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S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches
Peace, music and memories: As the 1960s fade, historians scramble to capture Woodstock's voices
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
In Senegal's capital, Nicaragua is a hot ticket among travel agents as migrants try to reach US
California authorizes expansion of Waymo's driverless car services to LA, SF peninsula
Critical asset just had biggest fall on record (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
College athletes will need school approval for NIL deals under bill passed by Utah Legislature
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches
Peace, music and memories: As the 1960s fade, historians scramble to capture Woodstock's voices
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
In Senegal's capital, Nicaragua is a hot ticket among travel agents as migrants try to reach US
California authorizes expansion of Waymo's driverless car services to LA, SF peninsula
Critical asset just had biggest fall on record (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
College athletes will need school approval for NIL deals under bill passed by Utah Legislature
S&P 500   5,137.08
DOW   39,087.38
QQQ   445.61
Lawyers who successfully argued Musk pay package was illegal seek $5.6 billion in Tesla stock
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
A US appeals court ruling could allow mine development on Oak Flat, land sacred to Apaches
Peace, music and memories: As the 1960s fade, historians scramble to capture Woodstock's voices
This is the #1 Stock to Buy for the AI Tidal Wave (Ad)
In Senegal's capital, Nicaragua is a hot ticket among travel agents as migrants try to reach US
California authorizes expansion of Waymo's driverless car services to LA, SF peninsula
Critical asset just had biggest fall on record (Ad)
Norway's hospitalized king gets a pacemaker in Malaysia after falling ill during vacation
College athletes will need school approval for NIL deals under bill passed by Utah Legislature

Gartner Q4 2022 Earnings Call Transcript


Listen to Conference Call View Latest SEC 10-K Filing

Participants

Corporate Executives

  • David Cohen
    Senior Vice President of Investor Relations
  • Eugene A. Hall
    Chief Executive Officer
  • Craig Safian
    Executive Vice President and Chief Financial Officer

Presentation

David Cohen
Senior Vice President of Investor Relations at Gartner

Good morning, everyone. Welcome to Gartner's Fourth Quarter 2022 Earnings Call. I'm David Cohen, SVP of Investor Relations. [Operator Instructions] After comments by Gene Hall, Gartner's Chief Executive Officer; and Craig Safian, Gartner's Chief Financial Officer, there'll be a question-and-answer session. Please be advised that today's conference is being recorded.

This call will include a discussion of fourth quarter 2022 financial results and Gartner's outlook for 2023 as disclosed in today's earnings release and earnings supplement, both posted to our website investor.gartner.com.

On the call, unless stated otherwise, all references to EBITDA are for adjusted EBITDA with the adjustments as described in our earnings release and supplement. All growth rates in Gene's comments are FX-neutral, unless stated otherwise. And his contract value comments exclude Russia from 2021. All references to share counts are for fully-diluted weighted average share counts, unless stated otherwise. Reconciliations for all non-GAAP numbers we use are available in the Investor Relations section of gartner.com website. Finally, all contract values and associated growth rates we discuss are based on 2022 foreign-exchange rates, unless stated otherwise.

As set forth in more detail in today's earnings release, 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 2021 Annual Report on Form 10-K, quarterly reports on Form 10-Q, as well as in other filings with the SEC. I encourage all of you to review the risk factors listed in these documents.

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

Eugene A. Hall
Chief Executive Officer at Gartner

Good morning, and thanks for joining us today. Gartner drove a strong performance in the fourth quarter with double-digit growth in contract value, revenue, EBITDA and EPS. We generated nearly $1 billion in free cash flow and we returned even more than that to shareholders through our ongoing share repurchase program. Enterprise leaders are dealing with high volatility and uncertainty, inflation accelerated to the highest level in 40 years.

The dollar was the strongest it's been in 20 years, and it remains extremely volatile. There are ongoing supply-chain issues. Energy prices have been volatile. The labor market has been volatile. Enterprises are assessing the impact of remote versus hybrid versus in-person work. There are widespread concerns of a recession. All these factors and more impact enterprises around the world.

Leaders need help navigating these turbulent times. And they know Gartner is the best source for that help. Our services often make the difference between success and failure for executives and their enterprises. We help clients succeed with their mission-critical priorities, whether they are in growth mode or cutting costs. With all this volatility, our most recent research shows that Chief Financial Officers are more carefully scrutinizing the expenses. But at the same time, are increasing investment in mission-critical priorities even in enterprises they are under extreme financial pressure.

Our research business continues to be our largest and most profitable segment. We help leaders across all major enterprise functions in every industry around the world. Our market opportunity is fast across all sectors, sizes and geographies and we're delivering more value than ever. Research revenue grew 13% in the fourth quarter. Total contract value growth was 12%. Contract value growth was broad-based across practices, industry sectors, company sizes and geographic regions.

We serve executives and their teams through two distinct sales channels. Global Technology Sales or GTS is our largest sales force. GTS contract value grew 11%. The large majority of GTS serves IT leaders and their teams. And we saw double-digit growth with this client segment, despite tough compares. GTS also serves leaders at technology vendors, including CEOs and Product Managers. In this segment, growth moderated, but still grew high-single-digits despite even tougher compares.

Global Business Sales or GBS serves leaders and their teams beyond IT. This includes HR, supply chain, finance, marketing, sales, legal and more. GBS contract value grew 19% in 2022. In the five years since we launched our GxL products within GBS, we've seen exceptional compound annual growth rates.

Gartner Conferences delivered extraordinarily valuable insights to an engaged and qualified audience. In the first half of 2022, we delivered most of our conferences virtually. In the second-half, we pivoted back to in-person for nearly all our conferences. Feedback has been excellent. Most in-person conferences we're sold-out in 2022 and we've sold significantly more than half of our exhibitor space for 2023.

Gartner Consulting is an extension of Gartner Research. Consultant helps clients execute their most strategic initiatives through deeper, extended project-based work. Consulting is an important complement to our IT Research business. Consulting revenue grew 24% in the fourth quarter. We exited the year with a strong backlog and pipeline.

