Yahoo Finance

Craig Safian

Thank you, Gene, and good morning.
First-quarter contract value or CV grew 7% year over year. Revenue, EBITDA, adjusted EPS, and free cash flow were better than expected as we continued to execute well in an increasingly complex environment. We were resilient in a quarter affected by macro factors.
Since we reported Q4 2024 results in early February, there were notable changes in the US federal government and market. The broader selling environment also shifted during the quarter as many company decision makers started to adjust to the evolving global macroeconomy. We are updating our guidance to reflect Q1 performance, the new macro landscape, the benefit from the move in FX rates, and our own expense agility. We repurchased $163 million of stock in the quarter, maintaining flexibility as the market digests the changes in the macro landscape. We remain eager to repurchase shares, which we will do opportunistically.
First-quarter revenue was $1.5 billion, up 4% year over year as reported and 6% FX neutral. In addition, total contribution margin was 69%, up 20 basis points from last year. EBITDA was $385 million, up 1% as reported and 3% FX neutral versus the first quarter of 2024. Adjusted EPS was $2.98, up 2% from Q1 of last year. And free cash flow was $288 million, a very strong performance for our first quarter.
Research revenue in the quarter grew 4% year over year as reported and 6% FX neutral. Subscription revenue grew 8% FX neutral. Non-subscription research revenue was in line with our expectations. First quarter research contribution margin was 74% consistent with last year. Contract value was $5.1 billion at the end of the first quarter, up 7% versus the prior year. Contract value and CV growth are FX neutral.
Excluding the US federal government, CV grew 8%. Contract value growth with tech vendors continued to improve. Global CV was $63 million lower than Q4 2024 with around 80% of the change attributable to the US federal government and market.
CV growth was broad based across practices, industry sectors, company sizes, and geographic regions. Across our combined practices, all of the industry sectors except two grew at high-single digit rates, led by the energy, healthcare, and manufacturing sectors. CV grew at high-single digit rates across all enterprise sizes except small, which grew low-single digits.
We also drove double-digit or high-single digit growth in the majority of our top 10 countries. Canada, which represents about 3% of total CV, had a more challenging selling environment in the quarter. Nearly all of our US federal contracts will come up for renewal during 2025 with about 40% having transacted in Q1, the largest quarter of this calendar year. In the first quarter, the dollar retention was almost 50%. At March 31, we had $225 million of US federal CV.
Global Technology Sales contract value was $3.9 billion at the end of the first quarter, up 6% versus the prior year. Excluding the US federal government from both periods, GTSCV grew 7% in the quarter as the tech vendor market continued to improve.
$44 million of the $58 million change in GTSCV from Q4 was due to the US federal government. While retention for GTS was 101% for the quarter, GTS new business was down 4% compared to last year. GTS quota bearing headcount was up 3% year over year. Our regular full set of GTS metrics can be found in our earnings supplement.
Global business sales contract value was $1.2 billion at the end of the first quarter, up 11% year every year. All of our major GBS practices grew at double-digit or high-single digit rates. Growth was led by the sales, finance, and legal practices. GBS CV was $5 million below the fourth quarter. Excluding the US federal government, GBS CV was largely unchanged from Q4.
While retention for GBS was 105% for the quarter, GBS new business was down 3% compared to last year. GBS quota bearing headcount was up 9% year over year. As with GTS, a regular full set of GBS metrics can be found in our earnings supplement.
Conference's revenue for the first quarter was $73 million, increasing 4% as reported and 5% FX neutral compared to Q1 of 2024. Adjusting for the two conferences we moved to Q2 this year, revenue increased around 12% FX neutral. Contribution margin was 38%, consistent with typical Q1 seasonality. We held 10 destination conferences in the first quarter as planned.
Q1 consulting revenue was $140 million compared with $135 million in the year ago period of about 4% as reported and 5% FX neutral. Consulting contribution margin was 38% in the first quarter.
