Welcome to Gartner's second quarter 2026 earnings call. I'm David Cohen, SVP of Investor Relations. At this time, all participants are in a listen-only mode. After comments by Gene Hall, Gartner's Chairman and Chief Executive Officer, and Craig Safey, Gartner's Chief Financial Officer, there will be a question and answer session. We ask that you limit yourself to one question in order to give all our analysts a chance to participate in the call. Please be advised that today's conference is being recorded. This call will include a discussion of second quarter 2026 financial results and Gardner's outlook for 2026 as disclosed in today's earnings release and earnings supplement, both posted to our website, investor.gardner.com. On the call, unless stated otherwise, all references to revenue are for adjusted revenue, and all references to EBITDA are for adjusted EBITDA, in each case excluding the divested operation and with the adjustments as described in our earnings release and supplement. All contract values and associated growth rates we discuss are FX neutral. All references to share counts are for fully diluted weighted average share counts unless stated otherwise. Reconciliations for all non-GAAP numbers we use are available in the Invest Relations section of the Gartner.com website. As set forth in more detail in today's earnings release, 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 2025 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as other filings with the SEC. I encourage all of you to review the risk factors listed in these documents. Now, I'll turn the call over to Gartner's Chairman and Chief Executive Officer, Gene Hall. Good morning.

Thanks for joining us today. Second quarter revenue, EBITDA, adjusted EPS, and free cash flow were ahead of expectations. Return on invested capital was 31%. Client engagement improved again, up 140 basis points compared to last year. Contract value growth accelerated compared to the first quarter. Midsized enterprise clients across both GTS and GBS grew mid-single digits year-over-year. We saw positive NICPE with our government clients. Wallet retention across both GTS and GBS improved sequentially. We delivered above-average growth in several of our end markets, and we remained agile in managing expenses. We have a strong and enduring value proposition. Gartner proactively guides C-level executives and their teams across every major enterprise function, in every major geography, industry, and market sector on their journeys to achieve their mission-critical priorities. Our insights help clients in four critical areas. We identify blind spots, see around corners, fill critical information gaps, and prepare for the future. First, we leverage our vantage point across about 13,000 diverse enterprises to help leaders identify blind spots and avoid common pitfalls. Second, we help leaders see around proverbial corners, which is to say, we guide leaders to understand how today's decisions can impact future performance. Third, we help clients fill critical information gaps. For example, most clients have data on their own performance, but lack comparative data that helps them understand how their performance compares to others. Gartner provides access to highly detailed proprietary information, such as vast pricing databases, maturity models, and cost benchmarks that are not available through public sources. Finally, using our extensive knowledge of end-user needs and vendor capabilities, we help our clients determine what the future might look like and how best to prepare. There's no other alternative where clients can get this kind of value on the full breadth and depth of their mission-critical priorities. AI remains the single most requested topic, including with Chief Information Officers, Chief HR Officers, Chief Sales Officers, Chief Marketing Officers, and more. Demand for support on AI continues to grow. Gartner proactively covers the full range of AI technologies and priorities, AI strategy, domain and multimodal models, AI cybersecurity, physical AI and robotics, AI cloud-to-edge processing, adoption cases and best practices, and more. Gertner is at the center of the three critical constituencies. We connect more than 80,000 business leaders looking to get value from AI, more than 10,000 CIOs and IT organizations implementing AI, and about 5,000 technology providers building out their AI strategies. In today's world, it's difficult for executives to know which sources they can trust for critical decisions. Our analysts have deep expertise. They're independent and objective. Clients trust Gartner. We're seeing strong demand for help with AI. We also have strong demand for support on other essential priorities, such as cybersecurity, cost optimization, data and analytics, and more. However, in today's environment, persistent macroeconomic and geopolitical challenges are creating new and shifting budget pressures as a result executives are scrutinizing expenses escalating approval processes and delaying decisions we're taking steps to further strengthen our value proposition to thrive in persistently challenging environments and return to historical growth rates as we've discussed before the heart Part of this change is our business and technology insights transformation. We continue to make progress on this transformation in four key areas, volume, impact, timeliness, and user experience. The number of documents in our insights library is up 18%, which allows us to cover a broader range of mission critical priorities. The number of higher impact documents is also up double digits. With the rapid pace of change in AI and other areas, it's essential for clients to stay current. To meet this need, the insights we produce immediately after important events are up significantly. Making it easier for clients to access our insights increases the value they receive from us. To address this, we continue to enhance the Gartner digital experience. And we're improving our sales, services, and analyst capabilities to deliver value to our clients. With the strong demand we're seeing for help on mission-critical priorities such as AI, a vast and growing library of high-impact timely insights, and the transformational improvements we're making in our ability to deliver unparalleled client value, we remain optimistic about our future. We expect contract value growth to continue to accelerate. We will continue to drive strong free cash flow that we can put to use to drive incremental shareholder value, and we expect to deliver adjusted EPS on a compound annual basis above 12% over the next three years. With that, I'll hand the call over to our Chief Financial Officer, Craig Safian.

