Good afternoon. This is Heather Balsky, BofA's Business and Information Services Analyst. I want to welcome you all to our fireside chat with Gartner's Senior Vice President, Investor Relations, David Cohen. David, I appreciate your time very much.
Glad to be here, Heather. Thanks for having us.
Yeah, it's great to have you at our conference. I wanted to start off by touching on you know, the slower sales growth Gartner has been seeing from its vendor customers. It's just an area of focus. Can you walk us through what happened, when it started, and how do you see that trending in 2023?
Yeah, sure. It's a great question. Let me give a little bit of context if there are folks that are sort of newer to the story.
Yeah, sure.
Gartner provides actionable, objective insight to enterprise function leaders and their teams. That's the bulk of what we do. Our value proposition is always focused around helping these leaders within these enterprises, they could be anywhere in the world, any industry, address their most important mission-critical priorities. We help them, and we grow as a result. We've got a strong track record of double-digit top-line growth. We use a measure we call contract value. It's the annualized revenue under contract at a point in time, and we've been able to grow that very well for many years, and we expect that to continue into the future.
You know, one of the things we talked about on the most recent earnings call you know, our growth had decelerated a little bit. We grew 12% contract value that's FX Neutral for, you know, for the quarter. That was up against the 16% compare that we had, as you know, in the year ago period.
Yeah.
We talked about roughly you know, three quarters of our contract value comes from enterprise function leaders. We serve all the functions of the enterprise. If you think about it, there's a CEO, he or she will typically have a number of direct reports, a CFO, a CIO, chief supply chain officer, chief HR officer, all the way across the functions. The titles and the roles can vary a bit, but we serve all of those functions. When we talk about enterprise function leaders, it's the people in those roles. We sell to individual subscribers. The people in those roles, their direct reports, and their direct reports.
Yeah.
That's the enterprise function leader piece, and that continued to grow double digits. We break it out into GTS, which are the technology leaders, as well as the tech vendors, which I'm gonna get to. We also sell to all of the other enterprise functions through GBS or Global Business Sales, and that's, you know, HR and finance and sales, marketing, all the way across. That continued to grow double digits. You know, GBS, we break out separately, and you can see that the growth there was high teens also against a tough compare, but very strong growth. The implied growth for the technology enterprise function leaders was also double-digit growth. Very good performance there. Coming back to the tech vendors to answer your question, we saw high single-digit growth there.
A little bit slower than where it had been. That was down against a very tough compare in the prior year where we had grown high teens.
Yeah.
you know, a little bit slower growth, the premise of your question, for Gartner still, you know, we think very good growth.
Yeah. That's really helpful. You know, you talked about it, you know, despite economic uncertainty, demand from your core enterprise function leader customers, you know, coming out of your fourth quarter was still very strong. You know, why do you think that is? You know, how has Gartner kept these customers engaged?
Yeah. I think it comes back to the core value proposition that we offer. If you put yourself into the shoes of one of these enterprise function leaders, CIO, CFO, chief supply chain officer, at any point in time, each of those individuals is gonna have their most important mission-critical priorities. They might have a short list. It might be three, it might be five, some people might have 10. At any point in time, they're gonna have some priorities. These are the things that they need to be successful at doing their job in order to help make their companies successful. What we do is we have several thousand experts, Gartner associates, across all of these different areas. We do primary research, and we engage with market participants, and we engage with our clients.
We publish research that's available through gartner.com. We also engage with the clients through interactions. They're largely virtual, as well as at our Gartner conferences. Even pre-pandemic, a lot of them were phone-based. Now we use video because people are more comfortable than they had been before. Really it's about making sure that we have the breadth and the depth to enable us to be able to help them with whatever their priorities are. These priorities, they can shift and change. As you might imagine, in February of 2020, nobody was focused on remote work and work from home, and suddenly people's priorities changed. The priorities that people have very often will differ. They could be individual specific, company specific.
They could be informed by geography or industry. We're well positioned to be able to help them with whatever those priorities are.
Yeah. This is really helpful. You touched on GBS, you know, a lot of people know Gartner for their technology research, the Magic Quadrant, you know. Your GBS segment, I think is less well understood. Can you walk us through that, what that business is and the transformation that's taken place over the last five or so years?