Our business is fueled by our highly talented associates. During 2022, we grew our team by about 2,900 associates. With this growth, we ended 2022 with the lowest percentage of open positions ever. When we're fully staffed, we provide our clients better service, which results in better retention. We also sell more in territories that are fully staffed. We have carefully aligned our hiring with recent demand and a long-term opportunity we have for growth.

Our 2023 outlook reflects our most recent experiences from Q4. We've also been prudent in considering the potential impact of volatility from the global environment. We expect to deliver at least 21.5% margins across a wide range of economic scenarios. And our guidance has opportunity for upside if the business performs in line with historical trends. Craig will take you through our guidance in more detail.

One of the unique things about Gartner is that we provide value to enterprises that are thriving struggling or anywhere in-between. But exceptionally agile and adapting to the changing world we have sustained record of success. We're well-prepared as we enter 2023. We've carefully aligned staffing levels with demand and we have the lowest percentage of open positions ever. Our content addresses today's mission-critical priorities and we know the right things to do to be successful in any environment.

In closing, we again saw strong growth across the business. Looking ahead, we are well-positioned to drive growth far into the future. Even as we invest for future growth, we expect margins to increase modestly over time. And we generate significant free cash flow well in excess of net income. We'll return capital to our shareholders through buybacks, which reduces shares outstanding and increases returns over time.

With that, I'll hand the call over to our Chief Financial Officer, Craig Safian.

Craig Safian
Executive Vice President and Chief Financial Officer at Gartner

Thank you, Gene, and good morning. Fourth quarter results were strong with double-digit growth in contract value, revenue, EBITDA and adjusted EPS. FX-neutral growth was even stronger than our reported results. We also delivered better-than-planned EBITDA margins. During 2022, we generated almost $1 billion of free cash flow and we returned more than that to shareholders through stock repurchases.

Our financial performance for the full-year 2022 included total contract value growth of 12%, total revenue growth of 16%, EBITDA growth of 14%, diluted adjusted EPS of $11.27 and free cash flow of $993 million. We are introducing 2023 guidance, which reflects higher-than-normal variability in the set of reasonably likely outcomes. The guidance accounts for the tough compares at the start of the year and the opportunity for upside if near-term demand is stronger than we've built into the outlook.

With the catch-up hiring we did last year, we are very well-positioned to add value to enterprise function leaders and their teams across all industries and around the world.

Fourth quarter revenue was $1.5 billion, up 15% year-over-year as reported, and 20% FX-neutral. In addition, total contribution margin was 68%, down 100 basis points versus the prior year. EBITDA was $421 million, up 37% year-over-year and up 44% FX-neutral. Adjusted EPS was $3.70, up 24% and free cash flow in the quarter was $166 million.

We finished the year with 19,505 associates, up 18% from the end of 2021. About 40% of the headcount growth was catch-up from prior years. Our hiring has been carefully calibrated to revenue growth and future demand, and we are well-positioned from a talent perspective, heading into 2023.

Research revenue in the fourth quarter grew 9% year-over-year as reported, and 13% on an FX-neutral basis, driven by our strong contract value growth. Fourth quarter Research contribution margin was 74%, consistent with 2021. The contribution margin had a benefit during the quarter from somewhat lower headcount levels and travel expenses still modestly below our post-pandemic expectations.

For the full-year 2022, Research revenues increased by 12% on a reported basis and 16% FX-neutral. The gross contribution margin for the year was 74%, in line with 2021. Contract value or CV represents the annualized revenue under contract at a point in time. And looking at our global contract value across both GTS and GBS, more than 75% of our CV is from enterprise function leaders and their teams with the bulk of the balance coming from leaders at tech vendors.

Our enterprise function leaders business includes IT leaders who are end users of technology and who we serve through our GTS sales force and leaders of other business functions who we serve through our GBS sales force. In both cases, we serve leaders around the world and across all industries. We're helping these enterprise function leaders address their most important mission-critical priorities.

CV was $4.7 billion at the end of the fourth-quarter, up 11.9% versus the prior year and up 12.3% adjusted for the impact of exiting Russia. CV from enterprise function leaders across GTS and GBS grew at strong double-digit rates. CV from tech vendors grew high-single-digits compared to a high-teens growth rate in the fourth quarter of '21.

Quarterly net contract value increase or NCVI was $189 million [Indecipherable] business of almost $400 million. CV growth was broad-based across practices, industry sectors, company sizes and geographic regions. Across our combined practices all industry sectors grew at double-digit rates other than technology and media, which grew at high-single-digit rates. The fastest growth was in the transportation, retail and manufacturing sectors. We had double-digit growth across all of our enterprise sized categories. We also drove double-digit growth in nine of our top 10 countries with high-single-digit growth in the 10th.

Global Technology Sales CV was $3.6 billion at the end of the fourth quarter, up 10% versus the prior year and up 10.5% adjusted for the exit of Russia. GTS had quarterly NCVI of $138 million, while retention for GTS was 105% for the quarter. GTS new business was down 8.5% versus last year. New business with IT function leaders was up modestly year-over-year against the tough compare. New business with tech vendors facing even tougher compare against Q4 of 2021, which was its strongest quarter ever.

GTS quota-bearing headcount was up 18% compared to December of last year, about 40% of the growth was catch-up hiring from 2021. Our continued investments in our sales teams will drive long-term sustained double-digit growth. Our regular full set of GTS metrics can be found in the appendix of our earnings supplement.

Global Business Sales CV was over $1 billion at the end of the fourth quarter, up 19% year-over-year, which is above the high-end of our medium-term outlook of 12% to 16%. All of our GBS practices other than marketing grew at double-digit growth rates, led by supply chain and HR, which both continued to grow faster than 20%.