Good morning. Before updating you on the results of the Courier, I'm going to follow up on several points Gene just made. We are making significant progress on our BTI transformation with a focus on delivering even more value to our clients. Macrodynamics and AI are driving uncertainty and affecting enterprises around the world. The data we see across engagement, retention, and growth in multiple end markets reinforces the enduring value of Gartner's expert-led insights. This gives us confidence that this cycle will normalize and CV growth will continue to reaccelerate. Client engagement continues to improve meaningfully, increasing 140 basis points versus last year across both digital and human interactions, underscoring the relevance and the value of our expert insights. Digital engagement improved by more than 110 basis points year over year. Human interactions increased more than 150 basis points year over year, including through improvements in the usage of analyst consultations. Wallet retention continues to improve as down sell activity stabilizes and overall retention rates improve. In-quarter retention rates increased in Q2, providing another important leading indicator of future growth. We continue to win new business with both existing clients and new enterprises. Our clients have conviction in the value we can deliver for that. We are seeing multiple areas of above average growth, reinforcing the value our clients place on expert insights and guidance. Core GBS subscription products grew 7% in the quarter. The sales practice grew double digits. Finance and legal grew mid-single digits. and conferences revenue increased 12% year-over-year on an organic, FX-neutral basis. Mid-sized enterprise delivered mid-single-digit CV growth in the quarter. Government CV returned to positive NCVI in the quarter and was an important contributor to overall acceleration. We see this as a leading indicator for the broader client base navigating different but analogous spending constraints. Tech vendors, which are among the organization's closest to AI-related advancements, continue to rely on Gartner for timely and actionable insights. Software and services were again our strongest performing tech vendor subsectors. While some parts of this market are reprioritizing spending as they adapt to a rapidly evolving landscape, demand for our expertise remains healthy. Taken together, these trends demonstrate the resilience of our business model. Even as clients navigate budget pressures and evaluate AI-related investments, total company CV growth accelerated in the quarter. Second quarter contract value, or CV, grew 2% year over year. This was the second consecutive quarter of acceleration. Revenue, EBITDA, adjusted EPS, and free cash flow in the second quarter were better than expected. We are increasing our EBITDA, adjusted EPS, and free cash flow guidance for the full year. In the second quarter, we reduced our share count by another 5%, buying back $547 million of stock. Rolling four-quarter return on invested capital was 31%, and we expect to generate significant free cash flow and have fewer shares outstanding over the course of the next several years. Second quarter revenue was $1.7 billion, up 3% year-over-year as reported and 2% FX neutral. In addition, total contribution margin was strong at 71%. EBITDA was $466 million, up 6% as reported and 4% FX neutral. Just DPS was $4.37, up 24% from Q2 of last year. And free cash flow was $378 million, up 9% year-over-year. Insight's revenue in the quarter grew 2% year-over-year as reported and 1% FX-neutral. Second quarter Insight's contribution margin was 77%, up about 140 basis points versus last year. Contract value was $5.3 billion at the end of the second quarter, a sequential increase of 30 basis points from Q1. Year over year, CV was up 2%, which is a 70 basis point acceleration from last quarter. Excluding the U.S. federal government, CV growth was 3.3%. At June 30th, we had approximately $125 million of U.S. federal CV. We had about $240 million of new business in the second quarter as there continues to be considerable interest in Gartner's proprietary, unbiased insights. Across GTS and GBS, we saw new business dollars increase by about 10% from Q1. As you may have seen in the earnings supplement, we implemented a minor update to how we present FX-neutral KPIs. The details are in the supplement, and our investor relations team can answer any questions you may have. Global technology sales contract value was $4 billion at the end of the second quarter, about flat sequentially and up 1% versus the prior year, a 70 basis point acceleration from Q1. Excluding the U.S. federal business, CV grew 3%. Tech vendor year-over-year growth accelerated from Q1. Wall retention for GTS was 97%, an improvement from the first quarter. Ex-Fed wall retention was 99%. GTS new business was up 2% compared to last year and up sequentially from Q1 of this year. Global business sales contract value was $1.3 billion at the end of the second quarter, up 1% from Q1 and up 3% year-over-year. Ex-Fed GBS CV grew 4%. Growth was led by the sales, legal, and finance practices. Within GBS, about 90% of the CV is from core subscription products. CV from these products grew about 7% year-over-year in the quarter, with even faster growth from our offerings for C-level leaders, while retention for GBS was 99% for the quarter. GBS new business was down 5% compared to last year. Q2 new business was around 20% higher than Q1. The conference's business continues to perform well. We're seeing strong demand for our insights as clients and prospects