IT - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Gartner Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct the question-and-answer session and instructions will follow at that time. [Operator Instructions] Please note that today's call is being recorded.

I would now like to introduce your host for today's conference, David Cohen, Gartner's GVP of Investor Relations. Mr. begin. may you Cohen,

David Cohen

and and quarter for everyone. in earnings Gartner's are current a XXXX Executive me Sarah, This for Financial joining will outlook financial call call. appreciate press results us today's today include Officer; Chief Hall, today second of Gene disclosed Safian, good you, release. Chief We Officer. second morning, discussion you With Craig XXXX Thank as quarter our XXXX and

a analysts. today's detailed business to release, press financials earnings have provided of addition and review In metrics supplement we our for an in investors and

We and our on the have website posted press the earnings release investor.gartner.com. supplement

and Following will We a open comments your we limit questions. and ask for by Craig, up that the one your follow-up. Gene call you to questions

On and to the stated All XXXX XXXX are our the contribution the contribution margin and references described excluding as adjustment adjusted exclude references earnings margin, divestitures. with EBITDA which for otherwise, in release accounting and the all for and purchase adjusted revenue revenue EBITDA adjusted are the divestitures. adjustments to revenue unless deferred call,

All In related GFL the neutral, Business divestitures. cash enterprise. is or we as Leaders growth Marketing the the otherwise, Sales, stated are Gartner All comments in GML, our for otherwise. across to for will GxL to Finance discussion for products. rates refer on. products Gene's Leaders of GBS, so leaders unless XXXX no with These are stated business the Gartner and is flow FX unless reported, numbers, adjustments are Global

Relations of numbers all in as to the GxL. In available gartner.com business for section for website. Investor are use refer leaders aggregate, we the we non-GAAP these products Reconciliations

values we exchange based associated and XXXX discuss contract foreign are rates all Finally, rates. on growth

statements this made As today's set may release, statements. forward-looking in in call on constitute more certain earnings detail forth

report on the subject of and the the filings annual XX-Q, Form with number well encourage Form other uncertainties, and quarterly reports risk SEC. vary contained Forward-looking those in results you statements actual these listed and documents. from company's I to on including review can factors are a in as materially in to XXXX risks of as XX-K all

Officer, Now over I Chief Executive will turn Hall. to Gene Gartner's call the

Gene Hall

thanks and joining morning, us. Good for

of segments continue growth to deliver and were -- For up Conferences quarter business. across fueled each double-digit the Total XXXX, Research, our second of performances we XX%, business our strong Consulting. by in revenues

XX,XXX while to We more continue than the global impact these more help jobs to than countries through world make providing XX,XXX enterprise great segments. than associates in priorities, mission-critical significant their We XXX around globally. clients more with

and largest our Research, most the profitable proposition. core of value is segment, our

Our formula Research for this over our growth Research business drives business. was success Gartner The last time our year. in double-digit sustained XX% up

enabling sales and As we've previously Gartner highlighted, infrastructure. of exceptional formula indispensable insights, consists excellence talent, the

consistent sized relentless, contract company represents virtually For group Technology total or year-over-year. industry. value. XX% more practices every these each leaders globally This best region than elements, double-digit value GTS, IT. of We continues innovation. growth Global drive and GTS execution growth every of and Sales and contract we teams of XX% improvement within their research our delivered serves across in was in in every

which more. total enterprise teams growth GBS, supply major on several roles path and towards HR, contract or value continued research and finance, total X%. including with legal, their about GBS Sales, Business and sales accelerating years, of to addressed XX% value. a as well we've beyond as for other marketing, and double-digit IT leaders GBS chain represents Global serves includes our This contract

user GxL are Our in and turn to This provide prices the products $XX clients higher in GxL contract product results increasing continued they value line because needs. client's to momentum value with to per sequentially. tailored gain individual stronger greater retention. million

exponentially provide growth products products Beyond can more throughout organizations. because pricing these retention, we our opportunities, GxL high-value clients' sell better

grew QX, up was value XX%. new GxL XX% contract and year-over-year business For

growth double-digit in the expect contract of end to continue GBS We the by value year.

XX%. Our for Conferences QX, the segment experience also research delivered the up gathering revenue most Gartner growth making important serve. the with of executives with conference value for outstanding produce, combined Conferences performance terrific a immersive every in live double-digit interactions, the we we

trends to We exceeded guidance GBS. continue and IT our held Canada, Over program peers build our conference our GTS, to talk the This This performance gave portfolio launch put performance to in time, the great to align conference attendance Conferences XX% conference. leaders. thought one-on-one we with we June, participants at the conference, level. conferences Executive a to VP We other in leadership. Finance expectations. launched personal in featured had and in CFO opportunity GBS attendees the strategic connect to IT with rules of we'll the Gartner expanded invest In with Gartner conference we serve. company which flagship an on CFO that We In symposium finance, GBS, shape portfolio. Symposium. functions continue we or In additional the out

we'll Evanta that, business. all continue growing to the addition In

with strategic Our work Consulting deeper execute an Gartner of extended through clients double-digit of their is help up Consulting also involvement most segment initiatives. extension achieved Gartner to level Research. provides project-based a growth revenues in QX It XX%. them

our a strength Contract in Our business business. combination growth quarter of was our and in the Optimization labor-based

hear our well. As and modest changes revenue revenues costs. Craig, in A increase you in The reduction factors: for expected adjusted These guidance year. the rest of by by factors modest driven a driven expected we've change was from two as will are the two

expected. than many are which products, segment, First, of lower non-subscription non-subscription-based Research legacy. revenue we some Within our have Research

