Gartner, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Gardner third quarter 2019 earnings conference call. At this time, all participant lines are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during the session, you will need to press star then one on your telephone. If you require any further assistance, please press star then zero. I would now like to hand the conference over to your speaker today, David Cohen, Gardner, GVP of Investor Relations. Please go ahead.

Thank you, Sarah, and good morning, everyone. We appreciate your joining us today for Gartner's third quarter 2019 earnings call. With me today are Gene Hall, Chief Executive Officer, and Craig Safian, Chief Financial Officer. This call will include a discussion of third quarter 2019 financial results and our current outlook for 2019 as disclosed in today's press release. In addition to today's press release, we have provided a detailed review of our financials and business metrics, and an earnings supplement for investors and analysts. We've posted the press release and the earnings supplement on our website, investor.gartner.com. Following comments by Jean and Craig, we will open up the call for your questions. We ask that you limit your questions to one and a follow-up. On the call, unless stated otherwise, all references to revenue and contribution margin are for adjusted revenue and adjusted contribution margin, which exclude deferred revenue purchase accounting adjustments and the 2018 divestitures. All references to EBITDA are for adjusted EBITDA, with the adjustments as described in our earnings release and excluding the 2018 divestitures. All cash flow numbers, unless stated otherwise, are as reported, with no adjustments related to the 2018 divestitures. All growth rates, in Jean's comments, are FX neutral, unless stated otherwise. In our discussion of global business sales, or GBS, we will refer to the GXL products. These are the products for business leaders across an enterprise. Gartner for marketing leaders is GML. Gartner for finance leaders is GFL, and so on. In aggregate, we refer to these products for business leaders as GXL. Reconciliations for all non-GAAP numbers we use are available in the investor relations section of the Gartner.com website. Finally, all contract values and associated growth rates we discuss are based on 2019 foreign exchange rates. As set forth in more detail in today's earnings release, certain statements made on this call may constitute forward-looking statements. Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the company's 2018 annual report on Form 10-K 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.

Good morning, and thanks for joining us. For the third quarter of 2019, we continued to deliver strong performances across our business. Total revenues were up 11%, fueled by doubled growth in each of our business segments, research, conferences, and consulting. We continue to make a significant global impact through these segments. We help more than 15,000 enterprise clients in more than 100 countries around the world with their mission-critical priorities, while providing great jobs to more than 16,000 associates globally. Research, our largest and most profitable segment, is the core of our value proposition. Our research business was up 10% over this time last year. The Gartner formula for sustained double-digit growth continues to drive success in our research business. As we previously highlighted, the Gartner formula consists of indispensable insights, exceptional talent, sales excellence, and enabling infrastructure. For each of these elements, we drive relentless, globally consistent execution of best practices and consistent improvement and innovation. Global Technology Sales, or GTS, serves leaders and their teams within IT. This group represents more than 80% of our total research contract value. GTS contract value growth was 13% year over year. We delivered double-digit growth in every region, across every size company, and in virtually every industry. Global business sales, or GDS, serves leaders in our teams beyond IT and represents about 20% of our total research contract value. This includes supply chain and marketing, which we've addressed for several years, as well as other major enterprise roles, including HR, finance, legal, sales, and more. GBS continued on the path toward double-digit growth, with total GBS contract value accelerating to 3%. Our GXL product line continued to gain momentum, with contract value increasing $26 million sequentially. GXL products provide greater value to clients because they're tailored to the client's individual needs. This, in turn, results in higher prices for a user and stronger retention. Beyond better pricing retention, GXL products provide exponentially more growth opportunities. because we can sell these high-value products throughout our clients' organizations. For Q3, GXL contract value grew 65% year over year, and new business was up 39%. We expect continued acceleration in GBS contract value. In Q4, if new business growth and retention improvement is the same as it was in Q3, contract value growth will be 9.6%. Our conferences segment also delivered a terrific performance in Q2, with double-digit revenue growth of 19%. Gartner conferences combine the outstanding value of research with the immersive experience of live interactions, making every conference we produce the most important gathering for the executives we serve. I recently attended our IT symposium conference in Orlando, Florida. This conference is the most important gathering of CIOs and senior IT executives in North America. We hosted around 8,000 attendees on site, and about 3,000 of these were chief information officers. This is near our all-time highs. At our conferences, you can see firsthand the power of Gartner in helping clients achieve their mission-critical priorities. Clients received incredible insights from our analysts. They networked with leading peers, and they experienced leading-edge technology from the most important providers in the world. Our executive attendees were inspired and empowered to succeed as a result of the insights we delivered at this important event. Our associates were equally inspired and excited about the incredible value we delivered to our clients. Our consulting segment also achieved double-digit growth in Q2, with revenues up 20%. Gartner Consulting is an extension of Gartner Research and provides clients a deeper level of involvement through extended project-based work to help them execute their most strategic initiatives. Our growth in the quarter was a combination of our labor-based business and strength in our contract optimization business. So we delivered another strong quarter across all three of our business segments. We continue to have a vast market opportunity. We've made investments over the past two years that position us well to capture that market opportunity. We're preparing our 2020 business plan and expect to continue attractive double-digit growth. We plan to maintain expense growth in line with revenue growth by leveraging investments we've made over the past three years. Specifically, we expect total expense growth to be in line with total revenue growth. We've had a strong history of continuous improvement and continuous innovation. We're shifting the emphasis of our innovations and improvements to be on more tightly managing expenses. Sales is one of our largest expense categories. In sales, we'll be implementing significant innovations that we expect will improve sales expenses relative to contract value. Here are three examples. Territory design is an important factor in determining a salesperson's productivity, especially in a growth company. We've developed a highly sophisticated territory planning capability over the past few years. For 2020, we're making a major advance by making the territory planning process much more dynamic. Another important factor impacting sales expense is how quickly new sales hires get into territory and make their first sale. Over the past few years, we developed a very strong recruiting capability. For 2020, we're implementing changes to the recruiting process, which will allow us to put salespeople in territory just in time, analogous to just-in-time manufacturing. A third factor impacting sales expense is training. Over the past few years, we've developed sales training that is broadly recognized as being outstanding, For our next evolution, we're reducing the amount of upfront training and shifting this training to be just in time as the salesperson needs it. This will enable us to be even more effective while getting salespeople into territory even faster. Beyond sales, we expect to get leverage from the G&A investments we've made over the past few years. We've already begun making these changes to ensure we get the full impact in our 2020 plan. Summarizing, We're shifting to getting returns from the investments we've made over the past three years while maintaining the long-term growth that captures our enormous market opportunity. Looking ahead, we are well-positioned for sustained long-term growth. We expect continued sustained long-term growth in GTS. We expect continued acceleration in GBS. And conferences and consulting are on a strong path. Looking ahead to 2020, with the great strategic positioning of GTS and GBS, Together with leveraging the investments we've made, we expect double-digit top-line growth and EBITDA growing approximately in line with revenues. With that, I'll hand the call over to Craig.