Sure. The value proposition for GBS is exactly the same as the long-standing value proposition that we've had, you know, within GTS. If you go back, you know, we had this value proposition to help enterprise technology leaders address their mission-critical priorities. In 2009, we had a small acquisition. We launched our supply chain business effectively, in 2010 to bring that same value proposition to supply chain leaders. In 2012, we started a marketing practice. We did it organically, and so we were able to adapt this value proposition for technology leaders to other functional areas. With GBS, through an acquisition in 2017, we expanded to all of the enterprise functions. Our approach is to go to market consistently across all of the practice areas.
We have separate sales teams for each of them. Our technology salespeople sell technology research to technology leaders, and our supply chain salespeople sell supply chain research to supply chain leaders, and so on across all of the different functions. You know, I think there's a very large addressable market for the technology insights. There's an even larger addressable market for all of the insights beyond technology. That's given us the opportunity to really drive strong growth within the GBS areas.
Helpful. You just mentioned it. One thing I thought was interesting is that each focus area at GBS has its own sales force. You know, why is that? Why isn't it one sales force across GBS?
Yeah, it's a great question, and it's something that we've looked at over the years. What we've decided is that our salespeople can be more effective when they're subject matter experts in one functional area. You know, if we asked our technology sellers to sell supply chain research to supply chain leaders, first of all, it's different folks than they might have interacted with, so they don't necessarily know the right people, you know, to call on. In addition, you know, technology salespeople might get distracted from selling technology research. It's harder to be effective selling supply chain if you're not immersed in the supply chain dynamics, trends, themes, and jargon. Our approach that we found to be more effective is specialization within the sales, different sales teams.
That's helpful. It makes sense. I wanna shift. Conferences, we're back in person. It feels like it's, you know, a long time since we were all virtual, but a year ago we were doing this virtually. Conference demand was robust for the back half of the year. Seems like people are very eager to return to in person. Do you think you can hold up even in this economic environment in terms of corporate travel and all that?
Yeah it's a great question. you know one of our three reportable segments is the conferences business. We hold conferences in different locations around the world. We're expecting to have 47 in person, what we call destination conferences in 2023. It's a really important part of the business. It's an extension of our research business, and our objective is to have conferences aligned with all of the roles that we serve within research across all different regions throughout the world. as you know, we had more conferences actually than that in 2019 before the pandemic. Temporarily, when the pandemic hit, we had to stop all of our conferences. We created a virtual capability. We were successful running virtual conferences for a number of years.
During 2022, we were really excited to get back to in-person conferences. There was a lot of enthusiasm from the exhibitors, the sponsors of the conference. Those are vendors that attend as well as, you know, the attendees, the clients. The conferences business is a great opportunity for us to showcase the Gartner brand and highlight the breadth and the depth of the insights that our analysts provide. It's a great opportunity for our clients to meet with vendors conveniently all in one place. It's also a great place for our clients to network with one another. You know, we're gonna be back in person throughout 2023.
A little bit more of a normal calendar, seasonally, than, you know, we've had for the last two years. We're really excited to be back to in-person conferences. As far as cyclicality goes, it was extremely cyclical in the pandemic when it literally, you know, had to stop for a quarter. We do expect that when companies decide to cut back on their travel costs, that that could reduce the ability of some of our clients to attend. However, our goal with each of our conferences is to make it the must-attend conference. If people are gonna attend just one conference, our goal is to make sure that the Gartner conference is the one that they're going to attend. You know, I think we're feeling very good.
Gene spoke on the call about the advanced bookings. We've got good visibility. Comfortably more than half of our exhibitor slots are set for 2023. We'll have to see. I mean, We've been hearing from investors about the risk of a slowdown for quite a while. You know, we're gonna continue preparing to run the conferences and, you know, deliver great experiences for all of our clients and vendors.
You know, one thing I've wanted to ask is your conferences, you know, when you think of the number of conferences you've returned to and your sales outlook around conferences, like, it seems like you're kind of the relative or percentages are a little different. You know, what's the, you know, in terms of your sales target, and you're back to 49, you did a lot more before that, kind of how are you know, what's driving the fact that sales and conference is recovering so quickly?
Yeah. You know, we had last year a mix of both virtual and in-person conferences. As we're returning to in-person, our focus was to bring back our largest conferences. If you think back to 2019, there was a mix. Some were, you know, very large, some were very small, some were in between. We prioritized bringing back the largest, most impactful conferences. We've, you know, we're generating a lot of the revenue relative to where we had been pre-pandemic. We didn't quite get all the way back there. We expect that we will over time. Part of the strategy going forward, as it has been in the past, is to make sure that we're running conferences aligned to the different roles.
We've got a much more built-out set of conferences in technology than we do in the other areas.
Mm.
