences as a part of our go-forward strategy for the business. I will detail our updated
annual outlook for Conferences shortly.
First quarter Consulting revenues increased by 17% year-over-year to $116 million. On an FX-neutral basis,revenues were up 20%. Consulting contribution margin was 44% in the first quarter, up almost 5 percentage
points versus the prior year, with better-than-expected revenue and a mixed benefit from strong growth in contract
optimization.
Labor-based revenues were $96 million, up 14% versus Q1 of last year and up 18% on an FX-neutral basis.
Backlog at March 31 was $147 million, increasing 30% year-over-year on an FX-neutral basis with another strong
bookings quarter. We revised our backlog methodology to include the expected revenue from the out-years ofmultiyear agreements. This change contributed about 7 percentage points to the backlog growth rate in thequarter.
Our contract optimization business was up 29% as reported and 30% on an FX-neutral basis versus the prioryear. As we have detailed in the past, this part of the Consulting segment is highly variable. Consolidated cost ofservices increased 13% year-over-year in the first quarter as reported and 14% on an FX-neutral basis. The
biggest driver of the increase was higher head count to support our continued strong growth.
SG&A increased 27% year-over-year in the first quarter as reported and 29% on an FX-neutral basis. SG&A
increased in the quarter as a result of a $24 million non-recurring real estate charge, higher commission expense
following strong CV growth in 2021, and increased hiring and sales and G&A functions. SG&A without thefacilities-related charge would have increased 22% year-over-year and would have been 47% of revenue in thequarter. We expect SG&A expenses to increase over time as our hiring continues.
EBITDA for the first quarter was $329 million, up 3% year-over-year on a reported basis and up 5% FX-neutral.
First quarter EBITDA upside to our guidance primarily reflected revenue exceeding our forecasts.
Depreciation in the quarter of $23 million was down modestly versus 2021. Net interest expense excluding
deferred financing costs in the quarter was $30 million, up $5 million versus the first quarter of 2021 due to anincrease in total debt balances.
The Q1 adjusted tax rate, which we use for the calculation of adjusted net income, was 20.3% for the quarter. The
tax rate for the items used to adjust net income was 24% for the quarter. Adjusted EPS in Q1 was $2.33, growthof 17% year-over-year. The weighted average fully diluted share count for the first quarter was 83 million. This isa reduction of more than 6 million shares or about 7% year-over-year. We exited the first quarter with about $82
million fully diluted shares.
Operating cash flow for the quarter was $168 million, up 7% compared to last year. CapEx for the quarter was$17 million, up 38% year-over-year as a result of an increase in capitalized software. Free cash flow for thequarter was $150 million. Free cash flow growth continues to be an important part of our business model, withmodest CapEx needs and upfront client payments. As many of you know, we generate free cash flow well inexcess of net income.
Our conversion from EBITDA is very strong, with the differences being cash interest, cash taxes and modest
CapEx, partially offset by strong working capital cash inflows. Adjusting for the insurance proceeds we received

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Gartner, Inc. (IT)Q1 2022 Earnings Call

