高德納諮詢公司 (IT) 2011 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Gartner's earnings conference call for the first quarter 2011.

A replay will be available through June 6, 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 49696614.

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

I will now turn the conference over to Brian Shipman, Gartner's group Vice President of Investor Relations for opening remarks and introductions.

Please go ahead, sir.

Thank you.

Good morning, everyone.

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 a few items.

First, the rebroadcast, reproduction and retransmission of this conference call or 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 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 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.

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

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

Good morning, everyone, and thanks for joining us

Some of you will note the addition of Brian Shipman to the Gartner team, who we are pleased to welcome, with 15 years experience as a sell-side analyst on Wall Street.

Well, our first quarter results for 2011 continued the trend of accelerated growth we've now delivered since early 2009, with 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 this strategy was evident across our businesses and across all geographies as we exit 2010, and this strength has continued through the first quarter of 2011.

In the first quarter of 2011 Research contract value ended at the highest level ever reported in Gartner's history, up 14% year-over-year to over $983 million.

Our Events business performed extremely well in the first quarter, with strong year-over-year increases in attendees and revenue.

Our year-over-year performance in Consulting was primarily driven by normal variances in the timing of business in our contract optimization practice area.

Overall, the positive momentum in our growth has been driven by the success of initiatives to improve sales [through] productivity and drive higher client retention.

Following our proven strategy, we delivered double digit contract value, revenue and earnings growth in the first quarter of 2011 and are confident in our ability to do the same during 2011 and over the long term.

I will begin by discussing the highlights of our first quarter results and current business trends.

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

Research contract value grew to a record level of $983 million, a 14% year-over-year increase driven by both record first quarter new business and strong client and wallet retention.

New business was the highest of any first quarter in Gartner's history.

Q1 client retention improved to 82%, and wallet retention improved 10 percentage points year-over-year to 99%.

I am particularly pleased that over 86% of our contract value growth came from volume versus price.

This volume 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 disciplined increased pricing and no discounting.

Over the long-term we continue to expect to increase our list prices by 3% to 6% per year.

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

We've delivered double digit contract value growth again in the first quarter of 2011 and are on target to meet our revenue goals for full year 2011 with our robust retention rates and strong new business pipeline.

Let me now turn to our Events business.

The strong performance in 2010 continued into the first quarter of 2011.

During the first quarter, we held 11 events with 4,337 attendees, compared to nine events with 3,374 attendees in the first quarter of 2010 with revenue up 15% year-over-year and 13% excluding the impact of foreign exchange.

For the eight events held in the first quarter that were also held in the same quarter last year, revenue per event increased 26% year-over-year due to strong growth in both attendees and exhibitors.

These results, following our 21% increase in revenue in 2010, excluding the impact of foreign exchange, are driven by high value the clients find in our events.

This foundation, along with strong advanced bookings for the remainder of the year, will translate into continued growth throughout 2011.

Finally, our Consulting business declined slightly year-over-year, primarily due to the timing of contract optimization revenue.

Chris will talk more about this later.

Our Consulting pipeline is strong, significantly up year-over-year, and we remain confident this business will perform in line with expectations over the course of the full year.

Between the profits, our double digit revenue growth, coupled with the operating leverage of our businesses and our initiatives to improve operational effectiveness enable us to continue to deliver strong earnings.

As Chris will discuss in more detail, first quarter 2011 normalized EBITDA was $63.9 million, an increase of 21%, and diluted earnings per share were $0.29, compared to $0.19 in the prior year quarter.

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 Q1 we deployed almost $52 million to repurchase 1.4 million 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 generation, we are well positioned to continue investing in our businesses and returning cash to shareholders in 2011 and over the long-term.

Our results for the first quarter 2011 clearly demonstrate Gartner is continuing its long-term trend of double digit revenue and earnings growth.

We are confident that all three of our business will meet our growth targets for the year.

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

Gartner is the best and 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 revenue growth and high retention rates continue to be 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 $45 billion for research alone.

