Gartner, Inc. (NYSE:IT) Q2 2023 Earnings Call Transcript

Craig Safian: I think one of our core goals with pricing is to make sure that, at a minimum, we are offsetting our projected wage inflation. And so, the past few years, when we were seeing higher wage inflation, we went a little bit stronger on price increase. This year, again, the labor market, for the type of people that we are recruiting is still relatively strong. But the wage inflation we expect to be a little bit more muted. We’re still working through all the details of the price increase, which, again, to your point, goes into effect in November. But I would suspect it’s a little bit lighter than what we’ve done the last few years, just given the inflationary environment, particularly wage inflationary environment, had abated a little bit.

Operator: And our next question coming from the line of George Tong with Goldman Sachs.

George Tong: Following up on some of the tech vendor non-subscription trends, can you talk about which products specifically are seeing reduced demand due to a slowdown in tech vendor marketing spend? And generally, is the non-subscription demand leading coincident or lagging with broader client IT spend?

Craig Safian: Just want to clarify your question. So it was which products are most impacted? Is that what the question was?

George Tong: Yeah, within your non-subscription book of products?

Craig Safian: Within the non-subscription part of the business, which, again, represents around 8% – or less than 10% of, let’s call it, of our overall research revenue, the predominant way we derive revenue there is through lead generation for tech vendors and really focus on the, I call it, non-enterprise IT market. So, smaller businesses, et cetera. And so, our GTS business is really focused on enterprise tech companies, whereas the non-subscription business is really focused on a combination of enterprise and really small business focused technology companies. And so, that’s where we’ve seen, on the small technology companies, the companies most focused on selling into small businesses, that’s where we’ve seen the biggest challenge.

Again, you’ve covered all the things that are happening in the tech market from funding and the overall dynamics there. But as those companies are recalibrating their operating expenses, clearly, marketing and lead gen is a place that they often look to get a big handle on. And I think that’s what’s happening. That said, they are still spending and spending well in that business. And as Gene mentioned earlier, and I think I mentioned too, we fully expect, once the market is recalibrated, it will get back to growing, but it’s predominantly around the lead gen stuff and the focus on lead gen in smaller businesses.

George Tong: Separately, can you talk about how the tech vendor non-subscription performance trended over the course of the quarter? Did you see a bottoming? Did you see further deterioration as you move through the quarter? And does your updated guide assume trends stabilize from 2Q levels or worsen from two key levels?

Craig Safian: I think it’s been relatively consistent with normal levels of volatility week to week and actually even day to day, but trends pretty consistent Q1 to Q2. And what we’ve modeled into our guide is essentially stabilization from those Q2 levels for the balance of the year.

Operator:

Operator: And our next question coming from the line of Jeff Silber with BMO Capital Markets.

Jeffrey Silber: I’m sorry to keep on focusing on the non-subscriptions piece. Normally, can you just tell us from a breakdown perspective, what percentage comes from tech vendors and what percentage comes from enterprise customers? And if we could just focus in on the enterprise customers component of that, can you talk about how that’s trending?

Craig Safian: 100% of the revenue comes from tech vendors in the non-subscription part of the business. So, 100% of that less than 10% of our overall Research business is tech vendor focused.

Jeffrey Silber: I wanted to actually circle back and talk about AI, but the potential impact on your business internally. Do you think it’s going to make your analysts more efficient? Do you think you might be able to reduce headcount from an analyst perspective just to take advantage of technology? Any thoughts would be great.