In during subscription-based and is non-subscription-based expected, compared as QX, affect emphasizing our year lower were research the than One strategic to revenues priorities expect to our the non-subscription-based the offerings this well. of of we rest offerings. revenues

than The second revenue. forecast lower subscription factor is

drivers usual that contract aggregate impact. at are of modestly number our the individually below in is an While our These various for start deployment leadership set minor, There GTS, strong, and sales our a year. small but in expanded Dallas very tech of the changes value are included plan of growth companies. sales approach have larger out and number of into selling teams items changes our offices Barcelona than to

are they're take in a some it train business. get major second in the and or salesperson them hire about countries is three successful modest to filling can skills territory. a as to when driving The notice they gives months were territories adjusted the combination become sales that costs longer factor leaving, six in sales replacement more growth, another promotions, open moves weeks through Gartner, Sales territories. It before within leaving Once than people of takes increase into we expected planned needed. guidance our open a lateral specialized

salesperson. less Now with territory we a has that sell in one than salesperson sales no a

is our to again this this year and sales continue. to minimize the significant of expect one are We We territories made time open. progress last So priorities trend expectations our exceeded year.

in example, people X% our speed, we up of which For will lead Over are to sales. one planned this higher and additional to open organizations, for sales territories X%. come sales time, achieving

training near the In term, These technology. recruiting, costs. higher-than-planned include and we incur compensation,

in rest through than payout our incremental to As being the XXXX. a realized planned be originally of result, year the in with expecting higher sales the SG&A we're

modest revenues we've combined a So in reflect costs. increase reduction guidance adjusted modest in our with to a

are we sustained positioned double-digit ahead, Looking growth. for well

the We inflection contract on realize GBS we We've market invested an GTS. to a point in expect get GBS. continued potential. continue sustained accelerated, expect growth at trajectory double-digit growth In We're and to value to incredible growth in QX, acceleration.

higher and to in course, forward, both profits. on we've with Conferences a investments we expect to made return are a GBS, GBS Consulting strong Going growth value strong get research of contributing and path. increasing on the contract And

XXXX line we've we in growth Looking ahead with line and with double-digit top revenues. strategic the and positioning together of EBITDA to growing GBS the leveraging with expect great investments made, GTS approximately

With that, the hand Craig. to call I'll over

Craig Safian

our Technology and Thank Sales you, positive. growth. business Global Business everyone. largest good Gene, continues value the Global deliver contract turned Sales, exceptional of to morning, growth part

above-trend Our our deliver outstanding all and us services across This growth. functions strategy long-term a Conferences sustained positioning compelling a and period of is enterprise are working. investments with are to we Consulting proposition business value year, double-digit having completing years. products for across

quarter we The on FX-neutral a line XXX Second impacted top about the up billion, an reported basis was retirements by quarter basis. on points. basis last revenue X% rate $X product discussed growth and XX%

was X% year-over-year margin up XX $XXX basis X% neutral, contribution and XX%, addition, up from In points above million, was EBITDA our the slightly year. FX prior expectations.

Adjusted $XXX and quarter EPS was tax, free help from cash $X.XX meaningful the with million. in flow was

the on in Our Research strong and XX% basis. an revenue quarter. second X% Research a quarter business grew had FX-neutral

$X.X quarter year. Total growth margin the XX%. contract billion XX% at XX. Second was value prior versus neutral contribution FX of was June

year. prior second billion XX, the review the GTS and contract of details over value our value increased our GTS contract contract just In now total versus both on performance XX% XX% the value. I'll for quarter, GTS of had June representing $X.X of GBS.

remained Wallet reinforcing provide the and each XX%. value more Client retention combination strong XXX% GTS every with points retention wallet at of GTS for XX the the rates clients up spend us The retention for how to quarter, client year-over-year. basis our show and for year was clients. we

very GTS new business had business increased -- of strong last very new second which which had strong new year, growth. quarter business X% a versus the

growth coming additional a through upgrades. mix services is of sales enterprises business from and existing of and New enterprises new in

quarter pipeline third The is strong.

continues XXXX. XX,XXX compared contract GTS The the $XXX,XXX QX for X% value also now year-over-year. enterprise We second to XX% grow. with GTS, up It quarter in ended enterprises, at stands up for enterprise average to

GTS invest course previously, first and the we driving XXXX. the improving in seen GTS. of headcount acceleration productivity XXXX and we in investments to you have into are discussed the growth over continue half of As The

X,XXX reduction end open GTS we of our planned had XX%, and in growth of growth second the our the reflecting the better-than-expected associates quarter, At territories. or in quota-bearing

versus of quarter beginning year. the value is year-over-year provided per salesperson, headcount improvement. productivity quarter year-over-year For the by This the increase, net was up of seventh quota-bearing consecutive contract second period NCVI, X% or $XXX,XXX GTS, last

value returned be GBS continue total of to by the XXXX was to growth, legacy the Turning to contract second the GBS end of contract of products. Many CV increasing $XXX XX% of value. in about Business largest of or affected discontinuation X% Global million at quarter Sales. the our metrics sales year-over-year.

are products last purposeful important our our team and sales on As based allows focus of were an strategy. to GxL part strategy to forward. gain going a we described on the that products GxL the share of quarters, discontinuations continue couple

sold Looking we of in at million of from from we from last the to We Similar products, XX% the supplement, quarter to of the contract second Page year quarter. million on prior $XX GXL up million. earnings provided first XX% quarters, quarter. versus the drove to new total QX, a X $XXX GxL business bridge increase an value FX-neutral XX year-over-year $XXX the

to continue We serves. make with of products GXL across functions our the progress great each GBS

from came total CV quarter launched the in business XX% up products. year. makes QX from new GXL of GXL value, newly GBS our points the up of half contract of than More now percentage XX last

attrition GXL While levels. legacy GTS XX%, XX%, CV around at is is attrition almost to GBS close

We client reduced attrition levels through engagement. improving

We content and are driving expanded growing service engagement teams increased client and adoption service. of individualized through