want to hear from our experts and interact with one another. Conferences revenue for the second quarter was $244 million. On a same conference basis, revenue growth was around 12% FX neutral. Contribution margin was 59%. We held 18 destination conferences in the second quarter as planned. Q2 consulting revenue was $142 million compared to $156 million in the year ago period. Consulting contribution margin was 38% in Q2. Labor-based revenue was $96 million. This was about in line with our expectation. Second quarter bookings increased 17% over the prior year. Backlog at June 30th was $214 million, up about 9% year-over-year. This was the first year-over-year backlog increase since Q1 of 2025. In contract optimization, we had $148 million of revenue on an LTM basis, consistent with Q1 of this year. The two-year revenue CAGR was up about 9%. As you know, our contract optimization revenue is highly valuable. The performance in Q2 was better than we had expected. EBITDA for the second quarter was $466 million, up 6% from last year's reported and 4% FX We outperformed expectations in the second quarter through revenue upside, effective expense management, and a prudent approach to guidance. Adjusted EPS in Q2 was $4.37, up 24% compared to Q2 last year. We had 67 million shares outstanding in the second quarter. This is an improvement of about 11 million shares or approximately 14% year-over-year. We exited the second quarter with 64 million shares on an unweighted basis. Free cash flow remained strong in the second quarter, up 9% year-over-year. Free cash flow on a rolling four-quarter basis was $1.3 billion. Adjusting for several items detailed in the earnings supplement, free cash flow was 20% of reported revenue, 78% of adjusted EBITDA, and 140% of gap net income. At the end of the second quarter, we had about $1.5 billion of cash. This includes about $500 million for running the business and around $1 billion available to deploy on behalf of shareholders. Our June 30th debt balance was about $3 billion. Our reported gross debt to trailing 12-month EBITDA was under two times. We repurchased $547 million of stock during the second quarter, reducing our share account by more than 5% sequentially. Last week, the board increased the buyback authorization to about $1.2 billion. We expect the board will continue to evaluate and refresh the amount as needed. We are updating our full year guidance to reflect recent performance and trends. The update includes the effect of foreign exchange rates, reflecting a stronger U.S. dollar compared with our prior guidance from three months ago. For Insights revenue in 2026, our guidance is operationally unchanged. We revised the outlook to account for the stronger dollar. For conferences, we are basing our guidance on the 55 in-person destination conferences we have planned for 2026. We have good visibility into current year revenue with a majority of what we've guided already under contract. For consulting, we have maintained the outlook for the full year. Contract optimization has had several very strong years and the business remains highly variable. For 2026, we expect revenue at or above $6.375 billion, which is updated from last quarter and is FX-neutral growth of 1%. With positive NCVI in Q2, we expect Insights revenue in Q3 to be up sequentially on an FX-neutral basis. Reported results will reflect the effect of the stronger dollar. We now expect full-year EBITDA at or above $1.57 billion. Compare with our prior guidance, this is up $40 million on an operational basis and up $25 million net of the effect of a stronger dollar. This reflects full year margins at or above 24.6%, also up from last quarter. We expect 2026 adjusted EPS at or above $14, an increase from last quarter that primarily reflects the increase in the EBITDA outlook and a lower share count. For 2026, we expect free cash flow at or above $1.185 billion, also an increase from the prior guidance. This reflects a conversion from gap net income of 136%. Our guidance is based on 66 million fully diluted weighted average shares outstanding, which incorporates the repurchases made through the end of the second quarter. We exited Q2 with about 64 million fully diluted shares. For Q3, we expect EBITDA at or above $315 million. Our revenue, profit, and cash flow results in Q2 were ahead of expectations. We've increased the EBITDA, adjusted EPS, and free cash flow guidance for 2026. Contract value ex-fed grew 3.3% in the quarter, and total CV year-over-year growth improved by 70 basis points from Q1 of 2026. We are making progress on our BTI transformation with a focus on delivering even more value to our clients. Macrodynamics and AI are driving uncertainty and affecting enterprises around the world. The data we see across engagement, retention, and growth in multiple end markets reinforces the enduring value of Gartner's expert-led insights. This gives us confidence that this cycle will normalize and CV growth will continue to re-accelerate. Gartner's return on invested capital is strong, at 31% on a rolling four-quarter basis. We continue to generate significant amounts of free cash flow. We expect the conversion of gap net income will improve as CV accelerates. We believe this offers a durable and compelling value proposition for our shareholders. We are positioned to accelerate CV growth in 2026, and we expect to deliver adjusted EPS on a compound basis above 12% over the next three years. Over time, we'll opportunistically deploy our capital on stock repurchases, which will lower the share count, 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?