Labor-based revenue was $104 million. This part of the segment was down 4% versus Q1 of last year's reported and 2% FX neutral against the tough compare. Backlog at March 31 was $214 million, increasing 16% year over year FX neutral. This was driven by strength in multi-year contracts. In contract optimization, we delivered $36 million of revenue in the quarter, up 36% versus Q1 of last year and 38% FX neutral. The quarter was ahead of our expectations. Our contract optimization revenue is highly variable.
Consolidated cost of services increased 3% year over year in the first quarter as reported, and 4% FX neutral. The biggest driver of the increase was higher compensation costs. SG&A increased 6% year over year in the first quarter as reported and about 7% on an FX neutral basis. SG&A increased in the quarter as a result of headcount growth.
EBITDA for the first quarter was $385 million, up 1% from last year's reported and up 3% FX neutral. We outperformed in the first quarter through modest revenue upside, effective expense management, and a prudent approach to guidance. Depreciation in the quarter of $29 million was up 10% compared to 2024.
Net interest expense excluding deferred financing costs in the quarter was $12 million. This is favorable by $5 million versus the first quarter of 2024 due to higher interest income on our cash balances. The modest floating rate debt we have is fully hedged through the third quarter of 2025.
The Q1 adjusted tax rate, which we use for the calculation of adjusted net income, was 21% for the quarter.
This compares to last year's rate of 19%. The tax rate for the items used to adjust net income was 26% for the quarter.
Adjusted EPS in Q1 was $2.98, up 2% compared to Q1 last year. We had 78 million shares outstanding in the first quarter. This is an improvement of over 1 million shares or about 1% year over year. We exited the first quarter with just under 78 million shares on an unweighted basis.
Operating cash flow for the quarter was $314 million, up 66% compared with last year. CapEx was $26 million, up about $3 million year over year. This was primarily due to real estate related costs and in line with our expectations.
First-quarter free cash flow was $288 million, up 73% compared with Q1 in 2024. Free cash flow on a rolling four-quarter basis was 120% of GAAP net income and 97% of EBITDA. As we noted last quarter, there were several items in 2024 that affect rolling four-quarter net income and free cash flow, including after-tax insurance proceeds, a real estate lease termination payment, and tax planning benefits. Adjusting for these items, free cash flow on a rolling four-quarter basis was 20% of revenue, 82% of EBITDA, and 155% of GAAP net income.
At the end of the first quarter, we had about $2.1 billion of cash. Our March 31 debt balance was about $2.5 billion. Our reported gross debt to trailing 12-month EBITDA was well under two times. Our expected free cash flow generation, available revolver, and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy of disciplined share purchases and strategic tuck-in M&A. Our balance sheet is very strong with $2.8 billion of liquidity, low levels of leverage, and effectively fixed interest rates.
We repurchased $163 million of stock during the first quarter. At the end of Q1, our share repurchase authorization was approximately $870 million. As we continue to repurchase shares, our capital base will shrink. Over time, this is accretive to earnings per share and combined with growing profits also delivers increasing returns on invested capital. We are updating our full-year guidance to reflect recent performance and trends.
Since we reported Q4 results in early February, the world has become significantly more dynamic. We are applying all the lessons we've learned from prior challenging environments. We are shifting our focus to the things our clients need the most in an extraordinarily uncertain operating environment. We're also remaining agile in managing our cost structure while also investing for future growth. In particular, we are preserving and growing our selling capacity outside of directly impacted areas, which is a key input into our algorithm for future sustained double-digit growth.
The US dollar weakened significantly during Q1. We now expect FX to benefit revenue growth by about 50 basis points and an EBITDA growth by about 130 basis points in 2025. We've provided both the FX driven and operational changes to guidance in our earnings supplement. As a reminder, about one-third of our revenue and operating expenses are denominated in currencies other than the US dollar.
