Good morning, ladies and gentlemen, and welcome to Gartner's earning conference call for the 4th Quarter and Full Year 2015. A replay of this call will be available through March 8, 2016. The replay can be accessed by dialing 8882868010 for domestic calls. And 617-801-6888 for international calls by entering the passcode 6104516 8. This call is being simultaneously webcast and will be archived on Gartner's website at www.gardner.
Com for approximately 90 days. I will now turn the call over to Sharif Bakkar, Gartner's Group Vice President of Investor Relations for opening remarks and introductions. Please go ahead, sir.
Thank you, and good morning, everyone. Welcome to Gartner's 4th quarter and full year 2015 earnings call. With me today in Stanford is our Chief Executive Officer, Gene Hall, and our Chief Financial Officer, Craig Safian. This call will include a discussion of Q4 and full year 2015 financial results as disclosed in today's press release. We will also discuss our preliminary outlook for 2016 After our prepared remarks, you will have an opportunity to ask questions.
I'd like to remind everyone that the press release is available on our website investor. Gartner.com. Before we begin, I'd like 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 2014 annual report on Form 10 K and quarterly reports on Form 10 Q, as well as other filings with the SEC.
I would encourage all of you to review the risk factors listed in these documents. Finally, before I turn the call over to Jean, I'd like to remind everyone that we'll be hosting our annual Investor Day in New York next Thursday, February 11. Will be a great opportunity to hear from Jean and other senior leaders of the company. For those of you who are yet to register and would to attend, please send an email to investor. Relationsgartner.com, and we'd be happy to send you an invitation.
With that, I'd like to hand the call over to Gartner Chief Executive Officer, Gene Hall.
Hey, thanks, Sharif. Good morning, everyone, and thanks for joining us on our Q4 and full year earnings call. As you may have seen from our press release earlier today, we continue to perform well in 2015. We delivered against all our key metrics for the year, including double digit growth in contract value, revenue and earnings per share. I remain bullish about our business.
We're getting better, stronger, faster every year and our results reflected. We drove another year of double digit contract value growth in every geography across all client sizes in every industry except energy and utilities where we had single digit growth. Because of ongoing currency fluctuations, our neutral turns, so you have an easier basis for comparison. For the full year 2015, contract value growth was up 14% Total company revenues grew 13% and EBITDA was up 13%. This performance was driven by robust quarter over quarter results and demand for our services remains strong.
Research, the core of our business in our largest and most profitable segment grew revenues 18% in the fourth quarter of 2015 and contract value grew 14%. These results represent 24 quarters of consecutive double digit contract value growth. Enterprise client level retention was at 84% and enterprise level wallet retention was 105%. Both down one point from Q4 2014. Our consulting business represents an opportunity for us to deepen our research relationships with our largest clients.
Our Consulting business revenue increased 5% in Q4 2015. We also grew backlog 19% in Q4, representing our biggest backlog ever. 1 of our core strategies in consulting is to increase the number of managing partners. And we ended the year with 109 managing partners, up 18% over last year. Our events business drove another quarter of double digit growth in Q4 with revenues up 17%.
We hosted more than 24,000 attendees across 15 events in the quarter, including our flagship conference series Symposium ITX ago. Finally, our supply chain and digital marketing businesses continue to grow significantly faster than our average. These results reflected tremendous value delivered to our clients. And all of this occurred against a challenging economic backdrop. Current estimates predict revenues and earnings for the top 500 companies in the U.
S. Declined during 2015. Many major economic countries and regions around the world experienced slowing economic growth or outright declines. Our clients in the oil and gas industry suffered from a 60% decline in oil prices, which also impacted into our countries and regions. Unemployment rates in many European countries remained high.
And virtually all currencies continue to weaken relative to the U. S. Dollar. In this environment, we achieved double digit contract value growth and once again delivered on our key metrics for the year. Whether enterprises are leveraging technology to disrupt entire industries or being disrupted by technology or leveraging technology to drive operational efficiencies, technology remains a key component of their solutions.
This makes technology and necessity for virtually every enterprise. Gartner is at the heart of technology. Our clients rely on us for independent objective and fact based insights when making critical technology decisions. For most of our clients, we represent substantially less than 1% of their IT budgets, while delivering tremendous value and a very high return on their investment. In addition, our business is highly diversified by industry, geography and size of clients.
That's why despite the economic disruptions I just mentioned, we achieved double digit growth in every geography across all client sizes and every industry, except energy and utilities where we had single digit Because regardless of people business, we continue to make significant investments in our talent. In 2015, we added more depth to our global analyst community. Invested in recruiting and in training. We continually improved our customer service processes. In addition to our core IT businesses, we continue to accelerate our growth in supply chain and for marketing.
