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Gartner, Inc. (NYSE:IT)

Q3 2011 Earnings Call

November 1, 2011 08:30 am ET

Executives

Gene Hall – Chief Executive Officer

Chris Lafond – Executive Vice President & Chief Financial Officer

Brian Shipman – Vice President, Investor Relations

Analysts

Peter Appert – Piper Jaffray

Dave Lewis – JP Morgan

William Bird – Lazard Capital Markets

Manav Patnaik – Barclays Capital

Robert Riggs – William Blair

Bill Southerland – Northland Capital

Kelly Flynn – Credit Suisse

Daniel Leben – Robert W. Baird

Brian Karimzad – Goldman Sachs

Operator

Good morning, ladies and gentlemen, and welcome to Gartner’s Earnings Conference Call for Q3 2011. A replay of this call will be available through December 2nd, 2011. The replay can be accessed by dialing 888-286-8010 for domestic calls, and 617-801-6888 for international calls; and by entering the passcode 44261278. This call is being simultaneously webcast and will be available 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.

Brian Shipman

Thank you and good morning, everyone. Welcome to Gartner’s Q3 2011 Earnings Conference Call. With me today is our Chief Executive Officer Gene Hall and our Chief Financial Officer Chris Lafond. This call will begin with a discussion of the quarterly financial results disclosed in today’s press release as well as an update of our increased revenue guidance, followed by an opportunity for you to ask questions. I’d like to remind everyone that the press release is available on our website, and that web address is www.gartner.com.

Before we begin we need to remind you that certain statements made on this call may constitute forward-looking statements. Forward-looking statements can vary materially from actual results and are subject to a number of risks and uncertainties, including those contained in the company’s 2010 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?

Gene Hall

Good morning, everyone. Thanks for joining us. Our Q3 results for 2011 continued the growth trend that we’ve delivered through the successful and consistent execution of our long-term strategy. As you’ve heard me say before, the fundamentals for our strategy have been and remain to create extraordinary research insight, to build strong sales capability, to deliver high-value differentiated offerings, to provide world-class service, and to continuously improve our operational effectiveness. This strategy has been successful across our lines of business and across all geographies.

In Q3 2011, research contract value continued to demonstrate strong growth. We achieved 15% contract value growth excluding the impact of foreign exchange, and ended the quarter at the highest level ever reported in Gartner’s history. The 15% year-over-year increase in research contract value was driven by both strong Q3 new business as well as strong client and wallet retention. New business was the highest of any Q3 in Gartner’s history, and wallet retention was 100% the second quarter in a row.

Our events business remains strong. In Q3 revenue growth of 12% excluding the impact of foreign exchange was above our long-term target of 5% to 10%. For our events held this quarter, attendees were up 12% and exhibitors were up 14%. We also added two new events and we continue to optimize our events portfolio for maximum value. In consulting, the solid pipeline we told you about on last quarter’s call drove revenue growth of 4% excluding the impact of foreign exchange, a notable improvement from the first half results we reported previously.

The overall momentum in our business has been driven by the success of our initiatives to improve sales force productivity, drive higher client retention, grow share of wallet among existing customers, and penetrate net new opportunities. Information technology continues to grow in importance for virtually every institution in the world. IT and supply chain management remain the best way for companies to improve in any macroeconomic environment.

These areas are and will continue to be complex and continuously evolving. IT and supply chain professionals need expert assistance and insight to help them make the critical business decisions they face virtually every day. Gartner is the best and most cost-effective resource they can turn to for that help, and often makes the difference between success and failure in any economic environment.

I just returned from our largest symposium event in Orlando, Florida. This even had our highest attendance ever with more than 8000 attendees, including more than 2000 CIOs. I had the opportunity to meet with a number of clients, and they were there because IT is central to the key initiatives and strategies in their institutions, and they know that Gartner is the best source for help to ensure these critical initiatives are successful. While at the Orlando symposium I also had the opportunity to interact with many of our sales people and they are as energized and enthusiastic as I’ve ever seen.

