Q1 2020 Earnings Call
Hello, and welcome to the Factsets Q1, 2020 earnings Conference call.
This time all participants are in listen only mode. After the speakers presentation they'll be a question and answer session to ask a question. During this session you'll need to press star one on your telephone if you require any further assistant press Star Zero I would now like they had your conference over to your speaker today Rima Hyder. Please go ahead Madam.
Good morning, everyone welcome to Factset first fiscal quarter 2020 earnings call, we join usually it from our Brave New World headquarters in Norwalk, Connecticut.
Before we begin I would like to point out that supplies of people reference during the course of the presentation can be accessed via the webcast on the Investor Relations section of our website at <unk> Dot com.
The slight will be posted on our website at the conclusion, it's cool.
A replay of today's call will be available via phone and on our website.
Oh sure prepared remarks, we will open the call to questions from investors.
To be fair everyone. Please limit yourself to one question.
Which explains the risk the forward looking statements and they use non-GAAP financial measures.
Additionally, please refer to a forms 10-K, and 10-Q or a discussion of risks factors that could cause actual results to differ materially from these forward looking statement.
For such measures reconciliation to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued earlier today.
Joining me today are still snow, Chief Executive Officer, and telling Chen Chief Financial Officer.
I'd now like turn the discussion over to folks so.
Thanks, very much and good morning, everyone. We began our first of all 20 with growth across most of all businesses.
Remind everyone that <unk> first quarter typically that's most of the yet and it's important to look at half and full year performance is more appropriate matches a progress.
I'm pleased that we have a healthy pipeline for the first half of our fiscal year, especially against the backdrop sustained industry pressures.
Well I still think scold me outlined a three year plans to accelerate the breadth and depth of our investments in targeted areas within constant some technology with the goal of driving higher top line growth over the long term.
He has hit the ground running delivering encouraging early progress in Q1.
We then called <unk> deep sector private markets efforts are proceeding apace.
We find most experts following the launch of our successful banking regulatory data.
We're making good progress integrating third party private market state and the fact that under expanding our valued street account coverage into new markets. We believe this expansion of coverage will resonate across all business lines.
Taking all the reception well.
Our continued efforts to grow up Tech stack are also deal yielding early results. We've tripled the number of npis available since the start of the fiscal year.
Contractually, it's more than the second quarter.
Well migration to the public cloud is well underway, we've identified opportunities to reduce our fixed data center costs in the long run.
From a product perspective, we are building momentum in analytics with multi asset class risk fixed income and bolt on new performance measurement products. Each showing particular strength. We're also very pleased with all wealth pipeline and the positive response from clients.
Finally, we see growing demand for open solutions, we announced this quarter. The Factset is now available on open fan and we're proud to be the first market data provided to do so.
Early adopters of the shift to more open and flexible product excess we believe the when does it all back somebody will continue to deliver information to clients, where when and how they wanted.
In sales, we have a ballpark compensation plan.
And I'll focus on client retention and expansion.
These changes include growing all strategic client group, which looks out for our top accounts to couple of more clients and build upon the strong see lover relationships, we have an industry.
We're also expanding on new business and sales engineering teams to capitalize on increasing technology opportunities.
While these cost that much it will take time to impact all topline as the industry evolves, we're continuing to take proactive steps rough position of strength to ensure continued growth.
All services grew at 4% this growth rate reflects a decrease in I guess being the quarter driven by higher than expected cancellations and research and a decrease in <unk> or add on business, where we sell to cross sell to existing clients.
In addition, new business sales increase year over year as we added more clients this quarter.
Overall, we see continued cost pressures among institutional asset managers and Charlotte within our banking clients. However, it's important to remember that a lot of banks, along with spending quite a backstop and when they hire later in fiscal year next summer we have potently expect the benefit.
This quarter once again, we saw growth and use us from.
Private equity problems, an area, where we're investing.
In the Americas, we saw healthy growth in wealth asset owners and hedge funds. This was offset by seasonal banking, Sean or no response business.
Americas had a tougher comparison versus the first quarter up 2019, when we had larger deals that contributed to high speed.
We remain optimistic about the Americas, as we deepen existing client relationships and capitalize on new business opportunities.
In EMEA, we had positive momentum with the Buyside, well and institutional asset managers. This region is facing somewhat the same cost pressures. We have previously seen in the Americas and uncertainty with regulations and the political environment.