You know, both geographically and by function. We have conferences for CIOs and conferences for data analytics leaders and conferences for information security leaders and so on, and we replicate those around the globe. When it comes to the GBS roles that we serve, we have conferences for most of the major roles that we serve at sort of the headline level. There's an opportunity over time for us to build out, you know. We'll have conferences for chief HR officers, and down the road we can have conferences for, you know, their primary direct reports, and we can replicate those around the world. We're not gonna go too quickly. We wanna make sure that we deliver an extraordinary experience for all of our attendees and the vendors.
Sometimes we get the question, "Well, why not just go faster?" You know, Gartner conferences are really an amazing experience. You've been, so you know.
Yeah.
We wanna make sure that everybody has a great experience. We're not gonna go so fast just for the sake of rolling out more conferences. We're gonna be prudent and measured.
Yeah.
in how we do that. We expect that the you know, the revenue will grow over time and the profits along with it. You know the conferences will support continued strong growth in the research business as well.
Yeah. Our B of A team puts together a good conference, but your conferences are pretty impressive. Shifting to the consulting side of the business, and you know, if you wanna talk about sort of what you guys do there, but you do have a strong pipeline of projects. What's the type of work that's in that pipeline right now?
Sure. The consulting is the third of our segments, research, conferences, and consulting. Within consulting, broadly speaking, there are two things that we do. We have IT labor-based consulting. You know, this is again tied to the Gartner research business, where we're helping our largest clients solve their problems where they needed an extended engagement beyond the context of a research subscription. You could think about that as IT strategy and IT project management work. We'll do things like helping clients with technology modernization products, projects, helping them with things like information security strategy, cost optimization, right? There's a broad range, but it's really at the strategy and the project management level. As you noted, you know, demand has been very good.
The growth there has been very strong. Coming, you know out of the you know the fourth quarter, we had good backlog. The teams have been doing a great job there. The other piece, which is smaller, within the consulting segment, is a business we call Contract Optimization. We help our clients when they're in contract conversations with their vendors. You know, that can be more variable
Yeah.
as we talk about. You know, it's probably a little bit more acyclical, maybe even potentially countercyclical relative to the consulting business, which historically has been somewhat of a cyclical business.
Sense. EBITDA margins, I know you get this a lot. You know, margins were almost 27% in 2022, despite a significant ramp in hiring to catch up with sales. You know, guidance is for 21.5% in 2023. Can you help us understand the bridge from nearly 27% to 21.5%? If you wanna use 4Q2, 'cause I know that one comes up a lot, whichever the sort of best way to think about it.
Yeah, sure. Again, maybe just a little bit of context for those who are somewhat newer. I think historically, Gartner EBITDA margins had run sort of in the 18% and 19% range. We'd been through a little bit of an investing period pre-pandemic, where the margins had dropped down below that. I think what we saw over the last few years, was that the margins got a benefit from initially reacting to the pandemic. We had frozen hiring, and we resumed backfills. We faced a very competitive labor market in 2021. In the second quarter of '21, we really hit the gas pedal on ramping up our recruiting capacity.
I think because of the tougher labor market, it took us a little longer than we would have expected, but we did get fully caught up on the hiring that we needed to do. The hiring is across our sales organizations as well as across all of the other teams within Gartner. I think we got a little bit of a benefit for a number of years. You know, the travel costs temporarily went to zero. Our real estate costs dropped dramatically because everybody was working remotely. Then, you know, with the hiring, you know, needing to get caught up.
You know, as we're coming into 2023, we got it to at least 21.5% margins. You know, I think the way to approach understanding that is to look at the dollars in terms of revenue and costs. One of the things that I think investors have found helpful is there's sort of an inclination to say, "Well, okay, I understand that you have catch-up hiring, and there's an annualization effect, but shouldn't a lot of that be baked into the fourth quarter numbers?" That's fine. If you take the fourth quarter revenue minus EBITDA, all those operating expenses, you know, that was probably just under $1.1 billion. You annualize that, multiply by four, you get to
There's some rounding, but you get to about $4.3 billion as sort of the cost. Well, those aren't the only costs that we're gonna have.
Yeah.
Because, you know, there's merit increases that go into effect April first, and about three-quarters of our costs are people costs. Three-quarters of the year, those costs will be higher in 2023 than the run rate from fourth quarter. We also have the other 25%, the other quarter of the costs. There's just general cost, price increases in the world, so food and beverage at conferences and travel and all that. There's some incremental spending in 2023 as well. The other sort of large category as we think about it, just because we caught up on hiring in 2022 doesn't mean that we're done hiring, right? As a growth company and a people business, we're pretty much always hiring.