And we augmented our offerings in the small business space with 2 strategic acquisitions Nuvera and Capterra. Finally, for the full year, we repurchased more than $500,000,000 of our shares. With that, I'll now turn the call over to Craig. He'll provide more detail on our business results.
Thank you, Jean, and good morning, everyone. 2015 was yet another strong year for Gartner. We delivered on our financial goals while continuing to make significant investments to support our key strategic objectives and drive long term value for our shareholders. We continue to see robust demand for our services across the globe and the midpoint of our 2016 outlook, which I will discuss in a moment, is consistent with our focus on delivering consistent double digit revenue and earnings growth, strong free cash flow generation as well as maintaining a healthy balance sheet and liquidity profile. During the fourth quarter, we delivered double digit constant currency growth in contract value, revenue and earnings.
Our exceptional business model and focus on cash flow created a consistently high level of free cash flow conversion with a rolling 4 quarter free cash flow conversion of 156 percent of normalized net income. On an FX neutral basis, our for the quarter included contract value growth of 14% and research revenue growth of 18%, events revenue growth of 15% on a same event basis. Consulting revenue growth of 5% with backlog growth of 19% and normalized EBITDA growth of 19%. As Gene mentioned, on our strategy to capture the market opportunity ahead of us, winning new enterprise accounts and extending our penetration within existing clients. We delivered these results despite clients in this sector impacted our contract value growth and sales force productivity.
I will come back to this later in my remarks. Before taking your questions, I will discuss our 4th quarter business segment performance in-depth, provide some comments on balance sheet and cash flow dynamic before closing with remarks research revenue grew at 13% on an as reported basis and 18% on an FX neutral basis in the 4th quarter. Our newest acquisitions had a roughly impact on research revenue growth for the quarter. Points decline compared to the fourth quarter of 2014. On a full year basis, the gross contribution margin for research was 69% in 2015, flat when compared to the full on the gross contribution margin in research.
All of our other research business metrics remain very strong. Contract value grew to 1,760,000,000 a growth rate of 14% on an FX neutral basis. As Gene previously mentioned, our growth in contract value was broad based. Every region, every client size and every industry segment with the exception of energy and utilities growing at double digit rates. The energy and utility sector actually grew for us in 2015.
However, the growth rate in that sector slowed when compared to the performance from 2014. As we've discussed in the past, our business is highly diversified with our contract value mix roughly GDP in each country that we do business in. For Gartner, the energy and utility sector represents less than 5% of our contract value. From a regional perspective, it is worth noting that although contract value grew at double digit rates across all major regions, our contract value growth continued to be impacted by a few countries where growth has slowed. For example, Brazil.
Situation is extremely challenging for We continue to drive CV growth through strong retention rates and consistent growth in new business. Client retention down slightly from the fourth quarter 2014, while retention ended at 105% for the quarter, also down slightly once again impacted by the macro challenges I just mentioned. WALT retention is higher than client retention due to a combination of increased spending by retained clients, the fact that we retain a higher percentage seasonality. New business increased 9% year over between sales to new clients and sales of additional services and upgrades to existing clients. Also benefits from our discipline of we implemented a price increase on October 1 that averaged just north of 3%.
Our new business growth reflects our success in penetrating our vast market opportunity with both enterprise clients, up 8% compared to Q4 2014. And the average spend per enterprise continues to grow on an FX neutral basis. Again, reflecting our ability Turning to sales productivity. As we have detailed in the past, we calculate sales productivity as the net contract value increase what we call NCVI per account executive. We look at it on a rolling 4 quarter basis to eliminate seasonality and we use opening sales headcount as $211,000,000 in FX neutral terms.
Using our Q4 2014 ending sales headcount of 1881, as our beginning of period denominator yields NCVI per AE of $112,000 on a rolling 4 quarter basis, or a 5% decline over 4th quarter last year when the comparable figure was $118,000 per account executive at constant currency rates. The modest year over year decline in productivity was driven primarily by the deceleration in the energy and utility sector in a small number of markets. Many that have energy as a large portion of their economy. To
sum up,
we delivered another strong quarter in research. Despite challenges in the energy and utility sector as well as a tougher overall operating environment, we delivered contract value growth of 14% with retention rates near historical highs. Although we saw a slight decline in productivity in Q4, we are confident that the productivity initiatives we have in place and have recently introduced will positively impact contract value growth in 2016 and ultimately research revenue growth over the longer term. Moving to events. Our event segment had a great Q4 to end the great 2015.
On an FX neutral basis, events revenues increased 17% year over year in the quarter. Same quarter last year. As I noted earlier, on a same events basis, revenues were up 15% year over year. During the quarter, we held 15 events with 24,208 attendees compared to 13 events with 23,453 attendees in the fourth quarter of 2014. During the quarter, we held most of our symposium events.