Well it looks healthy for the year with institutional asset managers asset owners and wealth managers as we see a demand for our analytic solutions.
Cts was the main driver of the 10% growth in Asia Pacific as we sold data feeds across the region primarily to local data provides the opportunity in Asia Pac is where the buyside driven by risk solutions for asset owners.
Our next offerings for the institutional asset managers, especially for the investment portfolio lifecycle.
We continue to be bullish about or opportunity in this region and we're investing appropriately to capitalize on its potential.
Analytics was another bright bright spot driven by the strong performance of fixed income and risk products. Most cts continued to see solid demand for core and premium data feeds.
Our adjusted operating margin and adjusted EPS came in strong this quarter and we believe that for this year will be more in line with our annual guidance as we continued to execute throughout the year in accordance with our investment plan.
In closing I want to reiterate that our fiscal year is a tale of two have a pipeline is healthy and we believe that we are on sound footing to deliver on the first half of our fiscal 20 and are well positioned for the year. We have a proven track record of returning consistent long term value to shareholders a record that we firmly believe we will continue.
It is also increasingly clear that clients are demanding more open flexible and especially on technology to help them manage change an area, where we continue to excel and as we execute all three of plan early signs indicate that we are taking a winning to ensure continued growth through expanded opportunities with existing clients high retention.
A new business.
Now turning the call over to Hell, and who will discuss the specifics about first quarter performance.
Thank you fail and good morning, it as Grayson easier with all of you.
We began fiscal 2020 with a solid operating performance, 10% earnings growth and operating margin that continues to reflect the productivity and efficiency improvements made throughout 2019.
Well, we are at the beginning of our three year investment plan, we are on pace as we start to ramp up hiring and spend.
I'll now walk us through the specifics of the quarter's results.
GAAP inorganic revenue increased by 4% 367 million at $368 million expect.
Well, this driven primarily by well Cts and analytics.
Our geographic segments over the last 12 months America's revenue grew 4% and international revenue grew 5% organically.
Mark has benefited from increases and well analytics and Cts.
International revenue was largely driven by analytics.
GAAP operating expenses for the first quarter totaled $253 million, a 1% rose over the previous yeah.
With revenues growing faster than expenses.
GAAP margin increased 230 basis points to 31%.
Adjusted operating margin increased to 34%, a 240 basis point improvement versus last year.
As a percentage of revenue expense improvement came largely from a cost to service.
Which was 240 basis points lower than last year on a GAAP basis.
On adjusted basis improvement was 210 basis points.
Contributing factors include decreases in employee compensation, reflecting the continued mix shift from high to low cost locations as well as lower contractor.
This benefit was partially offset by an increase in computer related expenses as we continue to upgrade our technology stack.
I see the expenses expressed as a percentage of revenue grew 10 basis points over the prior year period on a gap.
On adjusted basis, we started improving 30 basis points.
This result was driven primarily by expense reduction in travel entertainment professional fees and lower bad debt expense and partially offset by higher employee compensation and higher rent expense associated with have moved to the new headquarters.
We've been improving operating margin over the past four quarters, reflecting our efforts to maintain disciplined expense management as opposed to grow and sustained productivity gains through our planned workforce mix.
We're pleased with the progress that we have made as it has given us the ability to redeploy capital back into the business and the key areas of content and technology.
On the last earnings call, we provided financial targets for that's why 22 to recap our investments build incrementally a $15 million per year in each of the next three years totaling an additional 45 million and the F. why 22 expense rate.
As we noted we expect our ASP growth rate to be in the high single digits adjusted EPS growth at 10% plus an adjusted operating margin of 33% plus and that's why 22.
We've got to execute on these projects still noted earlier.
And we'll be building over the course of year.
For fiscal year 2020, the majority of the cost will be people related.
We expect the level of expense the ramp up more heavily weighted in the second half of the year as we build up the resources and capabilities.
We believe will be in line with a that's why 20 guidance are you wanted to have the third you wouldn't have percent an operating margin given the phasing of incremental investment.
I remain confident in our investment strategies.
Moving on our tax rate for the quarter was 13.6%.
This rate included a few onetime items related to finalization of prior year talk to trim and a change in touch right and one of a foreign jurisdiction.
Excluding onetime adjustment our quarterly tax rate went up in 17.3%.