I’ve never been more confident or excited about our prospects for continued accelerated growth than I am today. We have a vast, untapped market opportunity for our services which we estimate at over $45 billion for research alone. There are hundreds of thousands of IT and supply chain practitioners who could potentially be Gartner clients but who have never been educated on the value we can provide. The Gartner brand is in a class by itself. Our products and services lead the market and we have a highly compelling business model. Gartner is the strongest company it’s ever been.

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

Chris Lafond

Thanks, Gene, and good morning everyone. We ended Q3 with double-digit growth in revenue, earnings and cash flow. Our results again demonstrate the continued successful execution of our strategy, our ability to consistently deliver on the long-term financial objectives we communicated over the past several years, and our overall importance on the strategic IT initiatives of our clients.

I’ll start today with a review of our business segment results for Q3 and finish with a discussion of our outlook for the remainder of 2011. Starting with research, Q3 research revenue was up 19% as reported, and 15% excluding the impact of foreign exchange. The gross margin in this segment increased over two points year-over-year to 68%, as our strong execution continues to deliver on the operating leverage (inaudible). All of our key research business metrics remained very strong in Q3. Contract value grew to a record level of $1.36 billion, a growth of 15% year-over-year excluding the impact of foreign exchange.

New business again increased year-over-year, continuing the trend we’ve seen since late 2009. The new business mix was balanced between sales to new clients and sales of additional services and upgrades to existing clients. While our contract value growth continues to benefit from our discipline of annual price increases and no discounting, approximately 75% of our contract value growth came from volume versus pricing. This volume growth reflects our success at 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 11,770 client organizations, up 6% year-over-year. This year-over-year growth is particularly notable given the uncertain economic environment, and we expect to increase our price list by3% to 6% per year on an annual basis.

Our client retention rate ended the quarter at 82%, consistent with last year’s Q3, and we’ve retained client retention at near record highs for five quarters in a row. In addition to retaining more of our research clients, the clients we retained increased their spending. Wallet retention increased five percentage points year-over-year to 100%. 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’ve discussed in the past, our retention metrics are reported on a four-quarter rolling basis in order to eliminate any seasonality.

In summary, our research segment continued its strong performance in Q3. We grew our contract value by $131 million on a year-over-year basis. We continue to see high levels of demand from clients and we expect continued acceleration in revenue and contract value growth over time. We remain confident in our ability to deliver 15% to 20% annual revenue growth in this business over the long term.

Turning now to events: events revenue increased 18% year-over-year on a reported basis and 12% excluding the impact of foreign exchange. During Q3, we held 16 events with 6676 attendees compared to 5954 attendees at 14 events held in Q3 2010. Total attendees at our events during Q3 were up 12% year-over-year and exhibitors up 14%. The Q3 contribution margin for events is seasonally lower in Q1 and Q3 given that both quarters are light and have fewer events scheduled. In addition, during Q3 we launched two new events. As we’ve mentioned in the past, first-time events have significantly lower margins as we build for the future. We built the impact of our 2011 launches into our full-year expectations and guidance at the start of the year.

During a seasonally light events quarter like Q3, new launches can have a material impact on the events segment contribution margin. In addition, two of our legacy summit events that have yet to be refreshed had solid year-over-year attendee growth but lower exhibitor participation. As Gene mentioned, we recently held our largest symposium event in Orlando, Florida. For those of you who attended this event you saw firsthand the strong attendance at this must-attend event. This was our largest symposium ever with over 8000 attendees. Our second-largest symposium starts in a few days in Barcelona, Spain, and we also expect record attendance at this event. Our remaining symposium events look equally strong as do our Q4 summit events, including our largest summit –Data Center – scheduled for early December. As a result, we’ve increased our full-year guidance for the events business segment.

Moving on to consulting, as we told you last quarter our pipeline heading into Q3 was solid and should drive improved results for the consulting business as the year progressed. That did occur and our consulting revenue grew over 8% in Q3 or 4% including the impact of foreign exchange. Backlog, the key leading indicator of future revenue growth for our consulting business, ended the quarter at $93 million, which represents a healthy four months’ of backlog. Additionally, our pipeline looks equally solid again as we start Q4.