Gartner Symposium is our flagship conference series. Specifically designed for CIOs and senior IT leaders. Symposium revenue growth was in line with our total events revenue growth for the quarter. Event's Q4 gross contribution margin was 57%, up a point compared to the year ago quarter. On a full year basis, Events revenue increased by 18% in 2015 with 65 events versus 61 events in 2014 and its gross contribution margin increased by 50 basis points to 52%.
Turning to consulting. On an as reported basis, consulting revenues were approximately flat year year, but increased by 5% on an FX neutral basis. The labor based business was up 2% versus Q4 of last year at constant currency. We also saw As we've discussed in the past, our contract optimization practice has a higher degree of variability than the other parts of our consulting business. This can significantly impact the results of this segment, either positively or negatively.
Our ongoing investment in managing partners is driving demand for our services. We now have 109 managing partners, an 18% increase over fourth quarter 2014. The underlying operating metrics of our consulting business also remains strong. On the labor based side, billable headcount of 606 was up 13% from the year ago quarter and 4th quarter annualized revenue per billable headcount ended at $389,000. The decline in revenue per billable head was driven by a combination of FX, lower utilization and a richer mix of more junior consultants who bill at lower rates.
Backlog, the key leading indicator of future revenue growth for our consulting business ended the quarter at $118,000,000, up 19% over this this and represents over 4 months of forward backlog, a great way to enter 2016. When combined with the visibility we have into the pipeline, we believe the consulting business is well positioned to meet our targets for this year. Moving down the income statement. SG and A increased by $20,000,000 year year in fourth quarter, primarily driven by the growth in our sales force. As of the end of 2015, we had 2171 direct sales associates, an increase of 2.90 dollars or 15% from a year ago and consistent with our previous guidance.
In the fourth quarter, SG and A was 70 basis points lower as a percentage of revenues than the year ago quarter, primarily due to better G and A leverage, which more than offset the continued investments in our sales capacity, recruiting and training capabilities. Moving on to EBITDA and earnings. We delivered another solid quarter of earnings growth. Normalized EBITDA was $137,000,000 in the 4th quarter up 13% year over year on a reported basis and up 19% on an FX neutral basis. For the full year, normalized EBITDA was $408,000,000.
Representing 5% growth for 2015 or 13% increase on an FX neutral basis. Moving down the income statement. Depreciation, amortization and acquisition and integration charges were all up year over year in fourth quarter, reflecting higher capital spending to support our growth as well as the impact of our recent acquisitions. Interest expense was $6,000,000 in Q4, reflecting our increased borrowing, which I will cover in more detail in a few moments. Our tax rate for the The tax rate was the U.
S. Government enacted the Path Act, which included the retroactive extension of several favorable tax provisions. 2nd, our mix of earnings was more in lower tax jurisdictions. Adjusting for acquisition charges, our normalized tax rate for the full year 2015 was 34.8%. GAAP diluted earnings per share was $0.78 in the fourth quarter 2015.
Our GAAP EPS includes roughly $0.14 worth of acquisition and integration charges. EPS excluding acquisition and integration charges was $0.92 per share in Q4, up 28% versus Q4 of 2014. For the full year of 2015, our fully diluted GAAP EPS was $2.06. GAAP EPS includes $0.33 of acquisition and integration charges. EPS excluding acquisition and integration charges was 2.39 per share for the full year, an increase of 7% on a reported basis and approximately 12% on an FX neutral basis.
Turning now to cash. For the full year 2015, operating cash flow of was essentially flat compared to full year 2014. This was driven by the adverse impact of a stronger U. S. Dollar, higher acquisition related incentive payments and higher cash taxes, which operating cash flow increased by approximately 7 characteristic of our subscription based business model, we generated free cash We define free cash flow as operating cash flow, less capital expenditures with cash acquisition and integration payments added back.
This equated to $316,000,000 in 20.15 or $3.72 per share on a fully diluted basis. When compared to our 2015 EPS, excluding acquisition and integration charges of $2.39, This represents a net income to free cash flow conversion of 156 percent, consistent with our free cash flow conversion of 153 percent from 2014. Share repurchases and strategic acquisitions continue to be our primary uses of our free cash flow and available capital. During 2015, we took significant steps to deliver value to our shareholders, utilizing more than $700,000,000 of cash on share repurchases and strategic acquisitions. 1st, on share repurchases.
$509,000,000 worth of shares, including $56,000,000 in the 4th quarter and repurchased an aggregate of 6,200,000 shares for the year. 2nd, on acquisitions, which totaled $196,000,000 in 2015. The addition of Capterra and Nuvera fits squarely within our strategy allowing us to meet the different capture the market opportunity ahead of us. We ended the year with a strong balance sheet and cash position, including the acquisitions and share repurchases I just mentioned. As of December 31, we had gross debt of $825,000,000.
