高德納諮詢公司 (IT) 2012 Q1 法說會逐字稿

Good morning ladies and gentlemen, and welcome to the Gartner Earnings Conference Call for the First Quarter 2012.

A replay of this call will be available through June 4, 2012.

The replay can be accessed by dialing 888-286-8010 for domestic calls, and 617-801-6888 for international calls, and by entering the passcode 92101447.

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 Finance President of Investor Relations for opening remarks and introductions.

Please go ahead, Sir.

Thank you and good morning everyone.

Welcome to Gartner's First Quarter 2012 Earnings Call.

With me today is our Chief Executive Officer, Gene Hall, and our Chief Financial Officer, Chris Lafond.

This call will begin with a discussion of Q1 2012 financial results disclosed in today's press release followed by an opportunity for you to ask questions.

I'd like to remind everyone that the press release is available on our website, that URL is www.Gartner.com.

Before we begin, we need to remind you that certain statements made on this call may constitute forward-looking statements.

Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the Company's 2011 annual report on form 10-K and quarterly reports on form 10-Q, as well as in other filings with the SEC.

I would encourage all of you to review the risk factors listed in these documents.

The Company undertakes no obligation to update any of its forward-looking statements.

With that, I'd like to hand the call over to Gartner's Chief Executive Officer, Gene Hall.

Gene?

Good morning everyone.

Welcome to our first earnings call for 2012.

We had a great first quarter and our business is performing extraordinarily well.

We continue to experience the strong growth trends we saw in 2011, and our business accelerated in all three segments.

As you will hear in more detail from Chris, Gartner is in the strongest position we have ever been.

Research, our largest and most profitable segment, continues to grow at double-digit growth rates.

Consulting had its strongest quarter in years.

And events continue to exceed our long-term growth targets.

Normalized EBITDA was up 11%, and diluted earnings-per-share was up 24% over first quarter 2011.

These results demonstrate the strength achieved through successful execution of our consistent strategy.

Our sales capabilities are the strongest we've ever had.

The productivity of our new hires is on a great trajectory and we're bringing in strong talent.

We continue to invest in our sales force and benefit from great sales leadership.

I recently spent several days at a meeting with several hundred of our top performing sales associates.

They are excited about Gartner.

They know we deliver a huge value to our clients and they also know the importance and relevance of our insight within our client organizations is growing.

Why?

Because IT is one of the most important drivers of growth and competitive advantage for virtually every institution in the world.

And IT is complex and continuously evolving.

Whether an organization is looking to leverage technology to achieve rapid growth, or whether they're looking to manage costs, Gartner is the best resource these professionals can turn to for help.

And our assistance often makes the difference between success and failure for our clients.

Because of this, we benefit from the vast untapped market opportunity for services.

Which as I stated before, we estimate at $47 billion.

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

The same is true of our events business which continues to deliver extraordinary performance.

We have the right strategy to capture this opportunity.

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

This consistent strategy is driving our growth and will allow us to maintain sustained, double-digit growth over time.

I remain confident in and excited about our prospects for sustained, accelerated growth.

The Gartner brand is in a class by itself.

Our products, services, and people are superior to the competition and we have a successful and attractive business model.

We delivered another successive quarter of strong growth and we're well poised to achieve strong results in 2012 and beyond.

As you will hear from Chris in a minute, we demonstrated growth across all three of our business segments, as well as a normalized EBITDA and diluted EPS.

Our business model is attractive with high renewal rates, great cash flow, and incremental margins.

And we have the right strategy to achieve our goals.

Finally, we're well-positioned to achieve our long-term targets.

With the leading brand in IT and supply chain research, a strong value proposition for our clients, great operational capabilities, and a vast untapped market of opportunity.

With that, I'll hand the call over to Chris, so he can comment in detail on our performance.

Thanks Gene.

Good morning everyone.

2012 is off to a strong start.

In our first quarter, we once again achieved double-digit growth in revenue, earnings, and cash flow.

Each of our three segments delivered strong results and contributed meaningfully to our overall Q1 performance.