Billable headcount of 482 was down slightly from Q2 and up 6% from Q3 2010. This reflects our continued investment in transitioning to a managing partner model for this business. Q3 utilization was 61% and revenue per billable headcount remained above $400,000 per year, ending the quarter at $404,000.

Moving to the income statement, during Q3 our total gross contribution margin increased by more than one percentage point year-over-year to 58.7%. This increase was due primarily to the successful execution of our strategy to capitalize on the high incremental margins and operating leverage inherent in our research business. SG&A increased by $23 million year-over-year during Q3. The increase was primarily attributable to the growth in our sales force as well as the impact of foreign exchange.

As of September 30th, we had 1215 [quarter-bearing] sales associates as compared to 1027 a year earlier. Since December 31st we’ve added 166 salespeople to remain on track to achieve our target of growing the sales force by 15% to 20% for the full year. Finally, G&A is flat year-over-year as a percent of revenue in Q3 and down for the first nine months of the year as we continue to tightly control G&A costs across the entire company.

Moving on to earnings, we delivered another strong quarter with solid earnings growth. Normalized EBITDA was $62.4 million, up 22% year-over-year and diluted income per share was $0.31, up 41% year-over-year. Our normalized EBITDA margin increased to 18% from 17.3%, or 70 basis points. This trend continues to reflect our commitment to improving margins while investing in the growth of our business. As expected, our Q3 2011 GAAP diluted income per share includes minimal non-cash amortization costs associated with AMR and [Burton].

Turning to cash, our strong performance in the quarter translated into an increase in cash flow mainly driven by cash from operations, which increased by 75% to $112 million. For the full-year 2011 and over the long-term, we continue to expect to generate free cash flows substantially greater than our net income given our tight cash management and the negative working capital characteristics of our research business. During Q3, we utilized our cash to return capital to shareholders through our share repurchase program. We repurchased over 1.5 million shares at a total cost of $53.4 million. We ended the quarter with a strong balance sheet and cash position and net debt of $53 million.

Our current credit facility runs through December, 2015, and at this time provides us with over $360 million of remaining borrowing capacity. We have ample cash flow and liquidity to continue to grow our business and execute initiatives that drive increased shareholder value. We continue to look for attractive acquisition opportunities as a potential use of cash. In absence of appropriate acquisition opportunities, we believe that repurchasing our shares remains a compelling use of our capital and we have over $360 million remaining under our Board authorization.

Now, let me turn to our business outlook for the remainder of 2011. We have had a strong year so far in 2011 and we are well-positioned for the double digit full-year revenue, earnings, and cash flow growth we expected as the year began. The details of our guidance are included in the earnings release issued this morning but let me take a minute to highlight some of the changes.

Overall, on a consolidated basis we are raising the low end of our previous-issued revenue guidance by $5 million and we’re maintaining the high end of our previous-issued revenue guidance at the same level. With respect to our research segment, we now expect revenues between $1 billion and $1.15 billion for the year. We’re raising the low end of our range by $5 million and expect this segment to grow revenues between 16% and 17% for the full year. With respect to consulting, we are now looking at revenues between $305 million and $320 million. We modestly reduced the bottom and top ends of our previous guidance range and now expect this segment will grow between 1% and 6% in 2011.

Finally, with regards to our events business we now expect revenues of between $140 million and $150 million, an increase of $5 million to both the low and high ends of our previous guidance range. From a seasonality perspective I will remind you that Q4 is the largest quarter of the year for the events business and will make up roughly 50% of the full-year revenues. There are no other changes to our previously-issued guidance.

So to summarize, all three of our business segments delivered solid year-over-year revenue growth. Gartner’s research business experienced another strong quarter. We grew CV by 15% and generated double-digit growth in research revenue. Our events business continued to show double-digit increases in revenue after a very strong 2010; our consulting business delivered year-over-year revenue growth during Q3 and has a solid backlog going into Q4. We are deploying our substantial cash flow to invest in our businesses and to return capital to our shareholders through our share repurchase program; and finally, we are currently and remain well-positioned for double-digit revenue, earnings and contract value growth, increasing returns to our shareholders for the full year and over the long-term.