We have $700,000,000 of interest rate swaps in place, which effectively locking our interest rates through September 2019 on this portion of our debt. Our cash balance as of December 31 with was $373,000,000, with 94% of our cash located outside of the U. S. Combination of our debt and cash positions represents a net debt position of $452,000,000 or about 1.1 times normalized EBITDA. Our current credit facility runs through gives us ample liquidity to continue $6,000,000 of revolver capacity.
We continue to look for other value creating acquisition opportunities as a potential use of cash We also believe that repurchasing authorization. Turning now normalized EBITDA, free cash flow and EPS. Our EPS guidance is on both a GAAP and adjusted basis with the latter excluding acquisition and integration charges. We'll also provide you with insight into the larger line items below EBITDA that get us to our EPS guidance the a double digit growth to revenues, EBITDA, EPS and free cash flow on an FX neutral basis. Our 2016 plan also includes investments that support our key strategic objectives and drive long term value for our shareholders.
The details of our 2016 outlook are also included in today's press release, but to summarize, our base level assumptions for our guidance are as follows: Our sales force grows approximately 15%. Sales productivity remains roughly flat from 2015 levels an FX neutral basis. And we have used foreign exchange rates from this week in setting our guidance and outlook for the year. As is our practice, we will provide updates on our quarterly earnings calls should there be any changes to any of these assumptions. For 2016, we are expecting total revenues of $2,390,000,000 to $2,450,000,000.
Or 12% to 15% growth on an FX neutral basis. A little less than two points of that growth can attributed to the impact and timing First, revenues for the research segment are expected to be $1,785,000,000 to $1,815,000,000 in 20 16. FX neutral growth of 14% to 16%. Again, continuing our trend of mid teens growth for our largest most profitable and most cash generative segment. 2nd, we expect consulting revenues of $330,000,000 to $345,000,000.
Or 2% to 7% FX neutral growth compared to 2015. And third, we expect to deliver events revenues of 275 to it. We currently expect to hold approximately 63 events in 2016. We expect normalized EBITDA for the full year 2016 to be between $440,000,000 $470,000,000 or 9% to 17% growth over 2015 on an FX neutral basis. Below EBITDA, we expect the cost associated with stock based compensation expense in 20 18 to be approximately $51,000,000 to $52,000,000.
Total depreciation expense should be approximately $38,000,000 we expect amortization to be around $24,000,000. $27,000,000 $28,000,000. 36% and approximately 35% for earnings, excluding acquisition and integration charges. Please note that our tax rate may vary from quarter to quarter due to the geographic mix of earnings as well as the timing of certain items. Our GAAP EPS guidance for 2016 is to be between $2.15 $2.37 per share.
This includes $0.40 per share of acquisition related charges. Excluding acquisition and integration charges, our guidance for EPS is to be between $2.55 $2.77 per share in 2016. This represents FX neutral growth of approximately 8 to 18% compared to full year 2015 or approximately 13% at the midpoint of our guidance range. Please note that our guidance is In 2016, we expect cash flow operations of $350,000,000 to $375,000,000 gross capital expenditures of approximately $47,000,000 and cash acquisition and integration payments of $42,000,000. This yields a free cash flow range of $345,000,000 to $370,000,000.
Or free cash flow per share of $4.18 to $4.48 in 2016. This equates to 12% to 20% growth when compared to full year 2015. Expected to again be well in excess of our normalized net income in 2016. Specifically, our guidance implies that we will deliver free cash flow conversion on 150% or greater, in line with our historical range. Now I'd like to provide some additional information allow for an understanding of The first quarter of 2016 has a number of larger events that were that we are moving in from Q2.
This is a significant change and less in Q2. As a result, we expect GAAP EPS to be between $0.32 $0.35 per share in the first quarter of 2016. We expect approximately $0.12 per share of acquisition and integration charges Q1 and Q3 still represent our smaller quarters for the year due to seasonality. As in years past, the 4th quarter is expected to be our largest with more than 50 percent of foreign exchange as it relates to our reported contract value. As we have communicated to you in the past, research contract values reported on an FX neutral basis throughout each year.
Year, we restate the opening contract value at current foreign exchange rates as a result of changes in FX rates since January of 20 18, contract value at January 1, 2016, is approximately $71,000,000 lower than the $1,760,000,000 reported on December 31. As a result, $1,690,000,000 is the baseline figure you should use for comparison for when judging contract value growth in 2016 on an FX neutral basis. So before taking your questions, let me summarize. We delivered another very strong and we continue to provide value to our clients regardless of the economic environment. In 2015, we delivered 14% contract value growth, and we grew the number of enterprises we serve by 8% in 2015 to almost 11,000.