GBS. stand-alone for quarter, down drove rates we the For attrition

renewal improved we that is For points retention impact. a in other over XXX prior this Again, were about of having programs quarter, increased engagement, contracts all second quarter. result basis an up by for discussed attrition in year our the the the of

us continue end attrition CV new ramping year. there. the continued corresponding double-digit business and GBS are The metrics improving of and We expect get GXL achieve this by rates growth of to to retention of that in combination will the

we At the in the quota-bearing had second or quarter, GBS XX%. XXX end of of growth associates

by We expect XX%. end year of the to moderate growth to approximately the XX% headcount to GBS

We sales well services. have and products research, made as as in significant investments in GBS in

our to positioned we guidance, With we made move as are benefits XXXX. the contemplated we see well investments into in and have the those

QX million. In Conferences, XX% in was year-over-year by XX%. to revenues FX-neutral growth increased $XXX

last Second up strong GBS year. and the including was Conferences XX%, marketing from had very quarter supply slightly chain. growth from quarter contribution same margin We

first improvement over As before Gene significant the from grow of mentioned, for successful XX%, Conference it. continues very we a owned finance we had Evanta launch to also a And our leaders.

in XX second destination Conferences had quarter. We the

were revenues increase basis, XX% On in an the XX% same FX-neutral with up Conference attendees.

largest quarter typically Conferences quarter second after fourth the business. our QX The second strong for and was is our quarter

million, or QX XXX Consulting quarter X%. quarter. X% last revenues XX% on was increased up X% basis. million. in versus up at the margin of second X% of Second contribution to XX%. Utilization XX%. $XXX year-over-year $XX was headcount million, Consulting by growth revenues XX billable was FX-neutral were Labor-based $XXX an Labor-based June year basis. an was was Backlog up on FX-neutral X% FX-neutral

Our remained half for the pipeline second the year strong. of

the prior up Contract optimization XX% year versus revenues quarter. were

of part highly in we -- detailed Consulting the this As the is have our segment this past, part of variable.

or basis. year-over-year an on quarter FX-neutral increased in SG&A XX% second XX% the

of grow like term. increased support to sales the investments support resources world. double-digit includes in and our the delivering number in of to recruiting enabling enabling infrastructure to human estate We real long strategy around sustained capacity infrastructure growth and The the over continue functions our associates

discussed in are As seen value Day, at GTS we Investor largest where productivity. strong growth contract have higher and investments we our dollar in

in that growth driving in the GCS, have been faster Our continuing investments sales Conferences' segment. team,

to investments GBS on we expect of the teams, investing making. to and territories value drive improvements this sales all been in going continuing, productivity. will to which our drive reduce and have increase are are sales to year contract Across also and see investments return roles acceleration we forward, open we

an on reported basis. million, about product to percentage X up $XXX retirements. on Adjusted basis impact was by EBITDA for $X affected due adversely EBITDA million the X% was second points FX-neutral the X% and quarter a or

Taking about into an EBITDA expected that FX-neutral from up $X Amortization growth as in after down some of was quarter the the last service. sequentially office their reached Depreciation underlying X% the last life. acquisition consideration, step year flat additional into XX-month the was million was space in year went fourth intangibles taking about as quarter.

Integration the cost Interest integration expense the down second past $XX million as down biggest quarter $XX in of expenses have financing from the year-over-year part deferred work. in excluding XXXX. was moved quarter of the million, were we

year. paying debt The the for adjusted income, for quarter. from net lower the calculation which in The over resulted roughly rate, tax past was the interest use million QX of adjusted we negative $XXX expense X% down

The which adjusted an rate. rate impact tax the quarter. tax property, the quarter the net positively XX.X% for was resulted the adjust material to was rate for the intellectual used by affected adjusted sale income items favourable intercompany in on The of in tax

rate. items in cash $X.XX a $XXX operating last relative million QX million our was flow to lower-than-expected was upside In line EPS including expectations $XXX from tax Adjusted with to below the year. QX, compared

was QX other lower $X and $XX and XXXX nonrecurring cash payments working in and QX, flow million from interest contributions CapEx cash increase driven approximately items operating million. lower acquisition was The by integration taxes expense, capital. and was

was excluding On divestitures rolling free of which divested working working This the cash yields year capital and of up prior income is flow net basis, free million, XXXX X-quarter XX% QX capital operations adjusted cash flow versus $XXX normalizing timing. for and quarter, a our XXX% conversion timing.

the Turning to balance sheet.

debt XX, June Our balance was about $X.X billion.

ratio rate. fixed leverage EBITDA our in stock for quarter. the XXX% is debt Adjusting X.Xx Our the divestitures, EBITDA. now about about of is repurchased We million gross $X

to capital price-sensitive continue shareholders. and we return will as We opportunistic to be

remaining We repurchase our have on $XXX million about authorization.

the through by We deploy Our our and to flexibility capital remains sheet same. our cash our allocation free shareholders strategy programs capital returning and value-enhancing M&A. through flow buyback balance strategic

increasing recalibrated strong. FX We've outlook fees basis The lowering an including while and neutral top Turning expectations line on Research the our modestly in XXXX. non-subscription revenue expectations the for Conferences growth outlook remained Consulting. growth the to the outlook, for

we half of addition, the we notably of In as reducing open first in make the through GBS. year, the modest to investments, decided territories move level most

Conferences GTS and move been we GBS to see investments we Our have returns, and returns investments expect as from into generating XXXX. the

our result we revised our guidance. of these initial a As outlook relative changes, to

rest expect facing. the the we're typical of the for mostly the seasonality quarter for As think about modeling you operations year, we

full as EPS In projected rates addition, across dollar free cash year FX we revenue, XX. for roughly our cost EBITDA, Due negative U.S. adjusted guidance impact to and flows. of expect two-point growth to reflects strengthening, FX rates June XXXX

