高德納諮詢公司 (IT) 2010 Q1 法說會逐字稿

Good morning, ladies and gentlemen.

Welcome to Gartner, Inc.'s earnings conference call for the first quarter 2010.

A replay of this call will be available through June 5, 2010.

The replay can be accessed by dialing 888-286-8010 for domestic calls and 617-801-6888 for international calls and by entering the pass code 35613278.

This call is being simultaneously webcast and will be archived on the Gartner's website at www.Gartner.com, for approximately 90 days.

I will now turn the conference over to over to Mr.

Hank Diamond, Group Vice President of Investor Relations and Corporate Finance, for opening remarks and introductions.

Please go ahead, sir.

Good morning, everyone, and thank you all for joining us.

On the call with me today are Gartner's CEO, Gene Hall, and CFO, Chris Lafond.

Before we discuss our results, I would like to remind everyone of four things.

First, the rebroadcast, reproduction and retransmission of this conference call are webcast without the express written consent of Gartner are strictly prohibited.

Second, if you did not receive a copy of our press release, it is available on our website at www.Gartner.com, or on the First Call system.

Third, the Company will be making statements about its future results and other forward-looking statements during this call.

Statements about future results made during the call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements are based on current expectations and the current economic environment.

Forward-looking statements and projections are inherently subject to significant economic, competitive and other uncertainties and contingencies which are beyond the control of management.

The Company cautions that these statements not guarantees of future performance.

Actual results may differ materially from those expressed or implied in the forward-looking statements.

Important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements and projections are specified in the Company's filings with the SEC including in its annual report on Form 10-K for fiscal year 2009.

Finally during the call, the Company will be using certain non-GAAP financial measures as defined under SEC rules.

Where required, we have provided a reconciliation of those measures to the most direct comparable GAAP measures in the tables and the press release.

Before I turn the call over to our CEO, let me briefly review the highlights of our first-quarter 2010 financial results.

At March 31, 2010, contract value which is a key leading indicator for Gartner's research business, was $864.4 million.

Year-over-year, contract value was up 14% as reported and 10% excluding the impact of foreign exchange.

Revenue was $295.8 million for the first quarter.

Year-over-year, revenue was up 8% as reported and 4% excluding the impact of foreign exchange.

Diluted income per share excluding acquisition adjustments was $0.24, up 14% year-over-year and reported diluted income per share was $0.19.

Normalized EBITDA was $53 million, up 10% year-over-year and net income was $9.4 million.(Sic-see press release)

During the first quarter, the Company deployed cash principally to repurchase 1.5 million shares of its common stock for a total cost of $35.2 million and to fund the reaming purchase price of the Burton Group acquisition.

As of March 31, 2010, the Company had a total debt of $367 million and cash of $105.9 million.

Finally, in addition to announcing first-quarter earnings, the Company increased its outlook for full-year 2010 earnings and cash flow and reiterated its outlook for revenue.

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

Thanks, Hank.

Good morning, everyone, and thanks for joining us.

Well there are four key points I would like you to take away from today's call.

First, Gartner is off to a great start for 2010.

In the first quarter, we generated double-digit growth in research revenue and contract value and we exceeded our earnings expectations.

The positive momentum in our business trends that began in the second half of 2009 has continued to accelerate this year and we are once again delivering year-over-year growth.

Second, the acquisitions of AMR Research and Burton Group are proving highly successful.

We are seeing strong demand for these products both from new and existing clients and they are already contributing to growth.

The acquisitions are on track to meet or exceed our expectations over the long term and to meaningfully add to earnings by next year.

Third, we are deploying our substantial cash flow both to invest in our businesses and to return capital to shareholders through our share repurchase program.

And fourth, we are well positioned to generate double-digit contract value and revenue growth for both the full year 2010 and over the long term.

As a result of our strong first-quarter performance, we have raised our earnings and cash flow outlook for the full year.

Now let me address each of these points in more detail.

We have now seen four consecutive quarters of sequential improvement in business trends and this improvement is continuing to accelerate.

The momentum in our businesses has resulted not only from a selling environment that has continued to strengthen, but more importantly from the positive impact of our ongoing initiatives to improve sales effectiveness and drive client retention.

We told you last year that the changes we made to adapt to the economic challenges in 2009 would make us a stronger company in 2010, and that is exactly what has happened.

Let me highlight some key points.

Research continues to be our engine of growth and we ended the first quarter with record contract value of $864 million, up 14% year-over-year as reported and 10% excluding the impact of foreign exchange.

Our contract value began the year at $855 million, including the AMR and Burton acquisitions.

So the sequential organic growth in contract value during the first quarter was approximately $9 million, which is a strong result given the first quarter is typically our seasonally lightest for growth.

As Chris will discuss in more detail, about two-thirds of this growth came from our existing product portfolio and one-third from AMR and Burton.

Our growth in contract value was driven both by strong new business and improving retention.

New business in the quarter was the highest ever for any first quarter in Gartner's history and was up 50% year-over-year.