Looking ahead, we are in a very strong position as a company and we continue to invest to capture the market opportunity ahead of us. The highest quality they've ever been. Our initiatives to improve operational effectiveness coupled with a positive operating leverage in working capital dynamics inherent in our business model delivered solid earnings and cash flow growth for the full year 2015. And we continue to expect to achieve high free cash flow conversion, consistent with our historical range of approximately 1.5 times our normalized net income. Going forward, we will continue to invest in our business organically and through acquisitions and return capital to shareholders through our share repurchase program.
Finally, our strong close to 2015 positions us well to continue to deliver double digit growth in revenue, earnings and cash flow into the future. The midpoints of our 2016 guidance reflect those continued trends. Now I'll turn the call back over to the operator and we'll be happy to take your questions.
And your first question comes from the line of Manav Patnaik of Barclays. Please proceed.
Yeah, this is Ryan filling in for Manav. I was just wondering if you could kind of flush out some of the commentary on the energy markets and how that's affecting product just to give us a sense of I don't think that that's getting any better. So just your assumption of flat productivity next year that commentary on the headwinds you saw in the fourth quarter?
Hey, Ryan, it's Jean. So, the energy sector for the energy and utilities. First is a small portion of our business. As Craig mentioned, it's less than 5% of our overall business. In that sector, despite as you know, oil prices went from like $100 a barrel to $30 a barrel.
So it's a pretty tough environment in that environment, we, as I mentioned in my comments, still had a single digit growth. In many of the countries are that in the oil segment like Brazil. Our growth decelerated, but again in Brazil, we had double digit growth. And so we're aware of what's going on in the industry. And technology is important in oil and gas in every industry in the world.
Even when they have cost problems often in fact almost always technology is part of the solution, not the problem. The reason we're able to grow even in very tough environments like that is because technology helps them actually achieve their cost objectives as well as other parts of their business like looking at, how to grow with our clients as well. And so we're pretty confident that even in tough economic situations with our individual clients or in countries that when we focus on the right issues, which is helping them save costs or helping them grow their revenues, we'll have great growth with there.
Great. Thanks. And I guess what I was trying to get at is if, productivity is assumed to be flat in the guidance, and there were some headwinds. Is there a risk to that if energy continues to persist that. So just more on the how should we think of productivity being impacted by these energy and utility headwinds?
So we've assumed product as Craig mentioned, we've assumed productivity is flat going forward at the rate that we achieved last year. We have a because we want to assume what we've actually achieved. We've got improved recruiting. We've got improved training. We've got improved tools for Salesforce.
That we introduced, sort of that we developed last year and are coming into fruition this year. And all those leading indicators say that our sales productivity should go up. So for example, if you look at if you look at the indicators of the people we recruited throughout 2015, that class of new recruits, their leading indicators are that they're going to have better sales productivity than the ones in the previous couple of classes. Similarly, our training we continue to enhance, and we've got some really innovative tools we think have potential to increase sales productivity a lot. We haven't baked that in because we won't actually see it happen.
And so we actually are looking for sales productivity. We're aiming for and working hard to get sales productivity to grow during 2016.
Got it. Thanks. And just on the M and A commentary, is there anything particularly industry wise geography that you're focused on Obviously, the small and medium sized markets were kind of a focus this year. Is that something we should expect to continue or is there anywhere else you're looking?
Track approximately 100 or a few more companies at any given point in time. So there's all different kinds of situations So I can't really characterize it as being one kind of particular area that we're looking at.
Got it. Thank you.
Your next question comes from the line of Jeff Meuler of Durud. Please proceed.
Yes, thank you. Another one on productivity and I recognize it doesn't impact this year's financial results all that much, but it was down in Q4 and this may be partially hit a bit too than looking at one word, but I think you said primarily due to energy utilities and other markets, are there offsetting factors that are offsetting some of these programs and initiatives that you have in place because it sounds like it was down in Q4, you're assuming flat in 2016. And I know you have initiatives, but just you did insert the word primarily. So, I'm guessing it's flat to down even outside of energy utilities and other markets. If you can just help us reconcile that.
Yes, sure, Jeff. Hey, it's Craig. Good morning. So the comment was really around the impact energy utilities and then some selected markets, most of which are very reliant on the energy utility sector. That said, as Gene just alluded to in the answer to the last question, we are very have been very focused on improving sales productivity.
We see great signs and we have great examples of large compliments or large teams where we've seen significant improvements in productivity on a year over year basis. That was muted confident that we're doing all the right things from a recruiting perspective, from a training perspective and from a tools perspective that will continue to improve productivity into the future. Okay.
And then just a comment maybe on how you're managing sales force headcount growth. There's a pretty big spread between constant see revenue growth in consulting and, or I'm sorry, consultant headcount growth. And that's despite, I think, a good contract optimization quarter. I know that you said there's more lower bill rate junior consultants, but still a fairly sizable spread. So how should we think about how you're planning to manage consultant headcount growth in 2016?