In research, year-over-year contract value growth remained strong at 14% and retention rates ended at or near all-time highs.

In consulting, year-over-year revenue growth of 6% was at the high end of our long-term expectations.

And in events, both attendees and exhibitors increased by double digits year-over-year resulting in 31% year-over-year revenue growth.

The demand for our services was robust across all three business segments in the first quarter.

Our strong top line performance and effective execution in capitalizing on the operating leverage in our business allowed us to once again expand our gross contribution margin.

Which is now at 61%, up from 59% in Q1 2011.

As a result, we delivered significant growth in earnings in Q1.

In the first quarter, normalized EBITDA increased 11% year-over-year, and our GAAP diluted earnings-per-share were up 24%.

With this strong start, we are well-positioned for continued growth for the remainder of 2012.

These results again demonstrate the continued successful execution of our strategy, our ability to deliver consistently on the long-term financial objectives we've communicated over the past several years, and the overall value we bring to strategic IT initiatives of our clients.

I'll now review the results of our three business segments in more detail, and then we'll take your questions.

Let me begin with research.

First-quarter research revenue was up 13% to $275 million, with a negligible impact from foreign exchange in the quarter.

The margin this segment increased 110 basis points year-over-year, to 68.7% as our strong execution continues to capitalize on the operating leverage inherent in this business.

All of our key research business metrics remained very strong in the first quarter.

Contract value grew to a record level of $1.111 billion, a growth rate of 14%, year-over-year on an FX neutral basis.

Our growth and contract value in Q1 remained extremely broad-based with all geographies, client sizes, and industries segments delivering strong year-over-year growth.

New business again increased from last year continuing the trend we've seen since late 2009.

The new business mix was balanced between sales to new clients, and sales of additional services and upgrades to existing clients.

While our contract value growth continues to benefit from our discipline of annual price increases and no discounting, approximately 85% of our contract value growth came from volume, with the balance coming from price increases.

This volume growth reflects our success in continuing to grow the business by penetrating our vast market opportunity with both new and existing clients.

And as a result, we ended the quarter with 12,303 client organizations, up 6% year-over-year.

And as for pricing, we've consistently increased our prices by 3% to 6% per year on an annual basis since 2005 and that remains our plan again in 2012.

We've maintained client retention near record highs for the past two years, and our client retention rate ended the quarter at 82%.

In addition to retaining our research clients at an impressive rate, the clients we retained continue to increase their spending with Gartner.

And as a result, wallet retention also remained strong at 99%.

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

As we've discussed in the past, our retention metrics are reported on a four quarter rolling basis in order to eliminate any seasonality.

In summary, our research segment continued its strong performance in the first quarter.

We grew our contract value by $134 million on an FX neutral basis year-over-year.

We continued to see strong demand from clients, and we expect continued acceleration in revenue and contract value growth over time.

We remain confident in our ability to deliver 15% to 20% annual revenue growth in this business over the long-term.

Turning now to events.

Our events business continues to deliver exceptionally strong year-over-year growth.

Events revenue in the first quarter increased 29% year-over-year on a reported basis, and 31% excluding the impact of foreign exchange.

During the first quarter, we held 13 events with 5,707 attendees, committed to 11 events with 4,337 attendees in the first quarter of 2011.

On a same events basis total attended at our events during Q1 were up 13% year-over-year, and exhibitors were up 12% in line with the guidance we provided to you for the full year 2012.

We are seeing strength in every geography and across the entire portfolio.

Our events business is well-positioned to deliver continued growth throughout 2012, and beyond.

Moving now to consulting.

Revenues in our consulting business grew 6% in the first quarter, again with a negligible impact from foreign exchange.

Backlog, the key leading indicator of future revenue growth for consulting, ended the quarter at $95.5 million, or a healthy four months of backlog.

This is 10% higher than at the end of the first-quarter of 2011 and the largest year-over-year increase in a Q1 since 2008.

Our pipeline looks equally solid as we enter the second quarter.

Billable headcount of 476 was down 1% from the first quarter of 2011.