Both client retention and wallet retention continued to improve sequentially, reaching 80% and 89% respectively.

In fact, client retention was flat year-over-year for the first time since the recession began.

As many of you know, we report client and wallet retention on a trailing 12 month basis to eliminate the impact of seasonality.

So for subscriptions that were up for renewal in the first quarter on a stand-alone basis, retention was up substantially year-over-year and has returned to pre-recession levels.

Now, the majority of our contract value growth in the first quarter came from volume, but we also benefited from increased pricing.

The annual price increase of approximately 3% that we implemented last November has held as expected with no material push back from clients.

Our consulting business also performed well in the quarter, eTrends, showing their first year-over-year improvement since 2008.

Backlog grew 3% year-over-year, driven both by improving demand for our services and the acquisitions of AMR and Burton.

In addition, revenue per billable headcount grew 7% year-over-year, reflecting our effective management of consulting headcount to maximize profitability.

We are seeing strong demand for our consulting services in the second quarter and a growing pipeline of new business.

Thus we expect both revenue and backlog growth to accelerate in the second quarter and full year revenue growth to be in line with our expectations.

Turning to events, that business has also continued to strengthen in 2010.

Attendance at ongoing events held in the first quarter was up year-over-year, consistent with the positive trend that began in the fourth quarter of 2009.

Moreover, exhibitors at ongoing events was also up year-over-year for the first time since prior to the downturn.

The improving trends in our events business have been driven by our efforts to enhance sales effectiveness and customer experience at our events, coupled with continued modest easing of corporate travel restrictions and increased marketing spend by technology providers as the Company improves.

And these positive trends have accelerated in the second quarter.

In fact, all seven of our ongoing events held in April had strong double-digit growth in attendee revenue versus last year.

Our events business is on track for solid growth in 2010.

Turning to profits, the cost control measures that we took last year coupled with the operating leverage of our businesses enabled us to generate earnings ahead of our expectations for the first quarter.

While our reported income per share of $0.19 was impacted by $0.05 in items related to the acquisitions of AMR and Burton, our income per share excluding acquisition adjustments increased 14% year-over-year and normalized EBITDA increased 10%.

So you can see the first quarter was a great start to 2010 and we are very optimistic about our outlook for the rest of the year.

Turning to point two, I'm pleased to report that the acquisitions of AMR Research and Burton Group are both performing very well.

The integrations of these businesses are proceeding as planned and there are approximately 80 research analysts and 60 sales professionals are now comfortably part of the Gartner organization.

Our combined sales force is actively selling AMR and Burton products and we are seeing strong demand from both new and existing clients.

In fact, during the first quarter, we grew AMR's and Burton's combined contract value by approximately $3 million or 6%, and this was only our first quarter of ownership.

We expect their growth to substantially accelerate later this year and in 2011 as our sales force becomes better trained and more experienced with selling these terrific products.

As we have discussed before, we estimate that the potential market opportunity for providing Burton Group's research products to front-line IT staff is approximately $11 billion and that the potential market opportunity for AMR Research supply chain research is over $1 billion.

As independent companies, their growth was constrained by a lack of scale and a combined sales force of only 60 associates.

As part of Gartner, we will leverage the scale and relationships of our more than 1000 person and growing sales force to reach a much broader base of potential clients as well as make additional investments to expand their research coverage.

We are very excited about the opportunity to substantially grow AMR's and Burton's revenues over time and we expect them to meaningfully contribute to earnings in 2011 and we are confident that they should be home runs over the long term.

Turning to point three, we are actively deploying capital both to invest in the future growth of our businesses and to return cash to shareholders.

As those of you who follow Gartner know, we benefit from a business model that generates a significant amount to cash flow over the full year.

Our top priorities for that cash flow are to invest in our businesses both organically and through strategic acquisitions and to return capital to shareholders through our share repurchase program.

During the first quarter, we deployed over $35 million to repurchase more than 1.5% of our shares outstanding while at the same time investing to expand our research and sales capabilities and improve our products and services.

Given our strong cash flow and balance sheet, we are well positioned to continue to invest in our businesses and to return cash to shareholders both this year and over the long term.

Finally turning to point four, Gartner is well positioned for double-digit revenue and contract value growth in 2010 and over the long term.

I am very encouraged by the trends we have seen year to date, which continue to show accelerating improvement.

With the economy strengthening, IT professionals are actively investing for growth.

They have complex IT problems to solve and decisions to make and Gartner is the best and the most cost-effective resource that they can turn to for help.

Sales cycles are returning to normal and sales force productivity is improving both due to the strengthening in the economy and our initiatives to increase sales effectiveness and client retention.

We are retaining more of our client enterprises.

They are spending more on Gartner's services, and we are continuing to add hundreds of new enterprises as clients each quarter.

Now the strength of the current sales environment was most evident at a meeting that I recently attended for the top performers in our sales organization.

I was truly impressed by their enthusiasm for our product offerings and our market opportunity.

