高德納諮詢公司 (IT) 2013 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Gartner's earnings conference call for the second quarter 2013.

A replay of this call will be available through September 2, 2013.

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 46902564.

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 and good morning, everyone.

Welcome to Gartner's second-quarter 2013 earnings call.

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

This call will include a discussion of Q2 2013 financial results as disclosed in today's press release.

After our prepared remarks, you will have the opportunity to ask questions.

I would like to remind everyone that the press release is available on our website at Gartner.com.

Before we begin, we need to remind you that certain forward 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 2012 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 would like to hand the call over to Gartner's Chief Executive Officer, Gene Hall.

Gene?

Good morning and welcome to our earnings call for the second quarter of 2013.

We had another quarter of double-digit growth as a result of the continued effective execution of our proven strategy.

Research, our largest and most profitable segment, continues to deliver double-digit growth of robust demand for our services across all regions, industries, and client sizes.

Our performance in the Americas, our largest geography, accelerated with great results across the business.

Europe was also strong with double-digit growth despite the challenging economic environment.

We also saw double-digit growth across nearly every industry including the public sector.

And finally, we saw double-digit growth across all client sizes, demonstrating the great demand for our offerings.

Our Events segment continues to exceed expectations in both attendees and exhibitors at our events around the world.

And our Consulting segment had double-digit growth during the quarter, with strength across all regions we serve and in both contract optimization and core Consulting.

We know how to be successful in any economic environment and you are seeing that today in our results.

You have heard me say this before.

These are remarkable times for technology.

Technology is transforming the world.

It affects how we work and what we do and it impacts every industry and Gartner is at the heart of it.

Every institution in the world is a potential client, giving us a vast untapped market opportunity for our services.

Gartner is the best source of help for enterprise leaders launching critical initiatives within the technology revolution and we are relevant whether an institution is growing or facing economic challenges.

I remain confident in and excited about Gartner.

The Gartner brand is a class by itself.

Our products, services, and people are superior to the competition, with a great business model and we are relevant to virtually every company and every government agency in the world.

In summary, I would like to leave you with three takeaways from today's call.

First, we continue to see robust demand for our services.

Our vast market opportunity and our consistent winning strategy allowed us to once again deliver double-digit contract value growth.

Second, clients value our services, whether they are growing or facing difficult budget cuts.

Third, we continue to be well positioned to achieve sustained double-digit growth in our key metrics, as we've done over the past several years.

With that, I would like to hand the call over to Chris.

Thanks, Gene, and good morning, everyone.

As Gene mentioned, we delivered a strong first half of 2013, reporting 13% growth in contract value, and double-digit growth in each business segment in the second quarter.

Our results demonstrate the continued successful execution of our strategy and our ability to consistently deliver on the financial objectives we have communicated over the past several years.

We continued to see strong trends in our key business metrics during the second quarter.

Year-over-year contract value growth remained strong and retention rates ended the year at all-time highs.

Our Events business increased by 15% year-over-year on an FX neutral basis and our Consulting business rebounded nicely with 13% growth year-over-year on an FX neutral basis.

Demand for our services remains strong across all three business segments.

Even as companies face the uncertainties of the current macroeconomic environment, they turned to Gartner because we are a key partner for IT and supply chain professionals in running efficient and innovative programs to drive growth in their organizations.

We are engaged on the most important projects for the institutions we work for.

This is why with the successful execution of our strategy, we continue to deliver consistent revenue growth and strong financial performance and why we are so confident that 2013 will be another year of double-digit growth.

Let me now review each of our three business segments for the second quarter.

I will finish today with a discussion of our revised guidance, and then we'll take your questions.

Starting with Research; second-quarter Research revenue was up 12% to $311 million.

Currency fluctuations had no material impact on Research revenues as compared to the prior year in the second quarter.

Contribution margin in this segment increased 49 basis points to 69% in the second quarter as our strong execution continues to capitalize on the operating leverage in this business.

All of our key Research business metrics remained strong in the second quarter.

Contract value grew to a record level of $1.293 billion, and growth rate up 13% year-over-year on an FX-neutral basis.