Thank you. If you'd like to ask a question, please press star 1-1. If your question has been answered and you'd like to remove yourself from the queue, please press star 11 again. Our first question comes from Faiza Alwi with Deutsche Bank. Your line is open.

Yes, hi. Good morning. Thank you so much. I wanted to ask about how your thoughts have evolved around the role of macro and AI kind of impacting your business because I feel like this is the first time that you've mentioned sort of AI as a factor. historically we've been talking more about you know the macro factors like tariffs so just curious kind of what if you know what's kind of driven the change in messaging around there yeah what I say is that the during Q2 the selling environment improved and I say many of the factors that we talked about were modestly better most notable when obviously being part of the public sector, but other sectors as well.

AI actually for us is something we get a lot of demand for. It's a single biggest demand from our clients. And so it's actually quite valuable to our clients. And again, we see the single biggest demand from helping clients with AI.

Thank you. Our next question comes from Andrew Nicholas with William Blair. Your line is open.

Hi, good morning. This is Tom Rastron for Andrew Nicholas. I wanted to ask about the Ask Gartner solution. And I was wondering if you could provide some caller on how, you know, renewal rates for users of Ask Gartner compared to those who don't, and also any type of benefits you're seeing, like, in revenue renewals, retention, any type of those numbers to this point. Thank you.

Hey, good morning. So, I think, you know, the way to think about Ask Gartner, and Gene referenced this in the BTI transformation, It's just a piece of all the things we're doing to enhance the user experience, both from a digital user experience perspective and also the experience when people do interact with our analysts and our experts. And, you know, AskGartner for us is table stakes because that's the way a lot of people are now when they're behind a firewall or working through information. They are leveraging a large language model. Our core value is really driving people there to our site proactively, because we know what their mission critical priorities are, and we know what their interests are, and we know what they should be thinking about many times before they even know what they should be thinking about. They really put a huge premium on that proactivity. And then when they do come, you know, they are proactively brought in behind the firewall, then Ask Gartner is one of our many digital tools that they can utilize to further enhance their experience, their insights, their intelligence, you know, moving forward on their MCPs. It's all positive, but again, I would highlight the broader digital experience as being the more important thing, and actually the broader overall engagement experience across all the elements that Gartner delivers value is really what we're focused on. Ask Gartner is obviously a piece of that, but not the biggest piece of it. It's an important piece, but more broadly, we're enhancing the overall experience, making it more effective and more efficient for our clients to connect with the insights they need to accomplish their mission critical priorities.

Thank you. Our next question comes from Jason Haas with Wells Fargo. Your line is open.

Hey, good morning. I'm just taking my question. I'm curious if you're still expecting the ex-federal government TV growth to accelerate to 4% plus by the end of this year?

Hey, good morning, Jason. Yeah, so along with overall CV growth continuing to accelerate this year, it is our expectation that the XFED CV growth will be a part of that. So short answer is yes. We do expect the entire business to continue to accelerate, XFED being a piece of that reacceleration as well.

Thank you.

Thank you. Our next question comes from Jeff Mueller with Baird. your line is open.