$X.X XX%. revenues billion year revenue end lower guidance, about neutral from the of at full FX half reduction is of billion updated About the products $X.X research towards the or services. X%. and XX% range. That $X.XXX reflects to about we of midpoint to billion the growth This our of at to non-subscription billion is expect Looking adoption $X.XXX of

non-core XXXX impacting of the growth $XX businesses drops which in is which were retired We we there CEB reminder, XX the about is to we've addition points. revenue the over viewed of our total additional million, acquisition products almost divested from by This basis these, about some EBITDA. as a rate As non-core. to XXXX, that course two-thirds that

Additionally, the we expected, Gene to than as our of lower this revenues the year. were continue and non-subscription-based trend QX mentioned, rest expect for

We adjusted expect EBITDA down $XXX to million. of $XXX growth X% million X%. FX to of up neutral

Some of the lower expectations. EBITDA revenue reflects modestly lower

In versus outlook. X% of addition, incremental operating to this prior X% reflects expense our

the most on to reduction plan in we mentioned, decided the growth, open we to increased Gene take As the for opportunities territories. advantage see notably invest original of

year around on if GAAP We that XX.X% full from the income, the of for the back XX.X%. Please for net expect an rate also the tax tax is add backs note rate adding about XXXX. you're adjusted effect

despite year Our remains tax in benefit the the second full unchanged rate quarter.

to related incremental fourth quarter. the ongoing, our anticipate is intellectual planning property in tax Our and we tax cost

We and expect flat XXXX of down EPS $X.XX adjusted per year-over-year. share, a of to X% $X.XX range between

XXXX, expect free to neutral on our For year up of full Investor guidance $XXX flow of site. versus the our down million X% cash normalized are flow. change our as to cash million projected free $XXX FX we X% the All included XXXX Relations of details

quarter, third share. EPS about to we $X.XX expect $X.XX For the per adjusted of

And be quarter, remember is a last a you was third strong. models, low larger our percentage a EBITDA tax year's to rate on quarter have build This in basis. your third expect adjusted and very small finally, the costs. of that effect cost magnifies the we year, As base, which XXs we the revenue quarter the

our be to Through have the results contract in to rise. business. GBS delivered our of year, we value of GxL products across strong GTS first and strong continues the new continue half sales growth Notably,

up Consulting flow year outstanding last stable. and and both Free conversion quarters. was businesses had was Conferences cash versus Our

the business across applying revenues, formula drive are the long-term flow. double-digit sustained growth free and to We cash Gartner to EBITDA combined

that, operator, take be to happy your to I'll call With we'll questions. and over turn back the the Operator?

Operator

Thank you. Blair. from the comes of [Operator first Our with Tim William Instructions] question line McHugh

Your line now open. is

Tim McHugh

year-over-year. revenue for be piece. kind one do or obviously, revenue I to and kind the first, looks you It guess, was would disclosures, that XX% released as the start sequentially. outlook want the the of the point-in-time business? you Thanks. number on -- non-subscription out guess, Q, In consistent pretty up I of Research The of the

more because seem healthy can So little would a you number? and give lower help that steady piece like pretty kind thought a you than us being non-subscription on color growth the of

Craig Safian

question. Hey, the good Thanks morning for Tim.

So on the Research factors revenue, to They're relates the non-subscription going a on buried seeing. couple as rate you and of the hunk out, there. a within the disclosure point growth you're of year-over-year revenue. reduction There's

non-subscription as of bunch impact with the of guidance. of were year in not XXXX, dealing know, a number the GBS and products driving of on XXXX. of we've as and On the sales half the did retired, tied not products. been we're the retired that that subscription end but that, So in a get was we you were real to top first contemplated GxL the of That there at focus in products original focus

for year. those And had rate the is and we the off that than faster so pronounced of we're and a the continued guidance and into the baking the balance more impacting but the revenue growth the that bit, obviously outlook rest fall-off of little the on fell anticipated, year,

strongly, to additional are of elevated very some perform down of quarters. have which, modestly out, point performance top but come previous there On from you non-subscriptions more continue revenues, levels in that, as

Tim McHugh

the and guess, that sorry, would've year X%, I'm comp a the unless I change, piece just change seem the or half than the year reconcile the against full guess fact would two-point GTS. thought a that impact I GTS' only guidance that assumed, for Okay. original changed further roughly to revenue half in I a year slowdown bigger we on growth, guess to bps left. by subscription even it's point, piece, drives if the And one acceleration tougher guidance outlook XX guess, Research why -- and trying be a then to in related I the I guide of have subscription

Craig Safian

Tim, of about Yeah. you're non-subscription. to relates a point, reduction good it's Again, right. half Hey, and half the subscription, to

it. to X% about a accurate way is more about think So,

things. I of think a couple

and very So where GTS really, And XXXX. in strong. early XX%, It along one not slowdown still a saw is of growth performing obviously, impact that been as we modulated at impact a quarter quarterly parts second from again, and well, XX.X% north and is on has and that well. and also really had it's we with up the it's flowing humming modest it's outlook of in were modest XXXX, just that expectations QX, the the flow-through QX the for we've and had through that impact,

really the it's stronger And CV described of total on so year. Gene and for combined the was the for – revenue the roughly and which impact that XXXX. first off essentially, that's outlook it, growth We're half X% causing our was modestly that through subscription

Tim McHugh

Thank you.