Please keep in mind that when we provided annual guidance for fiscal 2020, we did not include any onetime adjustment the tax rate.
GAAP EPS increased 12% $2.43 this quarter versus $2.17 in the first quarter of 2019.
I mean tribute of all the higher revenue and improved margin.
Adjusted diluted EPS grew 10% to $2 and 58.
A reconciliation of our adjustments to GAAP, yes, it's close at the end pressure.
Free cash flow, which we defined as cash generated from operations, that's capital spending 69 million for the quarter and increasing 18% over the same period last year.
The improvement was primarily due to higher net income and increasing cash collection and the timing of payables, partially offset by higher capital expenditure.
As noted on past calls our Capex is higher this year due to planned investments in technology as well as new office space build out some of our locations the existing leases have nearing expiration.
Last quarter, we look to update our annual ASP retention metrics on further review we have determined at the current methodology is aligned with our client retention metric remains an accurate measure of yesterday retention.
But the first quarter annually asking retention continues to be over 95%.
We're also pleased to report and a client retention never find we retained over the last 12 months remained at 89% and a client count was 6% year over year.
Looking our share repurchase program for the first quarter, we repurchased 343000 shares for 84 million at an average share price of $246 per share.
Over the last 12 months, we've returned approximately 345 million to our investors in the form a dividend and share repurchases.
We remain committed to creating long term value for shareholders and plans to repurchase shares at a steady pace inline with last year.
The improvement in operating results over the course of fiscal year 2019, and the first quarter. This year I felt progress operational discipline and and the sustainability of the productivity gains.
We believe I plan to invest in more comprehensive integrated contact and in digital technology will fuel future topline growth, which in turn is key to long term value for our clients employees and our shareholders.
With that you're not ready for your questions Michelle over to you.
At this time I'd like to remind everyone in order to ask a question. Please press star and the number one I know telephone keypad.
Your first question comes from a line Peter Halfmann from D.A. Davidson <unk> co. Your line is open.
Hey, good morning, Thanks for taking my questions. So just trying to.
Thanks, very much standing correctly, I mean significant upside maybe that spending due to ramp as quickly as expected.
This does your guidance that imply that you should see negative adjusted earnings per share growth in the back half the 20.
And how do you.
Think about me.
Had a 2022, but how do you think about that transitioning that into the first couple of quarters at 41.
Hi, Thanks for your question I'd tell him. So no I don't I don't what were essentially going to be doing because we believe will still end up with the same amount and for the year is that as it ramps up I will still be within that range and then at that run rate.
Well continue to see that through the first two quarters of 21, I mean, just do a little bit more color most of the expense. This year a much more people related so it takes time to ramp up.
I would say if you look over the phasing of the year, it's roughly 30% or be in the first half and the balance in the second half and so that's.
Then the technology spend is more in the latter half of the three year.
We are investment.
Plan.
So it'll be a little bit smell the gate and it takes time to higher but but we don't expect that to be an issue as we think about that so the guidance we've given for the year.
[noise] that's helpful. And then just Raleigh happy it could ever talked much about job Portware and the company's efforts in training can you just give us.
Yeah, Hey, Peter it's Phil Snow so.
Yes, we're seeing very positive.
Momentum and the trading space over the last few quarters and a lot of that is attributed to I think the integration now of the E.M.S. capabilities within Colfax out and we're also seeing.
Good momentum with our owe a mess offering as well so just to remind everyone. We have execution capabilities, we have water management capabilities.
Integrated those now into a portfolio management platform, which is also beginning to gain some traction. So these are not big numbers right now, but the trend is positive and we're very excited about that part of our analytics suite.
Thank you very much.
Sure.
Your next question comes from a line of men as Pat Neal from Barclays. Your line is open.
Thank you. My first question is just you know these cancellations that you called out this quarter well the contemplated in your full year guidance and I was just hoping if you could just help maybe give us a little bit more color on you know.
How much of the guidance is you know assuming that you win a bunch of contracts over the course of the.
Hey, Manav, it's Phil So I think that cancellations that we called out in.
Q1.
It was a little bit more of an expected cancellations within the sell side across banking as well as research and the and very often that's difficult to predict or given the numbers are pretty large and you're not you'd never show us sort of coming out of the hiring and into Q1, Oh, what that's going to look like.