For research subscription revenue in 2025, our guidance reflects an expectation that Q1 trends for new business and retention continue for the balance of the year. We've also incorporated the information we have about US federal spending decisions to date. In addition, we've taken a prudent view of the outlook as the current environment remains very dynamic. For the non-subscription part of the research segment, we've built a continuation of recent traffic and pricing trends into the guidance.
For conferences, we are basing our guidance on the 53 in-person destination conferences we have planned for 2025. We have good visibility into current year revenue with a majority of what we've guided already under contract.
For consulting, we have more visibility into the next quarter or two based on the composition of our backlog and pipeline as usual. Given the shifts in the macro environment, we've been thoughtful about the outlook for the labor-based part of the business.
Contract optimization has had several very strong years, and the business remains highly variable. We've incorporated a prudent outlook for this part of the segment. Our base level assumptions for consolidated expenses have changed to reflect the revenue outlook. We have demonstrated our ability to manage costs prudently in any market environment, and we will remain agile.
We will do this while also investing for future growth. Our plan is to exit the current environment better, faster, and stronger than before. We can both deliver on our EBITDA margin commitments for this year while investing for future growth. Our plan for both GTS and GBS is for mid-single digit sales headcount growth outside of directly impacted areas. This reflects our commitment to invest for future growth while delivering strong margins and free cash flow. We're maintaining recruiting capacity and are prepared to go faster on the hiring based on the macro-driven demand. And as the selling environment gets back to normal, we expect significant benefits from QBH productivity.
Our updated 2025 guidance is as follows. We expect research revenue of at least $5.34 billion which is FX neutral growth of about 4%. This reflects subscription research revenue growth of about 5%. We expect conference's revenue of at least $625 million which is FX neutral growth of about 6%. We expect consulting revenue of at least $575 million which is growth of about 2% FX neutral. The result is an outlook for consolidated revenue of at least $6.535 billion which is FX neutral growth of 4%.
We now expect full-year EBITDA of at least $1.535 billion, up $25 million from our prior guidance. We expect 2025 adjusted EPS of at least $11.70, up about $0.25 from last quarter. For 2025, we expect free cash flow of at least $1.145 billion. This reflects a conversion from GAAP net income of 137%.
Our guidance is based on 78 million fully diluted weighted average shares outstanding, which reflects the repurchases made through the end of the first quarter. For Q2, we expect adjusted EBITDA of at least $400 million. Our financial results through March were ahead of expectations, underscoring the resilience of our business model. While we updated the revenue guidance to reflect the macro landscape, we will also benefit from the latest FX rates. Our EBITDA margin outlook is now higher than it was in February.
We have successfully navigated challenging macro environments before and know the right things to do. We are running our operational best practices, including delivering exceptional value for our clients, running our sales and services best practices playbooks, investing in sales capacity, which is a key ingredient for future sustained double-digit, top-line growth; managing our expenses aggressively and thoughtfully to protect profitability and cash flow; and using our strong balance sheet and cash flow to buy our stock and for tuck-in M&A.
Looking out over the medium term in a normal macro environment, our financial model and expectations are unchanged. With 12% to 16% research CV growth, we will deliver double-digit revenue growth. There is operating leverage in the business which allows us to expand margins. With gross margin expansion, sales costs growing about in line with CV growth and G&A leverage, we will deliver modest EBITDA margin expansion.
We can grow free cash flow at least as fast as EBITDA because of our modest CapEx needs and the benefits of our clients paying us front, and we'll continue to deploy our capital on share purchases which will lower the share count over time and on strategic value enhancing tuck-in M&A.
With that I'll turn the call back over to the operator and we'll be happy to take your questions. Operator?