With that we are ready to open the call to your questions. Operator?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions.) Your first question comes from the line of Peter Appert with Piper Jaffray. Please proceed.

Peter Appert – Piper Jaffray

Thanks, good morning. So Gene, the consulting backlog is down a little bit on a year-over-year basis. Do you view that as an indication of sort of flow through from the weaker macro environment? And then just more broadly on that question, what are you hearing back from the sales force in terms of what the customers are telling you about spending plans going forward?

Gene Hall

Hey, Peter. Our consulting backlog we aim to be in the three- to four-months’ revenue range, and that’s exactly where we are with it now. If you have it less than three months that’s a little tight; if you have it more than four months then what happens is clients get a little anxious because when they commission work they want to go ahead and get started on it. So we’re kind of right in the sweet spot of where we want with that business. If you look at our business we’re seeing really robust growth in research, really robust growth in events because that’s really where we’re focusing, where we focus the majority of our effort. So consulting’s exactly where we want it to be. It doesn’t really reflect the macroeconomic situation at all.

Peter Appert – Piper Jaffray

Okay. How about just in terms of, for the overall research business, things like sales cycle, average order size – anything that might indicate tone of business, better/worse in the context of the macro environment?

Gene Hall

The selling cycle remains about the same. There’s no measurable change. We’re seeing things looking very solid, very good and no change on that.

Peter Appert – Piper Jaffray

Got it. And then the last thing: sales productivity, you’ve accelerated the sales force growth in the current quarter. Just talk a little bit about the productivity experience in terms of new sales associates. Is it similar to what you’ve been seeing, etc.?

Gene Hall

We track our sales productivity as you know very closely, and one of the things that we’re very focused on is sales productivity of our new people. If we look at sales productivity of our new hires over the last period of time, that productivity has been increasing and it’s been because of a focus on it. And so we feel very comfortable accelerating the amount of our new hires because we’ve seen this increasing productivity of the new hires that we get.

Peter Appert – Piper Jaffray

Got it. Great, thanks Gene.

Operator

Your next question comes from the line of Dave Lewis with JP Morgan. Please proceed.

Dave Lewis – JP Morgan

Hey guys, good morning. First question is, Gene, you touched on supply chain in your open commentary and I was just hoping you could just give us an update. It might be more anecdotal on the AMR business and strategically your latest thoughts on that building out over time.

Gene Hall

So the AMR business, well, we call it supply chain. The supply chain business we’re doing very well. We had a supply chain conference this year in Phoenix and it was literally sold out it was so busy. In fact, we’re looking for a different venue in the future perhaps because of the growth we expect there. We also held a conference in Europe which was equally successful. AMR had not had conferences in Europe and we had one last year and then we had one this year. The one this year had huge growth over the previous year and we were very successful there. We’ve expanded the number of salespeople selling supply chain and again are seeing very good bookings in that business. So we’re very happy with the supply chain business.

Dave Lewis – JP Morgan

Thanks, Gene, that’s great. And then just if you can just touch on Europe, if you’re seeing any regionally… It sounds like from the information you provided on the Barcelona conference, it doesn’t sound like there’s any softness there but regionally is there any outperformance from one region to the other?

Gene Hall

Yeah, so as Chris said, I’ll start with the events since you mentioned that. Our Barcelona conference, we’re seeing as strong as the Orlando conference. And by the way, that one starts on Sunday so we have a pretty good handle of what it’s going to be like. If we look at the other ones that we have rolling out in the other geographies, they look very strong as well. In terms of our research business in Europe and our consulting business in Europe, I’d say that it’s pretty much the same as everywhere else. You see growth slightly faster in Asia, slightly slower in Europe but not to any large degree.

Chris Lafond

It’s Chris, just to give you a little more color there on the growth: I think if you look across, whether it’s geographic, whether it’s industry, whether it’s client-side – we still continue to deliver very balanced results actually in all three of the segments. So no matter how you look at our performance, whether it’s geographically or otherwise, really good, solid growth coming from pretty much everywhere across the business.