GBS CV increased $52 million from the third quarter, while retention for GBS was 112%. GBS new business was up 3% versus last year, I guess, a very strong compare. The two-year compound annual growth rate for new business was 9%. GBS quota-bearing headcount increased 22% year-over-year with a little more than 50% of the growth being catch-up from 2021. Headcount we hired in 2022 will help to position us for sustained double-digit growth in the future. As with GTS, our regular full set of GBS metrics can be found in the appendix of our earnings supplement.

Conferences revenue for the fourth quarter was $188 million. Contribution margin in the quarter was 53%. We held nine in-person conferences in the quarter. It has been very exciting for our business to return to in-person conferences. For the full-year 2022, revenue increased 82% on a reported basis and 90% FX-neutral. Gross contribution margin was 54%.

Fourth quarter Consulting revenues increased by 17% year-over-year to $138 million. On an FX-neutral basis, revenues were up 24%. Consulting contribution margin was 37% in the fourth-quarter. Labor-based revenues were $96 million, up 11% versus Q4 of last year and up 19% on an FX-neutral basis. Backlog at December 31st was $140 million, increasing 24% year-over-year on an FX-neutral basis with another strong bookings quarter. The inclusion of multi-year contracts in our backlog calculation, a change we described earlier last year, contributed about 13 percentage point to the year-over-year growth rate.

Our contract optimization business had a very strong quarter, increasing 36% as-reported and 39% on an FX-neutral basis versus the prior year. As we have detailed in the past, this part of the Consulting segment is highly variable. Full-year Consulting revenue was up 15% on a reported basis and 22% on an FX-neutral basis. Gross contribution margin of 39% was up 140 basis points from 2021.

Consolidated cost of services increased 19% year-over-year in the fourth quarter as reported and 24% on an FX-neutral basis. The biggest drivers of the increase were higher headcount to support our continued strong growth and the return to in-person destination conferences.

SG&A decreased 3% year-over-year in the fourth-quarter as reported and increased 1% on an FX-neutral basis. We had lower non-cash non-recurring charges in 2022 compared to 2021. On a comparable basis, SG&A was up due to additional headcount for sales and G&A functions.

For the full-year, cost of services increased 17% on a reported basis and 21% on an FX-neutral basis. SG&A increased 15% on a reported basis and 19% on an FX-neutral basis in 2022.

EBITDA for the fourth quarter was $421 million, up 37% year-over-year on a reported basis and up 44% FX-neutral. Fourth quarter EBITDA upside to our guidance reflected revenue exceeding our forecasts, most notably in consulting and expenses at the low-end of our expectations. EBITDA for the full-year was $1.47 billion, 14% increase over 2021 on a reported basis and up 19% FX-neutral.

Depreciation was $24 million in the fourth quarter, down modestly versus 2021. Net interest expense, excluding deferred financing cost in the quarter was $29 million, about flat with the prior year. The modest floating rate debt we have is fully hedged through maturity. The Q4 adjusted tax rate, which we use for the calculation of adjusted net income was 16.7% for the quarter. The tax rate for the items used to adjust net income was 23.2% for the quarter. Full-year tax-rate was 21.6% on the same basis.

Adjusted EPS in Q4 was $3.70, up 19% year-over-year. The average share count for the fourth quarter was 80 million shares. This is a reduction of about 3.7 million shares or about 4%year-over-year. We exited the fourth quarter with about 80 million shares outstanding on an unweighted basis. For the full-year, adjusted EPS was $11.27. EPS growth for the year was 22%.

Operating cash flow for the quarter was $203 million. Excluding insurance proceeds in Q4 of 2021, operating cash flow is down about 7%. Q4 cash flow was impacted by Hurricane Ian, which hit our Center of Excellence in Fort Myers extremely hard in late-September. While we were able to sell and service our clients from Fort Myers, we did have some delays in getting invoices out as quickly as we normally would. Elections for some of these delayed invoices slipped into January, but we are now caught up.

Capex for the quarter was $38 million, up about $16 million year-over-year, led by increases in capitalized technology labor costs and catch-up laptop spend. Free cash flow for the quarter was $166 million. Free cash flow growth continues to be an important part of our business model with modest capex needs and upfront client payments. As many of you know, we generate free cash flow well in excess of net income. Our conversion from EBITDA is also very strong with the differences being cash interest, cash taxes and modest capex, partially offset by strong working capital cash inflows. Free cash flow as a percent of revenue or free cash flow margin was 18% on a rolling four-quarter basis. On the same basis, free cash flow was 68% of EBITDA and 123% of GAAP net income.

At the end of the fourth quarter, we had almost $700 million of cash. Our December 31st debt balance was $2.5 billion. Our reported gross debt to trailing 12-month EBITDA was under 2 times. Our expected free cash flow generation, unused revolver and excess cash remaining on the balance sheet, provide ample liquidity to deliver on our capital allocation strategy of share repurchases and strategic tuck-in M&A. Our balance sheet is very strong with $1.7 billion of liquidity, low levels of leverage and effectively fixed interest rates.

We repurchased more than $1 billion of stock throughout 2022. We expect the Board will refresh our share repurchase authorization as-needed, which they did earlier this month. We now have about $1 billion authorized for share repurchases. Across the past two years, we have returned $2.7 billion to shareholders by repurchasing more than 11 million shares. Over that timeframe, we have reduced our shares outstanding by 11%. As we continue to repurchase shares, our capital base will shrink. This is accretive to earnings per share and combined with growing profits also delivers increasing returns on invested capital over time.

Before providing the 2023 guidance details, I want to discuss our base level assumptions and planning philosophy for 2023. For Research, we continue to innovate and provide a very compelling value proposition for clients and prospects. Executives and their teams face uncertainty and challenges and they recognize how Gartner can help regardless of the economic environment. Our plan allows for a higher-than-normal level of uncertainty in the world, as Gene discussed. We've got tough compares across the business and particularly with tech vendors for another quarter or two. We've taken a prudent approach based on historical trends, as well as more normal patterns, which we reflected in the guidance.