Yes, it's a great question, Jeff. A big portion of that growth is actually the investment in partners. So that's been a strategic priority for us. And the business is starting to bear the fruit of those investments. And that's really reflected in that really strong backlog position we see as we're heading into 2016.
We've been adding the bottom of the pyramid, if you will, from a more junior consultants to actually fulfill all that backlog. And as always, we'll manage and match our backlog growth, our revenue growth and our headcount growth so that we ensure we deliver to roughly our target margins in that segment.
Your next question comes from the line of Ajana Singh of Credit Suisse. Please proceed.
Hi, good morning. Thanks for taking my questions. I just wanted to ask on oil and gas, I guess, first off. Could you characterize what your exposure is to oil and gas clients. I realize you've got some country exposure there also, so might not be cut and dry but if you could help us with that.
And then if you could just perhaps also just talk about what is actually happening there? Is it the larger end of the spectrum of clients that's cutting back? Is it the smaller end? Are they cutting the number of seats, cancelling subscriptions? And, what are the price increases, I guess, that you're able to put in for the ONG clients that you are retaining?
Hey, On, just Craig. So we wrap up oil and gas in our energy and utility sector. That's the way we characterize it here internally. And as we mentioned earlier, it's less than 5% of our total CV, specifically companies in that sector. And then Geme will take your second part of your question.
Yes. Here's what's going on at kind of an operational level, which is The companies in distress in the oil and gas sectors this way today with the big foam prices are they're having budgets that are smaller. So instead of budgets that are growing last year, they're saying, okay, our expiration budget is lower. Our HR budget is lower. Our IT budget may be lower.
And so of course, they're looking to say, okay, how do we save money? And so, the question comes up sort of where does Gartner fit in this? We are a teaming portion of the cost for these companies. To give you a flavor for a large oil company, we typically be less than 2 10ths of a percent of their IT spending. For they were a great client of ours.
They're big clients. And so they're not going to save any money by cutting Gartner Services. On the other hand, we are very good at a
little bit of a little bit of
a little bit of a little bit of a little bit of a little bit of through things like automation. And so the value proposition we have to companies in distress is you won't you can't make your budget cutting our 2 10s of our percent or less is not going to help you at all, but we can help you cut 10% or 20% of your IT budget. And more importantly, we can help you use IT and the rest of the organization to save cost through automation. At any given point in time in the world, something some substantial portion of our clients like 30% are, have budget problems. They're going through bankruptcy.
They have problems. So this is something we deal with every day. It's not just, this in the last year. So, we're actually very good to deal with this problem. And, it does affect just selling environment, which is why our growth flowed to single digit instead of double digit in energy and utilities.
But we do we thrive in that kind of environment. And again,
I just want to highlight an
example I gave earlier where Brazil is a country where, it's very dependent upon oil. The economy is not doing that great there. And we slowed our growth slowed from higher double digit growth to lower double digit growth even in that kind of environment. And it's because of the things I just talked about, which is that we can help clients tremendously and have a great return on investment they're financial distress. We just have to make sure they understand we can help them actually in managing their costs.
It's not we're not we're a big part of their solution to their problems. And we don't cost very much.
Got it. That's helpful. Appreciate the color there. And then I guess on the acquisitions in 2015, would you call out any difference in their outlook this type of choppy environment versus your core businesses lever to larger enterprises. It seems that they added a little bit more to the growth profile than you're originally anticipating a for Q4, but then your outlook is for only 2% in 'sixteen.
So if you could just help us parse those
So let me get the first part of that, which is so we bought these companies last year. They are performing at or above our expectations so far. And as we look forward to 26 seen, we're quite optimistic that they're going to perform at or above our expectations. Is it correct? I'll let you.
Yes, on the 2016 piece, it's hard to, piece together from probably your perspective around looking at the growth rates on the different pieces of the business. We expect those businesses to grow nicely into 2016. They still represent 2018, 2018, a teeny portion of the overall research revenue and the total Gartner revenue but we do expect them to continue to
Your next question comes from the line of
Thank you. Good morning. Just wanted to ask about the research contribution margins. They're a little bit lower than what we were modeling. And so you mentioned that these were impacted by acquisitions, but just wanted to find out if there was anything else to call out there and if you could sort of size how much acquisitions impacted those research margins?
Thanks.
Sure, Tony. Good morning. Q4 is typically our lowest contribution margin quarter for research. If you look back historically, it's typically always the lowest quarter we have because of a lot of travel and other things related to Symposium season. That said, there were 2 primary impacts of the gross contribution margin decline on a year over year basis.
1, modest impact from the acquisitions. They run at modestly lower gross margins. Net margins are good overall, but the gross margins are a little bit lower. And then the second thing, there was an impact and we saw this across the full year, but impacted us in Q4 as well, a little bit from foreign exchange as well. And so while we are nicely naturally hedged.