Question and Answer Session

Operator

(Operator Instructions)
Jeff Meuler, Baird.

Jeffrey Meuler

So what percentage of the contracts value base are you following the directly impacted areas and how are you managing sales headcount I guess for US federal government, agency, prospects or the more meaningfully other directly impacted areas in terms of are you (inaudible) are you kind of preserving some of that capacity, including to position for like win back opportunities.

Craig Safian

Hey Jeff, good morning, thanks for the question. I'll start and then then Gene will finish up on your question.
So from a directly impacted area perspective, it is largely US federal that we're talking about now, and so obviously we're not looking to grow our QBH there but we wanted to make sure it was really clear that outside of that directly impacted area, we were actually targeting to continue to grow the number of headcount, the number of territories for both GTS and GBS in the mid-single digits.

Eugene Hall

Yeah, and basically, Jeff, as Craig said, the largest impacted area is by far the US federal government and there what we're planning to do is we're not backfilling and we're basically making sure we're controlling headcount there very carefully. The rest of the business, the non-impact area, as I said, we're continue to grow in mid-single digits this year.

Jeffrey Meuler

But you're not reassigning the US federal government headcount, you're keeping them there for now.

Eugene Hall

Yeah, great question. So basically, we have some very strong public sector salespeople. We want to make sure we retain them and those really strong salespeople where we can reassign them we are absolutely reassigned because we have plenty of sales opportunities. In some cases, it makes sense; in other cases, it doesn't, but wherever we can, we of course are retaining our great salespeople.

Jeffrey Meuler

Got it. And then what is -- where there's early cancels for convenience among US federal government agency contracts? What is the RevRec treatment and what is the contract value treatment and can you just give us any sense of if that's a meaningful percentage of the attrition versus just non-renewal as a contract naturally comes due?

Craig Safian

Yeah Jeff, it's a great question. So actually we've got details on that in the queue, but let me just summarize for the benefit of everyone on the call. So as it stands right now, we've got about $30 million worth of termination notices related to contracts that are set to expire later in the year. One way to think about it is it's just normal course. We've just been notified ahead that those things will not be renewing or we have the termination notice in hand.
That $30 million remains in contract value because we are continuing to recognize the revenue on it, but in the grand scheme of not only the US federal business but actually on total CV, it's a relatively small amount, but that's how we're handling it and there's a little bit more detail in the queue I think on page 25, if you want to search it out.

Operator

Toni Kaplan, Morgan Stanley.

Toni Kaplan

I was hoping to get just maybe a little bit more color on the guidance. I know you talked about on the slide and in the remarks that the guidance reflects 1Q new business and retention trends. I know you mentioned that there was a little bit of a change during the quarter maybe a slower like back half of the quarter, so wanted to understand does the guidance reflect like the complete 1Q which was maybe a little bit better or more weighted towards like the more recent like slower experience that you've seen.

Craig Safian

Yeah Toni, it's great question.
So when we were together in early February talking about Q4, our commentary at that point through the month of January is we hadn't really seen a change in the selling environment and that was the case. Clearly things started to change mid-February into early March. I would say from a metric perspective though, since we are so dominated by the third month of every quarter, what we saw in back at February and March and in particular in March is reflective of the quarter and again we've taken that experience and rolled it forward across Q2, Q3, and Q4 to drive that update on the revenue guidance. So while January was normal, it's really small and the bulk of the volume in Q1 actually happened during the month of March.

Toni Kaplan

Got it. And then I wanted to ask I know US federal government was the big impact for what has changed on the government side. Wanted to though broaden it out to -- are you seeing anything at the state and local level or international government level that is similar to US federal and also maybe just opportunity for win back would be as Jeff alluded to as well is there an opportunity there this year, too.

Eugene Hall

So Toni, first on the win back side, so we believe we provide a lot of value to our clients, including our US federal government clients. On helping, we help them things like having strong cybersecurity capabilities, cost optimization, use of AI, which are priorities for every enterprise, including public sector enterprises. And so we believe we provide a lot of value there and will over time continue to provide a lot of value to the federal government.
If you look at the state and local governments in the United States, there wasn't much change in Q1 compared to what we've seen in previous quarters. The same is true for governments around the world outside of the US whether it's at the federal level or at the provincial or state and local government level.

