高德納諮詢公司 (IT) 2010 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Gartner's earnings conference call for the fourth quarter and full-year 2010.

A replay of this call will be available through March 8, 2011.

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 78467189.

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

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

Before we begin, I would like to remind everyone of four things.

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

Second, if you did not receive a copy of the Company's press release it is available on Gartner's 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 are 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, and in its most recent quarterly report on Form 10-Q.

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

Where required, the Company has provided a reconciliation of those measures to the most directly comparable GAAP measures in the tables and the press release.

I'll now turn the conference over to Gene Hall, Gartner's Chief Executive Officer.

Please go ahead,

Good morning, everyone, and thanks for joining us.

Our fourth quarter results for 2010 continued the trend of accelerated growth that we've now delivered since early 2009 for the successful and consistent execution of our strategy for growth.

As some of you know, the fundamentals of our strategy are to create extraordinary research insight, to build strong sales capability, to deliver high-value differentiated offerings, to provide world-class service, and to continuously improve our operational effectiveness.

The success of the strategy was evident in our financial results prior to the downturn from 2005 to 2008.

In 2009 we responded to the global economic recession with a number of actions to maximize operational effectiveness and invest in our business.

These enabled us to emerge as an even stronger company and achieve the results we are reporting today.

We finished what was a challenging and uncertain environment in 2010 strong.

In the fourth quarter 2010, Research contract value ended at the highest level ever recorded in Gartner's history.

Up 25% year-over-year to over $978 million.

Our Events business significantly outperformed expectations for the full year, driven by our symposium events which set a new global record for overall attendance.

Consulting growth finished in line with our expectations for the full year.

Deposit momentum in our growth has been driven primarily by the success of our initiatives to improve operational performance.

Following our proven strategy, we delivered double digit contract value, revenue, and earnings growth in 2010 and intend to do the same in 2011 and over the long term.

I'll begin by discussing the highlights of our fourth-quarter results and current business trends.

I'll then turn to our exciting prospects for strong growth in 2011 and over the long term.

And then turn the call over to Chris who will discuss our fourth quarter performance and financial outlook in more detail.

Our business trends have now shown sequential improvement for seven consecutive quarters.

In fact, many of our key business metrics are back to pre-recession levels, and some have reached new highs.

Let me highlight some key points.

In Research, our strong contract value growth was driven by both record fourth quarter new business and significantly improved retention.

New business was up 23% versus fourth quarter last year, and was the highest of any fourth quarter in Gartner's history.

Client retention improved five percentage points year-over-year to 83%, surpassing its pre-recession high.

And wallet retention improved 11 percentage points year-over-year to 98%.

Our strong new business and retention, coupled with the acquisitions of AMR and Burton, enabled us to grow contract value by 25% year-over-year and 8% sequentially to a record level of $978 million.

Importantly, we generated double digit organic contract value growth for the second consecutive quarter since prior to the recession, delivering year-over-year contract value growth of 14%, excluding the acquisitions and the impact of foreign exchange.

This growth reflects our success at continuing to penetrate our vast market opportunity by both adding new clients and by selling incremental subscriptions to existing clients.

In addition to sales of new subscriptions, our contract value growth also continues to benefit from our discipline of increased pricing and no discounting.

Our annual price increase of approximately 3% that we implemented in November 2009 and again in November 2010 has held as expected, reflecting clients recognition of the great value proposition that our research provides.

For the long-term, we continue to expect to increase our list prices by 3% to 6% per year commensurate with enhancements to our products and services, the inflation rate and other factors.

To summarize the Research business, we continue to generate strong and accelerating demand for our services.

We delivered double digit contract value growth for the full year 2010.

And as a result of our deferred revenue business model, this growth will translate into strong organic revenue growth in 2011.

Let me now turn to our Events business, which substantially outperformed our original expectations for 2010.

Growth in this business substantially accelerated beginning in the second quarter this year, and that momentum continued through the fourth quarter.

For events held in the fourth quarter that were also held in 2009, revenue per event increased 32% year-over-year, reflecting solid growth in both attendees and exhibitors.

This strong rebound in our Events business this past year was driven by enhanced customer experience at our events, coupled with continued easing of corporate travel restrictions and increased marketing spend by technology providers.

This strong foundation will translate into continued growth in 2011.

Finally, our Consulting business continued to form in line with our expectations for the full year, with strong year-over-year improvement in our key business metrics.