Utilization for Q1 was over 70% up 260 basis points from the first quarter a year ago, and revenue per billable headcount remained above $400,000 per year ending the quarter at $437,000.

With a strong first quarter, a four month existing backlog, and a strong future pipeline, the consulting business is on track to deliver a strong performance in 2012.

Moving down the income statement, during the first quarter, our total gross contribution margin increased by 134 basis points year-over-year to 61%.

This increase was driven by margin improvement in all three of our segments as we expanded margins while significantly growing each segment.

And in particular, the successful execution of our strategy continues to capitalize on the high incremental margins and operating leverage inherent in our research business.

SG&A increased by $21 million year-over-year during the first quarter.

The increase was primarily attributable to the continued growth in our sales force.

As of March 31, we had 1,288 quarter bearing sales associates as compared to 1,091 a year ago, which represents an 18% growth year-over-year.

And this is in-line with our long-term target for growing our sales force by 15% to 20% per year.

As we discussed on our last earnings call, or aggressive hiring in Q4 put us in a great position to start the year.

And we continue to see a strong recruiting pipeline with high-quality potential candidates.

Moving on to earnings.

We delivered another strong quarter of solid earnings growth.

Normalized EBITDA was $71 million in the first quarter, up 11% year-over-year, and GAAP diluted earnings-per-share were $0.36, up 24% year-over-year.

Our normalized EBITDA margin was 19.3%, and all of this is consistent with the phasing guidance we laid out at our Investor Day in February.

Now, turning to cash.

Our strong performance in the first quarter translated into significant year-over-year increase in cash from operations, which was $18 million, as compared to negative $25 million in Q1 of 2011.

Q1 is our seasonally lowest quarter for operating cash flow, given the timing of our annual bonus and commission payments and other factors.

Over the long term, we continue to expect to generate free cash flow, substantially greater than our net income, given our tight cash management and the negative working capital characteristics of our research business.

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

We repurchased almost 2 million shares at a total cost of over $77 million.

We also announced our intention to acquire Ideas International for roughly $20 million, which we expect will close in the second quarter.

We ended the quarter with a strong balance sheet and cash position with net debt of $101 million.

Our current credit facility runs through December 2015 and at this time provides us with almost $330 million of remaining borrowing capacity.

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

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

In the absence of appropriate acquisition opportunities, we believe that repurchasing our shares remains a compelling use of capital and we have $237 million remaining under our Board authorization.

Let me close with our business outlook for 2012.

Our business remains well positioned for another year of strong growth in revenues and earnings.

The first quarter modestly exceeded our original expectations with particularly strong performances in both consulting and events.

Coupled with our continued careful expense management, we once again delivered double-digit growth in earnings.

We remain confident in the guidance we provided at the start of the year given the strong start.

So to summarize, we delivered great results in the first quarter of 2012 and demand for services is strong.

We generated double-digit revenue growth and our key business metrics remain solid in the first quarter of 2012.

Our initiatives to improve operational effectiveness coupled with the positive operating leverage inherent in our businesses levered strong operating margins and we continued to generate substantial operating cash flow.

As always, we're actively exploring strategic alternatives for deploying our cash.

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 2012.

Finally, with double-digit growth in contract value in the first quarter, we established a solid foundation for delivering a strong year of revenue and earnings growth in 2012.

We remain well-positioned to continue our consistent delivery of double-digit revenue and earnings growth, and increasing returns to our shareholders over the long-term.

We will now be happy to take your questions.

Operator?

Thank you.

(Operator Instructions)

Peter Appert, Piper Jaffray.

Thanks, good morning.

So, Chris or Gene, I know you don't give guidance obviously on contract value, but I was hoping you might give us a little color in terms of what your expectations are in terms of what that number should look like over the balance of 2012.

I ask this, obviously, in the context of the sales force growth you had last year, when we start to see the impact from that in terms of the CV number.

Thanks.

Hello, Peter, it's Gene.

Great question.

So, as we've talked before, the way sales force growth works, basically, is when we hire salespeople, we bring them on board, train them.