Operator

George Tong, Goldman Sachs.

George Tong

Your business outlook for 2025 research revenue was downwardly revised by $135 million. Can you elaborate on how much of this reflects updated views on federal contract renewals versus updated views on other customer segments like tech vendors and enterprise functional leaders?

Craig Safian

Yeah, George, good morning.
I would say that the guide is reflective of everything we've seen and everything we know and so obviously, the biggest thing or the largest impact that we saw that was off trend in Q1 was related to the US federal government which we just talked about with Jeff and Toni, but in terms of what we're seeing more broadly macroeconomically, that has been factored into the update guide.
So I think what I'd say is from an update on the guidance perspective, and this applies to all the revenue lines, but research in particular is we took our Q1 experience and we flowed that through across our contract expirations for the balance of the year. We took what we knew specifically about US federal government. We modeled in the new FX rates and as always we try and take a prudent approach to how we approach our guidance for the full year. So I'd say those are the four things that factored into the update of all the guidance lines and the research line in particular.

George Tong

And can you talk a little bit more about what you're seeing with tech vendors and enterprise functional leaders? Would you say that those trends are holding up better than what you're seeing with federal contract renewals?

Eugene Hall

So what I say is with tech vendors, the market continues to improve. Our business there is accelerating, particularly the larger vendors. The smaller vendors are accelerating just at a slower pace than the larger vendors that businesses, I think, quite healthy. With enterprise functional leaders, again, you can separate it into the federal government, which we talked about and then all the other enterprise functional [leader business that we have which I think is more in trend with] (technical difficulty).

Operator

Josh Chan, UBS.

Joshua Chan

I was wondering if you could talk about the selling environment outside of federal. It seems like you're saying that the environment became more volatile, but I guess if I add back your NICV impact that you gave for the federal government, it seems like the CVX federal was fairly similar to what you had in Q4. So I'm just trying to triangulate the comment about volatility and then the relatively good ex-federal CV (inaudible).

Eugene Hall

Josh, so the selling environment for the federal government we talked about and that was the main thing that impacted our results in Q1. Outside of federal government, it's not completely uniform in terms of the impact. So there are some companies that are more impacted, for example, by tariffs than others by the way, both US as well as non-US companies.
And so, the companies that don't have a lot of tariff impact or other kinds of impact for policy changes, it's kind of business as usual in terms of decision making. The ones that are more directly impacted, decision making has slowed. They're still buying, they're still renewing, but decision cycles have extended compared to what they were say before last year. So still see the value, our pipeline is actually very robust, but decisions are taking longer to get than they did in Q4 (technical difficulty) of last year, basically.

Joshua Chan

Okay. That's great color. Yeah. Thank you for that.
And then I guess, how are you thinking about your cost structure going forward? Because you clearly raised the guidance despite lowering the revenue. So could you kind of talk to I guess how the lower revenue but then offset by your more prudent cost management is factoring into your increased margin guidance for the year.

Craig Safian

Yeah Josh, so I mean the way to think about that is we've proven over the last several years given all the things Gene outlined in his prepared remarks about the craziness and the macro and geopolitical environment and just how challenging it has been that we've been very agile in managing our expenses and what I'd say now is given the US Fed results and the impact that's having on the contract value growth and then some of the things Gene just outlined as well in terms of longer selling cycles and things like that we're taking the opportunity to make sure that we are managing our operating expense based super prudently and super carefully but also making sure that we're investing in areas that we know support and drive future growth.
We're in a period right now where our CV is growing call it mid-to-high-single digits. Obviously, we firmly believe that we can be a 12% to 16% grower on the research business and a double-digit grower on the overall top line and we want to make sure that we don't do anything that damages or impedes our ability to get back there when the economic situation is more quote-unquote, normal.
And so what we're doing is, I call it like a slight belt tightening across the board as we're seeing a little bit of pressure in some areas but also making sure that we're growing our selling capacity because we know that's a key ingredient going forward. So we're not chopping anything, we're not slamming on the brakes on anything. We're just being thoughtful and prudent and careful and also making sure that we're investing in areas that we know drive and support future growth.