Yeah, thank you. Good morning. Could you go into more detail, I guess, on your takeaway from the midsize client base growing mid-single and what's different relative to large enterprise? One thing that would come to my mind that I'd be curious on your thoughts on is like if large enterprise just has more downselling of number of seats, but I don't know if there's any other takeaways from you because I would think the initiatives that you've been implementing would benefit both client sizes generally. Thank you. Hey, Jeff, it's Gene. Great question. I think what's going on with bit-sized enterprises is these are enterprises that are, again, they're typically revenues of 100 million dollars or more. So these are not small enterprises, but they're smaller than the very largest enterprises. And so the level of complexity in their environment is lower. And so when they're tackling things like AI, they actually, it's easier for them to actually get to what are the big areas they can get a good return on, how they track costs. All that stuff's much easier to control with midsize enterprise. I think large enterprises, these very large enterprises, they're extremely complicated. And I think it's very hard for leaders to sort out all of the puts and takes in terms of both where the value is and in terms of how you manage cost.

I think that's the big difference is in the smaller enterprises, actually it's easier to manage other stuff that make more progress and the larger enterprises it's a much more complex problem that they're still wrestling with how do you actually get that roi control cost and risk and things like that and i think jeff the other thing i would add is you know in the larger enterprises they tend to be more global in nature and so more impacted by all of the the uncertainty um that exists out there you know the one thing i would say is and again i would echo your point, all the things we're doing from VTI transformation and across the board will benefit all clients of all sizes, you know, across GTS, the end user piece, the tech vendor piece, and across GBS. We did note that we are seeing downsell stabilize in the second quarter, which again is largely a larger company phenomenon. So we're actually seeing some improvement there. We noted also that we are seeing in-quarter retention rates improve. That's a phenomenon across the entire portfolio as well. And so, you know, back to Jason's question a little bit, with ex-Fed accelerating, we need the entire portfolio to accelerate, and that would be inclusive of mid-size enterprises, large enterprises, and our largest, you know, clients across the board as well.

Thank you.

Thank you. Our next question comes from Josh Chan with UBS. Your line is open.

Hi, good morning, Gene. Greg, thanks for taking my question. I guess on Gene's comment about the selling environment improving, I was wondering if you could make a comment about the ex-FED selling environment. Do you see that improving as well through the quarter? And for you to get to the target of acceleration for the year, what kind of needs to happen on an ex-FED environment basis, I suppose?

So I'd say on the ex-Fed selling environment, there are areas where it's gotten better, and there's areas where it's gotten worse. And so I'd sort of say there's a mix of that. And so the areas where the macro has gotten better, I think that's performed, you know, very well. And the areas where it's gotten worse has been a little bit more challenging. And so I'd sort of say that's what's going on kind of under the covers. And, again, as Craig said, we expect that to accelerate over time.

And again, Josh, I think, you know, what it comes down to is, you know, our belief that I think a lot of people believe this, that, you know, this kind of environment is sort of the new normal to some extent. And so all the transformations we're doing and all the ways we are improving the business and focusing on execution and all those things are meant to, you know, be able to accelerate the business in the current environment. And so, again, we don't need a radical shift in the environment for the CV to continue to accelerate. We don't need a radical shift in the environment for the exped CV to accelerate. We just need to execute better, and we've got all the things in line. And, again, as I mentioned and Jean mentioned in our prepared remarks, as we look under the covers, a lot of our KPIs, they're definitely trending positively. and when we see those things trend positively, generally it results in improved performance over time.

Great. Thank you for the color.

Thank you. Our next question comes from Manav Patnik with Barclays. Your line is open.

Thank you. Good morning, guys. I was just hoping you could help understand the new business number. I think you said it was plus 2% in GPS and down 5% in GBS and kind of squared that off with your commentary around, you know, increase engagement, new sales, and so forth? And, you know, I guess within that, and maybe overall, just how is price tracking?

Yeah, good morning, Manav. I'll start off, and Gene can fill in any blanks. So, you know, I think there's a few things I'd highlight on the new business. So one is, as you know, and many of those who follow us for a while, we generally see new business dollars build from Q1 to Q2 to Q3 to Q4. So each quarter, we generally generate more new business dollars than the previous quarter. And as I noted in my prepared remarks and highlighted for both GTS and GBS, we did see a nice progression from Q1 to Q2 in new business dollars, which, you know, we view as very positive. When we look under the covers at sales pipelines and new business pipelines, they are also trending positively. And as you know, having new business pipelines doesn't immediately translate into, you know, growing new business, but you certainly, it gives us a much better shot of continuing to drive that build from Q2 to Q3, and then Q3 to Q4 from a new business perspective, and drive gains in new business as well. You know, when we look under of the covers that things like engagement and things of that nature, that's really about future retention rates. But what I would say is obviously future retention is also a good predictor of future new business. If you're not driving strong retention rates, it's really hard to grow those clients. And so the more that we can drive higher retention rates within our existing clients, the more new business opportunities we have as well. And again, you know, you saw, you know, while retention increased sequentially, that you should see filled as well over time as we both drive stronger retention rates with our existing clients. And then with more clients retaining, we have more, you know, at-bats, if you will, to drive new business with existing clients as well. And so, you know, it's a combination of all those things. And so, you know, primarily the engagement gives us, confidence about the retention rates. The retention rates give us confidence about being able to drive new business from existing clients, and then you flip over to the new business pipelines, which remain very strong and positive. That gives us confidence around the new logo contribution moving forward as well.