You know, we finished the year with almost 20,000 associates. You know, that's gonna increase. We haven't given a specific number. You can pick your number for the growth, but certainly we're gonna be adding people. As that, you know, as we add those people, you know, you can come up with an estimate of around what, you know, the spend would be. If you put a reasonable number on a reasonable growth in the associate population, you know, we didn't hire them all January 1st, so there's a mid-year convention you can use and do some math. The combination of all of those factors will get you to an operating expense number for 2023 that's in the ballpark of what's implied by the guidance that we've given for revenue and EBITDA.
You know, as people kinda go and do that bridge themselves, the fourth quarter isn't necessarily a proxy for every quarter, though, right? There are different costs seasonally.
That's exactly right. You know, and 2022 wasn't a perfectly normal year from a seasonality perspective. You know, we get seasonality in the conferences business. Our biggest quarter normally for conferences is in the fourth quarter. The second largest is in the second quarter. There's seasonality there. We have very few conferences in the first quarter, and so the revenue moves, and there are variable costs that move seasonally as well. The consulting business is also somewhat seasonal, not quite to the same degree. Excuse me, fourth quarter and second quarter is slightly larger than the first and the third. It's not a perfect analog.
There are moving parts, puts and takes, but I think the fourth quarter operating expense number is at least a reasonable starting point for a framework of how to think about, you know, what the costs might look like in 2023.
That's helpful. Another, another bridge, which is you mentioned margins were in the teens before COVID, and now you've got something with a two handle. You know, 21.5% is your guide. You know, what enabled you to rebase margins, you know, by that delta? Because it is a big change.
Yeah, it's a good question. You know, I think as you're thinking about the margins, you know, our view is that from the, you know, at least 21.5%, over time, we expect that we'll be able to expand the margins, modestly, going forward into the future. You know, some of the factors there which we could talk about are similar to some of the factors that have moved us up structurally from where we had been in the past. I think, one is travel. The new normal for travel is gonna be lower than where we had been pre-pandemic.
One of the things that we learned is that we can run the business very successfully with lower levels of travel spend than we had in the past. A second factor, again, a pandemic learning, is that we can run the business with lower real estate costs. We've become a virtual hybrid first company. We've long had people who were fully remote. We continue to have people who are fully remote. That was even pre-pandemic. There are a lot of roles where that makes sense and is a good fit. It helps us with recruiting and retention. It allows the people to be flexible and successful in their roles.
We do have some people who are full-time in the offices, and then a large portion of our associates are now flexible. They're in the office when they need to be. When teams are getting together, when there's project work going on, when it's helpful for collaboration. We're always looking for opportunities to bring our teams together where it can make an impact, where that collaboration is gonna be effective and allow people to be better at their jobs. It's really good for the culture, you know, to have people getting together. It's great when people are new to Gartner to give them exposure to the way we do things, the way we do business, which is really important.
Particularly for us as a people business, that those cultural aspects are really important. The last structural point is that, you know, there's operating leverage in the business. You know, we're bigger than we were before. You know, as for example, GBS growth has picked up, we've got more scale, and we're able to get benefits from that, and that's helped push the margins up from what they had been.
Yeah, that makes sense. I feel like, you know, because of COVID, you didn't, the turnaround in GBS got lost a little bit, and we're starting to really kind of see, you can see it now because you don't have all that disruption.
I mean, you know, I think at the time of the acquisition we had done in 2017, our view was that it would probably be about three years to get to double-digit growth. When we bought it, this was a business that wasn't growing, and, you know, so that would have put you know, to around, you know, 2020. We were actually set, and you could sort to start to see that the growth was accelerating, heading in the right direction, and then the pandemic hit.
Yeah.
The good news is that the GBS business, I think, proved a lot more resilient than people had expected. The growth bottomed there at +6%.
Yeah.
in 2020. From there, it accelerated and as you know, we've been growing, you know, very well since then.
Yeah. Yeah, that's helpful. Then last one on margins. Your management's committed to modest annual margin expansion in out years. Where's that coming from?
Yeah. The margin algorithm looks at, you know, the key expense lines. I think there's a little bit of operating leverage within the research gross margin line. Then we'll get a benefit on a consolidated gross margin basis from mix. The highest incremental margins are research over time. That's the fastest-growing of the three segments. Consolidated gross margins have the ability to move higher even just on the mix. But we do get some operating leverage within the research segment. Our view is that sales are a critical driver of contract value. Our expectation is that sales costs should be roughly neutral for EBITDA margins. In other words, the sales costs should grow roughly in line with revenue growth.