Joshua Chan

That makes a lot of sense. Thank you both for the time and the color.

Operator

Faiza Alwy, Deutsche Bank.

Faiza Alwy

I wanted to talk about the clients that you mentioned are anticipated or impacted by tariffs, for example, where you've seen slower decision making. How have you seen that play out historically because I was saying that as you mentioned in your script like these clients can certainly benefit from Gartner insights during this time. And so is there this initial period where folks are evaluating the situation and are you leaning in harder with these clients to explain your value proposition and so how should we think about those clients going forward?

Eugene Hall

Hi, Faiza. Great question.
So basically, what we've seen historically is when there's a lot of uncertainty, clients slow their decision making and then after a few months, they then say, well, we're in this world, we have to decide what to do Gartner's a big help, and then we actually have a burst of business from that. We continue to maintain relationships, continue to build pipeline, and clients know the value but when there's this kind of shock of uncertainty, the first reaction from some companies is to say, let's slow or stop decision making for a period of time. And then -- but that period of time goes by and then they know they need to get -- they need help with cybersecurity, they need help with AI. They need help with cost optimization. All the things that are software selection. So all those things that are sweet spots are things that they know they need and so there's a slowdown that picks up over time -- the historical pattern.

Faiza Alwy

Understood.
And then just on capital allocation and share buyback, I know you mentioned your eagerness to buy back shares a couple times. Is there any other perspective around that just given what's happened with the stock and the market overall? How are you viewing the opportunity to buy back stock and could we expect a more elevated level of share repurchases this year just given the amount of cash that you have on the balance sheet?

Craig Safian

Yeah, good morning, Faiza.
I think our long-term capital allocation strategy is using our balance sheet, our cash flow and excess cash to return capital to shareholders through our buyback programs and also to look for strategic value enhancing tuck-in M&A. We continue to believe that we can do both those things with our balance sheet and our capital allocation.
From a buyback perspective as we've talked about historically, our strategy is to be price sensitive, opportunistic, and disciplined, and we're looking to optimize returns on our buybacks, not in a quarter or two, but over the long term. And so we are always looking at combinations of what's happening with the price of the stock, what's happening with overall multiples, what's happening with the market, what's happening with our stock individually, what is intrinsic value? All of those things are inputs into how we look to be price sensitive, opportunistic, and disciplined.
You rightly point out that we have $2.1 billion of cash on our balance sheet. We expect to generate another order of magnitude $800 billion of free cash flow over the course of this year, and then, we expect to generate well over $1 billion of free cash flow each and every year. So what that means is we have a lot of capital that we can put to use on behalf of our shareholders behind either buybacks or strategic tuck-in M&A and we continue to monitor the situation very closely but we're going to stick to our guns and our approach of being price sensitive, opportunistic, and disciplined with a real focus on optimizing returns over the long term.

Operator

Jason Haas, Wells Fargo.

Jason Haas

I believe previously you were guiding the GBS quota bearing headcount to grow double digits this year and I believe you said that you're not expecting it to grow mid-single digits. Can you just talk about what's the reason for the reduction in that segment specifically?

Craig Safian

Yeah, I think it's part of our normal agile planning around the business. Obviously, we do have US federal footprint with our GBS business as well and that has been impacted in the first quarter as we described on our prepared remarks. We're also dealing with a more challenging macro environment Gene reference [longer] sale cycles things of that nature and so we're always tweaking what we want and expect from a quota bearing headcount growth perspective over the course of the year.
What I would say is what we've got dialed into our outlook right now is mid-single digit growth in both GTS and GBS, but if the end market improves, or the demand environment improves, our sales cycles reduce; we have plenty of recruiting capacity to be able to go faster, if we want to but essentially right now it's just a reflection of what we're seeing in the market and modest tapping of the brakes there just to make sure that we keep our cost structure in line with CV growth expectations and our revenue in CV growth expectations rolling forward in '26 and '27.