And I think when we look at Q1, you know, it's typically a smaller quarter for us as I said in my script I'm pleased to go back you know two or 3 million.
This quarter, but if you go back even a couple of years into two <unk> fiscal 2018 or that was a fairly small quarter for us as well. So when we look out for the rest of the how you know it significantly weighted that's a Q2 and when we look at the pipeline of us as the pipeline last year, we feel.
Hi, good about you know our opportunities as we head into the second quarter.
Got it and then maybe just either to go your comments on the growth in well what would the what would the drivers there was it just the ramp of the BAML contractility. It was it a lot of a in a single win here in there just curious if you could get a little bit more color there.
Yeah. So no I mean, we're doing very well at BAML I think that was obviously a great deal for US and was a significant contributor. That's a Q1 of last year. So I think you've kind of expected. Some deceleration in this quarter just given that was a tougher comp, but we've had some very nice wins in well at larger farms within the Americas.
And we also are doing very well in the middle markets part of wealth.
And the pipeline is very healthy you. So you know there are some larger deals out there for us which are a little bit more binary ah, but it's going back to the previous question you know, we're not relying on any.
Any like massive deals to a it's a come with it and the guidance range that we gave at the end to the yeah.
Alright, Thank you Dave.
Yeah. Thanks.
Your next question comes from line of the Hams, Missouri from Jefferies. Your line is open.
Hi, This is actually merial quite a lot you filling in for Hamzah kind of wanted to piggyback off the wealth a question and you mentioned that there is some binary wins and it sounds like you're doing well in the middle market channel, but just wondering if theaters, a larger deal and more and more consolidation and among the wire houses.
Just didn't know how you guys are positioned and obviously a window things as is our like you said binary but how are you position and how do you think you'll fair. If there is some consolidation among the much bigger players.
I think what well. This says you know this is a greenfield area for us its an area that we're not defending essentially right. That's all offense.
The product that we have as exception all we've put a lot of effort into it a big piece of our investment strategy for the next three is is to just continue to bolster the wealth offering in terms of content as well as and technology. There was some things that we're going to do there I think to make the life of the next generation of a financial advisor.
Wealth advisors, so much easier.
And some of that's integrating our risk capabilities.
Some of that's taking cognitive computing to essentially make the life of the wealth advisor in the financial advisor a much more efficient. So this is a space. We're super excited about you know typically when those consolidation it means disruption as an opportunity for a new come a like factset to come in.
And take a crack so you know we're in lots of RFP is either these are big problems that long contracts. You know you don't Wyndham overnight, but we feel exceptional about a this just this piece about business and the opportunity in front of us.
Great and just one more and I'll turn it over so like you said there there's a lot of white space in wealth and maybe it's just there's other part of the business isn't as big of a focus for you, but how much do you think your products lend themselves to the commercial banking or insurance and.
Or maybe you can give us a sense of how much you've explored those markets as well.
So commercial banking is really interesting we had a pretty good when a I think it was last year in Asia Pac not with a lot of seats up at medley at a lower cost, but our web offering approved very good for that market and I think but continue to explore some opportunities, though we have pretty good business and insurance.
Right now so what resonates with our insurance clients is our analytics products. You know we've got to a great multi asset class rest product, which we continue to invest them unrest because one of the things I talked about in my script. It's we've got a lot of good momentum in the rest space.
The pipeline for risk looks really good and some of that is that insurance companies.
Great. Thank you.
Yep.
Your next question comes from the line of Andrew Nicholas from William Blair. Your line is open.
Hi, good morning in terms of wells pipeline it sounds like you're waiting on a few larger decision any color on when you expect those decisions to be made.
Some of them are this fiscal year, you know some of them are further out.
Okay.
And then I was wondering if you could provide an update on momentum and analytics, a particularly as it relates to kind of the sales force realignment as that gets further and further in the rear view mirror just wondering if you could update us on progress with respect to sales momentum.
Yeah. Thanks, I'm not so great question. So yes, so fixed income had a very good quarter and we have a very good strong pipeline for fixed income and that was one of the areas that we did worse than last year than we hoped.
And the movement of the specialist back into.
The analytics area has really paid off so you got some great leadership. The other teams excited the areas that really a strong showing very strong momentum of fixed income risk vault and fall to remind everyone is kind of the combination of the by sound performance product with traditional P.J.
That is gaining a lot of momentum, we're having a lot of unit sales with vault.