It isn't always perfect when you get down to research revenue research expense, etcetera. So, if you look out, we were down 90 bps, I think, about half was FX a little bit, probably about a third was due to the acquisitions and a third due to some other stuff.
Okay, great. And then just in the events business, really strong guidance there. So just wanted to see if you could help us understand a little bit of the growth drivers better? I know historically you've talked about adding about 5 events or so a year and then have annual price increases Is there anything else in terms of specific initiatives that you're working on to increase revenue per attendee or anything else that we should be thinking about?
So I'll take the first part of that, which is Tony, which is the, our events growth is fundamentally driven by the fact that the stuff that I talked about before, which is every company is facing opportunities to use technology and is trying to figure out how best use technology. And so their senior technology leaders come to our events to help do it could be they're figuring how to be disruptors, figuring how to deal with disruptors, if you're the disruptee or how to use it in their business to drive revenue or cut costs. And so that's fundamentally what's driving it. We have lots of capacity at our existing events. And so we do add events on a regular basis, but we have lots of capacity.
Our existing events keep growing attendees at those events. In addition, as you pointed out, we have price talk about that.
Yes, we, because of all the dynamics that Jean just described, that does give us a significant amount of pricing power. In our events business. And as we shift the mix in terms of getting the right people to the right events, So CIOs and senior IT leaders to symposium heads of DI to the DI event, etcetera, as we do a better job of targeting people and getting them to the right events. We're actually able to exercise even greater pricing power. And so the fact that we do have capacity, the fact that we a great value and a great product for our attendees.
And the fact that we do have pricing power allows us to have confidence around continuing to grow that business at double digit rates.
Great. Thank you.
Your next question comes from the line of Gary Bisbee of RBC Capital Management. Please proceed.
Hey guys, good morning. First question, the new business growth or booking I think it was sub-ten percent for the 2nd quarter in a row and a sharp slowdown for the 1st half. I guess if that continues at that level, that would likely point to further deceleration in track value, but I know you haven't given that metric consistently till the second half of last year. So is part of this that just comps got more difficult or how do we think about that trending from here and what that might mean for CV going forward? Thanks.
Hey, Gary, how are you? So the CV growth is determined primarily by 2 things. The amount we retain and the amount of new business we put on top of that I think your characterization of the tougher compare, particularly in Q4 is accurate. We had an amazingly strong Q4 of 2014, which fueled us and gave us a great incremental research revenue growth as we headed in to 2015. We had a strong Q4, as Jean mentioned, or as we went through in all our remarks, new business was a little bit lighter than we expected.
Again, impacted also by some of the macro challenges that we described. So As Gene mentioned, energy and utility was a double digit grower for us and now it's dropped down to single digit Brazil was a double digit strong double digit grower for us drop down to a modest double digit growth All those things also had an impact on the new business growth. But again, we remain confident that we can continue to to grow our new business growth at strong rates, manage really strong retention that will equate strong productivity into the future.
Okay. It doesn't seem to me that the energy or the weakness in some geographic regions something that's going to change quickly. So what allows that new business to accelerate from here?
So it's basically the okay, the fundamental piece is what I talked earlier, which is there's this fundamental demand for help in addressing technology issues across the business. The thing that's going to drive the growth is we grow our sales force by 15%. If you look at our pipeline going into the year, our pipeline is very strong and that's what the new business growth, which is what kind of gives us confidence. Combination of we have great capacity. All the indicators on the account we've been hiring is that they are going to get off to a faster start had in the past.
And the lead indicator in terms of our actual pipeline looks great as well. So we're pretty confident we're going to have a great new business year in 20 16.
Okay, great. And then just one last one. As you think about the next few years, are there any gating factors to continuing the strategy you've used in recent years of debt financing a good portion of your buybacks. I guess, do you do the level of interest rates? And if they rise, does that matter to you?
I don't know. Do you look at your leverage ratio based on your U. S. Profits since I think your debt is here. And is that a factor?
Has that's clearly been rising more than your total leverage ratio? Or are you very that total leverage remains low and that you can continue to do this sustainably into the future? Thank you.
It's a great question, Gary. So we do look at on a total leverage basis, We have gross debt of just over $800,000,000 net debt of about 1.1 times leverage. And again, we also have this great benefit of amazing free cash flow generation. And so we are generating significant amounts of free cash flow year after year after year after year. And again, roughly 60 percent of that free cash flow gets generated here in North America.
So we have that at our disposal. The other comment I'd make on the interest rate comment, we have lots in $700,000,000 of our $800,000,000 or $825,000,000 worth of debt with interest rate swaps. So we're not We don't have exposure on continued interest rate rises on that one. And we'll continue to look at our capital structure, look at our free cash generation and look at other shareholder enhancing activities, whether they be share repurchases, acquisitions, or both as we manage our capital on a
Your next question comes from the line of Steven Sheldon of William Blair. Please proceed.