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

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

I have never been more confident in or excited about our prospects for continued accelerated growth than I am today.

Gartner is the strongest company it has 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.

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

First, our strong business performance continued into Q1 2011, proving that our business strategy is working.

The selling environment continues to strengthen, and we are solidly 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 net 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 are 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 businesses consistent went our long-term targets.

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

Based on our first quarter results and current business trends, we are in a great position to continue generating double digit revenue growth and expanding margins throughout 2011 and over the long term.

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

Thanks, Gene.

Good morning, everyone.

The continued successful execution of our strategy resulted in another quarter of double digit year-over-year growth in revenue and earnings in the first quarter of 2011.

Our results once again demonstrate our ability to deliver on the long-term financial objectives we established and communicated at investor day in February.

Let me start today with a review of our business segment results for the first quarter.

In Research, first quarter, revenue was up 16% as reported and 14% excluding the impact of foreign exchange.

The gross margin of this segment increased 2 points year-over-year to 68% due to the operating leverage we generate as revenues in this segment grow.

The strong momentum from 2010 in our Research business continued into the first quarter.

With the success of our initiatives to improve sales capacity and effectiveness, we grew contract value year-over-year by 14%, both as reported and excluding the impact of foreign exchange, to a record level of $983.5 million.

Recall that contract value related to acquisitions of AMR and Burton was included in our reported contract value in Q1, 2010, so this performance is a true reflection of the growth in our business.

In addition, we have now had seven consecutive quarters of sequential contract value growth.

This quarter sequential growth is notable, given that Q1 is typically our seasonally lightest for contract value growth and was driven by strong first quarter new business and a strong increase in wallet retention.

New business was 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 client perspective, our retention rates continue to improve as we retain more of our clients, and the clients we retain increase their spend on Gartner Research.

Client retention increased two percentage points year-over-year to 82%, while wallet retention increased 10 percentage points year-over-year to 99%.

Wallet retention was higher than client retention due to a combination of increased spending by retained clients and the fact that we retain a higher percentage of our largest clients.

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

In addition to our strong client and wallet retention rates, we also continue to add new clients at an impressive rate.

During the first quarter we added 394 enterprises as new clients, and as a result we ended the quarter with 11,574 client organizations, up 7% year-over-year.

In summary, our Research segment continued to perform strongly.

We grew our contract value by $119 million on a year-over-year basis, we are seeing strong demand from clients, expect continued acceleration in revenue and contract value over time, and remain confident in our ability to deliver 15% to 20% annual revenue growth in this business over the long-term.

Turning now to Events.

The strong performance our Events business delivered throughout 2010 continued into the first quarter.

Revenue increased 15% year-over-year on a reported basis and 13% excluding the impact of foreign exchange.

For ongoing events which were held in both years, attendees increased 34%, and revenue increased 26% on a reported basis, or 23% excluding impact of foreign exchange.

We continue to benefit from our efforts to increase client retention by enhancing the client experience and value that our events provide.

The growth in attendees coupled with sales effectiveness initiatives helped drive a 19% increase in exhibitors at our ongoing events.

In the first quarter the Events gross contribution margin declined by two percentage points year-over-year to 37%.

This was driven by two things.

A shift in our events calendar, with one high margin mature event held in Q1 last year moving into Q2 this year, and the fact we had three new highly successful launches in Q1, 2011.

New launches initially tend to have lower margins in the first year than more mature events.

During the first quarter we held 11 events, versus nine events in the first quarter of last year.

We are solidly on track to grow our Events business in 2011 in line with our expectations.

Now, moving on to Consulting.

Revenue in Consulting was down 1% year-over-year as reported, or 3% excluding the impact of foreign exchange.

Our results for the quarter were driven primarily by our contract optimization practice area.

As we have discussed in the past, our contract optimization business can be lumpy, as we only book revenue when a client actually commits to a purchase decision.

While the overall results for Consulting were slightly below our expectations, we remain confident in our full year outlook for this segment.

This confidence stems from many factors, including a solid existing backlog and the fact that our pipeline is strong and up significantly as compared to this time last year.