Corrected Transcript
03-May-2022

last year, free cash flow as a percent of revenue or free cash flow margin was 22% on a rolling four-quarter basis.
On the same basis, free cash flow was 84% of EBITDA and 159% of GAAP net income.
At the end of the first quarter, we had $456 million of cash. Our March 31 debt balance was $2.5 billion. Our
reported gross debt-to-trailing 12-month EBITDA was under 2 times. Our expected free cash flow generation,
unused 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.
We repurchased around $450 million of stock during the first quarter and about $630 million through the end of
April. Last week, the board increased the repurchase authorization by $500 million, bringing us to a total of about$1 billion available for open-market buybacks. We expect the board to continue to refresh the repurchaseauthorization as needed going forward.
Since the end of 2020 through the end of this April, we have reduced our shares outstanding by 8 million shares.
This is a reduction of 9% from the end of 2020. As we continue to repurchase shares, we expect our capital basewill shrink. This is accretive to earnings per share and combined with growing profits, also delivers increasing
returns on invested capital over time.
We are increasing our full-year guidance to reflect strong Q1 performance and the return of in-person
conferences. We also updated guidance to reflect the stronger US dollar. We now expect an FX impact to ourrevenue growth rates of about 260 basis points for the full year. This is up from 150 basis points based on rates
when we guided in February.
As we detailed last quarter, 2021 Research performance benefited from several factors including QBH tenure mix,
NCVI phasing within the quarters and the year, record retention rates and strong non-subscription growth. We
continue to assume that those benefits do not persist at the same levels through 2022. The growth compares also
get harder as we move through the year. We are taking a balanced approach based on historical trends andpatterns, which we've reflected in the updated guidance.
We are updating our guidance for the incremental revenue from 24 planned in-person conferences, withsignificantly more visibility into the second quarter. We will continue to update our outlook as we have more
visibility.
For our local one-day Evanta events, we expect to run most of them in-person while continuing to run some
virtually. We expect about one-third of our full year Conferences revenue in the second quarter this year.
Consistent with our commentary last quarter, our base level assumptions for consolidated expenses continue toreflect significant head count increases during the year to support current and future growth. We have modeled
higher labor costs and T&E well above 2021 levels, as we've previously indicated. We will also have higher
commissions during 2022 due to the very good selling performance we delivered in 2021.
Finally, we continue to invest in our tech, both client-facing and internal applications, as part of our innovation andcontinuous improvement programs.
Our updated guidance for 2022 is as follows. We expect Research revenue of at least $4.575 billion, which is FXneutral growth of about 14%. The FX-neutral growth is up about 160 basis points from our prior guidance due tostrong NCVI performance in the first quarter.

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Gartner, Inc. (IT)Q1 2022 Earnings Call

Corrected Transcript
03-May-2022

We expect Conferences revenue of at least $270 million, which is growth of about 30% FX-neutral. We expect
Consulting revenue of at least $430 million, which is growth of about 7% FX-neutral. The result is an outlook forconsolidated revenue of at least $5.275 billion, which is FX-neutral growth of 14%. The FX-neutral growth is up
about 330 basis points from our prior guidance due to strong performance in the first quarter and the shift to inperson conferences.
Without the strengthening US dollar since February, our revenue guidance would have been about $155 million
higher than previous guidance. We now expect full-year EBITDA of at least $1.135 billion, up $100 million fromour prior guidance and an increase in our margin outlook as well. Without the strengthening US dollar since
February, our EBITDA guidance would have been about $110 million higher than previous guidance.
We now expect 2022 adjusted EPS of at least $7.80. For 2022, we now expect free cash flow of at least $930
million. Our guidance is based on 82 million fully diluted weighted average shares outstanding, which reflects the
repurchases made through the end of April. All the details of our full year guidance are included on our Investor
Relations site.
Finally, for the second quarter of 2022, we expect to deliver at least $300 million of EBITDA. We had strong start
to the year with momentum across the business, contract value continued to accelerate. EPS grew mid-teens,
fueled by the significant reduction of shares over the past year. We repurchased roughly $630 million in stock thisyear through April and remain committed to returning excess capital to our shareholders.
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 in line with CV growth over time and G&A leverage, we can modestly expand margins from a normalized
2021 level. We can grow free cash flow at least as fast as EBITDA because of our modest CapEx needs and thebenefits 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?

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Gartner, Inc. (IT)Corrected Transcript

Q1 2022 Earnings Call

03-May-2022

QUESTION AND ANSWER SECTION
Operator: Thank you. [Operator Instructions] Our first question comes from Jeff Meuler with Baird. Your line isopen.
.....................................................................................................................................................................................................................................................................

Jeffrey P. Meuler

Q

Analyst, Robert W. Baird & Co., Inc.

Yeah. Thank you, and great quarter. So, you already gave me a 15 talking points on this, but I'm going to ask
about it anyway. Just the quota-bearing sales head count being flat. So, just so I understand, reconciling what you
gave us to that metric. So the turnover is seasonally higher in Q1, but turnover for quota-bearing head count is
actually getting better year-over-year. And then, Q1 is also seasonally high for promotions and given the planned
growth, there's more promotions this year than there were last year, but hiring is performing to plan and is actually
the best since before the pandemic. Are those the right reconciliation points to explain while QBH is still flat
sequentially?
.....................................................................................................................................................................................................................................................................