In fact, their level of excitement and energy was as high as I ever have seen, reflecting the fact that the sales environment is the strongest it has been since before the recession.

In light of our strong first-quarter results and current business trends, we have raised our full-year 2010 earnings and cash flow outlook and expect revenue to be in the upper half of our outlook range.

We are well positioned to generate double-digit revenue and contract value growth for the full year.

Yet our successes to date are only the beginning.

IT is and always will be a complex and continuously evolving industry and IT professionals will always need Gartner's thought leadership and insight to make the right decisions every day.

As you have heard us discuss before, there are hundreds of thousands of IT practitioners who could potentially be Gartner clients, but have never been educated on the value we can provide.

We have a vast potential market opportunity which we have barely penetrated.

Thus, we are well-positioned to accelerate our growth rate over time as we expand our sales capabilities and improve productivity.

So to summarize, you can see why I'm so excited about our growth prospects for 2010 and beyond.

The Gartner brand is in a class by itself.

Our products, services, and people are superior to the competition.

We have a great business model.

We benefit from a vast untapped market opportunity and our clients will always need our help to grapple with difficult IT issues.

The acquisitions of AMR and Burton have expanded our research and sales capabilities and should accelerate our growth over time.

The initiatives we took during 2009 to maximize the sales effectiveness, optimize our cost structure, and invest in our businesses are yielding positive results this year.

Based on our strong first-quarter results and current business trends, the momentum that enabled us to generate double-digit revenue growth and expanding margins from 2004 through 2008 has clearly returned and our sales force is as energized as I have ever seen them.

We're in a great position to generate double-digit revenue and earnings growth over the long term.

With that, I will turn it over to Chris for additional details on our results and financial outlook.

Thanks, Gene, and good morning, everyone.

Our first-quarter results demonstrate that our business has returned to solid growth.

The positive momentum that we experienced in the second half of 2009 has accelerated this year and we continue to see sequential improvement in many of our key metrics.

The initiatives we took last year to optimize our cost structure and selectively invest in our businesses yielded positive results in Q1, including increased sales force productivity and higher margins.

We expect to see continued sequential improvements as we move through the rest of 2010.

As a result, we are exceeding our earnings expectations and are on target to achieve double-digit revenue and contract value growth for the full year.

Let me start today with a review of our business segment results for the first quarter and finish with a discussion of our outlook for the remainder of 2010.

In research, first-quarter revenue was up 12% as reported and 8% excluding the impact of foreign exchange.

Approximately $10 million of the year-over-year growth in research revenue was related to the acquisitions of AMR and Burton.

We maintained gross margins unchanged year-over-year at 66% despite the incremental costs associated with the AMR and Burton businesses, including the addition of their 80 analysts.

More importantly, as Gene discussed, the improvements in the trends that drive revenue growth in our research business continued to accelerate during the first quarter.

With the success of our initiatives to improve sales effectiveness coupled with the acquisitions of AMR and Burton, we grew contract value year-over-year by 14% as reported, with 10 (technical difficulty) the impact of foreign exchange to a record level of $864.4 million.

Organic growth on a sequential basis was approximately $9 million, $3 million of which came from growth in AMR and Burton products during our first quarter of ownership.

We have now had three consecutive quarters of sequential contract value growth.

And this quarter's sequential growth is particularly strong given that Q1 is typically our lightest for contract value growth and was driven by record first-quarter new business, strong growth in client organizations, and higher client and wallet retention.

New business increased almost 50% year-over-year and set a record for any first-quarter in Gartner's history.

Consistent with the trend over the past few years, new business was balanced between sales to new clients and sales of additional services and upgrades to existing clients.

From a product perspective, our role-based offerings and executive programs continued to drive our new business in contract value growth with contract value for each reaching record levels.

As of March 31, Gartner for IT leaders, our role-based products for the end user market, accounted for $211 million of contract value, up 12% year-over-year as reported or 7% excluding the impact of foreign exchange.

Gartner for business leaders, our role-based products technology market, represented $127 million of contract value, up 26% year-over-year as reported or 23% excluding the impact of foreign exchange.

And executive programs, our role-based products for CIOs, ended the year with contract value of $223 million, up 17% year-over-year as reported or 14% excluding the impact of foreign exchange.

AMR and Burton also significantly contributed to organic contract value growth in the first quarter.

At quarter end, their combined contract value was approximately $54 million, up $3 million or 6% from the start of the quarter.

We are particularly pleased with this result since these acquisitions closed in December and we are still in the early stages of training our sales force on these new products.

We expect their growth to substantially accelerate throughout the year and beyond and to meaningfully contribute to earnings in 2011 at or above the guidance we gave at investor Day in March.

These are already proving to be outstanding acquisitions for Gartner.

From a client perspective, our retention rates continued to improve as we retained more of our clients and the clients we retained increased their spend on Gartner research.

Client retention and wallet retention each increased 2 percentage points sequentially to 80% and 89% respectively.