They then have their first year of sales, which is -- they're not as effective as in their second year.

The second year they're up to full productivity in sales and then that turns into contract value during that second year, which then turns into revenue really during their third year.

And so, if you look at our hiring from last year, which was -- tended to be more backend loaded towards through the year.

We hired more aggressively toward the second half of the year.

You'd start to see the impact of contract value, really, from those guys -- the big impact is going to be in 2013, not in 2012.

Chris, you want to do add anything to that?

No.

Peter, I think the only other thing I would add to that is, as you know, we track and monitor sales productivity consistently.

And so, as we add sales resources we do it with the knowledge that they are coming up to speed.

The new hires are coming up to speed nicely for us.

We feel really good about sales productivity.

And so, we're not looking for one quarter, as an indication for a certain strategy of continuing to hire.

We think that over the long term we are going to be seeing continued growth in our sales force because all of the metrics say that as we do that, what Gene just laid out will continue to materialize.

It will continue to see them come up to speed and over that period of time as they get up to speed we will see that revenue growth and contract value growth ramp.

So we're very, very confident in the guidance that we give and our ability to drive that research business in the 15% to 20% range as we continue executing the strategy.

Okay.

And, do you think 15% to 20% is a reasonable number for 2012?

Well, we've given guidance already, Peter, on the revenue line.

And so, obviously, as we've talked about at the fourth quarter last year, the 2012 revenue growth is a function of the contract value we delivered in 2011.

And so, that's why we've given the guidance we've given for this year.

Because for the most part, the growth in contract value this year, as you know, tends to be more towards the back end of the year, which will really affect 2013.

So, we don't give guidance on contract value growth, but we give revenue growth and so, as Gene said, we will expect over time to see -- certainly see it ramping as the sales force gets up to speed as we continue hiring at the pace we're hiring.

Okay, fair enough.

And then, you were obviously at the high end or slightly above the high end in terms of the sales force expansion last year.

Will this year look the same?

Well, what we've said over time is we expect to be in the 15% to 20% range as we talked about at the end of last year.

We saw a great quality of candidates that came in.

We hired a little bit ahead and really filled some of the open positions that we had hoped to hire early in Q1 of 2012 at the end of 2011.

So, actually, we're in a much better position starting this year and getting people up to speed early in the year, so hopefully we'll have a stronger back half of the year with more people early on.

So, I still expect us to be in the 15% to 20% range and that's where we would expect to be over time.

Got it, okay.

And one last thing.

So, Chris, margin -- EBITDA margin flat year to year around 19.3%.

Anything to read into that in terms of your longer-term expectation that you can grow the margins, I think it's 100 to 150 bps a year?

No, not all I think that, as we talked about at the end of last quarter, we certainly hired pretty aggressively the sales force.

We knew that would impact Q1 in terms of we have a lot more people on board in sales in Q1 than we did at the prior year.

We still feel very comfortable over time to drive that margin up, at the 50 to 150 basis points per year.

And as we've talked about many times, getting that into the mid 20%s is exactly where we still expect to be able to drive the business.

Great.

Thank you.

Great answer.

William Bird, Lazard.

Good morning.

On the topic of sales force growth, was there any particular reason why the sequential sales force growth was somewhat low at 1.5%?

You've been throttling at 4% to 5%, I was just wondering if there was any market factor or other explanation?

Thank you.

Hello, it's Gene.

So, no, there's no market factor.

What happened basically is we have a recruiting team, terrific recruiting team, built a pipeline of people.

We had a very strong pipeline in Q4.

We just closed people more -- we hired more people in Q4 from that pipeline that we expected we were going to hire in Q1.

So I think basically it's just we hired a little ahead of where we thought we would be in the pipeline.

So there's nothing to read in, I think again as Chris said, we fully expect our sales force growth this year to be, again, in the 15% to 20% range.

We were just fortunate enough to be a little ahead.

And then, on productivity are there any other factors just beyond the onboarding dilution that might be weighing on productivity?