As has been the case for the past several years, our growth in contract value in Q2 was extremely broad-based with every region and client size growing at double digits.

As Gene mentioned, our largest region, the Americas, continues to perform very well and delivered a modest acceleration of contract value growth in Q2.

And the rest of the world remains strong with double-digit contract value growth.

New business again increased year-over-year, continuing a 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 increasing and no discounting, approximately 80% of our contract value growth came from volume with the balance coming from price increases.

We have consistently increased our prices by 3% to 6% per year on an annual basis since 2005.

We implemented a price increased during the fourth quarter of 2012 and we expect to do it again later this year.

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

As a result, we ended the quarter with 13,315 client organizations, up 7% over last year's second quarter.

Our client retention rate ended the quarter at 82% and we have maintained client retention rates between 82% and 83% for 12 straight quarters.

In addition to retaining our Research clients at an impressive rate, the clients we retain continue to increase their spend with Gartner and wallet retention ended at 97% in the second quarter.

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 larger clients.

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

In summary, we delivered another strong quarter in our Research segment.

We grew our contract value by $145 million on an FX-neutral basis year-over-year.

We continued the high levels of demand from clients and we expect acceleration in contract value and revenue growth.

We remain confident in our ability to deliver double-digit annual revenue growth in this business over the long term.

Turning now to Events, our Event segment continued the trend of extremely strong year-over-year revenue growth we have delivered for the past three years.

In the second quarter, Events revenue increased 15% year-over-year on a reported basis.

Currency fluctuations had no material impact on Events revenue.

During the second quarter, we held 25 events with 12,098 attendees compared to 21 events with 12,540 attendees in the second quarter of 2012.

On the same Events basis, attendee revenue was up 12% and exhibitor revenue was up 15% year-over-year.

As we expected and discussed on our last earnings call, the gross contribution margin of 47% for Q2 rebounded from the seasonably light first quarter of the year.

Looking ahead, we see strong demand for both attendee and exhibitor participation at our upcoming events and for the full year, we expect this business to continue the trend of strong growth in revenue, contribution margin, and margin expansion we have seen over the past few years.

Moving now onto Consulting.

We told you last quarter that Consulting would improve as the year progressed and our second-quarter results reflect that.

Revenues in Consulting grew 12% on a reported basis in the second quarter, excluding the impact of foreign exchange, revenues grew 13%.

Billable headcount of 518 was up 8% from the second quarter of 2012.

Second-quarter utilization was 68%, up slightly from the prior year.

Revenue per billable headcount ended the quarter at $428,000 per billable headcount.

Most important for the remainder of the year, we are seeing good and steady demand for our Consulting services.

Backlog, the leading indicator of future revenue growth for our Consulting business, ended the quarter at $94 million.

This represents 1% growth year-over-year and a healthy four months of backlog.

Additionally, our pipeline is solid as we enter the second half of the year.

With the current backlog and visibility we have in the pipeline, the Consulting business is positioned to deliver results in line with our long-term objectives.

Moving down the income statement, SG&A increased by $20 million year-over-year during the second quarter, primarily driven by the growth in our sales force.

As of June 30, we had 1549 quota-bearing sales associates, an increase of 191 sales associates from a year ago.

We continue to tightly control G&A costs across the entire Company.

We believe this expense item will provide us with a source of operating leverage in the future as G&A will continue to decline as a percent of revenue.

Moving onto earnings, we delivered another solid quarter of earnings growth with normalized EBITDA of $90 million for the second quarter, up 14% year-over-year and GAAP diluted earnings per share was $0.49, up 14% year-over-year.

As expected, our Q2 2013 GAAP diluted earnings per share includes $0.01 in amortization and other costs associated with our acquisitions including IDEAS International.

Our earnings results were also impacted by higher than projected tax rate.

The effective tax rate of 35% in Q2 was driven by a modest shift in mix of our earnings to higher tax jurisdictions.

Turning to cash, operating cash flow increased by 41% to $140 million in the second quarter of the year.

In Q2, we experienced early collections in the same quarter a year ago.