Backlog at December 31 was up 7% versus the third quarter and increased 11% year-over-year driven by improved demand for our unique consulting services worldwide.

Revenue per billable head count increased 4% year-over-year, reflecting our effective management and consulting head count to maximize profitability.

We have successfully met our growth targets for this business for the full year 2010.

Turning to profits, our double digit revenue growth, coupled with the operating leverage of our businesses and our initiatives to improve operational effectiveness, enabled us to deliver even stronger earnings and cash flow this past year.

We met our increased outlook for full-year 2010 cash flow and exceeded the low end of our outlook for earnings.

As Chris will discuss in more detail, full year 2010 generated income per share excluding acquisition adjustments of $1.10 per share, at the upper end of our guidance.

And free cash flow of $192 million, also above guidance.

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

In 2010, we deployed almost $100 million to repurchase more than 4% of our shares outstanding, while at the same time investing to expand our research and sales capabilities and improve our products.

Given our strong cash flow and balance sheet, we're well positioned to continue investing in our businesses and returning cash to shareholders in 2011 and over the long term.

So our results for the full year clearly demonstrate that Gartner has returned to its long term trend of double digit revenue and earnings growth.

All three of our businesses met our growth targets for the year.

The actions we initiated to respond to the recession in late 2008 and 2009 have made us a stronger, more efficient company with a robust return to growth in 2010, and the ability to deliver higher operating margins.

As you've heard me say many times before, IT is and always will be a complex and continuously evolving industry, and IT professionals need expert assistance insight to help them make the critical business decisions that they face virtually every day.

Gartner is the best, the most cost effective resource that they can turn to for that help.

And can often make the difference between success and failure in any economic environment.

Our strong contract value growth and high retention rates in 2010 are a testament to this fact.

At the same time, we benefit from having a vast untapped market opportunity for our services which we estimate at over $33 billion for Research alone.

There are hundreds of thousands of IT and supply chain practitioners who could potentially be Gartner clients, but have never been educated on the value we can provide.

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

In fact, I have never been more confident in or excited about our prospects for continued accelerated growth as I am today.

Gartner is the strongest company it's ever been.

The Gartner brand is in a class by itself.

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

And we have a great business model.

We delivered double digit growth in 2010 and we're poised for even greater success in 2011 and beyond.

So to summarize, there are three key points I would like you to take away from today's call.

First, our business performance continued to improve and exceed our expectations throughout 2010, proving that our business strategy is working.

The selling environment continues to strengthen and we're solidly back to delivering double digit organic contract value growth.

With a continued focus on our proven strategy in 2011, we will continue our positive momentum for the coming year and beyond.

Second, we will continue to generate free cash flow substantially in excess of our income over the long term.

Our priorities for deployment of cash continue to be both to invest in our businesses and to return capital to our shareholders through our share repurchase program.

And third, we're well positioned to accelerate the growth of our Research business and achieve 15% to 20% annual revenue growth in that segment over the long term.

As well as growth in our Events and Consulting business, consistent with our long-term targets.

We benefit from the enviable position of having the leaving brand in IT and supply chain research, a strong value proposition for our clients, a vast untapped market opportunity, and a great business model.

Based on our fourth quarter results and current business trends, the positive momentum that enabled us to generate double digit revenue growth and expanding margins from 2004 to 2008 has fully returned.

We are in a great position to continue generating double digit revenue growth and expanding margins in 2011 and over the long term.

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

Thanks, Gene, and good morning, everyone.

We finished 2010 with a very strong performance in the quarter.

All three of our business segments delivered double digit revenue growth over the fourth quarter of 2009.

Our strong top line performance, coupled with the positive operating leverage of our businesses, and our ongoing initiatives to optimize costs, drove strong operating margins and cash flow.

The incremental growth contribution margin on the increased revenue was significant across all three businesses.

And as a result, for the full year, two-thirds of the Company's incremental revenue flowed through to the gross contribution margin.

We also saw improvement in our key business metrics, continuing the positive trend that began in the third quarter of 2009.

Contract value growth accelerated, retention rates continued to improve, and both Consulting backlog and Events attendees increased by double digits year-over-year.

Demand for our services was robust across all segments in the fourth quarter.

As a result, we delivered significant growth in earnings, both in Q4 and for the full year.

In the fourth quarter, normalized EBITDA increased 25% year-over-year, diluted income per share excluding acquisition adjustments was up 41%, and our GAAP diluted income per share was up 42%.