Eugene A. HallA

Chief Executive Officer & Director, Gartner, Inc.

Yeah. Hey, Jeff. This is Gene. So, [indiscernible] (23:00) is going according to plan. And we're on track for theyear to achieve double-digit head count [indiscernible] (23:07) our quota-bearing head count. The [indiscernible](23:10) we have more cushions at the [indiscernible] (23:17) than we were [indiscernible] (23:19) for the rest of
the year. We've done this for long period of [indiscernible] (23:22) a core part of our ongoing strategy.
And so, we [indiscernible] (23:27) in January. And, to your point, [indiscernible] (23:28) because of the pandemic
than we'd had in the – you know, during [indiscernible] (23:39). So, that's what [indiscernible] (23:44) bigger drainon our quota-bearing head count.
.....................................................................................................................................................................................................................................................................

Jeffrey P. Meuler

Q

Analyst, Robert W. Baird & Co., Inc.

Okay. I don't if you can hear me well...
.....................................................................................................................................................................................................................................................................

Craig Warren SafianA

Executive Vice President & Chief Financial Officer, Gartner, Inc.

Yeah. Jeff, let me just repeat what Gene said. We're just having a little bit of trouble with his microphone. So, thetalking points are [indiscernible] (24:06).....................................................................................................................................................................................................................................................................

Jeffrey P. Meuler

Q

Analyst, Robert W. Baird & Co., Inc.

Sorry. I don't know if it's just me. I'm also having trouble hearing you.
.....................................................................................................................................................................................................................................................................

David Cohen
Senior Vice President-Investor Relations, Gartner, Inc.

A

Try again.
.....................................................................................................................................................................................................................................................................

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Gartner, Inc. (IT)Q1 2022 Earnings Call

Craig Warren
SafianCorrected Transcript
03-May-2022

A

Executive Vice President &Chief Financial Officer,
Gartner, Inc.

All right. So, hopefully now you can hear me.
.....................................................................................................................................................................................................................................................................

Jeffrey P. Meuler
Analyst, Robert W. Baird &Co., Inc.

Q

Yes.
.....................................................................................................................................................................................................................................................................

Craig Warren Safian
Executive Vice President & Chief Financial Officer, Gartner, Inc.

A

Okay. Great. So...
.....................................................................................................................................................................................................................................................................

Jeffrey P. Meuler
Analyst, Robert W. Baird & Co., Inc.

Q

Yeah.
.....................................................................................................................................................................................................................................................................

Craig Warren Safian
Executive Vice President & Chief Financial Officer, Gartner, Inc.

A

We'll work through the problem [indiscernible] (24:31). But what he was saying is, we've seen improving attrition,
really starting in the second half of last year and continuing through this year, which is very, very positive. We do
almost all of our promotions in the beginning of the year in January. And so, because of the really strong growthand bounce back in GTS, we had more promotions than we normally have in the first quarter. And obviously, we
fill that in generally with our best-performing frontline associates, it's the next step in the promotional ladder that
our frontline sellers take.
As Gene and I both mentioned in our prepared remarks, very strong recruitment and hiring across theorganization and in particular, in GTS. And then the one other thing I would add and it had a modest impact but,was also the exiting of Russia had a small impact on the sequential QBH reported number as well.
.....................................................................................................................................................................................................................................................................

Jeffrey P. Meuler
Analyst, Robert W. Baird & Co., Inc.

Q

Got it. Very helpful. And then on Conferences, so I can understand kind of the business performance and theassumptions. For the Q2 Conferences that you have better line of sight to, I heard that at least some of them look
like record attendance or sold out attendance. Are those conferences, are you monetizing them above the prepandemic level at this point and the full year guidance being below the pre-pandemic level is about the riskadjusting the Conference's assumptions for later in the year plus fewer conferences? Just wondering conferencemonetization of those that are happening with good line of sight relative to pre-pandemic.
.....................................................................................................................................................................................................................................................................