If near-term demand is stronger than we've built into the outlook, and NCVI phasing retention rates and non-subscription growth perform closer to the way they have historically, there will be upside to our guidance. In addition, our teams are focused on driving greater growth than what's embedded in the guidance.

Finally, as you think about GBS, overall CV and revenue growth for 2023, please keep in mind that we closed on the divestiture of a small non-core asset last week. We sold TalentNeuron, which we acquired as part of the CEB transaction for $164 million. In the earnings supplement appendix, we've provided historical contract value updated for 2023 FX rates, as well as the removal of TalentNeuron from prior years.

For Conferences, we are basing our guidance on being 100% in-person for the 47 destination conferences we have planned for 2023. We expect to return to more typical seasonality for the business with fourth quarter the largest followed by the second quarter.

For Consulting revenues, we have more visibility into the first-half based on the composition of our backlog and pipeline as usual. Contract optimization is seasonally slower in the first quarter and remains highly variable. We had a very strong year in 2022, especially in contract optimization in the fourth-quarter.

Our base level assumptions for consolidated expenses reflect significant headcount increases from 2022 annualizing into 2023. Our plans for headcount for 2023 is more in line with our normal model as we've caught up on hiring last year. If demand is stronger than what's in the initial plan, we will have the opportunity to add even more great talent to our teams. We also expect T&E cost to more fully normalize this year.

Finally, we continue to invest in our systems and process automation, both client-facing and internal applications as part of our innovation and continuous improvement programs. We will continue both to manage expenses prudently to support future growth and deliver strong margins. At current rates, FX will be a modest tailwind to growth for the full-year with the benefit in the second-half.

Our guidance for 2023 is as follows. We expect Research revenue of at least $4.92 billion, which is growth of about 7%. Excluding the effect of the divestiture adds 1 percentage point to the year-over-year growth rate. We expect Conferences revenue of at least $445 million, which is growth of about 14%. We expect Consulting revenue of at least $500 million, which is growth of about 4%. The result is an outlook for consolidated revenue of at least $5.865 billion, which is growth of about 7%. Excluding the divested business from 2022 would add about 80 basis points to the growth rate.

As I've mentioned, we've taken a prudent approach to planning for 2023. This applies to revenue, operating expenses and free cash flow. We expect full-year EBITDA of at least $1.26 billion. We expect to be able to deliver at least 21.5% margins in most economic scenarios. If revenue is stronger than our guidance, we expect upside to EBITDA and margins.

Included in the guidance is equity comp of $132 million, up from 2022. We expect 2023 adjusted EPS of at least $8.80 per share. For 2023, we expect free cash flow of at least $920 million. Our EPS guidance is based on $80 million shares, which only assumes repurchases to offset dilution. Finally, for the first quarter of 2023, we expect to deliver at least $310 million of EBITDA. All the details of our full-year guidance are included on our Investor Relations site.

Our strong performance in 2022 continued in the fourth-quarter. Contract value grew 12%. Adjusted EPS increased 19%, fueled in part by the significant reduction of shares in 2021 and 2022. Over the past few years, our hiring has been carefully calibrated to demand and we are well-positioned from a talent perspective, heading into 2023. Our continued investments in our teams will drive long-term sustained double-digit growth. We repurchased more than $1 billion in stock last year and remain committed to returning excess capital to our shareholders over time. As I mentioned, we expect to generate at least $920 million in free-cash flow in 2023. In addition, we have ample liquidity and the net proceeds from last week's divestiture for our capital deployment initiatives.

Looking out over the medium-term, our financial model and expectations are unchanged. With 12% to 16% Research CV growth, we will deliver double-digit revenue growth. With gross margin expansion, sales costs growing in line with CV growth and G&A leverage, we can modestly expand margins. We can grow free cash flow at least as fast as EBITDA because of our modest capex needs and the benefits of our clients paying us upfront. And we'll continue to deploy our capital on share repurchases, which will lower the share count over time and on strategic value-enhancing tuck-in M&A.

With that, I'll turn the call back over to the operator and we'll be happy to take your questions. Operator?


Questions and Answers

Operator

Thank you. [Operator Instructions] And our first question comes from Jeff Meuler from Baird. Your line is open.

Jeff Meuler
Analyst at Robert W. Baird

Yeah. Thank you. Maybe if you could talk through what you think for the outlook for the tech vendor channel, just given the more recent risks and need to cycle through kind of renewals on annual and multi-year contracts. And related to that, is there an opportunity or a plan to reallocate some of those sales resources into kind of the functional leader channels?

Eugene A. Hall
Chief Executive Officer at Gartner

Hey, Jeff. It's Gene. I'll get started. So as we think about the tech vendor channel, I'm going to start with the tech industry itself, the technology companies and we think about those as being in two different segments, one is sort of enterprise IT and the other is consumer and devices, things like that. On the enterprise IT, we're expecting the technology vendors to grow about 7.8% globally during '23. And the reason they're growing pretty robustly is that enterprise IT spending, that's the ones that are not certainly consumers is selling to large complex B2B sales and they tend to be multi-year contracts, annual increases, etc.

So that's the technology vendors that are selling enterprise IT. They're also seeing continued demand for cloud, security, digital monetization and so all those things are growing at a much higher rate than the general tech industry. And when we survey CEOs, this is of end-users, their customers that are buying as B2B equipment. They basically said they believe digital modernization is still really important to meet the economic situation, as well as staffing situations they face, as well as consumer requirements for more technology and services they offer.

So on the enterprise IT just summarizing the enterprise IT tech vendors, we have to see that growing about 7.8% globally '23. On the consumer device side, that's going to be a lot worse. And since that we expect demand to be lower there and that's because a lot of demand was pulled forward during the recession and during the pandemic. And so there's sort of a tale of two cities in the tech industry. So that's the tech vendors themselves. Our business is predominantly on the enterprise IT side we've disproportionately served those. So looking-forward, we expect actually the tech vendors that we serve to be doing okay as opposed to the consumer and device manufacturers, which we expect actually just shrink during 2023.