For the full year, we delivered normalized EBITDA of $230.4 million, up 20% from 2009 .

Diluted income per share excluding acquisition adjustments was $1.10, up 26% year-over-year.

And GAAP diluted income per share was $0.96, up from $0.85 last year.

With the strong finish to 2010, we are well-positioned for continued growth in 2011.

Let me now turn to a review of our business segment results for the fourth quarter and full year.

In Research, revenue grew 19% for the fourth quarter and 14% for the full year, excluding the impact of foreign exchange.

Approximately 6 points of the Q4 and full-year growth was attributable to AMR and Burton.

We delivered gross contribution margins of 65% for both the fourth quarter and full year, up two percentage points year-over-year for the quarter, and flat to 2009 year-over-year for the full year.

These results were accomplished despite the incremental operating costs from the AMR and Burton businesses, which primarily include of the addition of their 80 analysts.

As Gene discussed, the business metrics for future revenue growth in our Research business continued to improve substantially during the fourth quarter.

We grew contract value year-over-year by 25%, as reported, or 20% excluding the impact of foreign exchange, to a record level of $978 million.

Excluding AMR and Burton, contract value grew 14% year-over-year FX neutral.

As was the case throughout 2010, our growth in contract value in Q4 was extremely broad-based with all geographies, client sizes, and industry segments, delivering strong FX-neutral growth year-over-year.

This growth was driven by record fourth quarter new business, continued penetration of new client enterprises, and significantly higher client and wallet retention.

New business in Q4 increased 23% year-over-year, and 52% sequentially, and was the highest for any fourth 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.

As you know, a core part of our Research product strategy has been to develop role-based offerings to meet the needs of the various segments of the markets that we served .

As of December 31, 2010 over 75% of our contract value was in our role-based products which include Gartner for IT Leaders, Gartner for Business Leaders, Gartner for Supply Chain Leaders, and our various executive programs.

Within these role-based products, we offer a number of pricing and packaging alternatives for our clients.

This continually provides us with the opportunity to upgrade our existing clients to higher priced, higher value role-based products.

AMR and Burton significantly contributed to contract value growth, again during the fourth quarter.

Their combined contract value on December 31 was up 23% from the start of the year.

These businesses are now fully integrated and contributed to 2010 earnings slightly above the high end of our original target.

They're proving to be outstanding acquisitions, and we expect their growth to substantially accelerate over time.

From a client perspective, the improving trend in our retention rates continued in the fourth quarter.

Client retention's at an all-time high of 83%, up five percentage points year-over-year.

Wallet retention improved 11 percentage points year-over-year to 98%, reflecting the clients we retain continue to increase their spend on Gartner Research.

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

During the fourth quarter, we added 701 enterprises as new clients, up 10% year-over-year.

With our success at penetrating these enterprises, combined with a higher retention of our existing clients, we ended the quarter with 11,601 client organizations, up 11% versus December 31 last year.

In summary, our Research segment continued to outperform our expectations for 2010 and has solidly returned the accelerating double digit organic growth that we delivered prior to the recession.

We grew our contract value by almost $123 million organically during the course of 2010.

We're seeing strong demand from clients, expect continued acceleration in revenue and contract growth over time, and remain confident in our ability to deliver 15% to 20% annual revenue growth in this business over the long term.

Moving now on to Events.

The strong performance in our Events business continued in the fourth quarter.

Total attendees increased 16% year-over-year to almost 18,200 at the 12 events held during the fourth quarter, as compared to the 13 events held last year.

Of the 12 events held in the fourth quarter, 10 were held in the fourth quarter last year, one was moved in from another quarter, and one was a new launch.

For the 11 events that were also held at any time last year, revenue per event increased 32% year-over-year, driven by strong growth in both attendees per event and exhibitors per event.

When we look at the full year revenue for our events business increased 21% year-over-year FX neutral at the 56 events held in 2010 versus the 54 events held in 2009.

Attendees were up 22% and exhibitors were up 24% year-over-year.

For the full year 2010, we increased Events growth contribution margin by five percentage points year-over-year to 46%.

Turning now to Consulting.

This business performed in line with our expectations for the full year 2010.

For the fourth quarter, revenue increased 11% FX neutral, and for the full year revenue was up 6% FX neutral.

Importantly, we ended the quarter with a backlog of $100.8 million, up 11% year-over-year and up 7% versus the third quarter.