Operator

you. Thank

Our next Jeff Baird. Meuler with of the from question comes line

now Your open. line is

Jeff Meuler

Yeah. I follow-up. guess subscription a on the just piece,

the at mentioned business deceleration? could GTS elevated the sales just as on leadership well factor GTS detail – some what or do you be execution hiccups. some extent Can revenue And into you macro non-subs that? You value impacting both a contract more as to as that small view of maybe kind leadership or go sales

Gene Hall

it's Gene. Hey, Jeff,

So GTS strong is contributor. It growth. we and a I was little basically, as is Craig mentioned, off mentioned, so XX.X% great a expected. had as what very –

a small big I be but deal, at As I'll said, happened once that through to individually wouldn't number go there here of just and a all it. factors were

we had always We leadership management some – some a both. have GTS. have to happen usual greater than changes number. So in first, We

We come similar to one for reasons. – were – to GBS. got had to for So, many we had promoted, who the Germany got our We personal top for running one back that in Germany, U.S. two had things. example, Asia people running we – years, changes for go needed leader had a in

it in business – be combination first the spread of to order concentrated I've and for out, So personal a a half. just more happened there's in for this more bunch reasons a of, got

of piece one was that So it.

mentioned I office to moved Barcelona, an as area. a London markets, just we piece, Second a – which same offices. grow. again, into planned between we've Through European opened and and of traditionally need a different office. been our This Brexit we time. – We major happened expanded other as of we the talent Texas. of in – of We our and expansion leaders was headquarters combination our was has bunch have We similar people, talent a Dallas in and Barcelona these quite pools. – thing Again, Barcelona, and bit The the here Florida a happened were year, disruptive. Dallas and an advance company, at

Each them all like these small are for changed great but of kind subscription but I basically. market. organized in our to it effective small, the mentioned, market in back, – others, of us, also minor there selling lot – innovations. falls Small And it's growth a you to Each then tech companies make biggest companies. things then And and have very change revenue. selling that those are results various to are more of were approach of to ones. our normally and in tech GTS is wouldn't rate we There the we rolls collectively slightly that but

Jeff Meuler

worsening is And not then factor? your view macro a on

Gene Hall

it. see don't We

had very of a our GTS strongest we've at quarter, ever look So one I'm and strong Conferences Research – business our GBS mean, accelerated then grew if -- quarters had. XX.X%, so you sorry, the I business,

a quarter. business very had strong Consulting Our

really had lot of a we business, the across So strength.

have Now at really in are again, that well. we point some any companies time, doing

XX,XXX some optimization. of clearly an our We our and all have our performance. There's just had interest well. businesses strong are of – It's uptick Consulting among again, some cost enterprise clients, not that in the clients very doing that But business. so

Jeff Meuler

guess, high Is about very margin? half-year then the the the right open a on then about I the magnitude it, revenue to some XXX% near headcount or because think margin it guidance And that decremental I just reduction it's the the of effect GBS being of trying only decremental – top a it. that of just, guess guidance magnitude Okay. just higher similar and Is given we should is think this to on other understand of And question reduction. or like lost to at going EPS of EBITDA territories. closing that, factor is the trend of way – I'm sales a

Craig Safian

I it's think, think the that's it. I Jeff, way about think Yeah. to right good Craig, morning,

reduction, flowed So portion through of have a the would very high for revenue margins. it at

basically, the flows So cost-based flow-through high very as revenue's when fixed hurt the margins when Conversely, well. through large it margins. is revenue's there, and not the there,

to able On costs, we for or were modulate a some fixed part, it to, the of cost are revenue, – the are able is but most the they base.

the revenue And is so large your appropriate. assertion on decremental

our conference a in but you're think also. in and In little the open GTS sales, cost, I terms also but is of is through of balance notably most the notably, in the Most right it flowing the GBS in to reduction GBS, that bit territories year. in

the QX increased I was other of spending the – is outlook. some thing noting some of worth our think this into baked

up At as gave we the quarter. and expectation it recalibrate coming a cost. obviously, in our then Gene modest our guidance, the and downtick us view would that we other make out the our modest – with was It in second point, areas outlook this revenue mentioned, uptick of we caused in when to

Jeff Meuler

you. Thank Okay.

Operator

you. Thank

of the Manav line with Our Barclays. comes next Patnaik from question

Your line is now open.

Manav Patnaik

$XX about could by Good follow-up to I $XX guess Thank you guidance, just reduced If million the I million. morning, that on EBITDA you. that on – gentlemen.

GBS non-subscription that had was kind or said that legacy you million of $XX of you think I the stuff through. complete drop

between rest of it, that the side? way talked is is that in $XX – to two of and million And about? guess, think is the investment through So drop I about on increased, the the GTS sales that GBS right that you split

Craig Safian

Yeah, Craig. good morning, Manav, it's

is you're about I way it roughly So think think to – the right.

spending, just yeah, lower flowing Jeff, And it territories with most again, cost, reduce so I downside most before to actually or eliminate increased open of We're there's some then of the or not mentioned but revenue as it's proportion in through. certain portion GBS. growth And the around faster where able of flow is notably through. XXX%

it. the So, I way about think to is right that think

Manav Patnaik

Okay, got question impact. it. And earlier then the also just on the to macro

XX-Q, think have language double-digit quarter, I quarter, in I quarters it this contract think this And and on three said in you last in you across was growth your was half. it usually your industry value segments.

So, use you large data are segments. follow-up and slowdown, of I law deceleration just numbers? to in is seeing guess it's if that to trying point any just that your

Craig Safian

Yes.

GTS, region client to every relates it's GBS. I the major where Q, The way industry combined the to and think in rates. we've size, double-digit made comment, it and is, in about comment at believe virtually every grew the GTS think I every traditionally that

And are a going X% combining mixed be grower. to just we with a a so more XX.X% grower little that's because

GTS level on the But had very across look the where you that could been way the same vector every it's growth consistent that we've universal of measures, at we side, look at. almost double-digit

Manav Patnaik

right. All you. Thank

Operator

Thank you.

from Our of the Kaplan next line Toni Stanley. comes Morgan question with

Your line is now open.