So, actually, our productivity we take our productivity and just aggregate it between experienced people and new people.

And what we're seeing basically is that our experienced people, the productivity is doing great and actually we've been seeing -- with each class of new hires we've been hiring, that in fact the productivity has been increasing over time.

But obviously if you have more of those new hires who, in their first year, as I mentioned, have lower productivity, that can take the overall number -- it dilutes the overall number a little bit as you pointed out.

And then just finally.

I was just wondering if you could touch on Europe.

How are trends holding up there?

So, we've had great growth across all geographies, including Europe, no big issues.

And, I might have missed it, did you give a growth number for Europe?

Hello, Bill, it's Chris.

No, we've not broken that out.

We don't break out growth by geography.

What I will tell you is, if you look across all three businesses, our events are doing great in Europe.

Consulting is actually particularly strong in Europe and we've got great backlog growth there.

And, when you look at research and the CV growth year over year it is extremely balanced including across the various parts of the world and Europe being -- continuing to grow double digit as well.

So, we've seen great growth in all three of our segments in Europe.

Great, thank you.

Robert Riggs, William Blair.

Good morning, thanks for taking my question.

Gene, you mentioned recently attending an event with some of your top sales people.

What were some of the common themes or maybe requests from them in terms of additional tools, resources that would maybe help them be more productive?

That's a great question, Robert.

So, yes, I was at an event with actually several hundred of our top salespeople.

So it was a great opportunity to kind of network and understand their perspective on how we're doing.

And they had an incredible level of enthusiasm, as you can imagine, because with the unlimited market opportunity that we have and the great market position we have.

So it's always interesting to go talk to them.

We have a strategy of continuing to add tools to our sales force over time, as you pointed out, to help improve the productivity of our salespeople over time.

We solicit their input all the time as a part of developing that.

And so, as you point out, they always have some ideas about how we can improve those tools and we -- not just for this particular forum, but we do it on a systematic basis as well.

But -- they had great tools as it is.

It's those things that kind of add another 5% in terms of the tool capabilities as opposed to there's a big gaping hole somewhere, or something like that.

But, and again, we get input there but we do it, actually, in a more systematic fashion with focus groups and work analysis and stuff like that as well.

But they have a great set of tools.

Great.

And then consulting was strong in the quarter.

Was there a particular bucket of work that exceeded expectations?

And then, maybe if you could just give us an update on the managing partner strategy, how that's progressing in terms of availability of people bringing people on there.

It's a great question.

So, our consulting business, we worked hard over the last couple of years to really get the right strategy in place.

And, as you pointed out, a big part of that strategy is building a cadre of managing partners.

In addition to that, it involves focusing our service lines on the areas that have the highest demand and that -- both those strategies have been working extraordinarily well as we've gotten them in place.

In terms of the actual numbers, I'll let Chris answer that.

Yes, hello, Rob, it's Chris.

What I would tell you is we've increased roughly 10% probably in the MP rank.

So, as we've talked about over time, this was a multi-year investment.

We've been making that investment while delivering continued great improvements in that business, improving expanding margins.

So, we're now getting close to 80 managing partners in that business and we still have some more to go there to fully cover, but we feel really good about the progress.

Great.

Thanks, guys.

Manav Patnaik, Barclays.

Hello, good morning gentlemen.

A few quick questions.

So, on the SG&A line, can you give us a sense of what the non I guess sales costs grew like the other costs?

I would say the non-sales related costs effectively are probably growing in the 3%-ish to 4%-ish range.

Most of the G&A functions we're managing and are growing more in that range.

We certainly have a few investments in HR to support the growth in other areas.

So we have a couple of pockets of places that are probably growing a little faster than that.

But the vast majority of the year-over-year growth in the SG&A line is really coming from the continued investment in our sales force.

Okay.

And can you maybe help us understand the -- I guess the number of client organizations was down sequentially, and I was just trying to understand if there's a seasonal dynamic to that or what happened there?

There is a seasonal dynamic.

If you look at past years you'll see that oftentimes there's a little bit of a dip in Q1.