Dave Lewis – JP Morgan

That’s great, thanks guys. I’ll hop off.

Operator

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

William Bird – Lazard Capital Markets

Yeah, Gene, I was wondering if you could talk a little bit about just what you heard from CIOs at symposium. And second, your full-year guidance range seems to imply a fairly wide range of growth for Q4. Just wondering if you’re trying to communicate uncertainty; has there been any real change in the tone of business? Maybe you could comment on it. Thank you.

Gene Hall

Yeah, great question about symposium. It was actually very exciting, being down there with so many CIOs and there was a really common theme, which is IT is central to everything they do in their institutions and in their business. And they’re very cognizant of that and it’s traditional things like implementing CRM systems, data center consolidation, implementing virtualization; but also there’s a whole new set of things, on things like mobile computing and how does Cloud impact their business and things like that. And so we’re sort of seeing a tremendous amount of interest in those issues, and then also looking to Gartner to help with those issues. And it was really fun seeing all the excitement and enthusiasm that was down there. And I’ll turn it over to Chris for the second question.

Chris Lafond

Hey, Bill. Thanks for the question. Just in terms of our guidance and outlook, a couple things that I’ll share. First, we’ve not made any assumptions in our guidance for foreign exchange movement, so that’s the first thing we should understand which is there’s been a lot of variability there but we essentially have assumed that foreign exchange will stay where it is today. So if that moves that could change ultimately where we end, so we’re not in the business of trying to predict foreign exchange.

If you go through each of the segments in terms of our revenue guidance, I think the research revenue was pretty tight - $15 million on $1 billion revenue number – so we feel pretty confident as you can imagine. Given it’s a subscription business we pretty much know where that will come in, give or take a little bit. Consulting, at the $305 million to $320 million range, as we talked about in the past we have a contract optimization business that does have some variability and it’s a little less predictable in terms of forward pipeline. And those deals can come in relatively quickly and that’s why we have a little bit of a wide range there, and again, still relatively small given it’s a $300 million consulting business with a $15 million range.

And then finally events we increased. We have great visibility into what we’re seeing now at symposium; good visibility in the forward-looking bookings for all of the events happening in Q4 so we feel pretty confident there. So what I would tell you is in no way does our guidance range mean to imply that there’s any uncertainty or anything else in our business. We’re very confident with where we are and very comfortable with the ranges that we’ve established.

William Bird – Lazard Capital Markets

Thanks. And Gene, just a follow-up on productivity: it looked like your dollar growth in contract value per salesperson just dipped a little bit in Q3. I would think there’s some dilutive effect from onboarding; I was just wondering if you could comment a little bit on productivity from Q3.

Gene Hall

Yeah, great question. So the productivity in Q3, as you mentioned we had a richer mix of new people who have less productivity than people who have been here a longer period of time, and obviously that’s going to have a little bit of an impact on productivity. But again as I said earlier, while the mix was richer the actual productivity we’re seeing out of new people has been increasing over time.

William Bird – Lazard Capital Markets

Great, thank you.

Operator

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

Manav Pataik – Barclays Capital

Hi, good morning gentlemen. On deferred revenue, I guess on the contract value rather, I mean given what you’re already seeing in Q4 should we expect the growth rate to accelerate like it did last quarter or how should we try and model that?

Chris Lafond

When you look at the full-year revenue guidance, essentially you can back that into what we expect Q4 to be. It’ll be pretty consistent in terms of growth rates that we’ve seen in the early part of the year. Obviously the ending contract values we get through Q4 will be what will drive 2012 and that we’ll talk about as we get through Q4 and into Q1 when we do our earnings call there. So I would expect to see research continue to be strong; we’ve seen good, solid performance all year. It’s been very consistently delivering those results and we expect research to end the year between 16% and 17% revenue growth.