We continue to expect the same level of free cash flow for the full year that we have indicated in our previously issued guidance.

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 second quarter, we utilized our cash to return capital to shareholders through our share repurchase program.

We repurchased over 850,000 shares at a total cost of approximately $49 million.

We ended the quarter with a strong balance sheet and cash position with net cash of $128 million.

Our credit facility runs through March of 2018 and at this time provides us with about $550 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.

We believe that repurchasing our shares remains a compelling use of our capital and we have $143 million remaining under our Board authorization.

Now let me turn to our business outlook for the remainder of 2013.

With a strong start to the year, we are well-positioned for double-digit full-year revenue earnings and cash flow growth that we expected as we began the year.

However, currency fluctuations have moved enough for the first half of the year to require a slight change to our guidance at this point in the year.

The details of our guidance are included in the earnings release issued this morning.

Let me take a minute to highlight some of the changes.

As with our guidance at the beginning of the year, we have made no attempt to anticipate future changes in foreign exchange rates.

This revised guidance is based on where rates are today and as a result, we are reducing both the low-end and high-end of our previously issued total revenue guidance by $15 million with the changes due to a strengthening of the US dollar since issuing our guidance back in February.

We now expect total revenues of between $1.76 billion and $1.805 billion, a change of less than 1%.

This change to revenue guidance in both Research and Consulting segments are solely related to FX.

In the Events segment, stronger expected performance was offset slightly by FX resulting in the increase in guidance for that segment.

From a seasonality perspective, I would remind you that the fourth quarter is the largest quarter of the year for the Events business and will [ink] up more than 50% of the full-year revenues in the segment.

With respect to earnings guidance, we modestly reduced the bottom and top end of our previous EBITDA guidance range by $5 million to account for currency fluctuations, again representing a change of 1%.

We also lowered our EPS guidance, driven again by these FX changes as well as a higher tax rate assumption.

We are revising our tax guidance upwards to approximately 32.5% from approximately 31% due to a shift in the projected mix of earnings to higher tax jurisdictions for 2013, consistent with our comments about the Research growth rates geographically.

There were no other changes to our previously issued guidance.

So to summarize, we delivered strong results in the second quarter across all three business units.

Demand for our services is strong and as a result, we generated double-digit revenue growth and our key business metrics remained solid in the second quarter.

Our initiatives to improve operational effectiveness coupled with the positive operating leverage inherent in our businesses delivered double-digit earnings growth and we generated substantial cash flow.

As always, we are 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 the remainder of 2013.

Finally with double-digit growth in contract value in the second quarter, we built a solid foundation for delivering strong revenue and earnings growth in 2013.

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

Now I'll turn the call back over to the operator and we will take your questions.

Operator?

(Operator Instructions).

Peter Appert, Piper Jaffray.

Thanks, good morning.

Gene, You cited better results in the US and you sounded fairly upbeat in terms of strength in Research across the board, but the CV growth and the revenue growth did decelerate at least a little bit on a quarter-to-quarter basis, so what was driving that?

Peter, it's Gene.

So as I said on the call earlier today, we are performing pretty well globally with every region, every client size, in almost every industry vertical growing at double-digit rates, including by the way the public sector.

And our Americas grew a little faster than average and the rest of the world grew at modestly lower than average.

What is going under the covers is there's a few pockets within Europe that posed some challenges for us and so Europe growth was a little slower than the overall average and it's an pockets of Europe, so again much of Europe is very strong but there are a few pockets that were a little not quite as strong.

Again just to reinforce, despite that, we still had double-digit growth in Europe.

So we would characterize it to be pretty strong still.

Okay, then Chris in his comments I think the quote was something like expect acceleration in CV and revenue growth.

Chris, can you be more specific on that?

Peter, thanks.

As we continue to see where we are and with Gene's comments he just made, if you look at our performance and as you know, what we've been doing over time is continuing to implement initiatives across the Company to improve our performance.

I think what you are seeing in the US with a slight acceleration is that those things are taking hold, so we feel really good about what we are seeing in the US.