So that translates into our own business. We expect to -- we had a -- as Craig mentioned results, our vendor -- our sales force that sells to technology vendors actually went from very-high teens growth -- I'm sorry, high-teens growth to low-single digit growth. So they actually -- high-single-digit growth. So they actually performed pretty well in the fourth quarter. Going-forward again, because our major business is selling to enterprise IT technology vendors, we expect that business to do pretty well on a go-forward basis.

Craig Safian
Executive Vice President and Chief Financial Officer at Gartner

And Jeff, the last part of your question on the territory assignments and where we're putting our growth, we've got a pretty robust territory optimization and analytics team that is always looking at this and we have the ability to very quickly and with a lot of agility flex up or down on where we're putting a territory. And so obviously, as we're looking at our selling environment and the growth of the business, we're continuing to allocate those resources accordingly.

And then the last thing I mentioned sort of had this vary in your question, but I'll pull it out is our business selling to the enterprise functions both in IT and outside of IT through GBS performed very, very well in Q4 and for the full-year and it was really the tech vendors that had, as Gene said, a very tough compare going from high-teens growth to high-single-digit growth in the quarter.

Jeff Meuler
Analyst at Robert W. Baird

Appreciate that. And maybe just a follow-up, given that comment on the strength selling to the functional leader channel. Productivity metrics, I understand kind of the way the metric works and the year-over-year acceleration in sales headcount growth, but productivity was down and quarterly productivity was also quite a bit down year-over-year. Can you just kind of like tease out 10-year mix impacts. I don't know if there's anything on anything further to say the tech vendor channel, but just kind of like help us bridge that, because it does look pretty soft. Thank you.

Eugene A. Hall
Chief Executive Officer at Gartner

Yes. So Jeff, I mean, again, the way to kind of think about the results in quarter. And if you look at it on a rolling four-quarter basis is again that the end-user side of the GTS business held up really, really well and performed really well throughout the year and in the fourth quarter, including the productivity. And again, just we saw that deceleration again from high-teens to high-single-digits obviously impacting the productivity as well. I think as we have brought in more and more new associates and the sales force, last year we talked about in 2021 rather, we had the best tenure mix we've ever had. In 2022, we had really the highest proportion of new people we've ever had, that's obviously an impact productivity we'll start to see the benefits of the tenuring over the course of 2023, as all of those people we hired over the course of 2022 start getting up the productivity curves.

Jeff Meuler
Analyst at Robert W. Baird

Got it. Thank you.

Operator

Thank you. Our next question comes from Heather Balsky from Bank of America. Your line is open.

Heather Balsky
Analyst at Bank of America

Hi. Thank you for taking my questions. I guess, first off, you've communicated a fair amount during the call that you are taking a prudent approach to guidance. And I know you just addressed the tech center piece of the business. But I'm curious if you can elaborate a little bit in terms of how you're thinking about the overall macro environment in your guide, especially on the Research side, and then as well for Conferences and Consulting, because it seems like the guide for those parts of the business imply the economy holds up pretty well. So just wanted to kind of get your deeper into your train of thought.

Craig Safian
Executive Vice President and Chief Financial Officer at Gartner

Sure. Good morning, Heather, and thanks for the questions. So I think a couple of thoughts there. So I'll start with Conferences and Consulting first. And so, as we look at those two businesses, again, coming off of very strong 2022s, if you look at the backlog position in Consulting, we actually entered the year in really good shape. We had a very strong delivery quarter in the fourth quarter, but also a very strong bookings quarter.

And again, based on the visibility that we have, roughly through the first-half of the year, we feel really good about the consulting business and trending looks good there. And again, I think, our client base to Gene's earlier comments about the tech sector are still embarking on a lot -- are embarking or continuing on a lot of digital transformation and major tech projects and programs, where our consulting team really can help them get the most value out of that.

On the Conferences side, again, we had a great year of returning to in-person conferences in 2022 and the team has done a fantastic job of driving forward what we call forward bookings, but basically locking up the revenue from the exhibitor side into 2023. And so as Gene mentioned, we've got significantly more than 50% of our pre-bookings already under contract as we head into 2023. So feel very, very good about the Conferences business as well.

On the Research side, again, our enterprise function leader business is performing very well and we expect that to continue to perform well. We do have continue to have tough compares there. But we do -- we're driving great value for our clients and we expect that to continue. We have been thoughtful and prudent about our experience in the fourth quarter with our tech vendor clients and making sure that we don't assume just some magical return to high-teens growth right out of the gate. And so we're trying to be prudent by making sure we use our most recent experience and rolling that through the four quarters from a research perspective, but again, end-user enterprise function leader business again performing very strong, nice double-digit growth rates, the tech vendor business still at high-single-digits, just down from where we were a year-ago.

Heather Balsky
Analyst at Bank of America

Thank you. And as a follow-up question. Sort of a follow-up on the last -- the earlier question with regards to the new associates and the hiring you've done. You're going into a potentially tougher environment in 2023 and you have a kind of a relatively young sales force. How are you preparing your teams for this environment and thoughts around ability to attract new customers in this environment with sort of associates who are, say, one year in.

Eugene A. Hall
Chief Executive Officer at Gartner

Hi, Heather. It's Gene. So the -- we always train our associates on what are the most important mission-critical priorities with our clients and prospects today. One of the issues that's going to be on people's minds in some industries, is going to be cost reduction. And so we train our salespeople on among other things, how to help clients with cost-reduction. We're a very small proportion of cost for any client. They can't -- they're not going to save a lot of money by cutting our services.

On the other hand, we can help them save whole number multiples of what they pay for us and their actual ongoing business. In addition to that, as I mentioned earlier, most companies even in a tough environment, still they want to invest in technology and it's on things like automation that help with their own labor situation, their own labor costs other kinds of costs again the continuing transition to more-and-more digital services that are often in just about every single industry.