Client retention was flat year-over-year for the first time since prior to the recession.

As we have discussed in the past, these metrics are reported on a four quarter rolling basis in order to eliminate any seasonality.

So the sequential increase in our reported retention metrics reflect significant improvements in the retention of both clients and dollars that were up for renewal in the first quarter on a standalone basis.

In fact, retention on this basis is now back to pre-recession levels.

Aside from retaining more of our existing clients, we are adding more new clients and thereby growing our overall client base.

During the first quarter, we added 558 enterprises as new clients, up 137% year-over-year.

And as a result, we ended the quarter with 10,784 client organizations, up 6% year-over-year and 3% sequentially.

The performance of our research segment during the first quarter demonstrates that this business has clearly returned to its long-term trend of accelerating growth.

As Gene discussed, we are seeing strong demand from clients.

Sales cycles are returning to normal and sales productivity is improving.

We expect continued acceleration in revenue and contract value growth as the year progresses and remain confident in our ability to drive 15% and 20% annual revenue growth in this business over the long term.

Moving on to consulting, trends in this business also continued to improve in the first quarter.

As we expected, revenue was up 2% as reported and down 2% excluding the impact of foreign exchange given the backlog and headcount levels at the start of the year.

We were able to deliver these revenue levels despite billable headcount being 6% lower year-over-year at 444 as we tightly managed resources to match demand during 2009.

As a result of our focus on consultant productivity, we achieved first-quarter utilization of 72%, unchanged year-over-year, and revenue for billable headcount of $441,000, up 7% year-over-year.

The increase in productivity enabled us to deliver a gross contribution margin in this segment of 40%, up 2 percentage points year-over-year and in line with our long-term target.

Backlog, which is our key leading indicator of future growth for consulting grew 3% year-over-year in the first quarter to $89 million driven both by organic growth and the inclusion of AMR and Burton.

This represents a healthy four months of backlog and we have seen demand accelerate in the second quarter and our pipeline of new business is strong.

So we expect substantially higher year-over-year growth in the second quarter and back half of the year.

Turning now to events, trends in this business continued to improve in the first quarter.

Revenue was in line with our expectations given the previously communicated change to our events calendar.

During the first quarter of 2010, we held nine events versus 12 events in the first quarter last year.

For ongoing events which were held in both years, attendees increased 2%.

We continue to benefit from our efforts to increase client retention by enhancing the client experience and the value that our events provide as well as the resumption of more normal spending on corporate travel.

We are seeing increased marketing spend by technology companies which helped to drive a 5% increase in exhibitors at our ongoing events held in both years.

This was the first increase since prior to the downturn and represents an important positive inflection point in our events business.

On the cost side, we continue to make progress at returning the margins of our events business to historical levels.

In the first quarter, we increased events gross contribution margin by 8 percentage points year-over-year to 39%.

Importantly, we have seen the positive trends in our events business substantially accelerate in the second quarter.

As Gene mentioned, we held seven ongoing events during April.

Each of these grew attendee revenue in the strong double digits year-over-year.

We are solidly on track to grow our events business in 2010, in line with our target.

Moving down the income statement, during the first quarter, we increased our total gross contribution margin by 1 percentage point year-over-year to 58%.

We achieved this increase despite the incremental costs associated with AMR and Burton due to our positive operating leverage of our business combined with our continued focus on controlling costs.

SG&A increased by $15 million year-over-year during the first quarter.

Most of this increase was in sales and marketing expense, primarily due to growth in our sales force and the SG&A attributable to AMR and Burton.

In addition, foreign exchange change has accounted for almost $5 million of this increase.

Despite the acquisitions of AMR and Burton, we reduced G&A as a percent of revenue year-over-year by eliminating duplicate overhead and continuing to tightly control G&A costs across the entire Company.

As of March 31, we had just over 1000 quota bearing sales associates up 8% year-over-year.

Included in this number are the 60 experienced sales associates obtained through the AMR and Burton acquisitions.

We will continue to invest in our sales force and remain on track to achieve our 2010 growth target of 15%.

Moving to earnings, we achieved results ahead of our expectations for the first quarter.

Normalized EBITDA was $53 million, up 10% year-over-year and diluted income per share excluding acquisition adjustments was $0.24, up 14% year-over-year.

As expected, our GAAP diluted income per share of $0.19 was impacted by $0.05 per share in costs associated with the AMR and Burton acquisitions, $0.03 per share of which were amortization and other non-cash items.

Earnings were ahead of our expectations due to our strong revenue performance coupled with better than anticipated margins.

I would like to note that both our GAAP and non-GAAP diluted income per share include approximate $0.02 per share benefit from an insurance recovery, which was recorded on the other income and expense line below operating income.

Turning to cash, our cash flow during the first quarter, which is normally our seasonally lowest quarter for cash generation given our annual bonus and year-end commission payments, was also (technical difficulty) by a few additional items.