Thank you. Our next question comes from Surrender 10 with Jeffries. Your line is open.

Thank you.

I was hoping maybe you can provide a bit more color on the wallet retention. Obviously, things got a little bit better quarter over quarter, but I think there was also commentary around, you know, continued downsell pressure within the large enterprises. Maybe just how you think about where downsell pressure is versus maybe where you would like it to be. and just some of the things that are the factors that you think are driving it in the near term versus structurally where we think we are longer term on that. That would be helpful.

Hey, Surinder, good morning. So, yeah, I think the commentary is really that we're seeing downsell stabilize. And so it didn't get worse Q1 to Q2. It is stabilizing. And if you think about when a contract comes up for renewal, you know, there are one of, you know, three or four things that can happen. And so when there is downsell, it means we lose the upsell opportunity. And while retention is really a function of the combination of renewing the base, you know, obviously there are a small amount of clients that will cancel. But, you know, you see client retention rates are improving and are at or near, you know, sort of historical highs. And so that's really not, you know, a challenge for us. But when a client decides to either hold spend or reduce spend, that is a missed opportunity for us to increase the spend, which generally translates into those higher while retention rates. We believe that over time, with the better engagement levels, all the improvements we're making that Gene highlighted on VTI, that that will lead to stronger retention rates. That stabilizes the wallet retention and gives us more opportunities to grow that going forward. It could be just growth through price. It could be growth through upgrading people to higher-level services, or it could be growth from, you know, finding new licensed users or finding new buying centers within those existing enterprises. But, you know, we view Wallet getting more back to normal over time as we drive all these improvements in VTI and engagement, which stabilizes the retention base and then just gives us more opportunity to grow that existing client base.

Thank you.

Thank you. Our next question comes from Jasper Bibb with Truist Securities. Your line is open.

Hey, good morning, guys. I just wanted to ask how you're thinking about managing Quota Baron headcount in the context of this reacceleration in the second half and then, you know, in the 27th.

Like, do you expect to add more salespeople in the second half to support that CV reacceleration, or do you think you'd get there on productivity again?

Hey, Jasper. So we basically want to add sales headcount when we have great productivity. And right now we look at it as we have a lot of capacity that is underutilized. And with the changes we're making, like the BTI transformation I talked about, the increased engagement that Craig talked about, we think that will actually drive our productivity up. We'll get a nice lift there. As that comes up, we will expect to accelerate our headcount growth. And so it really depends on kind of how we see this improvement in productivity developing over time.

And Jasper, I just add, you know, we're actively managing our operating expense base so that we can remain agile and ensure, you know, we can deliver on our profit expectations, free cash flow expectations, et cetera. And then just I would reiterate what Gene said, which is, you know, we have plenty of capacity to significantly reaccelerate CV. Even getting to, you know, half or three quarters of our historical productivity levels, that would provide significant uplift to the CV growth. And again, that return to productivity would give us the confidence that Jean highlighted to, you know, reignite investment in QBH. But, again, it's all about, you know, balanced managing of our off-back space, making sure we're getting productivity out of our existing cost base. And then when we see that, that's the signal to go faster on the QBH side.

Makes sense. Thank you for taking the question.

Thank you. Our next question comes from George Tom with Goldman Sachs. Your line is open.

Hi, thanks. You talked about CV growth continuing to accelerate from current levels and highlighted several drivers. Can you rank order the key drivers you expect to fuel CV growth acceleration and what you see as a reasonable medium-term target for CV growth?