Billable head count of 482 was 9% higher year-over-year, partly reflecting our continued investment in managing partners.

First quarter utilization was 67%, and revenue per billable head count remained above $400,000 per year, ending the quarter at $425,000.

Backlog, our key leading indicator for future growth for Consulting, declined slightly by 2% year-over-year in the first quarter to $87 million, but continues to represent a healthy four months of backlog.

Moving down the income statement.

During the first quarter our gross contribution margin increased by one percentage point year-over-year to 59%.

This increase was mainly due to the operating leverage inherent in our Research business.

SG&A increased by $11 million year-over-year during the first quarter.

Most of this increase was attributable to the growth in our sales force.

We reduced G&A as a percent of revenue year-over-year by continuing to tightly control G&A costs across the entire Company.

As of March 31, we had just over 1,090 quarter bearing sales associates.

Since December 31, added more 40 sales people and remain on track to achieve our target of growing the sales force by 15% to 20% this year.

Moving to earnings we delivered another strong quarter.

Normalized EBITDA was $64 million, up 21% year-over-year, and diluted income per share $0.29, up 53% year-over-year.

Our normalized EBITDA margin increased to 19.4% from 17.9%, or 150 basis points in the quarter.

This reflects our commitment to improving margins while also growing our business.

And as expected, our Q1 2011 GAAP diluted income per share included $0.02 per share in non-cash amortization costs associated with the AMR and Burton acquisitions.

Turning to cash.

Our cash flow during the first quarter is normally our seasonally lowest quarter for cash generation, given our annual bonus and year end commission payments.

As we expected, our strong performance in 2010 resulted in higher Q1 payments when compared to the same period last year.

You will also see that the additional excess tax benefits from exercises of stock-based compensation awards increased by $15.4 million from Q1, 2010, due to higher exercise activity and a substantially higher stock price.

In accordance with the US GAAP accounting rules, these excess tax benefits are required to be recognized as a use of cash in the operating section and a source of cash in the financing section of the cash flow statement.

For the full year 2011 and over the long term, we continue to expect to generate free cash flow substantially greater than our net income, given our tight and careful cash management coupled with the negative working capital characteristics of our Research business.

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

We repurchased 1.4 million shares at a total cost of $52 million.

We ended the quarter with a strong balance sheet and cash position, with net debt of $146 million.

Our current credit facility runs through December 2015 and at this time provides us with $340 million of remaining borrowing capacity.

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

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

In the absence of the appropriate acquisition opportunity, we believe that repurchasing our stock remains a compelling use of our capital, and we have over $452 million remaining over the exiting Board authorization.

Now let me turn to our business outlook for the remainder of 2011.

As both Gene and I mentioned earlier, our pipeline is strong across all three of our businesses.

Coupled with our strong first quarter results, we have reiterated our 2011 guidance and are well positioned to deliver revenue growth of between 11% and 15%, EPS growth of between 34% and 37%, and free cash flow growth of 10% to 19% this year.

Additional details on our guidance are provided in our press release.

So to summarize, Gartner is off to a strong start for 2011.

In the first quarter we generated double digit growth in Research revenue and contract value, and the strong momentum from 2010 has continued into 2011, as we delivered strong revenue and earnings growth overall.

We are deploying our substantial cash flow, both to invest in the business and to return capital to shareholders through our share repurchase program.

And finally, we are well positioned for double digit revenue, earnings and contract value growth, and increasing returns to our shareholders over the long-term.

With that, we will open the call for your questions.

Operator?

(Operator Instructions).

Your first question comes from the line of Peter Appert of Piper Jaffray.

Thanks.

Gene, I was hoping you might give us a little more color on your expectations for contract value growth on a full year basis?

And I ask this in the context of our target is 15% to 20% long-term growth in Research, and the CV growth is a little bit below that currently.

Peter, basically the -- what I would say is we have a very strong pipeline for all three segments, including Research, and we expect to be in the guidance range that we gave you in terms of the revenues.