As you know, Q1 tends to be our lowest quarter of new business and new enterprise growth.

And it tends to be more focused on retention as we go through the year, and then we have a lot more new enterprises and new business coming in towards the back half of the year.

So, it is a normal, seasonal pattern.

It -- as you look year over year we're still penetrating new organizations, adding new enterprises.

So we feel very comfortable with what we're seeing in terms of our ability to continue to grow the business and penetrate new clients.

And what percentage of renewals -- I think you'd mentioned last time it is in the fourth quarter, first quarter --?

It's relatively balanced.

It goes anywhere from probably 22%, 23% in our smallest quarter up to 26%, 27%.

Okay.

So every quarter you're seeing close to 25% of our business come up for renewals.

So you're getting a good picture of renewal activity with our retention rates every quarter.

Okay.

And last question, I guess based on your seasonal -- or, sorry, quarterly phasing guidance that you provided for EPS, if 19% was what you said this was the first quarter, that would imply that the 36% takes you above your guidance range.

Are there any changes I guess to that?

No, we're not seeing any changes.

As I talked about we had -- modestly above where we expected to be in Q1, primarily because of stronger performances in both consulting and events.

And, at this point, given where we are we're not expecting any changes to our full-year guidance.

We have some hiring, a little below our original expectations.

We certainly expect that to pick back up and hire to the levels of the demand we're seeing and the revenue.

So, as you noticed, for example, consulting, headcount was down slightly.

Our plan is to grow as we continue to see a growth in backlog, so you'll continue to see expense there.

So, we don't -- we right now don't see any changes to full-year and where we expect to be.

Okay, fair enough.

Good job, guys.

Kelly Flynn, CS.

Thanks.

Quick question about the financial services industry exposure.

Can you give a rough estimate of how much of your revenue comes from that sector?

And maybe speak to how experience in that sector is tracking versus other sectors.

And, more broadly, any kind of industry pockets of strength versus weakness globally?

Hello, Kelly, it's Chris.

Just a couple things I would say.

First is, our overall mix of business is -- roughly equates to the overall economy.

So when you look at our business next we're not really overweighted/underweighted in various industries, we're really balanced in terms of how the overall economy looks and that's how you should think about our business.

When you -- and so we don't necessarily answer break out individual industries by percentage.

But, in general, we are not dramatically different than the overall economy.

So that's one point.

The second point is, when you look at our contract value growth, no matter how you slice and dice it, even by industry, almost every industry sector has double-digit growth.

There's a couple that are high single digit, so we're very balanced.

Everything is growing nicely around the world, including financial services, including public sector.

So, everything we look at from an industry perspective -- I wouldn't point out pockets that are exceptionally strong, and I don't need to point out pockets that are exceptionally weak because everything is pretty well balanced, to be honest.

Okay, great.

Can I just ask a quick follow-up to Peter Appert's line of questioning?

I think, Chris, you made a specific comment in your remarks.

I think it was you, Chris, you said expecting continued CV acceleration over time.

I just want to make sure I'm understanding that properly.

I mean are you basically saying 2013, given the sales force growth should be a year of acceleration?

Or are you trying to say it should accelerate from here?

It's a great question.

Obviously, we don't give contract value guidance.

But what we've talked about and what we continue to say is that we are adding sales capacity in the 15% to 20% range.

As Gene talked about, it takes some time for them to get up to speed.

As they get up to speed we certainly expect that our growth will continue to accelerate over time.

So, we didn't make any specific statements about it being in 2013 or certain periods of time, because we don't give that guidance.

But we certainly do expect continued growth and continued acceleration with the hiring we're doing.

Okay, thank you.

Dan Leben, Robert W.

Baird.

Great, thanks, good morning.

Just to follow-up on the sales theme.

Help us think about where you're seeing now in terms of turnover levels and how that needed to trend to stay in line with the growth guidance.

Hello, it's Gene.

So the turnover by our sales people has been consistent for several years.

There's no material difference in turnover, even as the economy has in some places gotten hotter.

Our turnover has been very stable.