So we train our new salespeople on both how to sell to clients that value proposition, which is -- the continuing trends is digital but also how to save money on their IT purchases, so that they actually get they could be more efficient over time. So the combination of those things and of course our traditional selling skills, where we I think are quite good at training new salespeople in terms of how to sell effectively you put those things together and let's new salespeople, they're not as productive as experienced salespeople, but they're actually quite good in the broad context.

Heather Balsky
Analyst at Bank of America

All right. Thank you for the help.

Operator

Thank you. Our next question comes from Toni Kaplan from Morgan Stanley. Your line is open.

Toni Kaplan
Analyst at Morgan Stanley

Thanks so much. Wanted to start out on the margins. Margins in the quarter really exceptionally strong again. And obviously, the guide being 21.5% next year, you've had about 2.5 quarters, let's say, of this sort of higher sales headcount level. I guess, are you fully back on T&E? What really going to drive the margins to that sort of low-20s level?

Craig Safian
Executive Vice President and Chief Financial Officer at Gartner

Good morning, Toni. Yeah, I mean, the way to think about the bridge from 2022, 2023 is consistent with the way we've been talking about it for the last several quarters. And so, the biggest piece of it is the annualization of all the hiring we did in 2022 and obviously paying the full load for all those new associates over the course of 2023, so that's by far the biggest piece of it. Lot of our hiring was backend-loaded or second-half loaded, I should say. So, obviously, there's a pretty significant uplift in the annual cost as we annualize all of those individuals.

There is an element of T&E to your point. And so we're -- fourth quarter was kind of in line with where we expect it to be, but obviously, the first part of 2022, we were still mostly in lockdown and not traveling and so there are incremental T&E expense that we expect in 2023 as we get to kind of the new normal of travel post-pandemic. And there's a few other nits here and there, but the two primary ones are really the annualization of headcount and a little bit more on the T&E side.

Toni Kaplan
Analyst at Morgan Stanley

Okay. Great. And wanted to ask about free cash flow. I know you mentioned a couple of things in the prepared remarks, but maybe just talk about why the free cash flow came in below the guidance and then '23 guidance also looked a little bit lighter than I was thinking. So any puts and takes on free cash flow will be helpful. Thanks.

Craig Safian
Executive Vice President and Chief Financial Officer at Gartner

Yeah, absolutely. So in 2022, the bulk of the story is what I discussed in my prepared remarks, which is just some invoicing delays coming out as a result of the hurricane. And we thought we would be able to get all caught up on that in 2022, and a bunch of it slip into 2023 and actually through the end of January, we actually are all caught up on that. So feel-good about both the '22 finish and getting that all behind us.

In terms of 2023, obviously, there can be a lot of variability to the free cash flow numbers. If you look at it on the surface from the guidance, the free cash flow margin is in line with what we'd expect free cash flow as a percent of EBITDA is roughly where we'd expect and the free cash flow conversion as a percent of GAAP net income is in the range as well. And so I think the free cash flow guidance and the free cash flow expectation is sort of in line with the business performance. I do think there are a couple of things impacting '23 that potentially put it a little bit below your expectations. Probably, most notably, cash taxes. So because of all that extra earning in 2022, we have a more to you pay in taxes and that's obviously reflected in the 2023 free cash flow guidance as well.

Toni Kaplan
Analyst at Morgan Stanley

Perfect. Thank you.

Operator

Thank you. Our next question will come from Andrew Nicholas from William Blair. Your line is open.

Andrew Nicholas
Analyst at William Blair

Hi. Good morning. Thanks for taking my questions. First one I wanted to ask was just on Conferences. I think you said in your prepared remarks that there would be 47 conferences in '23 or at least that's what's the plan to this point in all in-person obviously a decent bit lower than where you were running pre-pandemic. So just looking for an update in terms of strategy there. I know you you've talked about adding conferences to different functional lines over the course of the next couple of years. Where does kind of '23 sit relative to your ultimate goal on Conferences is there the potential for additional destination conferences to be added as we move through the year?

Eugene A. Hall
Chief Executive Officer at Gartner

Yeah. Hey, Andrew. So our strategy is to have conferences for all the major functional areas in our businesses, being IT, HR, finance, etc., as well as within something like cybersecurity applications and so forth. And we're far from that now -- and sorry, and also each of those conferences in each of our major geographies. And so, there's a -- it will take us a long time to get to the point where we have the aspiration I just said, which is to have conference for every major functional areas in every major geographic region.

And we're at because these conferences add so much value to our -- the attendees our seat holders that actually go and attend these conferences. We really want to expand those as quickly as we can, we're limited by what you do operationally, like how fast we can actually hire people and build these conferences. So we're going to continue on that path. We did that. We've had as many as we think we think we can handle operationally in 2023. If we find during the year, we can add more, we will do that. And certainly in '24, '25, '26, we expect to have a continuing expansion these conferences, again because of the very high value they provide to our attendees, our seat-holders and also our prospectus.

Andrew Nicholas
Analyst at William Blair

Great. Thank you. And then for my follow-up, switching gears a little bit. I just wanted to ask more specifically about growth in GBS. You talked about some of the things that's kind of evolved outside of the functional leader channel in GTS. But can you speak to the different businesses within GBS, how conversations with clients have evolved over the past couple of months there, and if there's any individual businesses there to call out, either positively or negatively relative to last quarter? Thank you.

Eugene A. Hall
Chief Executive Officer at Gartner

Yeah, we had great performance in GBS during 2022, including the fourth quarter. There is tremendous opportunity in GBS. As with the rest of our business to really grow GBS as quickly as we can to capture that enormous opportunity. We had growth in across all functional areas, very robust growth actually. In the areas that we're slower, it was more internal operational things that we had. So for example, we might have had one area where we were a little slower in hiring than in another area. And so, the places that GBS was a little slower, we believe are more due to more internal operational things that we're working on, but again, the overall performance was very strong. We're very happy with that performance.