[That's kind of] -- I don't know, Chris, do you want to add anything that?

Yes, I would say, Peter, I think two things.

First, Q1 tends to be our lowest growth quarter from an overall new business perspective, so we actually feel really good and feel that Q1 was particularly strong in that regard this year.

And so we certainly continue to expect that as we execute on our sales initiatives, execute on sales capacity expansion, that we continue to move our growth rates in contract value up into that 15% to 20% range over time.

Okay.

And then color in terms of just tone of business currently around sales cycle, average order sizes, et cetera, that you'd share with us.

Yes, Peter, it's Gene.

I'd say basically we see strength across the across the board.

The sales cycles have continued to get shorter over the last couple of years, and the kind of buying mood is very good.

The enthusiasm of our sales force is very positive.

So to me we are seeing very positive results, and it is kind of true everywhere, across geographies and across industries.

Okay, that's great.

And last thing, Chris, the margin performance is very impressive, and I'm wondering if in the context of that you would take this opportunity to speak more optimistically than you have in the past about the margin leverage in the business?

Well, Peter, as we've said, we do believe we have significant leverage still that we can generate in a couple of ways.

First out of the Research segment.

As we have said repeatedly, our expectation over time is that have a 70% incremental margin in that business.

You can see that we are starting to approach the upper 60s now -- I think this quarter 68% in that segment.

So still have some opportunity as we continue to grow there to expand the margin in that segment, and given than that is approaching 70% of the business, it has a big impact on our financials and margins.

And in addition, as I talked about during my portion, we continue to get leverage out of our G&A infrastructure, which continues to come down as a percentage of revenue.

So those two areas will continue to give us opportunity.

As we said, our goal when we first started executing five years ago was to bring the EBITDA margin -- normalized EBITDA margin back to the 20% range, which is pretty close to where we are getting, and our guidance would have us pretty close to that this year.

So what I think we talked about at investor day is that our expectation is that was an intermediate goal that we are getting close to, and that we still believe we can move that farther into the mid 20s over time.

The Company, as you know, years ago had been up in the upper 20s, so we certainly think there is opportunity for us to certainly move into the 20s as we keep executing on the strategy.

Great.

Thanks, Chris.

Thanks, Peter.

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

Hi, guys.

Good morning.

Just a couple of questions.

First is, there's been lot of M&A activity of late, and I was just wondering if you could comment on adjacent opportunities, given that you are one year into Burton and AMR -- that integration -- and what you are seeing, and how active you are right now?

Hi, Dave, it's Gene.

So basically, as we've said, acquisitions continue to be an important part of our growth strategy.

We have a number of companies that we tract on an ongoing basis.

We have people full time focused on that.

And when the opportunities -- the right strategic opportunities -- the right price presents itself, we're certainly interested, willing and able, and -- as you saw with AMR and Burton last year.

Great.

Thanks, Gene.

And then on that note, could you just give us an update?

I know you are not breaking out Burton and AMR results, but anecdotally or qualitatively what the performance was or how the performance is tracking?

So, they're doing great.

AMR and Burton were meaningful contributors to our growth.

If you look at our year-over-year growth, they were meaningful contributors to year-over-year growth, and they're -- acquisitions are working extremely well.

That's great.

Thanks, guys.

Your next question comes from the line of William Bird of Lazard.

Thank you.

You had a nice spike in productivity.

I was wondering, Gene, if you could talk a little bit about some of the efforts around driving improvement in productivity.

So just to clarify, which productivity are you thinking about?

Productivity of which part of the business?

Research.

In terms of contract value added per sales person.

Okay, yes, yes.

So sales productivity in growth.

Absolutely.

That's how we track -- that's how we think about sale productivity.

It's a major focus of ours.

We spend a lot of time and energy on a series of programs; ranging from making sure we hire the right person, so we have got a recruiting team that's really focused on making sure we hire people that are likely to succeed and be very productive; to a whole set of world class training programs and productivity tools [for] our sales team.