Backlog is our key leading indicator of future growth for Consulting and its strength reflects the continued demand for our unique consulting services worldwide.

As a result, we expect continued year-over-year growth in 2011 per our full year revenue guidance for this segment.

On the cost side we continued to maximize consultant productivity.

Year-to-date through December 31 we achieved utilization of 68% and annual revenue per billable head count of $424,000, up 4% year-over-year.

Our solid revenue growth, coupled with increased productivity, delivered a 40% growth contribution margin for the full year, up one percentage point year-over-year and in line with our long term target.

Moving down through the income statement, the increase in SG&A for the fourth quarter and full year related primarily to higher sales and marketing expense with the growth in our sales force and the SG&A attributable to AMR and Burton.

Importantly, we decreased G&A as a percentage of revenue by approximately 1.3 percentage points for the full year, which allowed us to hold SG&A as a percent of revenue flat year-over-year.

The reduction in G&A as a percent of revenue was due to tight controls on G&A expenses across the entire Company.

During 2010 we increased the number of quota-bearing sales associates by 11% year-over-year.

This included the number-- in this number are the 60 experienced sales associates that joined us through the AMR and Burton acquisitions.

We continue to invest in our sales force and plan to grow the sales force by approximately 15% to 20% in 2011.

As previously disclosed, interest expense for the quarter included the impact of non-cash charges incurred with the refinancing of our previous credit facility including unamortized deferred financing costs and interest rate hedges.

We ended this year with an effective tax rate of 28.2% with the benefit of some nonrecurring items.

Now to cash.

During the fourth quarter, our cash flow exceeded our expectations.

We generated cash from operating activity of $79.1 million, up 79% year-over-year, including the impact of $1.2 million in cash charges related to the AMR and Burton acquisitions.

And we deployed $9.5 million on capital expenditures.

For the full year we delivered $205.5 million in cash from operating activities and spent $21.7 million on capital expenditures.

We continue to generate free cash flow substantially greater than our net income due primarily to the positive working capital characteristics of our Research business.

During 2010 we deployed our cash principally to return capital to our shareholders through our share repurchase program.

We repurchased 3.9 million shares of our common stock for a total cost of $99.8 million.

We also took advantage of favorable conditions in the credit market and refinanced our debt in the fourth quarter.

The new credit arrangement provides for a five-year $200 million term loan and a $400 million revolving credit facility, giving us greater borrowing capacity and flexibility.

At the same time, we reduced our net debt by $112.5 million, ending the fourth quarter with a strong balance sheet and cash position, and with net debt of only $100 million.

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

And we also believe that repurchasing our stock remains a compelling use of our capital.

We have over $481 million remaining on our existing share repurchase authorization.

The timing and amounts of our share repurchases will vary from quarter to quarter as we assess strategic alternatives for deploying point cash.

We currently have ample cash flow and liquidity to executives initiatives that will drive shareholder value over the long term.

Now let me turn to our business outlook for 2011.

Based on the steadily improving business trends we experienced in 2010, and the expectation of a reasonable economic environment in 2011, we believe our businesses are well positioned for growth.

For the full year 2011 we expect total revenues will grow by 11% to 15% to approximately $1.43 billion to $1.48 billion.

Projected revenues by segment can be found in our press release, but I would note that we expect growth in each of our three segments during 2011, with Research revenue expected to be up 14% to 17%, Consulting revenue up 3% to 9%, and Events revenue up 7% to 15%.

In terms of foreign exchange impact on our revenues, our guidance is based on the spot rates in early January.

We have made no attempt in our guidance to anticipate any strengthening or weakening of the US dollar from the actual foreign exchange rates in early January.Importantly, we still believe that movements in FX rates will have minimal impact on earnings given our mix of revenue and expenses around the world.

Moving down the income statement, we expect normalized EBITDA for the full year 2011 to be between $270 million and $290 million, an increase of 17 % to 26% over 2010.

And we expect our normalized EBITDA margin to increase at least 100 basis points.

In 2011 we expect the cost associated with stock-based compensation expense to be approximately $34 million to $35 million.

And total amortization and depreciation to be approximately $32.5 million to $33.5 million inclusive of the amortization of the acquisition intangible.The intangible amortization associated with acquisitions of AMR and Burton will equate to approximately $0.04 per share for 2011.

And we expect interest expense of approximately $11 million to $13 million, and other expense of $2 million to $3 million.