As Gene mentioned, we are still seeing really good performance even in challenging places like Europe and public sector, so we think those things are having an impact and as things return to more normal levels, we will see things accelerate.

So whether that is later this year or into next year is the question, but we feel very good about what we are seeing as we look at the details of our performance.

Okay, then just last thing for me, Gene, you've talked for a couple of quarters about focus on sales force productivity.

Can you give us an update in terms of how the initiatives are progressing?

It looks like the productivity is still down a bit on a year-to-year basis.

Yes, Peter.

We have a number of initiatives to continue to grow our sales productivity.

I should start with -- our sales productivity, actually we are very happy with it.

We think it's quite good and we have -- but we do have a number of initiatives we think over time will take that level to an even higher amount.

And as Chris mentioned, we have implemented -- the way we generally roll these things out is we start in the Americas and then we roll them out through the rest of the world over time.

We've implemented some of the latest ones in the Americas and as we mentioned there, we saw an uptick in performance there, which increases the productivity there.

As I mentioned, there are some other parts of the world, particularly Europe, where we had some pockets that weren't quite as strong and that's what's impacting the overall sales productivity.

Okay, actually, I'm sorry, just one more thing.

On the tax rate, Chris, any further color?

It's all just basically mix.

And is anything about the expiration of the R&D tax credit next year that we should be thinking about?

No, I think this quarter it's all due to mix, as I talked about.

We had originally projected 31% for the year.

We are now expecting about 32.5% and so what you saw in the quarter was a bit of a catch up for the year, which is why it was a bit higher for the quarter.

We don't expect it to be at that level.

For the remainder of the year, we expect the whole year to end at about 32.5%.

And again, consistent with the comments we just made on where our performance is driven, seeing some more income in the US, which is a higher tax jurisdiction so it's really all driven by that.

Okay, what's your view on the R&D tax credit?

If you look forward at this point, Peter, we're not expecting any dramatic change to our longer-term tax rates.

We have said that that rate should be in the 31%, 32% range.

We still are looking at that.

Obviously there's a lot of things changing the world of tax rate now and so as we continue to monitor that, we will be able to give you more color.

But as of this point, we don't see anything that should change that over the longer term.

Great.

Thanks, gentlemen.

Jeff Meuler, Baird.

Thank you.

I want to ask a follow-up to the answer you gave to one of Peter's questions, but in terms of the re-acceleration, I think you said whether it be later this year or next year, it seems like you are not baking a re-acceleration into your guidance.

Excuse me.

But are you seeing any signs whether it be in your business or whether it just be some of the European macro data points stabilizing that suggests this re-acceleration or is it just your confidence in your strategy and the things that you have been doing that lead you to believe that it will happen?

Jeff, it's Gene.

As we talked about it, we don't try to forecast any improvement or deterioration in the economic environment, so when we talked about our thoughts and what's going on, it is -- assume the economic environment doesn't get better and doesn't get worse.

So -- and then on top of that, frankly we think we can do pretty well whether the economic environment is challenging or whether it's robust.

The improvements we are talking about are more operational changes.

In fact frankly, as I talked about some pockets of weakness, it's operational.

It's not due to the economics.

If you tried to correlate it with the GDP growth or unemployment or something like that, it's more correlated to where we have operational work to do as opposed to that it's the macro environment.

Okay, but are you seeing signs of improvement already that give you the confidence, or is it just that you have confidence in the model and know that where there are pockets of weakness you can or are making operational changes and eventually that will yield re-acceleration?

Jeff, it's Chris, so a couple of things that I would say.

As we've talked about, in the Americas we did see an acceleration, so we certainly have factual data points in the Americas that things did accelerated bit, so we did see that.

So from our perspective, we are seeing them.

We looked across that business in great detail and we can see places where things are improving, but at the end of the day, as Gene said, we do believe that our own execution will continue to allow us to improve and accelerate over time.

Okay and then just maybe a comment on wallet retention, you guys kind of framed retention as being kind of in this record range that it's been in the last 2.5, 3 years, but wallet retention did tick down year-over-year by 2 full points, which seems somewhat meaningful.