And those things, we have a philosophy of continuous innovation and continuous improvement, and so those three areas I mentioned -- who we hire, the productivity tools and the training -- we really have continuous improvement, and they're better every year.

And that is the kind of thing that is driving -- those are the three factors that are driving our increase in sales productivity.

Could you also discuss, I guess, how you expect growth in the sales force to trend this year?

Yes.

So we are expecting to grow sales force in the range of 15% to 20% range this year.

We had good growth in the first quarter, and we expect to be in the range that we talked about there.

And it is an important part of our strategy, and we are on track to achieve that.

Also, could you elaborate a little more on the contract optimization business?

It sounded like timing was an issue.

What do you expect going forward for that business?

So let me just describe a little bit, because some people may not be that familiar with it.

The way this business works is that we help clients negotiate deals when they have large purchases, and then we get paid on the amount of money we saved them in helping through the negotiation.

So it's kind of a contingency fee business.

And so the -- and so we get paid only if they sign a contract.

And they can decide to sign the contract today, a week from today, a month from today, and sometimes when they are negotiating these deals, these large deals, for internal reasons, they will sometimes postpone the final decisions.

And so what you are seeing really is that business over time has been the same way, which is that because it is based on when the deals actually get signed, if our clients decide to delay a purchase for -- as I said, into another quarter -- and they can delay more than one quarter; they can delay it a couple of quarters even -- then our actual payment doesn't occur until they actually sign the deal.

The business in terms of our ability to help clients save money is doing great, and -- but it's just a matter of -- it's relatively lumpy compared to like our Research business.

Thank you.

(Operator Instructions).

Your next question comes from the line of Manav Patnaik of Barclays Capital.

Hi, good morning, guys.

Just trying to break down the SG&A a little bit more.

I guess you historically said that number is -- 60% of that has been the labor cost -- call it sales force.

Can you just, I guess, speak to that?

If that is around the same?

And I think you mentioned that the G&A was down year-over-year?

Is that right?

So can you just confirm that?

Yes, so overall the mix between the S and the G&A portion hasn't really changed dramatically.

I would say that over time it will continue to shift a bit.

We are adding a lot more in the sales portion, obviously, of cost, so S will become a bigger piece of SG&A as we continue to execute that strategy.

But overall it hasn't changed dramatically.

The other point you asked about is G&A as a percent of revenue.

Yes, it has continued to come down as a percent of revenue, right?

Got it.

So we are still adding -- we have added cost to the G&A piece, but at a much lower rate than revenue growth clearly, at a much lower rate than sales growth clearly, but as a percent of revenue it continues to come down.

Okay.

Fair enough.

And then just on incremental gross margins.

Obviously Research had a pretty -- above the 70% that you talked about.

Just wondering if there was any seasonality we should consider in terms of modeling that over the next few quarters?

And I guess a similar question just around the Events business, I guess, with the second half, so based on your guidance prior there were a few more conferences that you were adding I guess on a year-over-year basis.

So would that imply compressed margins in those quarters as well?

So a couple of things, starting with Research.

There tends to be a little bit of seasonality.

Fourth quarter tends to be the lowest quarter generally for the margin.

That is really because of our symposium season, increased sales travel to support closing deals, those kinds of things.

You will see some seasonality as a result of that, but not significant, and still all within the ranges that we are expecting in terms of continued expansion of margin in that segment.

On the Events side you have a couple of things happening.

Fourth quarter is our largest quarter for events, because of our symposiums, so it the largest revenue and largest profit quarter.

And so, yes, as we go through the year we do have some additional launches.

We expect, as we have done over time, that while those launches tend to be lower margin than more mature, established events, because of the scale of our Events business, we are able to manage that without having significant fluctuations in our year-over-year margins in that segment.

It happened to be Q1 because it's a very small quarter and because a very successful, very established event happened to shift one quarter, that you saw a bit of impact to margins.

So those things can happen at times.

But overall, I think, for the year we are not expecting any significant deltas as result of the launches we have going on.

Great, thanks a lot, guys.

Thank you.