We are projecting an annual effective tax rate of between 31% and 32%.

And average fully diluted shares outstanding of between 100 million and 101 million shares for the year.

Note that we have seen from time to time our tax rate may vary from quarter to quarter due to discrete items.

Our GAAP income per share for 2011 is expected to be between $1.29 and $1.41 per share.

We also expect to grow our cash flow as we drive growth in our Research business.

In 2011 we expect cash from operations of $250 million to $270 million, capital expenditures of $39 million to $41 million, and free cash flow of $211 million to $229 million.

Thus, we expect to grow our free cash flow by 10% to 19% in 2011 and generate free cash flow per share of $2.11 to $2.27, substantially above our income per share.

I'd like to note that cash from operations includes $15 million to be received as a tenant improvement allowance in connection with the previously disclosed lease arrangement on our Stamford headquarters.

And the $15 million in these related costs of these improvements are reflected in our capital expenditures and will be reimbursed by the landlord.

These amounts are not expected to have any impact on free cash flow during the life of the renovation project which ends in early 2012, and are not expected to recur.

While our policy is to provide annual but not quarterly guidance, I'd like to provide some additional information to allow for an understanding of the seasonality and other factors that will impact our revenue and earnings on a quarterly basis.

Full-year research revenue will be fairly evenly distributed across each quarter of 2011, with approximately 24% of the full-year revenue in Q1.

Consulting revenue will be lowest in Q1 with 23% of the full-year revenue, and highest in Q4 with 28%.

For Events, approximately 50% of the full-year revenue will be earned in Q4 because our fall symposium series is held in that quarter.

We plan to hold between 60 and 62 events in 2011 as compared to 56 in 2010.

The phasing of the Events calendar will be similar to 2010 with Q1 representing approximately 10% of the full-year revenue in this segment.

We preliminarily expect to earn approximately 20% of our income per share in each of the first three quarters of 2011.

And Q4 is expected to be 40% of the annual EPS, primarily due to the timing of our events.

Finally, I'd like to spend a moment on the impact of foreign exchange changes on 2011.

As we have communicated to you in the past, research contract value is reported on an FX neutral basis throughout each fiscal year.

We do this so you can understand the true organic growth in our Research segment.

In January of each year, we restate the opening contract value at current foreign exchange rates.

As a result of the strengthening of the US dollar in 2010, contract value at January 1, 2011 is approximately $2 million lower than the $978 million reported on December 31.

This is the baseline you should use for comparison purposes when judging contract value growth in 2011.

So to summarize, we delivered great results both for the fourth quarter and full year.

Demand for our services is strong and accelerating, and our acquisitions of Burton and AMR are proving highly successful.

As a result, our key business metrics continued to strengthen substantially and we generated double digit revenue growth.

Our initiatives to improve operational effectiveness, coupled with the positive operating leverage inherent in our businesses, delivered stronger margin expansion than we originally anticipated.

We generated substantial cash flow and continue actively exploring strategic alternatives for deploying it.

We will continue to invest in our business and return capital to shareholders through our share repurchase program, and we expect to repurchase shares throughout 2011.

Finally, with double digit growth and contract value in 2010, we established 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.

With that we will open the call for your

Thank you.

(Operator Instructions) Your first question comes from the line of Peter Appert with Piper Jaffray, please proceed.

Thanks.

Chris, the margin performance I thought was particularly impressive in the fourth quarter, and actually all year 2010.

So the two questions are -- and I think you might have addressed one of these in your discussion -- one is how you are feeling about the sustainability of the incremental margins you saw in 2010.

And then, two, longer-term, how are you feeling about the progression in margins over the next couple of years, and specifically the prospect of getting margins back closer to the levels you were doing before the tech downturn in the early 2000 period?

Thanks.

Thanks, Peter.

A couple of things.

First, in terms of sustainability, if you look at our guidance, you will see that in 2011 the guidance we have given would suggest at least 100 basis point improvement in margins.

We are moving that margin on the EBITDA side, normalized EBITDA, close to that 20% number that we had started to target a few years ago.

So, in terms of the rest of your question, in terms of the long-term where we think we can take it, as we've said many times our goal in the short to intermediate term was to get it back to 20%.

We still thought there was room for there to continue moving it into the lower 20s.

And then we would, as we get it into that range, take a step back and think about the combination of ongoing investments in the business so that we can have a sustainable long-term revenue growth for the Company, as well as letting what appropriate margins should flow through.