Finally, there'll be some G&A leverage. I think there's probably a little bit less G&A leverage than people might wanna naturally assume. There are parts of our G&A that are closely tied to our sales functions, and so, you know, not all of the areas are sort of quite as leveraged, you know, because we wanna be investing in the sales organization because the sales team is gonna help drive future growth. That's a very important part of the growth algorithm, and therefore it's an important part of how to think about the margins.
Okay, that's helpful. I mean, you talk about the sales costs like you've talked about a spread, you know, a certain spread in terms of headcount growth versus CV growth. I'm assuming then you also have some merit increases and inflation and that kind of thing.
That's right. Yeah. When you're thinking about the relationship between the sales cost and the contract value from a growth perspective, the headcount, our expectation is the headcount will grow slower than CV. CV has the benefit of price increases. The price increases roughly align with the wage inflation in the markets we serve, including our markets. When you gross up the headcount to reflect the merit, you end up with costs that then align with the CV dollars. There's a nice balance that we're able to strike there because we're able to increase prices consistently over time and consistently what we see for wage inflation.
Oh, that's helpful. You know what? Just in case, I'm gonna pause. It's been a quiet day for Q&A. Just in case someone might have a question, we do have mics available. Common theme. No one wants to be on the webcast. You know, Gartner's put a big focus on customer retention. You know, can you talk about what you've done there? It's been very successful too.
Yeah. Retention, whether you measure in terms of client or dollar or we have a wallet retention measure.
Yeah.
As you know, that captures the fact that the clients we keep, spend more with us each and every year. I think, you know, this has been an important focus for us operationally, you know, because we know how important retention is to our recurring revenue business. When we retain clients, it increases the opportunity for us, you know, to go ahead and expand the relationship because we're selling to individual subscribers, and when they're happy, you know, we'll have an understanding of what their priorities are. That potentially helps us understand what their colleagues' priorities might be. It's also a great internal reference to have and say, "Hey, you know what? If I'm benefiting, here are some colleagues that also might be benefiting." There's a lot of good that comes from strong retention.
It's been an important focus area for us, and it will continue to be an important focus area for us. You know, the way we approach it is that we've seen over the years that strong engagement tends to drive strong retention. We do a lot of things to drive engagement. You know, we have service teams that help engage with our clients. Our salespeople obviously engage with our clients. You know, our research analysts are important contributors to the retention rates through the, you know, the insight that they provide to the clients. The conferences are a great tool that we have for engaging as well. All of these factors combine, you know, to allow us to, you know, to drive engagement and in turn drive retention.
I think if you look back over a long period of time, what you'll find is that the engagement has moved up. The trend line is positive. There's always some normal course variability, around the trend line, but in general, we've moved, retention rates higher.
That's being at your conference to see customers interact with their sales reps, like, there's a very close relationship there. It's really, really interesting to see. New business growth. You know, that was a bit soft last year in terms of growth and you know, partly part of this was your sales force was relatively new. Can you elaborate on that? What was going on there, an you know, what are management's expectations for that line as the new salespeople start to ramp?
Yeah. When we talk about new business growth, we're talking about the growth of the new business dollars, not the growth from the new business.
Yeah.
If you think about what we're measuring, are the new business dollars that we've added this year versus the new business dollars that we added a year ago. That new business is gonna include the price increases, it's gonna include new business with existing clients, as well as new business from new logos. I think in 2021, we had very, very strong performance in terms of new business. We were at record levels for new business. In 2023, for GTS, we were near record levels, slightly off. GBS, we were at record levels again, modest growth above where we had been in 2022. The teams have been doing a tremendous job in terms of driving new business.
I think we talked in the call, you know, $hundreds of millions of new business. That's all been going very well. You know, in terms of the sales teams, I think the new sellers, when they come on board, there's a little bit of a learning curve. You know, we're selling an intangible. It's not really a replacement for something that they have, that the client might have. Our sales teams, who are very capable, will go out, and they'll engage with the clients to understand those client's prospects mission-critical priorities, as we talked about earlier. In understanding those, the salespeople can help the clients understand how we can help them address those priorities, right?