First, we had higher commission and incentive payments to our sales force due to strong Q4 sales in 2009 as compared to a weak Q4 2008.

Second, we had higher cash flow and payables which was due to timing.

As previously reported, we had higher than expected cash flow in the fourth quarter of 2009 in part due to this timing.

Third, we had approximately $3.5 million in one-time cash costs associated with the AMR/Burton acquisitions and the integrations of those businesses.

We still expect strong full-year cash flow and have raised our 2010 projection for both cash provided by operating activities and free cash, as I will discuss in a moment.

For the full year 2010 and over the long term, we continue to expect to generate free cash flow substantially greater than our net income primarily due to the positive working capital characteristics of our research business.

During the first quarter, we deployed cash principally to return capital to shareholders through our share repurchase program.

We repurchased 1.5 million shares at a total cost of $35 million.

In addition, we paid the remaining consideration for the acquisition of Burton and we ended the quarter with a strong balance sheet and cash position with net debt of $261 million.

Our current credit facility runs through January 2012 and provides us with $120 million of available borrowing capacity.

We have ample cash flow and liquidity to continue to grow our business and execute initiatives to drive shareholder value.

We will continue to look for attractive acquisition opportunities as a potential use of cash.

And in the absence of appropriate acquisition opportunities, we believe that repurchasing our stock remains a compelling use of our capital.

We have over $43 million remaining under our existing Board authorization.

Now let me turn to our business outlook for the remainder of 2010.

2010 is off to a great start.

The revenue performance in all three of our businesses is solidly in line with our expectations and we are well-positioned for double-digit revenue growth this year.

Accordingly, we have reiterated our 2010 revenue guidance, the details of which are set forth in our earnings release.

Based on current trends which have continued to show improvement, revenue is trending in the upper half of our outlook range.

As a result of our strong revenue performance per date -- to date, accelerating business trends and strong margin performance we've increased our earnings and cash flow outlook for the full year 2010.

Starting with normalized EBITDA, we've increased our outlook by $7 million at both the low and high end of the range.

And we now expect normalized EBITDA for the full year 2010 to be between $215 million and $230 million, an increase of 12% to 20% over 2009.

Normalized EBITDA excludes the costs associated with stock-based compensation expense which we continue to expect to be approximately $29 million to $30 million for the full year.

The $7 million increase in normalized EBITDA flows through as a $0.05 increase to our outlook for the diluted income per share excluding acquisition adjustments which we now expect will range from $0.96 to $1.08 per share, up 10% to 24% versus 2009.

Year-over-year comparisons for both GAAP income per share and income per share excluding acquisition integration charges are negatively affected by $0.05 per share of tax benefits received in 2009 that are not expected to recur in 2010.

Excluding the impact of these nonrecurring tax benefits recorded in 2009, income per share excluding acquisition adjustments is expected to grow 17% to 32% in 2010.

For the full year, total acquisition and integration adjustments are expected to be approximately $24 million to $25 million.

We now expect income per share impact to be approximately $0.15 per share versus our previous guidance of $0.16 to $0.17 per share as a result of the higher tax rate applied to these costs in our initial estimates.

As a result of this reduction coupled with increased outlook for our operations, we now expect full-year 2010 GAAP diluted income per share to range from $0.81 to $0.93 per share.

We have also increased our full-year outlook for cash provided by operating activities and free cash flow, each by $5 million at both the low and high end of the range, so we now expect cash from operations to range from $167 million to $187 million, which includes $8 million of cash integration charges and free cash flow of $160 million to $175 million.

Thus we expect to grow our free cash flow by 9% to 19% in 2010 and generate free cash flow per share of approximately $1.60 to $1.75, substantially above our income per share.

Please see our earnings release for more details on our 2010 financial outlook.

So to summarize, Gartner is off to a great start for 2010.

In the first quarter, we generated double-digit growth in research revenue and contract value and exceeded our earnings expectations.

The positive momentum in our business trends that began in the second half of 2009 has continued to accelerate this year and we are once again delivering year-over-year growth.

The acquisitions of AMR Research and Burton Group are proving highly successful.

We are seeing strong demand for these products both from new and existing clients and they are already contributing to our growth.

We are deploying our substantial cash flow to invest in our businesses and return capital to shareholders through our share repurchase program.

And finally, the current sales environment is as strong as it has been since prior to the recession.

We have raised our earnings and cash flow expectations for the year and are on track to deliver double-digit revenue and contract value growth.

With double-digit growth in contract value in 2010, we expect to establish a solid foundation for further acceleration in revenue and earnings growth in 2011.

We are well positioned for double-digit revenue and earnings growth and increasing returns to our shareholders over the long term.

And with that, we'll open the call for your questions.

Operator?

(Operator Instructions) Peter Appert, Piper Jaffray.

Thanks, the margin performance numbers I thought were particularly impressive, so Gene or Chris, is it possible to break out the components of the year-to-year improvement in terms of the cost reduction efforts you had undertaken previously and just inherent operating leverage in the model?