So can you just kind of break out what's going on there between upsell and kind of retention of different sized clients?

Then I guess why you have the confidence that this is just kind of normal variability in that range instead of a trend that's worth closer monitoring?

A couple things on retention that I would mention.

First, we've been very consistently retaining our clients, so our client retention has been 82%, 83% now for 12 quarters and so that is a very consistent trend where we retain all of our clients and retain them at the same rate that we have been for quite some time.

When you look at the wallet retention rate, it's very consistent with the comments I think we made during our talk here and that we are seeing some continued good retention rates in Americas, some of the slowdown and a little bit of the deceleration you've seen in Europe that's driving the CV growth is driven by a little bit of the retention.

So what you are seeing it is in those pockets that Gene talked about as opposed to broad-based.

When we look at our retention rates globally and look at it in great detail, we feel very confident that we are seeing really good retention rates across the vast majority of the business and it's just a few pockets of places that are causing that consistent with the CV going from 14 to 13.

Okay, then just one last one for me.

Can you guys just hit on which currencies we should we think about having the greatest impact on the guidance adjustment?

Is it the yen, the Canadian dollar, etc.?

Well, our biggest currencies other than the US dollar are the euro and the pound and those are by far the two biggest.

So as those move that, that's where you going to see the biggest impact.

Certainly if you work your way down, you have the Australian dollar, the Canadian dollar, and the Japanese yen.

Those are really the top five currencies that have an impact, but the two are the ones that really move the needle the most.

But I'm asking from the standpoint, weren't the euro and pound rates against the dollar more stable year to date than some of these other currencies?

So I'm just wondering what drove the adjustment in terms of the moves given that it seems like the euro and pound exchange rates are more stable.

Yes, that's why we only moved to buy 1%, so there was enough of a move that we felt it was material enough to update our guidance for the foreign exchange move, but it hasn't been significant, which is why we only moved it 1%.

Okay, thank you.

Tim McHugh, William Blair.

Yes, thanks, I was wondering if you can just elaborate in the US what you feel like you are having the most success with in terms of just kind of the operating strategies to drive the slight acceleration.

I know you are always doing a couple things but if there's any specific strategies that are helping to drive productivity up a little?

Tim, it's Gene.

It's a continuation of things we've been doing over time.

So it starts with things like productivity initiatives in the sales force, which are things like improving our training.

It's also things like the tools that we give our salespeople.

We also have introduced, every quarter we introduce a set of product enhancements and so there has been continuing sort of product enhancements.

And as I mentioned, we tend to roll those things out in the US first, in the Americas first and then through the rest of the world in different regions.

And so that is kind of where you see the first impact of these things.

That gives you a flavor for it.

It's things like sales tools, and training and product enhancements.

Okay, I guess what's your thought process on sales force expansion as we go through the year?

You added a decent amount and the year-over-year growth rate picked up a little.

Would you expect that to continue to pick up or do the pockets of weakness in Europe I guess give you pause from accelerating that too much?

As you know, our long-term objective is to grow our sales rate at 15% to 20% a year and earlier this year we said this year we are planning to grow at approximately 15% and we are still planning to grow at approximately 15%.

Okay, great.

Thank you.

Joseph Foresi, Janney Montgomery Scott.

I wonder if we could go back to Consulting.

I mean you guys put up what looks like a pretty decent quarter in that business.

Can you talk about the momentum there and I know you give a backlog number, but just maybe more of the feel of what we can expect that business going forward?

It's Gene.

In the Consulting business, we had some deals slide between from Q1 to Q2 and so gave us a stronger Q2 than kind of -- you have to look at the two quarters kind of together and I think that's indicative of what you would expect to see on a go-forward basis.

We have seen good strength with Consulting across all of the geographies that we serve and in the two major segments, core and CFC.

So we are seeing good strength there but again, I do think we had some deals that slid between quarters.

So if you look at the first half, I think that's a good way to think about the Consulting business.

I guess kind of given the lumpiness that has taken place in that business over let's say the last 12 to 18 months, do you feel like you have hit a more normalized run rate?