There's that dialogue that happens, the relationship that you saw at the conferences. You know, in general, it's three years to full productivity. We're always looking to help our salespeople get more productive faster. We focus on recruiting, we focus on training, we focus on tools to enable and empower and support them to come up the learning curve faster. You know, as we look back, you know, we had going into 2021, some of our most experienced mix of sellers that we've ever had. Coming into this year, you know, we have a lot more newer sellers relative to where we normally would be.
we're excited because as they come up the learning curve, as they get more experience, as we move through the year, that's gonna put them in a position to be strong contributors, you know, heading into the second half and looking out to 2024 and beyond.
Got it. Got it. You know, last question is we often get questions about your market potential and how you get to your 12%-16% growth target. You know, how do you know, how do you think about your market potential? How do you get there? You know, where does the 12%-16% come from? What drives that?
The addressable market is really important. Our view is we've got a really large addressable market, and sometimes people are surprised. We measure it at around $200 billion. You know, I think, you know, as people dig in, they get comfortable. Maybe they conclude that it's not $200 billion. That's fine. If it's half or a quarter of what we, what we think it is, it's still an extraordinary runway relative to where our contract value is. We're very comfortable with the $200 billion because we've done the work to identify 140,000 enterprises globally.
People sometimes say, "Oh, that's a lot of enterprises." I think a lot of investors sometimes start with a framework of, you know, a lot of companies sell into one vertical market, right? Gartner sells horizontal. We sell into all industries. Some companies are more focused on a geography, and then they expand, you know, outside their home geography, but Gartner's global. This 140,000 enterprises reflects companies or it could be nonprofits, government entities, not just, you know, commercial enterprises, but that's around the world, and they're large enough to be able to afford and benefit from at least one Gartner subscription across most of the practice areas. Not everybody has a supply chain function. We don't. You probably don't. Lots of companies do.
We know the products that we have available to sell to the individuals across these organizations, and we know by size, you know, how many subscribers there are likely to be based on our experience, and we know where we sell the products, you know, where they price, what we sell them for. You do the price times quantity math, and you roll that out across all of the people, across all of the organizations, and we get that bottom-up view to get to the $200 billion. We have. You've probably seen a little video at investor.gartner.com that talks through what I sort of just described with a little bit more audio soundtrack.
Yeah.
A little bit more detail, you know, sort of rounding out some of the thought process there. You know, I think, as you look at, just one slice of the opportunity, there's $55 billion that we've sized for technology. About $10 billion of that is tech vendor, so $45 billion for the users, or consumers of technology, the enterprise function leaders there. With that $45 billion, the value proposition is very broad, but even if you took just the opportunity for us to help those leaders with their tech spending, there's more than $4 trillion of global tech spending every year.
We're a very small piece of the tech spending, and we can help them with that as well as whatever their other mission-critical priorities might have.
Just on the 12%-16%.
Sure.
Yeah.
Yeah. You know, I think the, given the size of the addressable market, the question is often, well, why don't you just grow faster? I, and I think it comes down to, we need to be able to manage the growth. What that means is that we need to make sure that we can hire the salespeople and have them be successful. We can't just hire them and send them out into the, into the field. They need guidance and support.
to be able to scale up the business, we found sort of some operational, you know, sort of people management limitations in how fast we can go, while being successful in delivering both the growth and the margins and ultimately the free cash flow, you know, which is, I think probably worth touching on, if that's okay.
Yeah. If you wanna.
As we run out the clock.
Yeah, I know.
So we generate, as you know,
Yeah.
A lot of free cash flow, well in excess of net income, very strong conversion, whether you think about it from revenue or EBITDA, or net income. You know, we have modest CapEx needs. It runs around 2% of revenue, so, very much not a capital-intensive business. Working capital is an important source of cash for us.
Yeah.
consistently because we get paid in advance, you know, when we sign up clients. The free cash flow is a very important part of, from our perspective of the business and the opportunity. We expect over time, we'll have more free cash flow. We'll, we'll have fewer shares. You know, our capital structure is very strong. You know, we're actually running currently a little bit below, our leverage target, which is around two and a half, 2-2.5x. You know, all of our opportunities we talk about is organic.
Yeah.
We'll do small, midsize tuck-in acquisitions to support the research business when they make both strategic and financial sense. That leaves a lot of free cash flow available to return to shareholders through our buyback program.
Yeah.
Our buyback program is, as you know, price sensitive and opportunistic, so we look to buy more when the market, you know, sells off, you know, often for inexplicable reasons. We'll go a little bit slower if the stock runs.
That makes a lot of sense. Thank you, David. Down to the wire. Appreciate it very much. Thank you very much for your time.
Thanks for having us.
All right. Sure.