Toni Kaplan

Thank you.

just small how GXL So, processes, incrementally you sort of there you seeing as well? that I to has you're And wanted processes sales you or clarify, changing the it tech are the GBS expecting are time you made still that a goes such sort and of the general, companies or big in end CV just, are change get terms that goes, double-digit in seeing also of along by it sales GTS I that takes given of know just just but GBS changing to to transition, are in as growth year? the in are selling any been just you to in the

Gene Hall

Gene. it's Toni, Hey

obviously the So, our We the GBS we reflect half. in know the growth year, what which this were will are for results by that. first of expecting end double-digit

We business new looked think in get and for by we've what to retention's our have we QX will QX. we expectation XXXX. our be at that's growth forecast bottoms-up And the and still we're will double-digit of end likely what basing that

So, then positive on, it's would the our forecast I for what first the half, happen like based results QX. our in expectations and said, QX for on

impact So question. the that's

right which make got in has the the right product get let's that the right the process, sales of sure we've processes in, we've sure retention which let's is, training, sure direct recruiting, GXL terms selling we we've and capacity, sales programs. we and handling -- the let's In capacity, tools, GBS way right make selling place got get the make been line, got

place and done them talked things in past many for of we've the GTS. for now we've are those we what as modeled in All successfully very years

strong some And all really we terms as pieces the got so that's in make of really we've we're may of -- of tweaks feel you're the we while place why the in seeing we processes, acceleration. and like while kind learn

XX% about, talked new had $XX QX. in very, QX Craig for as are million These That was of in selling well. very And up products really business we GxL.

we're on track really we so good kind a of feel there. that And

Toni Kaplan

come margins is should or the transition before, EBITDA business over of year than then the to as margin but right time, And major as was going but Great. all the this I points you. lower given at are cetera, I not this year question I sort but than revenue know support? year a midpoint there margins et hasn't be the just are long-term, that ask XXX of you which right year, know for where what for the basis for growth say what time, and lower going level trying of guidance this on this like of points level expense Thank in the next business? sort year, kind now, to last quickly I'm like level the about XXX basis

Craig Safian

it's Hey, good morning, Toni, Craig.

we're not going our guidance to on long-term expectation. think I margin So, give

remarks, with right we'll that of and strength trend now, we'd EBITDA in grow approximately expect I roughly XXXX to our revenue which grow rates, in think Gene, all the double-digit way is at about revenue, thinking year. revenue in we're outlined line continue his next

We've realizing made And obviously talked investments the in returns in those the to GBS business, in we returns a and we about, we good of and start and Conferences. in really feel again GTS, about lot we're across GTS fully GBS getting XXXX. on side, Conferences expect as the

Toni Kaplan

Okay. Thanks.

Operator

you. Thank

Lynch. question America of with Our the line next Gary from of Bank Merrill comes Bisbee

line now is Your open.

Gary Bisbee

Good Hi morning. guys.

within even look shift than margin that the if reduction on assume that guidance a $XX that, revenue X% there's than like higher slight incremental like like implies, mix higher I of EBITDA annualize million falling acknowledging revenue, your cost of incremental more at with which that, corporate coming SG&A -- the still the and incremental So, average to the were the much if of some feels number, margin X% it revenue I guess there's that it's if cost in, we in and total we than more or revenue.

to are what's is us some the just more in number? really directionally seems right? territories. high Can good investing help -- in of number pretty and a level like back you a What investments a first -- of at few that such half It what's year? the in relative open that filling understand And that you all,

Craig Safian

It's Gary. Craig. morning good Hey

So I is the probably on probably million about to think you're expense it roughly way range. your in a bit impact. $XX-ish a little lower, the high It's think little

-- of have late part second in may think I started The it's QX, half not all is QX. this spending. spending in certainly

just And so you annualize it. -- to it can't annual double

already run for it baked of is into Some our rate XXXX.

Gene in where of units, level the with we from open example one X% of territories As X%. sales reduced one our to mentioned,

and so And those need if have more And a the more frontline cost get in actually there's on many increase managers, we might X% individuals. heads of people, number about cetera. board, might et almost then we it to recruiters and we add the see, as of more them think needed that

thing territories, that notable the upfront. the our thing in reducing pays in cost reduction, or line I that's firmly, EBITDA, of cost in open is that does most the impacting absolutely, have which move reduction the so we the the that only future, firmly but a within that firmly, believe not off is And And think think people, sizable again pays our GTS of long-term, we force But P&L off. territories about what from GBS it terms believe, firmly open size of is, the is impact against so XXX perspective. have in changes of percent at a can short-term X,XXX and sales again, assumptions pretty our a Modest people. just over is

Gary Bisbee

reinvestment to So targets? weigh being relative day-to-day row Because medium-term how you're follow-up, the of target which a delivering now is when the some I running well investment on of constantly within because of investors -- in that concept business, guess that so you there's for point in won't lot not year I this EBITDA investing a do showing so really a revenue frustration, at the growth the targeting, the hit and to but of level your investing the return me, despite is just certainly to a high. much, yet range on growing know that concept you're you I from and second remains of leads it lot this think basis

Gene Hall

So Gary, it's Gene.

our growing performance, look is at We've gotten really GTS you returns invested if great on there. We've again first, well. So it.

growth reason we've the Conferences got there, business, such returns. has Our we've great record invested it because is

in we Conferences in about as GTS investing we've ahead. great inflection as start heavy, going in that talked we we we're where know incredible there. those have and And there's We we've in -- returns GBS business. opportunities reached in growth before, to said we're I I've where been the investing past GBS know point, that our think getting

the a deciding territories. open We So than year. a to said, was se. is the last per improvement as on biggest number that make assumed Again, we side and Craig last of -- had It percentage as factor new investments not better cost an year. significantly -- we we're

the of actually growth. major That And sales across it's all overachieving in territories. fewer is three terms We're forces. of open long-term great our for

only growth can retention get existing if with better get clients. you You better

great a do, thing have it's so territories. those and already to we And

So decided another it's we day just that to whole one investment. incremental have not a

GTS well. summarizing, just GCS returns again, on great those and feel made, great the reinvestment So we like we've returns seeing we beginning of as at from got returns we're for GBS