Manav Pataik – Barclays Capital

Got it. And based on your commentary, and just sort of trying to get an early read on 2012, it seems like there’s no reason to believe at least now that the growth or the contract value growth or the continued increase in backlog is going to show any signs of slowdown. Is that fair?

Chris Lafond

It’s a little too early to be talking about 2012. We obviously need to finish out 2011 first but it is our objective as we’ve continued to talk about and continued to remain confident in, of growing research at 15% to 20%, growing consulting 3% to 8% and events 5% to 10%. And obviously we’ve been doing much better than that on the events business. All of our metrics continue to be in those ranges and so at this point we feel very comfortable that our business continues to perform in those ranges today and into the future.

Manav Pataik – Barclays Capital

Got it, and one final one just on the variance on the EPS guidance range. Assuming the FX doesn’t really move from where it is today, based on your model are we on the higher end of that range?

Chris Lafond

We feel very confident in that range. We generally don’t provide color around where we are in the range so we feel very confident that we’re going to be in that range that we’ve given.

Manav Pataik – Barclays Capital

Okay, fair enough. Thanks, guys.

Operator

Your next question comes from the line of Robert Riggs with William Blair. Please proceed.

Robert Riggs – William Blair

Good morning, thanks for taking my question. Just in the consulting business, are there any notable trends in the types of engagements that clients are looking for maybe versus cost savings versus growth strategy going forward – anything to note there?

Gene Hall

Yeah, it’s Gene. No, I don’t think so. I think basically the mix of business, the mix of the kinds of engagements we’re doing has been pretty much constant over time, other than where we’ve purposefully changed it. So we have some areas we think might be a little higher growth and might focus in on those areas, but it’s on the margin as opposed to any major change.

Robert Riggs – William Blair

Okay. And then Chris, you mentioned the switch or the continued transition to more of the managing partner approach in consulting. How far along are we with that process there?

Chris Lafond

We are probably kind of three-quarters, two-thirds to three-quarters of the way through. We’ve been working on that over the past few years and as you know, what we’ve been trying to do there is make that investment while also managing improvements in the overall productivity and profitability of the consulting business, which I think we’ve done a good job of over the past few years. So I think we’ll still be on that task for a couple more years as we continue to ramp up and get a full managing partner capacity.

Robert Riggs – William Blair

Great, thank you.

Operator

Your next question comes from the line of Bill Southerland with Northland Capital. Please proceed.

Bill Southerland – Northland Capital

Thanks for taking the question. Most have been asked, actually, but I was wondering about headcount plans at this point in consulting.

Gene Hall

Hey Bill, good to hear you again. From a consulting perspective, as we’ve talked about over time what our objective there is, is to hire at capacity to deliver as we see the pipeline and backlog grow. So what you saw in the earlier part of the year was our backlog was flat to slightly down and so our headcount’s been flat to slightly down in the last couple of quarters. As that continues to build and grow we will add capacity appropriately. We still believe that the utilization of our consultants has some room for improvement so we can drive incremental revenue growth without adding capacity in some areas, but as we grow over time if we expect the consulting business to grow 3% to 8% you will expect over time the headcount growth to be in that range as we continue to move ahead.

Bill Southerland – Northland Capital

And so the utilization number for the quarter, I know it’s a tricky quarter just in terms of time off and so forth. Any other thoughts on that number for the quarter?

Gene Hall

Yeah, a couple things. Q3 is seasonally lower because of the summer holiday period, so if you look back at time it is a seasonally lower utilization figure for consulting. We have been higher in the past and I would say that our long-term target continues to be 70%, so we’re continuing to drive efforts to get the business to be at that level consistently over time.

Bill Southerland – Northland Capital

Okay, and then last one – the three groups within consulting, are they pretty much tracking kind of in the same course?

Gene Hall

Yeah, I would say generally continuing to track consistently across all three of those segments.

Bill Southerland – Northland Capital

Okay, thanks guys.

Operator

Your next question comes from the line of Kelly Flynn with Credit Suisse. Please proceed.