Joe, it's Chris.

I think there's a couple things.

As we talk about all the time, the CFC business can be quite lumpy depending on when our clients choose to do some of these larger engagements.

So what we have said over time is that that business tends to be a little less predictable quarter over quarter.

So you can see some shifts in the quarterly results as a result of that.

Contract optimization, sorry -- I used an internal acronym.

It's contract optimization is the business that tends to be a bit lumpy.

I think what you saw in the quarter, as Gene mentioned, is a really nice balanced performance.

You saw the contract optimization business improve.

You saw, as Gene said, our core and benchmark business has also delivered some nice results.

And so as Gene said, I think when you look at the half, you can see kind of we are right where we wanted to be as we started the year in terms of our overall expectations for the business.

I can't sit here today and say that every quarter is going to be perfectly smooth because the business, as you know, tends to be a little less even as our Research business, which is a subscription model -- we recognize revenue evenly over the course of those contracts.

That's not the same model as Consulting.

So we feel very good about the results, very good about where we are today.

As you know, we've done a lot of things in that business to get to the kind of results we are at and we expect to continue to deliver against our longer-term expectations over time.

Okay, in Europe could you talk about any changes to your approach there?

In other words, either on the sales front or -- and/or pricing or deal size, any changes in your approach given sort of the weakness that we have had in that particular region?

It's Gene.

The same approach is pretty much we used in Europe as we used elsewhere with one exception, which is there is -- because of the economic environment very challenging in Europe for many companies and many government institutions, there's offerings in our product line that are more focused on helping people save costs and so we emphasize the cost reduction part of our offering more there than we would in companies and institutions that have a lot of growth.

It's not like we don't do it elsewhere but it's just more of an emphasis.

Got it, then the last one from me, you talked about maybe an acceleration kind of in the business as we head towards the back half of the year.

Is that because we are returning to a normal state or do you feel like demand has improved in particular regions and that carries it?

I just wanted to get a feel for sort of that -- where that acceleration is coming from.

Just let me make sure we are clear on the comment I made.

What I said when we were talking about the Research business is that over time we certainly expect acceleration and what we also said was we weren't necessarily saying it's going to come in the third quarter, fourth quarter, etc.

What we really are saying there is that given the performance we are seeing, seeing the acceleration in the US, feeling good about the programs and things we put in place, feeling good as we look in detail across the business at much deeper levels, various regions and certain managers around the world, we are seeing great performance and great results and we certainly expect that that will continue to make its way through the rest of the world as things start to stabilize in Europe and some of the other pockets of weakness that we see.

So we certainly expect it for all those reasons and I wouldn't sit here and tell you today that we have forecasted you are going to see that acceleration in either Q3 or Q4.

Great, thank you.

William Bird, Lazard Capital.

I was wondering if you could give us your current philosophy on buybacks and potentially adding leverage for buybacks.

Separately for Events, could you talk about just what you are seeing in advanced bookings for exhibitors and attendees?

Thank you.

Thanks, Bill.

In terms of buybacks as those of you who have followed us for a long time know, we have been pretty aggressive in terms of using our cash, whether that's acquisition where we find them and they makes sense, which we will continue to do and absent those, continue to be aggressive in share repurchase and we spent about $100 million to date.

You should expect us to continue to be there.

So our strategy remains the same.

We think it's a great use of cash.

We're going to continue to be aggressive in the marketplace and we will continue to be buying shares back for the remainder of this year and into the future.

We still have $143 million on our share authorization program and so plenty of capacity.

And we also right now are not very heavily levered on a debt to EBITDA basis.

We certainly have no issues with taking our leverage higher for the right transactions, whether that is more aggressive share repurchase or the right acquisition.

We certainly have been much higher over time and have no concerns or issues with taking our leverage higher at all.

So that's kind of the comments on your first question.

On the second question around Events, our advanced bookings and indications for our Events in the back half of the year particularly symposium look really strong as strong or stronger than we saw in previous years at this same period time prior to the event.