So what I'd say, George, is the thing that's going to drive CV growth the most are two factors. The first is as engagement with our clients increases, that strengthens retention. And then as our client retention increases, obviously if we retain a client, just as Craig explained earlier, our opportunity to grow in that client increases. And so I think the first thing we'll see is increasing engagement leads to higher retention. Now, higher retention actually leads to more new business with our existing clients. Then on top of that, as we make the changes that get higher engagement, that also makes it easier to sell new clients to. It makes their value proposition more transparent to new opportunities as well. And so then that will kick it as well. So I think those are the three key factors that impact.

And George, I would just add, you know, obviously in the near term, the biggest impact is a combo of lapping the U.S. Fed and that business actually getting back to growth as well. And so, you know, again, I know that's baked into a lot of the way people are thinking already, and so that's fine, but mathematically that will provide you know a nice lift this year and then again we believe that that business and again we both Gene and I noted on our prepared mark so we actually drove you know in TBI in that space the second quarter so you know that's another piece of it as well that sort of gets rolled in to the total and will behave exactly the way Gene highlighted but obviously we we won't have you know the same challenges we had in 2025 from the US Fed business going forward.

Thanks. And a reasonable medium-term target for CV growth?

George, you should know us better than that, that we do not provide, you know, CV guidance or medium-term growth. I think, you know, the short answer is we expect CV growth to continue to reaccelerate. You know, we've got to go through, you know, continue through the low single digits to get to mid-single digits and then get through mid-single digits and beyond. And, you know, we look forward to updating everyone each quarter, but we're not going to provide a medium-term target on the CV growth as is our normal practice.

Got it. Thanks. Thanks very much.

Thank you. Our next question comes from Tony Kaplan with Morgan Stanley. Your line is open.

Thanks very much. You mentioned in the prepared remarks, clients are reprioritizing their tech budgets. I imagine a lot of them are putting sort of more expense dollars towards utilizing large LLMs and related expenses, is that largely what you were referring to? And are you seeing any impact in the amount that they're willing to spend with you as a result of the reprioritization? Thanks.

Hey, Tony. So you're correct in that clients are reprioritizing their IT spending to shift more towards AI. LLNs are one piece of it, but more towards AI. What I'd say is that doesn't impact us in a negative way directly, because if you look at the amount they spend with us relative to their IT budgets, we're very, very small. Think a tenth of a percent or less for typical clients. And so as they reprioritize, actually, as I mentioned before, the biggest single driver demand for us for our clients, including IT, is help with AI. So we're actually helping them figure out how do they reprioritize. And so in that sense, it's actually driving demand for our products as we help them reprioritize. And again, so they're, again, across both within IT and across the business, typically companies are trying to reprioritize to create more money for AI, and we're helping them with that.

Thank you.

Thank you. Our next question comes from Scott Wurzel with Wolf Research. Your line is open.

Hey, good morning, guys. Thank you for taking my question. Craig, just wondering if you can talk a little bit more about some of the, you know, OPEX efficiencies that you're recognizing, you know, in the context of, you know, you're excluding FX, you're raising your revenue outlook by $5 million, EBITDA by $40 million. Just wondering if you could talk a little bit more about the OPEX efficiencies. Thanks.

Yes, Scott, good morning. Thanks for the question. You know, I think it's ongoing best practice around making sure that, you know, our in-quarter OPEX rates align with the revenue, but more importantly, that our run rates align with our revenue CV expectations rolling forward. So, you know, we continue to manage the business to ensure that we are delivering on our profit targets and also, you know, delivering on our free cash flow targets. What I would say is a lot of the reprioritization is to make sure that we are investing in key areas that we know will drive short-term, medium-term, and long-term growth. And so there's a lot of reprioritization happening on a quarterly basis. It's not always in the name of driving profitability. It is often in the name of making sure that we're able to double and triple down in the places that we think are most important for delivering value for our clients and that we think are most important for delivering long-term value for the company and our stakeholders as well.

Great. Thanks, Doug.

Thank you. Our next question comes from Daniel Zaka with BMO Capital Markets. Your line is open.

Hi, this is actually Jeff Silber with BMO. Other companies in this space have talked about potentially changing economics, maybe a faster move to enterprise pricing or a consumption-based model.