Craig Safian
Executive Vice President and Chief Financial Officer at Gartner

Yeah. And Andrew, just to underscore that, I mean, 18.9% growth for the full-year coming off of a 24% full-year growth in 2021 is really, really strong continued consistent growth. And as I mentioned in my prepared remarks, both supply chain and HR were well-above 20% year-over-year growth, again coming off of really strong years in 2021 as well. And so, you know, really strong demand there. It's indicative of the fact that across all of GBS we are providing enormous value to the functional leaders that we serve in finance, HR, supply chain, marketing, sales, legal and so on.

Andrew Nicholas
Analyst at William Blair

Thank you. I'll get back in queue.

Operator

Thank you. Our next question comes from Seth Weber from Wells Fargo. Your line is open.

Seth Weber
Analyst at Wells Fargo & Company

Hey, good morning, guys. Gene, in an answer to one of the prior questions you mentioned customers looking to manage costs better. I'm wondering if you're getting any pushback on pricing, less appetite for multi-year contracts. Can you just talk about the pricing environment and how prospective customers are and what you think that might look like in an environment where inflation starts to come down? Thanks.

Eugene A. Hall
Chief Executive Officer at Gartner

Yeah. So we've had a larger than usual price increases over the recent past because of accelerated inflation and we've had I'd say essentially zero pushback from our clients on it. And if you look at the cost of Gartner for an individual user or for even contract for the company, it's a small-ticket items and whether it increases 3% or 7% isn't a swing back or swing factors. The value we provide and we provide a tremendous amount of value to these clients for the costs that they have to pay any alternative and can provide incredible value. So we have had, I'd say no measurable pushback on our price increases even though they are higher rates.

Seth Weber
Analyst at Wells Fargo & Company

Okay, and is there still appetite for multiyear contracts or is that --

Eugene A. Hall
Chief Executive Officer at Gartner

Absolutely. In fact, again, the many of our clients prefer multi-year contracts. It's a small-ticket item and they have administrative costs in dealing with it. And so, many, if not most of our clients actually prefer multi-years because the procurement people don't waste their time doing this over and over again. So you actually see demand from our clients for multi-years as opposed to the other way around.

Craig Safian
Executive Vice President and Chief Financial Officer at Gartner

Yeah. And on top of that, obviously, their mission-critical priorities are not bound by contractual term. So they want to make sure that they have ordered and insights to support their mission-critical priorities and so we've seen no pushback at all on our ability to sell multi-year contracts.

Seth Weber
Analyst at Wells Fargo & Company

Okay. And then, Craig, you mentioned the 50% sign-up pre-booking for the Conference business. Can you just -- how does that compare to pre-COVID levels for this time of year?

Craig Safian
Executive Vice President and Chief Financial Officer at Gartner

Yes, it's a great question. So actually significantly greater than 50% is actually the -- what both Gene and I said, we're actually comparable or perhaps a even a little bit stronger than we were pre-pandemic on that metric.

Seth Weber
Analyst at Wells Fargo & Company

Okay. Thank you very much, guys.

Operator

Thank you. Our next question comes from George Tong from Goldman Sachs. Your line is open.

George Tong
Analyst at The Goldman Sachs Group

Hi. Thanks. Good morning. You mentioned headcount growth in 2023 for research will be more in line with the normal model. Can you discuss how hiring is progressing in GTS and GBS, given the tight labor market? And what level of headcount growth do you think will be achievable this year?

Eugene A. Hall
Chief Executive Officer at Gartner

Hi, George. So the -- we are a very attractive employer in the marketplace and we go for talent, we're a place that people want to work. And we -- it's a -- actually tough place to get a job and we're very selective as well. And so we've had no trouble hiring at all. That's why our growth rate in our associate body has accelerated so much, as I talked about in my remarks. So again, we're an attractive place to work, people want to work here. And so we have a great associate value proposition. So we don't have any trouble hiring people.

Craig Safian
Executive Vice President and Chief Financial Officer at Gartner

And I think, George, the way to think about, just building on Gene's comments, we've in '21 and '22, we invested to rebuild our recruiting function and recruiting capacity and we have -- we have that now available rolling forward. As Gene mentioned, we have a great selling brand and associate brand more broadly for those recruiters to go out and attract people. As we think about the headcount growth for this year, it is more in line with our kind of quote-unquote normal algorithm, where we expect to grow headcount 4 to 5 points slower than CV growth.

That being said, given the recruitment capacity we have and given our standing in the market, if we see our CV growth accelerating, it gives us the opportunity to potentially go a little bit faster there. And if we see challenges with the business, we can easily tap the brakes and slow down. And so, we've built the plan that we feel real comfortable with that, is in line with our normal or our go-forward model, but also allows us the flexibility to flex up or flex down given on what we're seeing from a demand perspective.

George Tong
Analyst at The Goldman Sachs Group

Got it. That's helpful. And then as a follow-up, you're guiding to at least 21.5% EBITDA margins in 2023. Under what conditions, could you outperform the 21.5% target?

Craig Safian
Executive Vice President and Chief Financial Officer at Gartner

Yeah. I mean, I think the major way would be from revenue upside and as we mentioned in the prepared remarks, we've taken a prudent approach on the revenue on the expenses and on free-cash flow. And if revenue does come in stronger, we would anticipate potential upside to the margins. That's probably the primary way that you can see it.

We are, again, making sure that we are calibrating all of our expenses, most notably headcount, but all of our expenses with what we're seeing from a revenue perspective. And we're making sure that we're also seeding the right investments, so that we can sustain growth into the future and also deliver a really, really strong margin. So we feel like we've got the balance right now. We're obviously our structural margins are significantly higher than they were pre-pandemic. And as we talk about, we believe we can modestly expand margins on a year-over-year-over-year basis moving forward.

George Tong
Analyst at The Goldman Sachs Group

Great. Thanks very much.

Operator

Thank you. Our next question comes from Jeff Silber from BMO Capital Markets. Your line is open.

