Gene Hall: Good morning, Brendan. I mean, the biggest thing impacting contract value and contract value growth right now is the tech vendor part of the business. And so as we mentioned, the enterprise function leader part of our business grew at double-digit growth rates in the fourth quarter and actually has been a consistent double-digit grower through the course of 2023. And so if you look at that 7.7% overall contract value growth, the reality is the enterprise function leader portion of the business, which is more than 75% of total CV is growing at double-digit growth rates. And the tech vendor portion of the business, as we mentioned in our prepared remarks, was essentially flat for the year. And so as we start to see a reacceleration of the tech vendor business, which again is a little less than 25% of total CV.
That obviously has an impact on the overall CV growth. The other piece that I think is obviously super important is we caught up on our hiring quite a bit over the course of 2022. And so what that meant is over the course of 2023, we had a lot of people very early in their Gartner sales careers. And as you know, as people come up with tenure curve, their productivity increases. And so we feel confident that we’ve got enough capacity from a selling perspective heading into 2024, given the combination of tech sector rebound and probably more importantly, our salespeople coming up the tenure curve, that should provide the right amount of fuel, if you will, to drive contract value growth in 2024, and we’re growing our GTS/GBS headcount mid to high single digits during 2024.
And that’s really about accelerating and sustaining that growth as we roll into 2025 and 2026.
Unidentified Analyst: Okay. And then just any callouts or growth rates you can give us within GBS? Obviously, it’s still performing pretty well. So just anything – any other color you can give us?
Gene Hall: Yes. I mean it’s still 12.9% or 13% year-over-year growth on a bigger base. And so getting bigger and bigger and sustaining growth within our medium-term objective for the segment. As I mentioned in my prepared remarks, supply chain, legal, and HR are the three fastest-growing pieces of the segment. But obviously, all pieces have to be growing nicely for us to register a 13% year-over-year CV growth.
Unidentified Analyst: All right, thanks.
Operator: Thank you. Our next question comes from the line of Josh Chan with UBS. Your line is now open.
Josh Chan: Hi. Good morning. Thanks for taking my questions. I know that you don’t guide to CV trajectory or NCVI, but I guess it sounds like you are emphasizing more the tech vendor renewal dynamic here. So I guess, are we to interpret that as there being more of an impact of that on Q1 than normal. Could you just kind of explain the rationale behind calling that specific dynamic out the way you did?
Gene Hall: Yes. Good morning, Josh. Thanks for the question. So we’re always looking at the skew of contract end dates and contract value associated with that. And as we’ve talked about in the past, generally speaking, we’re pretty evenly skewed across the year. This year, we actually have a little bit of a bubble and not a huge one, but just a little bit more than average in – with our tech vendor clients in the first quarter. And so you may have heard us use the word prudent several times during our prepared remarks. We just want to make sure that our guidance reflects our most recent performance and what we know about the next couple of quarters coming up. And so we’ve taken a prudent view on our first half NCVI to take that into account. That said, again, I’ll reiterate, we do expect CV growth overall to bottom during 2024 and begin to reaccelerate with – even with that first quarter focus on tech vendor renewals.
Josh Chan: Okay. I appreciate the color there. That’s really helpful. And if I can shift over to margins. Could you talk about the different drivers of margin year-over-year? I mean, you have positive revenue growth, you have reaccelerating CV, the cost structure seems to be in a good spot. So are there more margin pluses and minuses? And how does that reconcile with the guidance? Thank you.
Craig Safian: Sure. Thanks, Josh. The simplest way to think about it is that with our targeted headcount growth in GTS and GBS of mid to high single digits. And think about that, not the only place that we’re actually growing but growing a little bit elsewhere, combined with normal merit and wage inflation, combined with a growing conferences business. If you look at the implied operating expense in the guidance, it’s up about 8% or 9% year-over-year, which aligns with the headcount growth and the conference growth that we’ve got dialed into the guidance. And so as we mentioned, a much more “normal” cadence of operating expense in 2024 as compared to prior years where we fell behind and we’re catching up, et cetera, et cetera.
So a much more normal quarter-to-quarter build of our operating expense. We are – the biggest thing that drives our revenue for 2024 is the ending contract value for 2023. And obviously, as we talked about on Andrew’s question, the revenue will lag the recovery in contract value. And so the reality is – and again, we’ve been not guiding, but pointing this way for the last several quarters that this was going to be the reality for 2024, which is we’re going to get back on our normal cadence of investing for the future and growing our sales force and growing other areas. We are dealing with the CV deceleration through 2023. And obviously, that has an impact on 2024 revenues. Obviously, the nonsubscription revenue performance also mutes the overall revenue as well as does the consulting growth rate, which, while still within our medium-term guidance, given we had such a strong year in contract optimization, we’re being thoughtful about the growth rates there.