So we feel really good about what we are seeing right now in the pipeline and what has already been booked for those events.

Chris, on leverage, is there a certain limit that you have in mind that the Company just philosophically wouldn't cross?

We have no problem being in the 3 to 4 times debt to EBITDA range for the right transactions because we could take it down very quickly with our cash-generating ability.

Could you go higher than that if the transaction was right?

Sure, we would absolutely look at that.

So we are very comfortable with our financial model, very comfortable with the cash we generate and so taking that level up for a short period of time and bringing it back down pretty quickly for the right transaction is no source of a concern for us at all.

Just one final question.

On Research, the lower guidance, is it due only to FX?

In the three segments, Research and Consulting are solely due to foreign exchange, no other reason for the change.

And on the Events business, we actually increased it because our performance has been so strong and it was offset slightly by lower FX.

So really Events was the only one that was changed for performance reasons and that was changed to the upside.

Great, thank you.

Jerry Herman, Stifel.

Thanks.

Good morning, everybody.

I do have a follow-up to the currency question.

You have been helpful with regard to how it impacted the top line.

Could you give some color in terms of how it has impacting the bottom line for the year outlook?

Sure, what we have said over time and it continues to be the case is we are fairly naturally hedged, so we have with revenues in around the world and particularly in those major currencies I mentioned earlier, we also have costs analysts, salespeople in those regions.

As we get bigger and bigger, the natural hedge is not 100% and so as you see a little bit of movement on the topline, it does start to filter as we have larger EBITDA now over time and so that's why you are seeing the slight change to the EBITDA side.

So while we saw the 1% reduction on the topline, it's about 1% on the EBITDA line or about $5 million and that's why it's relatively minimal to the earnings line.

Okay, great.

Maybe some additional color on sales force and realizing that you have targets there but can you talk sort of below the raw numbers what you are seeing with regard to recruiting, attrition, and sort of the tenure?

Is there a drift in tenure in either direction?

It's Gene.

In terms of our sales force, I'd say there's no important changes in any of the three things you mentioned.

So in terms of recruiting, we are seeing lots of interest for Gartner.

The technology sector is a very exciting sector to be in and we have a great brand name.

So attracting salespeople to Gartner has always been a very -- we are an attractive place to work for salespeople and that continues to be that way.

Our attrition is right in the range where it has been historically and where we expect it to be, so no change there either.

Okay, a question about Events.

Maybe you can help us with the dynamics of the quarter and the outlook.

The raw number of attendees was actually down and the revenue was up a lot.

Help us with regard to either pricing or mix in that business, both for the quarter and on a go-forward basis.

Great, just a couple things on price, actually.

Our average price was actually up nicely year-over-year.

We do increase prices in Events as we do with Research and every part of our portfolio in fact.

And so the average price, again when you look at average prices, it's also depending on the event.

So as the mix moves, certain events have higher price points than other price points, but overall if you try to normalize that, the average price per attendees is actually up, which is great.

There are -- when you look at the attendee mix, there are some mix of attendees that pay different price points and the mix has been -- has shifted to where we want it to be in terms of the attendees, and so we are very comfortable with what we are seeing on the attendee side at all of the events that we have had in the first half and continue to see really nice demand at this point for the events we are holding in the second half.

So that's kind of where we are on the Events business.

Great, final question for me just with regard to cash deployment, you referenced potential for deals.

Can you talk about pipeline or activity targets there relative to the past?

It's Gene.

Obviously we're not going to comment on any specific companies.

We do track a number of companies.

Today we are probably tracking on the order of 100 companies.

That's been true every quarter for the last five or six years and so we have a number of companies we think are interesting that we track and where it's appropriate, we maintain relationship with those companies and if the right strategic situation comes up at the right price, as has happened several times in the past, we will do an acquisition.

Okay, great, guys.

I'll turn it over.

Jeff Silber, BMO Capital Markets.

Thank you so much.

Over the past quarter or so we've been hearing a lot of cautious comments from a lot of technology companies and even your own company lowered your forecast for IT spending in the back half of the year.