Operator

Thank you.

comes Wells of with question next the Bill line Warmington Fargo. from Our

now open. line is Your

Bill Warmington

Good everyone. morning

on So in within productivity wanted new the the couple for in to new QX. questions guidance, guidance? It productivity I guidance The minus X,XXX productivity a growth to was XX,XXX. The up was double-digit -- it implied in side. what implied plus the about QX. to of in And improvement X,XXX is given the ask GBS, GBS a previous had

Craig Safian

Bill. good Hey, morning,

in opening So the it -- think measure we about headcount. way is change way there's really period to the The productivity. no

$XXX drive to the the again, changed. drive million base, growth so have and XX% on a And we to NCVI number our opening million, roughly level headcount of of just hasn't $XXX same below

So essentially, mass. same it's the

very And QX rates in improved in QX of right calcs we've believe we your retention is and again, and through what for QX favorable. QX. You're combination both seen a and

on We QX to came measure up were points were renewal, said contracts think XXX XXX we of those the the close retention in QX. transactions. basis basis Same up we terms pure in in I for for that up points.

basis. total business decline year-over-year, You several in was that's coming GBS new quarters will in that XX% QX a new note for off business of a up on year-over-year

in we selling think that the way of to getting double-digit on year. about still to momentum of growth so the get new of you and to the more GBS forward, improvements real as comfortable get path this GxL improve our we kind ramping And model that's again, by -- GxL, and continued as they sales as if the force the seasons, continued end retention business, again,

Bill Warmington

the sounded a productivity I quarter X% And side, comp. open easier was initially GBS XX% versus of XX% grew comp. rapid X% more on the that the that really might the last the grew quarter, side. territories like then In And closing expected, but GTS versus of Okay. on an productivity lot that the this than be it thought

to wanted that was I driving productivity. So ask what lower

Craig Safian

sure. Yeah

that's deceleration have the So and a still we, on as is X% up the productivity. overall in the the growth contract quarter really modest the in but productivity caused modest in a did basis, the XX.X% strong value very, you know, And year-over-year deceleration still we given is deceleration again, GTS what modest rate. very

measure And being other modest the the have but basis -- the year-over-year we said impacted again, productivity impacted on or up decel. quarter modest we're a the productivity measure -- it was up seventh the consecutive way, of decel productivity

really at either the that's second look but can You way, in what quarter. it happened

Bill Warmington

okay. Thank very you it, Got much.

Operator

Thank you.

of line the with from Jeff comes question Silber Capital next Our BMO Markets.

line Your now open. is

Jeff Silber

so Thanks much.

year. next If margins if a next but it year next would just year, guidance soft of margin filling little go GBS, bit to you're I business, growth a away the you have bit thought, we expansion your from we're XXXX, wanted off ending flat is the for at talking looks about Sorry, double-digit we're why the I this quicker to in territories from like shift look back we little questions headwinds at accelerating than thought CV -- expansion year? from that margin open potentially the shouldn't you from your legacy see earlier.

Craig Safian

Jeff morning, Good question. the thanks and for

the we guidance giving it at land XXXX this not upon where determined lot point. will a again, be year. So Obviously, we're of

and value the the are So GTS bulk economics second deliver NCVI of we the half or of determined growth contract the year. through both our the GBS XXXX in by

around in and able in of reconcile walk we outlook about moving not a where make. we're position guidance I'll go and give detail growth when into certainly to being to you right the happy margin just the We're and infinite the our we'll talking terms assumptions forward. and now immense visibility transparency all the EBITDA provide be XXXX outlook, or of points the XXXX

Gene Hall

GBS to trying that had the and been feel can start we've -- products, we that, specific wanted base where guidance opposed getting growth CV reached where about that as I'd margins of where the have that, ahead talked like the communicate, I et earlier, right Jeff, we've was know in to point now number people, add that we of to the we we returns is right are of we year. what that, I that And investing to reason a to communicate sales we're going comments which the my as be out right cetera, in next

Jeff Silber

detail more then, just quick progresses. a Okay. as question. numbers Look getting to year the forward And

the exact amount benefit of tax EPS on impact EPS? You the adjusted that tax was in mentioned impacting XQ. What benefit

Craig Safian

recorded I benefit on was Jeff, the million line. tax think $XX a it speaking, roughly income So about

Jeff Silber

into EPS back number. right. so came That Thanks the much. Okay. All

Craig Safian

Yes.

it. got You

Operator

Thank you.

with Joseph Fitzgerald. Foresi Our next Cantor line from question comes the of

open. now Your line is

Joseph Foresi

Hi.

What kind undervaluing either just double-digit is to hit inside the What see a from outside other sort do some necessary the Street would that you circle on the So of not see The back that to wanted of think growth? you in I ramp to product-improvement area? that or GXL. we do result on standpoint

Craig Safian

morning. Good Craig. Joe. Hey, It's

Joseph Foresi

Good morning.

Craig Safian

the the And It is and very us low products with consistent marketing quality Joe, high-value products. really our I cost products, very confidence product, always had confidence a it's at of think proposition I our gives relatively what chain a supply -- in we've is things. our think strong, two product. really IT

parts, new GXL the we've in but business isolate moving million new making. one $XX the on business one of the see been function of where new side, total so business. out again, So can and the in a why enterprise we're numbers, quarter, is the it's sold what's investors, continued when lot ramp launched And new a we've consistently there's second little particularly the investors And you reasons it out we GXL, happening the GXL of that that product. breaking because that progress across can worth of for with was masked every again, get

across And if very strong. year-over-year functions, growth was all the enterprise those I growth basis look at on the a

to Gene and were As in average. business overall, was enterprise GXL about up growth just year-over-year we mentioned, that every XX% close new function,

very strong So very, growth.