Craig Warren Safian
Executive Vice President & Chief Financial Officer, Gartner, Inc.

A

Yeah. Jeff, It's a great question. And, Gene, follow on here as well. So, a few thoughts there. So, as we noted,
we're transitioning 24 that had previously been planned as virtual to run in-person over the balance of the year.

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Gartner, Inc. (IT)Q1 2022 Earnings Call

Corrected Transcript
03-May-2022

And, clearly, we have more visibility into ones that are running next week, as Gene noted, than ones that are
running in the fourth quarter.
From a monetization perspective, just a couple of thoughts there. So, one is, we're planning on having fewer, insome cases, fewer attendees at each of the conferences than we had historically, to be mindful of being able tosocial distance and not feel like we are packing everyone in shoulder to shoulder, given the environment. And so,
in some cases, we will have fewer attendees than we had in pre-pandemic. In some cases, as the conferences
have been building, we'll have more attendees than we had pre-pandemic.
And so, the revenues will not bounce back immediately to pre-pandemic levels, predominantly because we wantto make sure that we can keep people safe, healthy, and feeling safe and healthy at the conferences by justmoderating the attendance.
.....................................................................................................................................................................................................................................................................

Jeffrey P. Meuler

Q

Analyst, Robert W. Baird & Co., Inc.

Got it. Thank you.
.....................................................................................................................................................................................................................................................................

Operator: Thank you. Our next question comes from Toni Kaplan with Morgan Stanley. Your line is open.
.....................................................................................................................................................................................................................................................................

Toni Kaplan
Analyst, Morgan Stanley & Co. LLC

Q

Thanks so much. Wanted to ask about pricing. Are you able to increase prices more this year compared to prioryears just given the inflationary environment and have customers been generally understanding about it, if that's
the case?
.....................................................................................................................................................................................................................................................................

Craig Warren Safian
Executive Vice President & Chief Financial Officer, Gartner, Inc.

A

Hey, Toni, thanks for the question. So, we are being a little more aggressive on pricing this year, and the way
we're basically thinking about it is as we're dealing with and have modeled in more wage inflation, our cost
inflation on our people, we are making sure that we at least match that from a pricing perspective, so that we canprotect our margins.
And I think generally speaking, so far this year, our clients are understanding of the price increases. Again, as
we've talked about in the past, are the spending with us and most of our clients represent a pretty small ticket
item. And modest price increase, our clients are generally understanding. And, of course, we've been significantly
improving our products and insights along the way as well.
.....................................................................................................................................................................................................................................................................

Toni Kaplan
Analyst, Morgan Stanley & Co. LLC

Q

Great. I wanted to also ask about the EBITDA margin guidance, you raised the margin to 21.5% for the year from
20%. And I think the results in the quarter and the FX impact, based on my estimates, that drove, sort of, about
half the raise. But maybe you could have had different forecast than I did. But anything else outside of the firstquarter be and the FX that really drove, sort of, the higher margin for the year, that'd be helpful? Thanks.
.....................................................................................................................................................................................................................................................................

Craig Warren Safian
Executive Vice President & Chief Financial Officer, Gartner, Inc.

A
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Gartner, Inc. (IT)Q1 2022 Earnings Call

Corrected Transcript
03-May-2022

Yeah. Of course. That's a great question. The way to think about it is it's probably two or three things. So, number
one, the NCVI performance in the first quarter exceeded our expectations, and obviously that benefited Q1 but it
also flows through into the balance of the year and generally flows through pretty nicely from an incremental
margin perspective.
Second thing is obviously the pivot to in-person conferences, and that incremental $70 million of revenue does
flow through with some decent incremental margins there. And then third, there are some SG&A savings,
predominantly G&A savings, that we're able to dial through the P&L as well. Most notably, we did take, as you
would note, a charge for real estate in the quarter and we've dialed in the 2022 expense benefit from that facility
charge. So, it's really a combination of those three things that are driving, both the revenue and EBITDA upside
and translating it to modestly higher EBITDA margins for the full year.
.....................................................................................................................................................................................................................................................................