I'm just curious how you can reconcile that with the bullish comments that you are seeing in your business?

Our business is not driven by technology spending.

It's driven by companies having initiatives in their business and so it's not really driven by technology spending at all.

So we are not sort of correlated with that.

Another way to think about it is there's like $3 trillion of technology spending and if that goes up or down a little bit, it just doesn't affect.

People are still buying trillions of dollars worth of equipment and services -- so whether that's $2.9 trillion or $3.1 trillion, they are still buying a lot of stuff, which is why whether it goes up 5% or 10% doesn't matter to us.

It does to some of the technology providers.

It's much more important.

That's helpful.

On a couple of the retention metrics in the Research segment, can you remind us is there any seasonality in those metrics?

You know, we always report our metrics on a four-quarter rolling basis to avoid that.

So there tend to be a little bit of seasonality at certain points in time, and so the reason that we don't report an individual quarter's retention is to normalize for that seasonality.

Okay, that's helpful.

I appreciate that.

Then also, Gene, in your comments you talked to some extant about Europe.

Mostly was good but there were some countries that are a little bit weaker.

I'm just curious if you could tell us generally which countries those were and what's going on there and how the focus to improve that is going?

Yes, so we are not going to break that out but it wasn't even necessarily the country level.

Meaning it was sort of pockets.

You shouldn't interpret that as even a whole country necessarily.

So we had -- if you look at our individual sales teams, we had teams -- in general teams did very well.

We had a few pockets where again we have operational improvements to make.

So again, more of internal issues as opposed to external?

Yes, again I would say that it is definitely internal.

Again, if you looked at our performance versus GDP growth in those countries, we didn't have the best performance in the countries with the best GDP growth or the worst in the countries with the worst GDP growth.

Again, it depends on the operational performance of the individual teams.

All right, great.

Thanks so much.

Manav Patnaik, Barclays.

Good morning, guys.

The first question on the Event side, clearly you guys are going to continue to do well there year-over-year and you can continue to increase the number of events.

Long-term, I guess two parts.

First in the medium-term, are there any particular themes or certain specific niche events that are driving sort of the growth there?

Then longer-term, is it just a game time decision year-over-year or is there a focus or a long-term plan to increase those four, five events every year?

It's Gene.

So there's no kind of niche events that are driving our business.

It's very broad.

If you look at it, we are getting great growth across all our geographies and across the vast majority of our events.

Again, I would characterize it as being very strong and very broad-based in terms of the performance.

It's not driven by any kind of niche-y thing or anything like that.

Long-term again, we intend to keep the same strategy in Events, which is we think there's plenty of opportunity to grow our existing portfolio of Events.

We will continue to do that.

And we intend to keep launching new events over time as well, very consistent with what we've done in the past.

Okay, just a follow-up on the M&A pipeline you talked about 100 interesting companies.

Maybe you could just help us understand like clearly there's a lot and you said they were all interesting, so what is the sort of hold back?

Is it you guys being very price-conscious?

Is it them asking for way too much?

What's the dynamic there in terms of why one of these 100 over the last couple of years haven't sort of been more than just an interest?

I'd say it's two things.

Pricing is certainly a factor because we want to make sure we pay the right price for any kind of acquisition we make.

The second thing is has to do with the owners and the management team.

If it's a private company, if the owners don't want to sell, then obviously we can't buy it.

Similarly even if it's a public company, we have to make sure that the management team is going to be helpful in an acquisition and that's part of why we often maintain relationships in advance and people kind of understand that how great being a part of Gartner can be.

Okay, just one last one.

Share count assumed in your guidance?

Just some housekeeping here?

From a share count perspective, no change to the original guidance, roughly $95-ish million for the year -- sorry -- 95 million shares for the year.

Sorry about that, not dollars.

All right, thanks a lot, guys.

We have no further questions at this time.

I will now turn the call back over to Brian Shipman for any closing remarks.

Thank you, Erica.

Thank you everyone for joining us today.

We look forward to updating you again next quarter.

Thank you for your participation in today's conference.

This concludes the presentation.

Everyone may now disconnect and have a great day.