And then related to that, I've asked you this before but I have to ask you again.

I'm wondering if you are rethinking the upside in margins over the next couple of years, particularly in the context of the strength you are seeing now?

Thanks.

Peter, it's Chris.

Thanks for the question.

The margin performance is really a combination of both.

If you look at the strength in our margins, we are getting it out of a combination of growing revenues as well as the cost efforts.

If you look each segment, you can kind of get a different picture of each.

So certainly in the research business just the continued growth in contract values is a significant driver of the margin performance.

We have had some additional costs there with the addition of analysts as a result of Burton and AMR, but we are still seeing really strong incremental margin flow through as we expect we would see even as we have that business growing and are adding analyst capacity.

As a result of that, we were able to maintain the 66% margin in that segment and expect to see that to continue to expand as we move ahead and continue to see acceleration in contract value growth.

On the consulting side, again really primarily driven by the fact that we are continuing to improve the productivity of our consultant base, so our revenue per billable consultant has gone up pretty nicely over the past year.

I think it's up about 8% year-over-year, so what that is really showing you is that despite the fact that we have about a 6% decline in headcount there as we were managing very tightly resources to demand, we are managing that utilization and driving margin out of that.

Finally, on the events side, as we start to see, as we talked about improving attendance and exhibitors, we're going to get the leverage of the fixed costs.

So when you hold an event, you have some fixed cost of the space and the more people and exhibitors we can bring, you are going to see pretty significant flow through In addition to the fact that the team has done a lot of great work in thinking about how to more efficiently and effectively deliver our events.

So I think when you look at each of those three segments, those are some of the big drivers.

And so it really is a combination of both.

In terms of your second question, our longer-term expectations on margin, we still absolutely believe that we can return the business to a 20% EBITDA margin and then move that into the low 20s.

Then from there think about where it should go.

There's no reason why we think we can't get it above 20 but as we get to 20, we can kind of see where that looks, what's the right level of investment to both grow the business and return profitability to shareholders.

So we are really pleased that we are seeing this kind of margin expansion now and as we kind of get through the rest of the year, we will be able to give a better expectation of when we think we can see that 20% number.

Sure.

Thanks, Chris.

And then on the sales side, any color you can provide in terms of the drivers of the reacceleration of sales growth, in terms of -- is there any differential in terms of end-user customer types or geography or particular product offerings that are driving this performance?

This is on the research side.

Peter, it's Gene.

So basically we are seeing improvement across all sectors, all geographies, spread pretty consistently.

And so it's not like there is one place that has improved much better than the others.

It's kind of broad scale improvement and I think it's being driven frankly by two things.

One is we have made a lot of operational improvements to the business and every quarter we continue to and those things kick in.

And then second, as I talked about before, when clients are actually making decisions about changes to their business, they buy our services.

And in the first quarter of last year they were in gridlock.

Since then they have not been, and so that's why you've seen acceleration.

Got it.

Gene, last thing.

I see you've got a new head of sales.

Can you talk about what drives that transition?

Sure.

So basically, we wanted to put somebody at a senior level in charge of our strategies for growth as we go forward.

And we are fortunate to have a very deep bench and so Diane Julian, who had been our head of sales, but also she has had a career in sales, has also had a career as an analyst.

Understands all the segments of our business very well is sort of a perfect person for that.

And then we have a very deep bench of sales leaders as well.

And so we're lucky enough to pick one of those folks, Dave Godfrey, who again has tremendous experience, has been a great leader, who could just step in without missing a beat and carry on the strategies that Diane had put in place.

So it's just -- it's part of our accelerating the entire business.

So no change in the strategy in terms of sales execution, etc.?

No, absolutely not.

No, I think the strategy that we had in place is working extremely well and David had worked with Diane in developing those.

So he understands them perfectly well and they will continue exactly as they have been doing.

Got it.

Thanks, Gene.

Laura Lederman, William Blair.

Good morning and thank you for taking my questions and the good quarter.

Can you talk a little bit about the sales headcount, where are you getting people, what the churn is looking like?

You mentioned that you have over 1000 people, up 8% and you are on track for the full year (inaudible) 15%.

Are you finding the right people and also keeping the ones that you have?

And then I will follow up with another one.

Thank you.

Laura, it's Gene.

Great question, so we are hiring our salespeople typically come from selling in the technology industry.

The majority of our salespeople are experienced salespeople.

We have a very small group that we might take out of college for small companies.

But other than that, they are highly experienced sales that have been selling technology and know it very well.

Our turnover has continued to be very low by any sales force standard, and in fact the productivity of the salespeople that we've hired in the last two years is as high -- the productivity of the people that we have hired in the few years is as high people that have much more experience.

So we've actually refined our recruiting and our training to where we get tremendous performance out of new people, which is --obviously as we want to grow the sales force, it's tremendously helpful when you got great productivity out of your new guys.

Great, switching gears a little bit, if you look at acquisitions you made, two really solid ones with AMR and Burton, and I was wondering what the acquisition pipeline looks like.