Toni Kaplan

Q

Analyst, Morgan Stanley & Co. LLC

Terrific. Thanks again. Congrats on the quarter.
.....................................................................................................................................................................................................................................................................

Operator: Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is open.
.....................................................................................................................................................................................................................................................................

George K. Tong
Analyst, Goldman Sachs & Co. LLC

Q

Hi. Thanks. Good morning. GTS and GBS productivity both increased pretty significantly in the quarter. Can you
elaborate on the factors driving improvement in productivity and how much further improvement you see in both of
the segments?
.....................................................................................................................................................................................................................................................................

Eugene A. Hall
Chief Executive Officer & Director, Gartner, Inc.

A

Hey. It's Gene. I'll try again. Hopefully, my line works this time. So basically, we're very focused on improving
productivity for both GTS and GBS. It's been [indiscernible] (31:50) for one period of time, and we have a lot ofprograms we've talked about from time to time on improvement productivity. It includes things like our recruiting
programs or training programs, the tools we give our salespeople and our processes.
And what you're seeing, I think, it also includes our content to make it sure on the most important issues. And I
think all those things are coming together, driving great productivity. In addition to that, because of our slower
growth in head count last year, we have a higher average tenure than we would have in kind of a normal time to,call it, pre-pandemic times. So, those are key factors that drive productivity. The operational changes we're
making and modestly higher tenure compared with pre-pandemic times.
.....................................................................................................................................................................................................................................................................

George K. Tong
Analyst, Goldman Sachs & Co. LLC

Q

Got it. That's helpful. And then, you're guiding to double-digit growth in head count this year. Can you elaborate
on how much head count growth you're expecting in GTS compared to GBS over the remainder of this year?
.....................................................................................................................................................................................................................................................................

Eugene A. Hall
Chief Executive Officer & Director, Gartner, Inc.

A

Yeah. Yeah. We're expecting both to grow at double-digit rates. Because of the faster contract value growth we'veseen from GBS, we'd expect that double-digit head count to be modestly higher than GTS.

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Gartner, Inc. (IT)Q1 2022 Earnings Call

Corrected Transcript
03-May-2022

George K. Tong

Q

Analyst, Goldman Sachs & Co. LLC

Very helpful. Thank you.
.....................................................................................................................................................................................................................................................................

Operator: Thank you. Our next question comes from Andrew Nicholas with William Blair. Your line is open.
.....................................................................................................................................................................................................................................................................

Trevor Romeo
Analyst, William Blair & Co. LLC

Q

Hi. Good morning. This is actually Trevor Romeo in for Andrew. Thanks so much for taking the questions. First, I
was kind of just wondering if you could call out any drivers of the consulting strength, at 20% FX-neutral growth
and what look like record backlog? Any new kind of service offerings or changes that clients have been
particularly receptive, too, there?
.....................................................................................................................................................................................................................................................................

Eugene A. HallA

Chief Executive Officer & Director, Gartner, Inc.

Hey, Trevor. We always make improvements to our processes and we've been making substantial improvements
to our consulting processes. But it's fundamentally the strategy we have, which is consulting is an extension of our
Research business, and we're helping clients with the same difficult issues that we do in our Research business.
But it lets us work with clients in a more in-depth way for those clients that prefer that. And so, it's really a
combination of operational changes with fundamental demand.
.....................................................................................................................................................................................................................................................................

Trevor Romeo
Analyst, William Blair & Co. LLC

Q

Okay. Great.
.....................................................................................................................................................................................................................................................................

Craig Warren SafianA

Executive Vice President & Chief Financial Officer, Gartner, Inc.

Trevor, I was just – Sorry, Trevor, I would just add, the growth in the quarter was both across labor base andcontract optimization. So, 14% year-over-year reported growth on our labor-based revenue and 29% reported
growth on the contract optimization business.
.....................................................................................................................................................................................................................................................................