I think, as we've said many times, the margins that we had well before the tech downturn in the early 2000s, the Company was a little bit of a different mix in terms of the size of the businesses.

Research even then was much larger as a percent than the other two.

And we didn't think there was the right level of investment in the business.

To say we'll get all the way back to the upper 20s in the short-term, but we certainly believe we can get back into the 20s as we move ahead here.

Certainly a lot of sustainability for the foreseeable future.

Great.

Thanks, Chris.

On the sales force expansion, I think you mentioned you're up 11% for the year, and I'm thinking that might be slightly below what you had been thinking about.

So, any issues in terms of hiring?

And how should the sales force expansion play out through 2011?

Peter, it is Gene.

It was a little bit below what we had mentioned earlier, as you say.

It wasn't due to problems hiring people but it was just an operational decision we made.

We saw good productivity growth and think that's a great way to grow, as well.

Going forward, we've said we expect to grow the sales force in the 15% to 20% range, and that's what we expect to continue on a go-forward basis.

And through 2011, even through the year in terms of the pace of increase?

Yes we are targeting a relatively even pace through the year.

There may be a little seasonality but more or less even through the year.

Gene, lastly, on the acquisition opportunities, it feels like a lot of the consolidation has already taken place in the IT research business.

So where are the opportunities for you guys?

Peter, we track a sizable number of companies that we are interested in.

We think there is still a lot of acquisition opportunities that would fit very well strategically.

Obviously, I don't want to comment about any particular companies or even sub sectors or whatever.

I wouldn't say your characterization, we don't share your characterization that the opportunities aren't there.

Actually, there are a lot of opportunities and in all different size ranges, et cetera.

Great, thank you.

Your next question comes from the line of Dave Lewis with JPMorgan.

Please proceed.

Hi guys, good morning.

Gene, I was wondering if you could talk about the selling environment right now, specific to sign-off and the length of the sales cycle, what you are hearing from customers right now?

Great question.

So basically, what we're seeing is that institutions in every geography and in every industry are looking at IT as being a source of improvement.

Whether they are doing well, so it's new products, or whether they are doing poorly and they want to use it cut costs.

There is a global consensus, it seems, around industry everywhere that IT is one of the key, if not the key, lever to improve their business.

And, by the way, we agree with that, with that point.

And because of that, we are seeing a lot of, I think, very good demand, shorter selling cycles.

And sign-offs are not an issue because from the top down people see IT as essential for everything they do.

So, I think it's a great selling environment.

Great.

And then can you give us any update on the number of analysts that you have, that you've hired in 2010, and what the plans are for 2011?

Hi Dave, it's Chris.

We have approximately 775 analysts across the organization.

As we talked about, I think, in the beginning of the year, with the acquisitions of AMR and Burton, we added probably 80 analysts roughly to the analyst base.

And, as we saw their contract value grow, we expected to add additional analysts there.

And they've grown, as I said during my talk, pretty significantly this year, both of those businesses.

So we have been adding analysts.

So, consistent with what we've said in the past, we will add analyst capacity as we see the contract value build.

But the most important part for everybody to keep in mind, as you saw this year, that we will do that within the context of the research business having roughly 70% incremental margins.

So as we move ahead, we believe we can add the appropriate delivery capacity across research and still deliver that 70% incremental margin there.

Thanks, Chris.

And then just one quick follow-up to that.

Burton and AMR, the sales force is fully trained at this point, but can you give us any sense for the percentage of salespeople that are selling them?

I believe it's ramped up throughout 2010.

Yes, it's a great question.

You are right, the AMR and Burton are fully integrated into Gartner, the sales forces are trained.When you think about the two businesses, there's a smaller set of our sales force that has the opportunity to sell into supply chain because not every business is a supply chain business.

So, we have targeted, we think, the appropriate salespeople at Gartner, and they are all often able to sell that.

On the Burton side, the vast majority of the sales force is able to sell that.Keep in mind, both those businesses, when we acquired them, are primarily US-based.So, over time we will look to expand those businesses outside the US.

Initially, primarily the focus of the sales force is our North American sales force that are selling those, although there is some sales, obviously, going on in Europe and other parts of the world.

Thanks Chris.

Your next question comes from the line of Bill Sutherland with Boenning & Scattergood.

Please proceed.

Thanks, good morning, guys.