Kelly Flynn – Credit Suisse

Thanks, guys – a couple questions. First question, it relates to a couple other questions people have asked but I just want to drill down further into what you’re saying about near-term contract value expectations for research. I wanted to look at it this way: can you talk about if new sales, renewals or any other indicators deteriorated at all as Q3 progressed and then what we saw in October; and I know you can’t really predict the future but whether or not so far what we’ve seen in Q4 is tracking kind of in line with mid-teens contract value growth? Thank you.

Chris Lafond

Hi Kelly, thanks. So a couple things I would say there: first, overall from a renewal perspective, our renewals are pretty balanced throughout the whole year so every single quarter we’re seeing a pretty good indication. So give or take a few points around 25^% - that’s how much our book of business comes up for renewal. What I would say as we look at our retention rats, they’ve held very steady so from a retention point of view we’re seeing no issues or no changes in what we’ve seen earlier in the year, and they’ve been pretty consistent for quite some time.

From a new business perspective we’ve had record new business again in Q3. It’s the highest Q3 we’ve ever had so we still are seeing really good demand from clients, still seeing really good new business bookings. We’ve continued to add to the number of client organizations, so penetrating new organizations; and because of our wallet retention number increasing yet again we continue to penetrate the existing client base. So no matter how we slice and dice and look at it, and as I said earlier if you look at our CV growth geographically, industry-wise, client-size – all of those are up so we’re seeing a very broad-based performance. So at this point there’s nothing that we’re seeing that says we can’t continue on the delivery we’ve seen this year and keep research revenue in our long-term expectation range of 15% to 20%.

Kelly Flynn – Credit Suisse

Okay, so but for October specifically I guess versus Q3, does what you just said apply to October as well as September?

Chris Lafond

October, when you look in between quarters, the early part of the quarter tends to be relatively small. We’ve seen nothing; we don’t go into a lot of details in-quarter but we haven’t seen anything that we’ve seen so far. In addition to the comments Gene made, we’ve seen great demand in our events business and we’re seeing great demand in consulting; still seeing the continued performance in research. So nothing we’re seeing in the business at this point suggests anything.

Kelly Flynn – Credit Suisse

Okay, great. And then can I ask a second question related to the Orland symposium? I don’t know if you can get into this much detail but you mentioned record attendees and I think exhibitors as well. Can you talk about the growth for each of those for that symposium year-over-year?

Gene Hall

We don’t have that actually handy.

Chris Lafond

Yeah, if there’s another question, Kelly, you have I will try to dig it up.

Kelly Flynn – Credit Suisse

That’s okay, we can take it offline or if you have it later in the call let me know. But I’ll leave it at that, thank you.

Operator

Your next question comes from the line of Daniel Leben with Robert W. Baird. Please proceed.

Daniel Leben – Robert W. Baird

Thank you, good morning. We talked a little bit about AMR earlier. Can you talk a little bit about [Burton] and kind of the growth rate you’re seeing there as well as the aggregate contribution of those two products to the overall contract value growth?

Gene Hall

It’s Gene. We’re seeing very strong growth with what’s now IT One, and the aggregate contracts, that’s been just a complete homerun. As you can imagine that’s a product where all of our IT salespeople can sell it. It’s applicable to every one of our IT clients and so it’s having extremely, I’d say very strong growth. And if you look at the contributions together, both are doing great and we’re very happy with both of the results of those.

Daniel Leben – Robert W. Baird

Okay. And then Gene, to the extent you had a lot of conversations with CIOs at symposium, could you talk about the tone you’re hearing from them as they’re thinking about their 2012 budget planning process?

Gene Hall

Yeah. I mean basically there’s a full range, and this is true kind of in any economic times. There’s some people that are focused on growth-oriented activities and there’s some groups that are focused on cost reduction, like datacenter consolidation, stuff like that; and then virtually everyone is asking questions about these disruptive technologies like things like “Do I need an iPad app? How does mobile affect me? How’s the consumerization of IT affecting me? How does social computing affect me? Cloud?”

So all the traditional stuff that’s on people’s mind is I’d say more important than it’s ever been, and then you layer on top of that all these what I call “disruptive” technologies that are on their mind. And in fact, I think that’s one of the things that’s really driving strong demand at symposium and throughout our business, is the combination of the traditional drivers with the layering on top of it of all of these new technologies that have opportunities and frankly risks for these companies, too.