Gartner is a great place to work if you're a salesperson, because we have a great brand name.

We have this incredible market opportunity.

And so the -- and there's plenty of money-making opportunities for salespeople as well.

So if you're a salesperson, it's a great place to be.

We don't have any trouble retaining our sales people.

Great.

And then when you're putting those people in the field, could you talk about any particular areas where you see more low-hanging fruit than others either by vertical or geography?

You know, as Chris said earlier, our business pretty much reflects the GDP in each of the markets we're in.

And we're in 85 countries.

And so the -- and we're in all size ranges of clients, either from the very largest companies in the world to very small companies.

And as we've added sale people, we've added them across all of the geographies, across all of the industries, and across all size ranges.

And there's kind of a practical operational reason for that, which is that as we grow our sales force in the 15% to 20% range and then we have kind of normal turnover in that sales force, you can -- we have a lot of new people in the sales force.

If we grew one area at 50% and another at 0%, the 50% growth area has even more new people in it and operationally it's just more difficult to manage.

And so, really our strategy is to grow -- we see low-hanging fruit across every industry, across every geography, and every size range, and so we're really growing our sales force across each of those.

And maybe, specific operational reasons why it's a little faster, a little slower in one of those but in general it's pretty well distributed.

Great.

And then last one for me, utilization up to 70%.

How are you thinking about a target for that metric as you start to ramp up the hiring?

Is it somewhere in the low 70%s where you want to manage that to?

As we've talked about, Dan, over time, keeping it consistently around 70% has been our objective.

There are certainly opportunities as we continue to execute our strategy to maybe bring that up a bit, but we certainly target to stay at 70% and slightly above that.

And if we can stay there, we feel very comfortable that we can keep delivering on that 40% margin.

So, ultimately, getting to 40% consistently requires us to stay around that 70% number consistently.

So that's what we're trying to drive to.

Great.

Thanks, guys.

Brian Karimzad, Goldman Sachs.

Hello, I wonder if you guys can clarify a bit more the growth within verticals, geographies, and client sizes?

So when you reported last, you were fairly emphatic that every single one of the verticals, geographies, and client sizes was growing research contract value of double digits.

It sounds like a couple of the verticals have slipped down below that.

Can you give us color on whether the geographies and the client sizes, each of those within there are all at double digits?

And then if a couple of the verticals slip down below double digits, what accelerated to keep the total RCV growth stable?

Hello, Brian.

It's Chris.

I would say is it's noise around the edges when we look at it.

So, as I said, we do have some things high single digit.

We have some things that are certainly higher double-digit.

So, it's no different than usual.

Every time we look at our results, every quarter, there's things that move around a little bit, plus or minus.

So, when we looked at the trend lines, we didn't see anything here that jumped out at us as worth kind of describing, either as a high or a low point.

And so, for us, we think it's trending exactly as we've seen over the last few quarters with extremely balanced.

And I wouldn't say anything dramatically accelerated, nothing dramatically decelerated, and we feel very comfortable where everything is right now.

Okay.

And, just out of curiosity, now those two verticals that were below double, were those financials and government, or was it something else?

As I said we're not going to go into the details of that, Brian.

I think at this point as I said we feel really comfortable.

There's no change in trend.

We feel really good about the balance perspective we have, and there's nothing there that I think warrants highlighting.

Okay.

And then on the sales force turnover, it sounds like on absolute basis you haven't seen anything change.

But, any difference in mix on the type of salesperson who's leaving, outperformers versus underperformers?

No, absolutely not.

Again, we do track exactly who's leaving.

We do exit interviews with a vast majority as well to understand why they're leaving in detail, and we use that to speed that back into the organization for both recruiting and how we manage.

And there's no change at all basically in terms of why people leave.

Okay, thanks.

Thank you, and that's all the time we have for Q&A.

And now I'd like to turn the call over to Brian Shipman.

Thank you.

Thanks everyone for listening and we'll speak to you next quarter.

Thank you for your participation in today's conference.

This concludes the presentation and you may now disconnect.

Good day.