Are there still a lot of businesses?

Are we likely to see less as you integrate Burton and AMR over the next year?

So acquisitions are a core part of our growth strategy and we see it in the future continuing to be a core part of our growth strategy.

And if the right property at the right price comes along, we feel like we could handle them today just as we did two with AMR and Burton at the end of last year and handled their integrations seamlessly in the first quarter.

So the fact that we have got -- so first, we think acquisitions continue to be a important part of our strategy.

And secondly, it's about the right property at the right price as opposed to we will slow down because of AMR and Burton.

Okay, got it.

Looking at the improvement in the business and in consulting and events, would you look at adding new events and adding high counter consulting and consulting?

What is your kind of thought on managing growth or adding growth in those businesses?

So let me just take them each one by one.

So in the events business, as I mentioned, we have seen substantial acceleration with good performance in the first quarter and we are seeing all of our forward-looking metrics look like we're seeing really good acceleration there.

We -- as you know, we are expecting something like [50]% margins in that business over the long term, so it's got great margins.

And so we certainly are looking to over the long term grow that business at an accelerating rate, so both organically as well as from new events.

So when thinking events, we see it as a big growth business.

And if I look at consulting, I think there's plenty of opportunities to grow there.

And today we are constrained by headcount and so I think we would expect to, as we see demand building, we will match that demand by building our headcount out in consulting as well.

Okay, final question, which is a quick question.

That's a hard one to say.

Can you talk about the internal growth rate in CV for core Gartner, taking out AMR and Burton?

I know you gave us the sequential numbers, but if you could give us a sense of sort of the organic growth rate of just Gartner CV year-over-year.

Thanks, Laura.

If you look at all the different components, as I talked about throughout my talk track, if you take out -- just look at -- void foreign exchange, take out all the acquisition activity, you get about 3% year-over-year organic growth in contract value.

So I think what we said is it was 14% as reported, 10% FX neutral, and if you strip out all the acquisition activity, it is about 3% organic growth on an FX neutral basis, yes.

Lewis Dave, JPMorgan.

Good morning.

I was wondering if I could just touch on the AMR and Burton acquisitions and I guess specifically, when do you think your sales force will be fully ramped up to sell AMR and Burton?

You mentioned that you are selling the products right now, but I know that you were going to train in the first quarter.

And I was just curious when are they going to be firing on all cylinders?

It's Gene.

So basically -- and I think it differs a little bit with the two acquisitions.

So as you know, Burton, the key person buying Burton is an IT leader who we sell to anyway.

They are already our clients and so I think our sales force uptake will be very quick on Burton as we go through the year.

We've actually launched the new products.

We have -- started making sure we've trained our entire sales force on them, and they are now I think starting to go out and take it to their clients.

So I would expect in the next six months or so we'd see great traction with Burton broadly across our sales force.

AMR is a little different because it is -- part of the clients are different buying center, the supply-chain management organization, and in addition to it not every company, it's not relevant for every company.

It's relevant for probably 40% of the companies in the world economy, but not every single one.

So because it's a little different buying center and in many cases and it's not -- it's a little different product because its focus is in supply chain management, still syndicated research.

We would expect that to be a little bit slower but still at a pretty good uptake.

So I think over the course of this year, we would expect the salespeople for whom AMR is very relevant to make good progress in selling.

In fact in Q1, we trained the people we thought were the highest -- had the richest territories for AMR and we actually saw a great uptake not only with those but also even when we didn't, even among the people we didn't train, we saw great uptake in sales of their products.

And so it sort of has exceeded our expectations in that sense in terms of the broadness by which the sales force has adopted it.

But I think just because of the nature of it, it will be a little bit more slower than it was with Burton.

But both are going to be just home runs I think.

That's great.

Thanks, Gene.

So I guess it is fair to say that you had mentioned that a third of the salespeople were in territories where supply-chain customers were focused.

And I think that you also said that having the CIO relationship would be very advantageous.

It's fair to say that that's playing out to some degree already?

That is absolutely the plan.

One of the things that AMR had found -- you know, AMR started in IT research and then they migrated over to some selling supply-chain management.

They had tried having people just doing dedicated supply-chain management or having the IT salespeople also sell supply-chain management.

They found the latter was better meaning having the person that calls on IT also call supply-chain management was more effective because you get referrals.

We actually in the first quarter found that to be true as well.

As I said, the uptake even among people we didn't train was very good among the sales force.

And so I think we're finding the same thing is true, that our IT sales force is very -- has been very capable in selling the AMR products.

That's great.

Thanks, Gene.

And then can you just comment on how much of both of those acquisitions are Web only sales right now versus Web and analyst access?

We don't actually have that broken out right now in terms of how much is what we call reference or adviser.

Okay, and I guess the last question, which is the events in Europe, is that -- it sounds like obviously -- it sounds like business trends are moving very positively right now.

How much exposure is there to governments in Europe?