Hey, in for Tim McHugh. Good morning. First, in the consulting business, the gross margin has continued to trend down. I think around 40% back in 2010, but has continued to move down since then. I'm guessing a lot of that's the strong that you've seen in managing partner and a consultant headcount.
But I was just curious if you think that could reverse at some point and trend back up or if you view kind of the lower gross margin as more of a permanent structural change in the business?
Hey, Stephen, good morning. It's Craig. You're right. The primary driver of those reductions in gross contribution margin have been the investment in managing partners. We've been growing that very aggressively, well faster than revenue.
The goal of making those investments, though, so that we can drive, deeper relationships with our largest clients where we're doing longer engagements in repeat engagements. And inherently, those have better economics over the long term. So we continue to believe that this can be a 35% to 40% margin business for us. And we manage it so that we, or we plan for it so that we do see a modest margin improvements on a year over year basis. But again, the investment in MPs, we think is the real lever there for us to drive better, more consistent results for us and better, more valuable relationships for our clients.
Okay. That's helpful. And then just on the pace of share repurchases, it was a little slower in the second half of the year. So just wanting to to know how you're thinking about share repurchases as you move into 2016?
Yes. I mean, we did over $500,000,000 of repurchasing in the year, yes, it was heavily weighted towards the first half of the year, but we still did well over $500,000,000 for the year. As we've talked about, share repurchases remain a strategic use of our cash flow and our our balance sheet and we'll continue to look at both share repurchases and acquisitions as the 2 primary uses. As we talked about when we put the current authorization in place, we talked about it being a roughly 2.5, 3 year program. That's the way we still think about Your
final question comes from the line of Jeff Silber of BMO Capital Markets.
Thanks so much. Sorry to go back to the Salesforce productivity issue. I just wanted to clarify something. If we somehow or if you can take out the impact of the energy and utility sector, would your NCBI per AE have gone up in 2015?
So we probably would have seen a very, very modest decline on a year over year basis.
But that's not something you expect to continue going forward, correct?
Just one follow on that, which is, so the energy and utility sector is just the companies. If you look again, like I use Brazil since I've already talked about Brazil as an example. So, in Brazil, because they're the whole economy has a lot of reliance on oil and gas. If the oil price goes down from $130 to $30, have directly affected oil companies, but it affects government revenues. The government has less to spend.
It affects all the companies to supply the oil companies. So, you know, the, part of the fact that we had was directly driven by the oil and gas sector itself. But the other thing is, if you're in a country like Brazil, it affects more than that. And then putting perspective again, I want to drive home that the we didn't see shrinkage or anything, Brazil was growing a bit above our average double digit growth last in 2014. In 2015, it had double digit growth a little below our average growth.
So even in that tough environment, we had a great growth there. But again, if you go from higher double digit growth to a little lower double digit growth that has an impact on productivity. So it's not that we have things that are going from like great growth to negative. It's the double digit just quite as good as it was. And so that's the other small piece of it.
Okay. That's fair enough. I got that. And just to shift gears to the events, segment for a second. Was there an issue in terms of the size of the events this quarter, your average attendee per event blend own a bit.
I know you had 2 more events, but was there a mix shift or a timing issue? Thanks.
Yeah. Our attendee growth in the quarter, Jeff, was was 3%. I don't think you were in Orlando, but as you know, Orlando is our largest event, where we actually sold it out for 2 years in a row. And so you don't see a big attendee growth. When we have a sell out, we do see revenue growth because Again, we're attracting and targeting a higher quality of attendee and then we're able to get a higher price out of that.
But no, no issue you or no risk from the math you're doing. Q4 was a very strong quarter for us, from an events perspective. Particularly from an attendee revenue growth perspective.
At this time, I would like to turn the call back over to Gene Hall, Chief Executive Officer of Gartner. Please proceed, sir.
I just returned from our annual kickoff meeting with our sales managers from around the world. And our sales leaders are excited about our prospects for growth and feel well equipped success in any economic condition. As a company, we're in a very strong position. We have more impact on end users and technology providers than any other company in the world and we know how to be successful. The macroeconomic environment affects all companies, but Gartner is better prepared than average deal with these disruptions.
We're entering the year with the highest number of sales people than ever before. Our recruiting processes are better than ever. And all the new indicators on our people suggest the talent we have in our organization today is better than end. We're getting better, stronger, faster, day after day, year after year. We have a vast market opportunity, a powerful value proposition, winning strategy and an exceptional business model.
Looking ahead, we're prepared for ongoing macroeconomic challenges in 2016, and I remain confident we'll deliver another great year. We're well positioned for accelerating sustained growth for years to come. I look forward to giving you a more detailed update across our business at our upcoming Investor Day. Thanks for joining us today.
Thank you for your participation in today's conference. This concludes the presentation You may now disconnect.