Trevor Romeo
Analyst, William Blair & Co. LLC

Q

Yeah. Understood. Thank you. And then just kind of a follow-up on the margin outlook. Looks like now 2022, theguide implies about 21%, 22% margins. Has your thinking around kind of the normalized margin run rate for thebusiness going forward kind of also increased? Is this kind of a good baseline to build on?
.....................................................................................................................................................................................................................................................................

Craig Warren Safian
Executive Vice President & Chief Financial Officer, Gartner, Inc.

A

Hey, Trevor. Great question. So, the implied margin of the outlook right now is about 21.5%. The way we continue
to think about it is our normalized margin is around 20%, as we think about it. We are still seeing some benefits
and we are still catching up to some extent on a number of items, whether it be head count, travel and a few otherthings. And so, the way to think about the normalized margins moving forward is around 20%.
.....................................................................................................................................................................................................................................................................

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Gartner, Inc. (IT)Q1 2022 Earnings Call

Corrected Transcript
03-May-2022

Trevor RomeoQ

Analyst, William Blair & Co. LLC

Okay. Great. Thank you very much. Very helpful.
.....................................................................................................................................................................................................................................................................

Operator: Thank you. Our next question comes from Jeff Silber with BMO Capital Markets. Your line is open.
.....................................................................................................................................................................................................................................................................

Ryan Griffin

Q

Analyst, BMO Capital Markets Corp. (Broker)

Hey. Good morning. This is Ryan on for Jeff. I just had a follow-up question on the Conferences. Given the moveto in-person conferences this year, how does that affect the financial model from both the margin percentage andmargin dollar basis?
.....................................................................................................................................................................................................................................................................

Craig Warren SafianA

Executive Vice President & Chief Financial Officer, Gartner, Inc.

Hey. Good morning. So, as you saw, we're – we flow through an incremental $70 million of revenues. And you
guys, it's important remember that we're pivoting from virtual, where there was a revenue expectation to in-person
where there's just a higher revenue expectation. So, it's not going from zero to something. It's going from asmaller number based on a virtual conference to a larger number based on an in-person conference.
As I mentioned earlier, and I forget whose question it was about – oh, it was Jeff's question about the scale of theconferences. We are running them at a little bit lower scale than we had pre-pandemic. And so, our expectationon the margin flow-through is not as high as it would have been pre-pandemic. That said, the margin dollar flowthrough is obviously more than it would be had we been running virtual.
So, the way to think about it is we're probably in the 20% to 30% incremental margin flow-through on the shift
from virtual to in-person conferences. That hurts the margin percentage but is obviously helpful in terms ofgenerating nicely more margin dollars for us flowing through to the bottom line.
.....................................................................................................................................................................................................................................................................

Ryan Griffin

Q

Analyst, BMO Capital Markets Corp. (Broker)

Got it. Thank you. And then just a modeling question. When should we think about a normalized T&E expensebase returning this year?
.....................................................................................................................................................................................................................................................................

Craig Warren SafianA

Executive Vice President & Chief Financial Officer, Gartner, Inc.

Yeah. It's slowly building. Q1, given the environment and given the fact that we weren't running too many
conferences or anything – or any in-person conferences, was very light. We would expect second half of the year
to look more like "normal." That said, though, we are still rebuilding our conferences portfolio. As we roll into years
beyond 2022, there may be more travel associated with delivering those. But second half of the year, we expect
to be back at a semi-normal rate of travel. But, again, I think we won't get back to true normal travel levels until
our conference portfolio has fully come back.
.....................................................................................................................................................................................................................................................................

Operator: Thank you. [Operator Instructions] Our next question comes from Heather Balsky with Bank ofAmerica. Your line is open.
.....................................................................................................................................................................................................................................................................

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Gartner, Inc. (IT)Q1 2022 Earnings Call

Heather Balsky
Analyst, BofA Securities, Inc.