I know government is at least a modest customer of yours and it's very diversified I believe.

But is that any concern to you guys right now or is it very modest?

So as I mentioned earlier, we are seeing -- if you look at events, the same as other segments of the business, the improvement in Europe is comparable to the improvement that we are seeing elsewhere and in fact some of our events are actually doing better in Europe.

All of the events actually as I said are doing very well.

If you look at the leading indicators, some of them are even doing the best in Europe as compared to other parts of the world.

So we are not seeing -- I know there is a lot of publicity about what's going in Europe in terms of our actual -- if I look at our event demand, we are not seeing that same kind of impact.

Thanks, guys.

Dan Leben, Robert W.

Baird.

Good morning.

This is [Nick Dobray] for Dan Leben.

A couple of quick questions for you.

First, you give us a quick update on the sales force.

I was wondering for the remainder of growth for this year, how are you thinking about spreading the hires amongst quarters first half versus second half?

Do you have a plan there?

Yes, it's Gene.

We are pretty much planning to spread them evenly through the rest of the year.

We had -- in the first quarter we didn't do a lot of aggressive hiring because we had AMR and Burton that we were doing the integration with and obviously got a bunch of terrific salespeople added to our sales force then.

For the rest of year, we sort of see hiring them kind evenly through the year.

Okay, and as far as the AMR and Burton impact on consulting backlog, you said that there was some.

Can you quantify that a little bit?

It's pretty small, pretty immaterial.

They both had very small consulting business.

Think about handfuls of people, so their backlogs were pretty small.

So it was a -- it contributed a little bit, but not anything in any material way.

I see, so when we are looking at backlog, obviously first quarter has a bit of a seasonal downtick typically and it's been smaller this year than what we've seen in the past.

So how should we think about this business and revenue building up seasonally here compared to what we have seen historically?

I think you're right.

Historically you see Q1 tend to be lighter both from a backlog perspective.

We tend to have a pretty big backlog builds in the fourth quarter.

It tends to get off a little bit in the early part of the year and then starts to build again.

So our expectation I think for the businesses that you will see accelerating performance through the remainder of the year, that you'll see backlog build and ultimately start to see the headcount start to grow again as we talked about earlier.

The headcount is still down from where it was.

I think it's down 6% from where it was in Q1 of '09 and I think you'll start to see that build through the remainder of the year.

I think our phasing is exactly what we discussed about at investor day.

So if you go back and look, which I don't have handy right in front of me, we don't see any changes really to that.

I think we're trending exactly where we would have expected based on Q1 performance to trend to that kind of phasing.

Okay, thank you.

(Operator Instructions) Brian Murphy, Sidoti & Company.

Thanks for taking my questions.

Chris, on AMR and Burton on the cost synergy side, can you just give us a sense for where you guys are there?

G&A already down as a percentage of sales, does that continue to come down over the balance of the year?

Brian, yes, just as a reminder that those two acquisitions, the majority of the business case was not really based on cost synergy.

Certainly as we do with any acquisition, we are able to eliminate duplicate overhead certainly in the finance, HR, legal, etc., those kind of functions.

For these two companies, those were relatively small.

If you look at both of the acquisitions, we planned on retaining well over 95% of all the associates of both, probably even a little higher than that.

So the cost takeouts of both are pretty small.

We've executed those very quickly.

I would expect that as we get through the end of April and into May and June that all of the cost takeouts will have been executed and implemented, so that will be reflected.

So you're not going to see a continued kind of cost reduction through the remainder of the year as a result of that.

You will see a little bit more in Q2 that some of those resources [leave], but all in all, it's relatively small.

Okay, great, and how many client organizations did you pick up from AMR/Burton?

Pretty small amount, and the reason it's a small amount is that both of -- for both companies, Gartner was working with most of the companies that they were working with, so for example, Burton, there was a high degree of company and organization overlap, not end-user overlap.

But the same companies were buying both products and services.

And similarly with AMR, although not quite to the same degree.

So we added a little bit.

I don't have the same number but it was a pretty small change in our orgs as a result of the two acquisitions.

Okay, I know you guys are targeting sort of contract value growth in the double-digit range.

How do we think about the growth in client organizations?

Is it sort of mid-single digits?

The way -- you know, if you think about the mix of growth in contract value, it's coming fairly balanced, so we are getting a good amount of our contract value growth out of selling to existing organizations, uplifts of existing contracts, and then of course, we're getting new enterprises.

As Gene talked about, we got over 500 new enterprises this quarter.

So we can certainly get double-digit contract value growth.

That doesn't mean we're going to get double-digit growth in orgs.

In fact, I think single-digit is probably a reasonable expectation given the mix and balance of how we bring new business in.

That's good.

Thanks very much.

With no further questions in queue, I would o turn the call back over to Mr.

Gene Hall for closing remarks.

Well, I would like to think everyone for joining us today and we look forward to updating you again next quarter.

This concludes the presentation.

You may now disconnect.

Have a good day.