Jason Haas

Got it. Thank you. That's helpful.
And then as a follow-up I appreciate the commentary on how you're leveraging AI. I'm curious if you put any thought to rolling out any sort of -- like chat functionality driven by AI if that's something that your customers are asking for or if there's any potential to use that to maybe make it a little bit easier for your customers to access and utilize all the primary insights from your research.

Eugene Hall

Hey, Jason.
As I mentioned my remarks, we're really experts on AI. We know it really well. We use AI internally, so we have an application much like you described where internally our associates can use AI to help them navigate through our very large content base. We're planning to release that to clients but because of the problems like hallucinations and things like that, we want to make sure that we get the [bugs worked out] because like our clients -- you count on us not to have any hallucinations and things like that that can happen with AI.
So we've developed it, we're using it internally. You can think about it as piloting it, but it's very broad on thousands of our associates and it's working very well, but we want to make sure that it is bulletproof before we roll it out to clients and our clients understand that. They know we understand that they want it bulletproof.

Operator

Andrew Nicholas, William Blair.

Andrew Nicholas

First, on the government side, just curious if you could provide any additional color on the timing of renewals throughout the remainder of this year. I believe I caught 40% in the first quarter, but just curious if there's anything unique about kind of the cadence throughout the rest of the year and relatedly, I think you said half or roughly half of those contracts were renewed. Is there any reason for us to think that renewal rates will get better or worse from that level as the year goes on maybe as you get more comfortable selling back into that group or anything like that that I'm not thinking of.

Craig Safian

Yeah, Andrew, thanks.
So over the next three quarters, Q1 was the largest as we mentioned, and you referenced. Q2 is less than half of what we saw in Q1 and Q3, which aligns with the US fed fiscal is our next largest quarter, but it's probably three quarter the size of what we saw in Q1 and so and then Q4 is really small in terms of the expirations there. So bulk is actually in Q3, which again aligns with the US federal fiscal.
In terms of what we've modeled in is what you highlighted. Essentially, what we experienced during the first quarter which is nearly $0.5 attention around 50%, we've modeled that forward. I do think and Gene made this point earlier as well, we're intent on making sure and really helping our US federal clients achieve their most important mission-critical priorities and so we're not just abandoning our clients if the contract doesn't renew, we are there and we want to make sure that we're there when they are ready to buy again which we have a high degree of confidence that if they are still there, they will want to buy our services because we provide so much value.
That's not baked in because again we haven't seen it yet and so our philosophy generally is not to build forecasts, plans, and outlooks based on what we hope is going to happen but more along what we've seen but that is certainly a possibility. And again we're organizing our teams to make sure we take advantage of that probably more of a '26 and '27 dynamic than a '25 dynamic but if we are able to get people back and turned on during 2025, great, and that would be that upside to what we're looking at.

Andrew Nicholas

Understood. Thank you.
And then kind of changing gears for my follow-up. Just wanted to ask about the conservatism of the OpEx guide. I understand, and you gave some great reminders on the flexibility of the cost base and how you're thinking about the cost structure, but you've also over the past several years given a pretty prudent outlook in terms of spend. So just hope -- wondering if some of the cost actions that you've started to take and tightening of the belt over the past month-plus maybe lower some of the conservatism on that front or if we should think about it being relatively consistent with previous approaches.