Corrected Transcript
03-May-2022

Q

Hi. Thank you. First, just a follow-up question on the normalized margin outlook. You talked about you still think
it's 20%. I guess, given that you exceeded plan thus far this year and raised your guidance, I'm curious then when
you think about the 150 basis points of margin improvement in your guide, how much of that kind of is a goforward, sustainable benefit or boost? And how much of it – I guess, how much shifted into next year? I'm justcurious, given that you'd be planning why your margin outlook would stay at 20%?
.....................................................................................................................................................................................................................................................................

Craig Warren SafianA

Executive Vice President & Chief Financial Officer, Gartner, Inc.

Hey. Good morning, Heather. I think it's a few things. So, one, given the really strong growth that we delivered lastyear, we are still, to an extent, catching up on all the people we need on staff to, to really deliver to our clients anddrive future growth. And so, while we're hiring at a furious pace, as Gene highlighted, and we are on ouroperational plan, we are still playing catch up in some areas. And so, that will be a little bit of, some of the bridge
between the 21.5% and the normalized level of 20%.
We just talked about one of the other levers, which is travel, which again has not fully come back yet. We actually
were under planned in travel – travel expense in the first quarter. We do expect it to build. But as I just discussed,
it's not back to full "normalized" levels yet and we'll get there over time. Those are probably the two biggest ones.
And then, obviously also making sure that we are making all the right investments so that we can drive
repeatable, sustained top line double-digit growth. Again, that means growing GTS and GBS at those double-digit
growth rates and continuing to do that. And I think those are the three big factors as we think about the current
guide and the normalized level of margins.
.....................................................................................................................................................................................................................................................................

Heather Balsky
Analyst, BofA Securities, Inc.

Q

Got it. And your second comment, I guess brings me to my follow-up question, which is, as we think of the rest of
the year, if you were to exceed on your sales plan, I think you've talked in the past about what your flow-throughon the gross margin side is. I'm curious how much – how should we think about incremental investment for kind ofany [ph] sales beat (41:26) that you might see as the year progresses?
.....................................................................................................................................................................................................................................................................

Craig Warren SafianA

Executive Vice President & Chief Financial Officer, Gartner, Inc.

Yeah. I mean, I think we are – we've built a real solid operational plan at the beginning of the year that had thesales hiring and expert hiring and service hiring that we need to deliver on 2022, and also to make sure that we're
set up to continue to drive really strong growth rates into 2023 and beyond.
If CV growth is a little faster than we had expected, there would probably be incremental sellers, incremental
experts, and incremental service people, again, to make sure that we keep our clients really, really happy andkeep delivering great value and can continue to grow.
So, as we move through the year, I'd say right now we feel good about our investment plans and hiring plans. If
the performance is starting to look higher or lower than our current expectations, we will obviously adjust as
necessary. So if we see stronger growth, we would probably do more hiring. If we see softer growth, we would
potentially slow down a little bit. But from where we sit today, we feel like we've got a really strong hiring plan thatwill allow us to deliver on 2022 and also set us up for continuing to grow into the future.

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Gartner, Inc. (IT)Q1 2022 Earnings Call

Corrected Transcript
03-May-2022

Heather Balsky

Q

Analyst, BofA Securities, Inc.

Great. Thank you for your help.
.....................................................................................................................................................................................................................................................................

Operator: Thank you. And I'm currently showing no further questions at this time. I'd like to turn the call backover to Gene Hall for closing remarks.
.....................................................................................................................................................................................................................................................................

Eugene A. Hall
Chief Executive Officer & Director, Gartner, Inc.

So summarizing today's call, we started 2022 with strong performances. We have great momentum across thebusiness. Whether our clients are experiencing good times or bad and regardless of role, we can deliver
incredible value to enterprise leaders and their teams. We have strong demand for our services, and we have avast untapped market opportunity. We generate significant free cash flow in excess of net income.
Looking ahead, we're well-positioned to drive strong top-line growth with modest margin expansion. As we invest
for future growth, we'll continue to return significant levels of excess capital to our shareholders. This reduces ourshares outstanding and increases returns on capital over time. And with our strong results, we're increasing our2022 guidance. Thanks for joining us today, and we look forward to updating you, again, next quarter.
.....................................................................................................................................................................................................................................................................

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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