Is that something you're contemplating, and if not, why not? so uh we talk to our clients and do market research uh on a pretty much continual basis to understand how they want to work with us and what they you know how they feel about our pricing and uh what i'd say is um if you look at who we're targeting with our research it's the typically the c level like the cios cfo their direct reports and maybe one level down and so So an organization that might have 1,000 people or 10,000 people or 15,000 people, you know, we're targeting a handful of those people. And when we go back to talk to clients about how they want to pay for it, how they want to structure the contracts, they like the way we do it today as seat-based because they don't see a need to have it with all 10,000 of their associates. And if I can contrast that, you know, there's some, you know, like software purchases where they sort of say, like, if you buy, you know, a lot of packaged software, sort of say, well, I need it for each of my associates. We're not in that kind of a business. It's really focused on the top, really, three levels in the organization are our core clients. And when we ask them how they want to pay, they don't say we want enterprise licenses. They actually like the way that we're working today.

And Jeff, just to add to that, I mean, again, if you look at the average spend on the GTS side, it's probably about six licenses per enterprise. On the GBS side, it's a little bit lower than that. And so, again, you know, we are really targeting, to echo Gene's point, the top of the R-chard, that person's direct reports, and in large organizations, a level or two down from that. We are not targeting the enterprise. We are targeting the C-level because those are the people that have significant enterprise-wide mission-critical priorities that we can drive the most value for. and that's where we're going to continue to focus and drive a lot of our growth of value.

Okay. Thanks for the call.

Thank you. Our next question comes from Ashish Sabhadra with RBC Capital Markets. Your line is open.

Thanks for taking my question. Maybe a quick clarifying question. Can we know what the ex-FED NICVI was in the quarter? We get around $11 million from Fed and $3 million from ex-FED just wanted to confirm that. And then just a follow-up on prior responses, I was just wondering, can you talk about which areas are you seeing continued pressure? Are there certain industries or, for example, tariff-impacted industries were impacted last year? Do you see EZCOMs going into this year? Thank you.

Hey, Ashish, I'll start with the computational stuff, And then we can dive into the more macro question. So, ex-FED NICHTI in the quarter was about positive $4 million. So, that's the math on that. You know, in terms of – do you want to cover the tariff in fact?

Yeah, in terms of industries, again, companies that have tariffs imposed have much tighter, you know, cost constraints for that company than ones that don't. And so that's clearly a macro factor that continues to impact just for those companies that dare us. As I mentioned before, and Craig mentioned this as well, we're assuming that the world is going to be like that for the go-forward basis. And so we're restructuring our business, especially with the BTI transformation, so that our value goes up. So that even in industries where there's a big macro dislocation, that actually they see the value in our products and are going to want to buy and grow with us.

And Ashish, just, you know, the one thing I'd also just highlight is it's really the uncertainty. There are lots of different macro factors that are popping up, you know, on a daily, weekly, monthly basis. They ebb and flow, but it's causing just lots of uncertainty, you know, around the enterprises that we serve globally. And we're adapting and transforming so that we can, you know, perform better given all that uncertainty. that's very helpful thank you thank you our next question comes from curtis nagel with bank of america your line is open great thanks so much for taking the question um if you're pushing gears a little bit just on consulting i think you said the backlog is 214 or so um first increase in in about a year or so um i guess where are you seeing incremental demand uh you know what's driving that improvement yeah good good morning curtis It's, you know, I think it's a little bit better execution across the board, a little bit, you know, of just driving better focus with, you know, with our core anchor clients. There's no, like, one thematic around we sold a lot of, you know, this kind of project or this kind of engagement. I think the team has just been laser focused on, you know, one, delivering on the backlog that we have, and two, generating the pipeline and turning that into bookings. so that we've got more backlog to burn in the future. You know, obviously in Q2, we had a very strong bookings quarter. Again, no Uber trend among the type of business that we did end up selling, but it's just a matter of staying close to our clients, understanding, you know, where they have needs, and then, you know, our consulting team diving in to meet those demands and meet those needs. And so, you know, we feel good now about the full-year outlook, particularly on the labor-based side, given the strong bookings quarter, and we need to follow it up with another strong bookings quarter so that we can keep the backlog growing so that we can return that business to grow over the medium OK, thank you.

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

So in closing, with the strong demand we're seeing for help on mission-critical priorities such as AI, our vast and growing library of high-impact timely insights, and the transformational improvements we're making in our ability to deliver unparalleled client value, we remain optimistic about our future. We expect contract value growth to continue to accelerate. We will continue to drive strong pre-cash flow that we put to use to drive incremental shareholder value, and we expect to deliver adjusted EPS on a compound annual basis above 12% over the next three years. Thanks for joining us today, and I look forward to updating you again next quarter.

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