Just another question on Burton and AMR, Chris or Gene.

As you look at their momentum going into 2011, do you think the growth there was pretty much in line with what you're looking for for the rest of the business?

Great question Bill, it's Gene.

Those businesses we expect to grow considerably faster than the Research businesses both.

We started with a great product and a relatively small base.

And so when you go from 20, 30, 40 salespeople to all of a sudden you've got hundreds of salespeople selling the products, there's a huge growth opportunity on what was, again, a relatively small base in our scale.So, we are expecting very, very good growth rates in those businesses.

Great.

In Consulting, is the plan there, I noticed that utilization dropped back just very slightly on a year-over-year basis with a head count increase.

Do you plan to work utilization up in 2011 or keep it steady?

So on utilization, we think our utilization is in a good range but we can do better.

So, we'll be aiming to work it up bit by bit over time.

And we expect, also, to add selected headcount as we see demand in 2011.

Okay.

And, Chris, on the 2011 detail guidance, that net interest number again, did that include any meaningful amount of the deferred or hedging costs?

The expectation for the year is $11 million to $13 million.

As I said, in 2010 we did have some non-cash charges incurred for deferred financing costs of our previous facility and the hedges per the accounting rules that we had in place.

So, yes, we do have some deferred financing costs that are in that $11 million to $13 million number.

As well as we did, as we've commented on, we did put in place an interest rate hedge in the current environment to lock the rate, at least $200 million of our borrowings, at a very low rate.

So the answer is yes on both of those.

Great, thanks Chris.

Last, the G&A cost controls are impressive.

Do you expect the same dynamic in 2011 in the margin as far as the G&A line coming down to offset any further increase in sales and marketing?

Bill, it's Gene.

Basically we have structured our business so we think we get a lot of leverage out of our G&A functions.

That's what we've done over the last several years and we expect to see that on a go forward basis.

Our expectation and what's operational under the covers is that G&A will go slower than the rest of the consumer business, lower than the rest of the business.

And if we consider that line in total SG&A, then it stays relatively flat or can it improve?

It will stay relatively flat.

Over time, as we've talked about improving sales productivity, that will continue hopefully to come down over time.

But you should expect to stay relatively flat even as we expand the sales force.

Great, thank you both.

(Operator Instructions) Your next question comes from the line of Dan Leben with Robert W.

Baird.

Please proceed.

Good morning, guys.

This is [Mick Dobrick] for Dan Leben.

Thanks for taking my question.

First, on the guidance, can you provide us a little more color as to what the low end versus the high end of guidance would imply as far as the environment for 2011?

Not necessarily environment related.

When I talked about guidance, we essentially expect a reasonably stable economic environment.

If you look at our actual ranges in our guidance, they are actually still relatively tight ranges for our business.

So if you look at Consulting on a $310 million to $330 million, we have a $20 million range there.

And we only have a $10 million range in Events at $130 million to $140 million.

So, when you look at the guidance ranges, it's really just driven by the fact that we don't have perfect insight, obviously, at this point in the year for those businesses, but we have reasonably good visibility which is why we have, I think, reasonably tight ranges.

That's really the big driver of the businesses, where those two come in.

I think on the Research side, with our stable retention rate, with the sales force size we have, the productivity we've seen and the improvements we've seen, we feel pretty confident with where that business will land.

And it's really the other two businesses that there is a little bit of variability which is why we have the ranges we have.

Great.

And one more for me.

On the pricing side, you commented on the 3% to 6% increase in Research.

But I'm wondering what kind of pricing are you seeing in Consulting and Events?

I know in Consulting you don't publish a bill rate or anything like that, but are you seeing traction in those two verticals, as well?

Hi, Mick, it's Gene.

Yes, absolutely.

Our pricing strategy really is the same across the three businesses.

And we see the same kind of traction in each of those businesses.

Sometimes you will see a little variation because there can be a mix difference where, if the mix changes of what we thought in terms of the product line, that can have an impact on the apparent pricing, like the bill rate per person.

But if you look on a like for like basis, it's the exact same pricing strategy.

I see, thank you.

At this time there are no further questions.

I would now like to turn the call back over to Gene Hall for any closing remarks.

I'd like to thank everyone for joining us today.

And I look forward to seeing everybody at our Investor Day on February 16 in Greenwich, Connecticut.

Ladies and gentlemen, that concludes today's conference.

Thank you for your participation.

You may now disconnect.

Have a great day.