Jeff Silber
Analyst at BMO Capital Markets

Thanks so much. You mentioned the divestiture of the TalentNeuron business. Can we get a little bit more color on that? It looks like you own that business for about five or six years. What did they do? Why sell it now and should we expect any other kind of divestitures?

Eugene A. Hall
Chief Executive Officer at Gartner

Hi, Jeff. TalentNeuron is a business that provides data -- labor market data principally to people that in companies that are doing long-term planning for where companies should have their workforce. And we got the business when we bought CEB. It was an acquisition CEB had done. When we bought CEB, therefore we acquired that business. As we looked at it, we've been looking at the business to see does it really fit with our business on a go-forward basis and it's a strategic to us. We've looked at it in a lot of job, we looked for innovative ways we could use it. And the other day we decided that it was not a strategic fit and there were better owners for that business, but us, which is why we divested it. Let's just focus on our core business and HR which that was not really related to. In terms of other divestitures, again, if we see things that don't fit our core business, we will divest them. We'll discuss those ones as appropriate.

Jeff Silber
Analyst at BMO Capital Markets

All right. Great. Sorry. I got the name mixed up with Jimmy Neutron. In terms of my follow-up, nothing nitpick here you provided tremendous amount of data. But in looking at wallet retention, it did decline slightly year-over-year. Is there anything to read into it? Are you getting pricing concussed in, are there people pushing back on reordering etc.?

Eugene A. Hall
Chief Executive Officer at Gartner

Jeff, I won't comment on your Jimmy Neutron comment. We'll save that for later. In terms of wallet retention, again, I think it's consistent with the way we've talked about all the GTS business earlier and the overall Research business as well. Our enterprise function leader business performed very, very well across GBS and GTS. And essentially what you're seeing in the wallet is just that deceleration of the tech vendor business from high-teens growth to high-single-digit growth.

Even with that, it's still really strong at 105%. Obviously, well above 100% and significantly in excess of client retention. And so the core value is still there, but the slight deceleration or variance on a year-over-year basis can be completely attributed to tech vendor business and again I underscore the enterprise function business in both GTS and GBS performed very well in fourth quarter.

Jeff Silber
Analyst at BMO Capital Markets

Okay. I appreciate the colour. Thanks.

Operator

Thank you. Our next question comes from Manav Patnaik from Barclays. Your line is open.

Manav Patnaik
Analyst at Barclays

Thank you. Good morning. I just wanted to clarify on the tech vendor side again. I think you said it was a quarter of your business grew high-single-digits. And did I hear you say that isn't '23 assume it's going to be growing high-single-digits. I was just curious if that decel was due to churn or new business and how that's going to trend basically.

Craig Safian
Executive Vice President and Chief Financial Officer at Gartner

Hey. Good morning, Manav. So, we didn't talk about the expectation from a CV growth perspective for any part of the business. We don't provide CV guidance or anything like that. I think, again, it's -- as we've built the plan and our guidance for 2023, we've utilized what we saw in the fourth quarter in terms of retention metrics, new business metrics and productivity metrics and things of that nature and some of the inputs to extrapolate out our expectation for 2023.

Yeah, I think on the tech vendor side in particular, obviously there is a lot going on in that industry right now. We're still selling through it. High-single-digit growth is still pretty nice growth, just not high-teens growth. And so we believe that given the value proposition that we have or even leaders in that space that we've got a great value proposition and a great set of products and we'll continue to serve those clients and help them with their mission-critical priorities in the same way that we help the enterprise function leaders across GTS and GBS.

Manav Patnaik
Analyst at Barclays

Okay, got it. And then just on the sales, the question around the sales force growth, you said 4 to 5 points below CV. I guess -- and I think you said lowest level of open positions. So does that mean this year's growth is going to be less than the kind of -- maybe even much less than the kind of 10% to 15% we used to historically.

Craig Safian
Executive Vice President and Chief Financial Officer at Gartner

Yeah. So we recalibrated the way that we were going to grow the sales force back in 2019, and essentially, the model, obviously 2022 is different because we had to do a lot of catch-up. But our model moving forward is we want to essentially not dilute our overall cost of sale. And the way we do that is grow the sales headcount, call it, 4 to 5 points depending on wage inflation, slower than CV growth. That's our stated model moving forward. And so that's what we've got in place for 2023.

And so, yes, it will not be 10% to 15% headcount growth unless we see 15% to 20% CV growth. And again, as I mentioned during George's question, we believe we are set-up to speed-up or slow-down accordingly as-needed. And so we see CV growth start to accelerate. We have the recruitment capacity to be able to increase that. And if we see CV growth slowing, we obviously can tap the brakes as well. So we feel like we're in a really, really good placement talent perspective. We are as we both mentioned Gene and I carefully calibrating headcount growth in expenses and we feel like we've struck the right balance between making sure we're investing for future growth and delivering strong, strong margin performance.

Manav Patnaik
Analyst at Barclays

Got it. Thank you.

Operator

Thank you. And I am showing no further questions from our phone lines. I'd now like to turn the conference back over to Gene Hall for any closing remarks.

Eugene A. Hall
Chief Executive Officer at Gartner

Here's what I'd like you to take away from today's call. In the fourth quarter of 2022, we again saw strong growth across the business. Gartner delivers incredible value enterprises that are thriving shortly or anywhere between but exceptionally agile and adaptive to changing world, we've delivered a sustained record of success. We're well-prepared as we enter 2023. We're carefully aligned staffing level with demand with the lowest percentage of open positions ever.

Our content addresses today's mission-critical priorities and we know the right things to do to be successful in any environment. Looking ahead, we're well-positioned to drive growth far into the future. And even as we invest for future growth, we expect margins to increase modestly over time. We generate significant free-cash flow well in excess of net income. We'll return capital to our shareholders through buybacks, which reduces shares outstanding and increases returns over time.

Thanks for joining us today and we look-forward to updating you again next quarter.

Operator

[Operator Closing Remarks]

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