Daniel Leben – Robert W. Baird

Great. And then the last one from me, the consulting utilization down to 61%, struggling a little bit there. Does that number change in terms of the targets for all the historicals where we’ve seen utilization in excess of 70% with the new managing partner model? How should we think about a target for that going forward?

Chris Lafond

We have not changed our long-term expectations. We still absolutely expect and believe we can have that business in the 70% range, so what we’re seeing in the short-term has not caused us any reason to think differently about that business or think differently about utilization.

Daniel Leben – Robert W. Baird

Do you need to do something on the headcount nearer-term to start getting that number back or is it by driving the top line you’re going to get there?

Chris Lafond

As I said, we manage our capacity to the backlog but like right now, our expectation is that we’ll continue to see the kind of demand we saw in Q3. So if you look back at the first couple of quarters we commented earlier in the year and again that the first couple of quarters of the year were a little weaker than we expected; Q3 was a much stronger quarter after a strong end of Q2 bookings-wise. And we expect that to continue in there and ultimately drive utilization back to the levels that we expect.

Daniel Leben – Robert W. Baird

Great, thank you.

Operator

(Operator Instructions.) Your next question comes from the line of Brian Karimzad with Goldman Sachs. Please proceed.

Brian Karimzad – Goldman Sachs

Hi. I guess the first one would be at your symposium in Orlando, you guys did share some preliminary results of your CIO survey for budgets next year. I wondered if you could share that with us and put in some context with what that survey said last year, and then I have a follow-up question.

Chris Lafond

Yeah, we don’t actually have that handy so we’ll have to get that to you separately.

Brian Karimzad – Goldman Sachs

Okay, I can tell it to you, that’s alright. Generally it was pointing to low single-digit growth in budgets for next year, but looking at historic numbers am I correct in saying that the last couple of years that survey has also pointed to low single-digit growth?

Chris Lafond

Yes.

Brian Karimzad – Goldman Sachs

Okay, and you’ve grown despite that. I guess my follow-up is what do you need to see to be confident that you can achieve the mid- to high-end of that 15% to 20% research revenue growth next year? What are some indicators you need to see happen and some benchmarks for that?

Gene Hall

It’s Gene. So to me, the key thing in driving it – there are two key components in driving it. The most important one is our sales force productivity, and so we are continuing to drive sales force productivity. It’s been increasing over time as I mentioned. We are focused on existing salespeople and getting their productivity as well as the new salespeople. It ranges from things like training, the tools we give them, making sure we hire the right profile, etc., and so all of those things are driving sales productivity and that’s the single biggest driver. And then the second one is obviously adding capacity over time, which is we’re planning to add between 15% to 20% more salespeople over time. And that helps with the long-term but the thing that really drives it is what we get with productivity, which is why we’re so focused on that.

Brian Karimzad – Goldman Sachs

Okay. And one of your competitors had some issues with productivity. Did you get a sense that you were able to take some share in the quarter as a result of that?

Gene Hall

Well as I mentioned, we’re very happy with our productivity and as I said, the productivity’s good. It’s going the right direction and that’s what we like to see.

Brian Karimzad – Goldman Sachs

Okay, thank you.

Operator

(Operator Instructions.) With no further questions in queue I would now like to turn the call over to Mr. Hall for any closing remarks. Please go ahead, sir.

Chris Lafond

Great, and before Gene finishes up I just wanted to follow-up on Kelly’s question on the symposium. Kelly, we’re seeing good double-digit growth in both attendees and exhibitors in our Orlando symposium so in excess of 10% on the attendee side and even faster than that on the exhibitor side. So I don’t have all of the final, final calculations but it’s in that range and it was a very strong event. Gene?

Gene Hall

Yep, it’s Gene. I just want to thank everybody for joining us today. We look forward to talking with you again next quarter.

Operator

Ladies and gentlemen, that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.

Executive

Thanks!

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