Craig Safian

Yeah, it's a great question.
I mean the environment is dynamic as we discussed and so we are rolling with that dynamism and attempting to have as much agility around our operating expense space as possible. The reality is we're obviously managing the '25 P&L to make sure that we're investing for the future and protecting profitability and free cash flow, but in reality as you know, we run this business for the long term and we're making sure that our OpEx space is right size for '26 that we're investing in the right areas during 2025 so that we can reaccelerate CV into the future.
And so I wouldn't characterize the guidance as or the OpEx guidance as any more prudent or conservative than normal. I would say it's our normal approach to how we build our outlook and how we build our guidance and as you mentioned earlier, we're prepared to invest more if we see positive changes in the environment and we're prepared to tighten the belt maybe one more notch if we have to as well and so we're very focused on making sure we're doing the right things for the business over the long term but we're also going to make the right decisions in the short term as well to make sure that we are again making the right investments but also protecting profitability and free cash flow.

Operator

Jeff Silber, BMO Capital Markets.

Jeffrey Silber

I just wanted to go back to some of the mechanics regarding a cancellation of contract. I know on the federal government side, most of your contracts, if not all of them are one year, but I think you have a number of multi-year contracts outside of that. Can a client, if let's say I have a two-year contract, can we as a client cancel ahead of that? How much notice do I have to give you? Does it have to be around the anniversary date? Some of the specifics around that if you can provide would be great.

Craig Safian

Yeah, generally, Jeff, a multi-year contract is a multi-year commitment with no out clauses or term for convenience rights within that contract. And so our multi-year contracts are true multi-year contracts. They can be two, three, four, even five years at some points, but the bulk of them are actually two-year contracts. And so when a client -- and again your point is right, the US federal contracts are almost exclusively one-year contract. But our multi-year contracts are multi-year with no true out clauses in them.
And again we've been very focused on continuing to increase the proportion of multi-year contracts in our contract value base, specifically for challenging macroeconomic times and again that's part of the resilience we've baked into our business or engineered into our business so that short-term challenges from a macro perspective have a more muted impact on our overall results because of a focus on operational best practices like selling multi-year contracts.

Jeffrey Silber

Okay, that's helpful.
And then you were kind enough to give us kind of the finality on renewals for the federal government. Can we get some similarity for the non-federal government contracts? I know they vary, but any help would be great.

Craig Safian

So I'd say again you can kind of see this in the external metrics as well, so client retention is holding up really well, and looks pretty good and would look even better or modestly better if we excluded US federal from it. So retention rates, broadly continued to look pretty good. I think that the challenge and Gene alluded to this earlier is our sales cycles from both A, new logo perspective and also from an upsell perspective have lengthened and that impacts a lot retention numbers and so you're seeing a little bit of that new business velocity impacting the retention numbers, but overall the retention numbers are holding up pretty well, and again you can see that in both the GTS and GBS client and while retention numbers.

Jeffrey Silber

And is there a specific quarter where most of these contracts renew?

Craig Safian

Our two biggest quarters are Q1 and Q4 from an exploration perspective, Q2 and Q3 tend to be lighter quarters, but one of our practices is to when we have the opportunity to early renew things and so that can move things around, but if you just look at the pure contract term dates or end dates, overweighted to Q1 and Q4 think like 26% or 27% and then a little underweighted in Q2 and Q3 thinking that 22% to 23% of total range.

Operator

Thank you and I'm currently showing no further questions at this time. I'd like to turn the call back over to Gene Hall for closing remarks.

Eugene Hall

Well, here's what -- takeaway from today's call. Gartner has delivered financial results ahead of expectations. Our tech vendor CV growth continues to accelerate. We have a vast addressable market opportunity. We have a strong and compelling client value proposition. Looking ahead, we're well positioned to drive sustained double-digit revenue growth over the long term. We'll continue to create value for our shareholders by providing actual objective insight, guidance, and tools to our clients by prudently investing for future growth, by generating free cash flow well in access to net income, and by returning capital to our shareholders through our repurchase program.
Thanks for joining us today. We look forward to update you again next quarter.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.