So market continues the be to uptake strong.

of you product if and sales better just they're repetitions, our get to better and will, better the and again, teams selling And getting more continue more and at it.

things a the very is the GXL strong with couple improvements in seen the retention. strong You that retention that retention come first in renewal the retention again, also rates. very year, half improvement seen have in for both of our and that on we've And comment we've and up product legacy on --

And of should again, as underneath on balance that year, and continue seeing make again, of every we're selling possible or you and GXL, given we're things, these again, of we transparent through, the really to millions millions flow dollars believe up ramp what the twosies of as these that's of flow you for trying tens through covers. we're the well. not millions quarter, each the as we're and which if to And selling onesie, that

Joseph Foresi

currently of you know you've I Maybe schedule you of spike you it. back feel the I Because Got as closing, then, we, could couple forward -- are saw to investments, follow remind And the of made after pull like investment in in proper just goes that stuff. all this GXL. think the the up. rest What the at it a and investments just in that us Do investing in? point? a

us So it sales? bit feel into you the maybe now a they you're mostly Just with CapEx just color or business. that the Is you What ongoing? on now? like are more the back the are putting Thanks. investment can schedule? investing little continually in you in help investments are Do complete,

Gene Hall

largest we've that's to sustained The Hey, And we've the getting sales Joe. capacity, in sales that It's long-term single to place. because growth investment force. added key is Gene. got and

also we're invested Craig the mentioned, business right gets delivery the are that in again, seeing and in as doing and continue and getting right well. up will that service working, place, retention -- to the as Now selling products grow. teams, We've meaning all those very the is grows, things, GXL

up the that strong. as first are ones where, been retention as come have The The legacy retention the products very there well. well, Craig renewal our as of is affecting retention programs also for mentioned,

most to -- the in and in so, basically, a product. investments is the lesser in service degree, sales, in really And delivery are key

Joseph Foresi

you. Thank

Operator

you. Thank

of the from line Our Sachs. with George comes Goldman next question Tong

Your now line is open.

George Tong

Hi. Thanks. morning. Good

drive previously, slow CV growth. to headcount to Your XX.X%. more rely GTS GTS in your growth to you productivity headcount and gains were recall growth the I on accelerated quarter looking

two in So four quarters? next, productivity GTS balancing can to you growth talk over about headcount call strategy overall the between your and it, gains

Gene Hall

George, in force sales of we and want the we the we way territories of we that certain question, And talked adding number about. through certain that answer year. to to then a that phasing about think the opens which assume add is decide value of our each year territories is, half a of there's that, So, the capacity I'll first the number those we

the story in territories. number as you GBS, is, growth in gave guidance GTS gave on you is based we the we we headcount the talked force which so, sales about of was same And on -- a the

we're in actual GBS sales the is and as reduced in growth on the board. sales territories As Craig actually the people sales number higher, territories, the why -- a GTS you little of because as giving number and force I that's growth the well mentioned, not number giving of we you

Craig Safian

and George, good morning. Yes,

question. Just to your answer continue and the to thought of part second the

we in board not yes, growth XX% it's and more were open a it's assumptions had And to more our were compared territory filling or change just for a that many we heads is, where that and -- point quarter. full more effective the territories, year. had we last modestly above at efficient So two guided on we what

in roughly of For to level driving Again, of expect growth. the remain increased few on given low this we sales the level territory territories range we same next open consistently. productivity focused quarters, the and run

mentioned, growth and focused done it of I row as quarters seven we continue striking right As headcount on will we and productivity that GBS, on we've to also get that improvement, But between productivity. we sustained And to productivity we and again, be year-over-year sure, a we balance growth. improvements. employ accelerate make that to opportunity drive market add, we'll want want of think, same that the kind we way can we huge double-digit capture so in still long-term thinking

George Tong

you number what of filled filling territories to of the next with territories in how the better upside territories the And expect then from versus that and had open respect you most expected helpful. Got confirm come it. these can to That's perhaps sales quantify, filling of impact open over And in did territories, you the maybe those GBS? initially fact that you year.

Craig Safian

Sure, Yes. George.

think level in actually, teams open way units, again, selling GTS, conferences, So of GTS, And seeing return then at that look sell the you to so off. if we've argue we've the territories in GBS sales and benefits segments. paying about is that you we're could it our those the of the that major of is each reduced three the and

think we're about to planned in we've GTS is returns X% historically to from In quantitatively GBS. we've roughly and value growth The just And all had starting expect start XXXX Conferences, way mentioned, as the really see benefit. open it And in beyond. accelerate. and we're investments those to -- seeing GBS, seeing Gene we in territories the contract

can And headcount reduction that two or open in growth the a X% or impact territories so same by three-point X%.

so and this than territories particular, we moved effective efficient year a at faster filling And through had we've rate in really as at been we've open previously.

couple points it's side, On GTS a probably better. the

little run better. is baked you're for we On more that a in growth points into the And rate couple accreting each year. expect a least of that -- territories, to it's than notable in outlook GBS of side, the more terms balance again, those of those at headcount. seeing the at level that of now of we our we've at kind And the level that running filled improvements

George Tong

it. Thank Got you.

Operator

today's This back turn Hall session. you. now to for closing remarks. Gene would question-and-answer concludes Thank I to like call the Mr.

Gene Hall

So summarizing today's call.

double-digit XXXX, For We across we Conferences Research, business our the to strong each of and our business. deliver Consulting. second in quarter growth continue segments, again of performances delivered

We are sustained for well growth. double-digit positioned

on we're inflection in at double-digit expect are Consulting path. and in GBS a Conferences point growth We GTS, continued an and sustained strong

next forward us again for bright. Gartner updating and Thanks at future we Our today look you joining quarter. remains to

Operator

Ladies and today's conclude today's program. in gentlemen, thank does you This for participating conference.

Everyone, You may a great disconnect. all have day.

Gartner (IT) 30 Jul 192019 Q2 Earnings call transcript