The next question from Daniel Leben of Robert W.

Baird.

Great, thanks for taking the question.

Good morning.

First off, on the contract optimization business, is this a business that is also a little back end loaded in terms of tech companies that [shift people a ton] at the end of the quarter, and you never quite know what is going to hit or what is going to miss?

So, Dan, if we heard your question right, you asked -- you were a little -- breaking up a little bit.

I think you said contract optimization being back end loaded as a result of the timing of vendor year ends maybe and other things, I think?

Is that your question?

Yes, that was it.

Yes, so basically -- it's Gene.

So the business has traditionally been a little bit back ended, but again, it's based really on when people decide to buy, which again, is biased toward the back end of the year.

But as an example, first quarter of last year there were are a larger number of deals than we had expected.

And so it can -- because of the lumpy nature of it, and there could be some very big deals with individual -- that result in very -- relatively sizeable fees for us, relative to the size of our Consulting business, that it's -- there is no constant rule of thumb.

So, yes, on average it is bigger in the fourth quarter, but it can vary a lot.

Great.

I was also asking about within -- even within the quarter, do you do most of that business in the last month of the quarter.

There'd be a little more in the last month of the quarter, again, so I think that's why it's biased toward the last month of the quarter.

But it's not like all [of those] occur in the last month of the quarter.

As one example, it is not uncommon for deals people intended to sign the last month of the quarter to slip over into the first week or second week of the following quarter, just because of the buying processes at our clients.

Sometimes it takes a little longer to get things done than they are expecting.

Okay, great.

Gene, could you talk about the sales hiring environment?

What you are seeing, availability of people, and as well as ability to retain your current sales force?

Yes, so first let me talk about retaining our current sales force.

We are a great place to work.

You are in the technology business, you want to be selling the technology business, there is no better place than Gartner.

We have no trouble at all retaining our sales people, and that is true anywhere around the world.

If you look at hiring, what I'd say is its a tougher hiring market incrementally then it was during the worst part of the recession, but we are not having trouble finding highly qualified sales people.

And the reason again is that we are the top brand name in IT.

If you are a sales person in Gartner, you can get access to any senior leader in IT or supply chain management.

There are very few companies in the world where you can do that.

And so confident, talented sales people, Gartner's really the place they want to be.

And so attracting sales people -- again, it is a little bit harder than it was during the worst part of the recession when there were a lot more unemployed people, but that is still -- we don't have any -- that's not a governor to our growth in any way what so ever.

We don't have any trouble attracting and retaining great sales people.

Okay.

And then last one for Chris.

Last year on the guidance you guys gave before and after FX numbers.

With the declining dollar over the last several months, should we think of the revenue growth this year as constant currency growth, and then FX is moving around that?

Well, I guess I'm just trying to -- so there's two things.

Let me make sure everybody understands how we kind of report.

Contract value we report on an FX neutral basis throughout the whole year.

So contract value you will always get a true constant currency view of that, so foreign exchange does not affect that.

We only adjust contract value as we turn the year, so in January.

And in fact this year the impact of foreign exchange from what we reported was minimal, less than a couple million dollar impact.

So very little impact as we changed to the new rate moving into 2011 from 2010.

On the revenue line it is obviously reported at actual rates throughout the whole year.

We will it continue to do what we did this quarter and share the combination of actual reported and FX neutral.

I have no idea, obviously, where foreign exchange will go as we move from here.

We usually give guidance based on the rates, which is -- our guidance is based on the rates we knew at the time in January, and that's the way we'll continue to forecast as we give guidance the rest of the year.

So as we see things move, we'll tell you if we change that assumption based on where we are at a point in time.

Okay, great.

Thanks, guys.

(Operator Instructions).

And there are no further questions.

This concludes the Q&A session.

I would now like to turn the call back over to your CEO, Gene Hall.

I'd like to thank everybody for joining us today and look forward to seeing you on our call next quarter.

Ladies and gentleman, that concludes our presentation.

Thank you for your participation.

You may all now disconnect.

Have a great day.