The Apiay us within analytics are doing very well, we see it a ton of momentum there and then I'd I mentioned, we tripled the number of Apiay is that we had in in a Q1.
So a lot of that is around analytics say, yes. So all in all we feel good about analytics I also mentioned you know our momentum there in the trading space and a lot of these are really the workflows solutions and the portfolio lifecycle. So you know we made a bunch of acquisitions three years ago, it has taken us longer than than than I expected.
To get those integrated but I think what we're seeing now an out into the rest of the fiscal year is great momentum in those areas the workflow solutions and helping the larger clients be more efficient from a technology standpoint.
Got it thank you.
Yep.
Your next question comes from line of Toni Kaplan from Morgan Stanley . Your line is open.
Thanks very much.
Another question on the research cancels.
Related to affirms getting out of equities are banking or consolidation affirms closing or competitive losses.
Just any sort of extra color you could give on what led to the canceled.
Yeah, Thanks, Tony as Phil So yeah, I think these are a lot of the councils our.
Typical in terms of the seasonal banking, Sean there were a couple of.
Well, we had some things happened that we didn't anticipate a one was that a larger or sell side from and the other was that a middle markets Bob I'm at the sell side from it happened we have a very strong relationship with I'm pretty excited about the opportunities moving forward.
I can get into the specific details, but clearly this pressure, particularly on the big up arms, you know with feeling some of that I think that's what you're seeing in the numbers for Q1.
What we're doing lots of things right to Ah to work our way up the stack up these bigger farms provide more solutions and its you know it's gonna be a little bit choppy at some of them, but we feel good about the longer term opportunity for us.
That's great.
For my follow up I'm, just trying to find out how much FX benefited margins this quarter and if there was anything one time if it wasn't.
That helps margins just because they were a lot stronger than expected.
Yes sure. Thanks for your question. So this quarter the benefit of FX was about a million, which is actually less than in the previous a year and obviously a lot less important of course, so that's why 19 so.
That was not material impact you know if you compare our margin this quarter to Q4, where exactly the same 73.9%. So I think it's reflecting whereas the consistency of they actions that weve. Unfortunately the question here.
Thank you.
You want.
Your next question comes from a line of Alex Kramm from you.
Your line is open.
Yeah, Hey, good morning, everyone. Phil you talked about your excitement or all of them I think to Q launch of some of the more in depth stayed around financial services. All banks can you just talk about the appetite there little bit I. I think this supposed to be a little bit of a SNL competitor, but one other things that I'm also hearing is that.
Yeah. That's competitor has a lot more different industries that they cover so some firms might still wait until you have the full breadth. So I guess, how much is is gonna be a niche solution for now and maybe in a few years is gonna be a real a real competitor up can you just flesh it out a little bit. Thanks.
Yeah. Thanks, Alex So you know weve. So we're we're attacking you know about around eight sectors I believe over the next three years you know to your point, we can get them. All done. This year. So we have a very methodical plan to work our way through weight sexism in doing it in the order that we think we'll have the biggest impact for us we've already high.
But oh from the outside the industry experts for each of these sectors. So they are on board already this quarter. So nothing we did an exceptional job, they're hiring and it's going to depend on the on the farm essentially so some from this may just want one or two sectors.
Some may want to all AIDS are some may be very happy with 80% of the you know 20% into the functionality, but 80% to the value.
But yeah, we are seeing a very healthy appetite for you know more choice in this area.
And we feel that we're gonna have some impact this fiscal year. In fact, we already had I think one very good when I can't remember fits in Q1 or in the pipeline for Q2.
You know with another farm for that for the financial data that we have.
Okay, great. Thank you for the color and then just secondly.
Again on the opportunity side I mean, you mentioned the tough environment, which obviously all of US on this call probably know about I've I've been hearing a little bit more of an effort to reduce cost when it comes to the really expensive competitors of yours. So I think you've been benefiting from that to some degree I I think you've done this all along over the last year.
But they are you seeing an acceleration and focus on cutting some of your most it's more expensive competitors and this is that's gonna be something that's going to help in the next couple of quarters or or is it business as usual from that perspective.
I think we are seeing more of an appetite for that and it was on a recent trip to Europe I had a couple of you know good meetings that larger firms, where I think historically people up and given choice and that's been a little bit more of a grassroots effort to do this but I'm what I'm feeling it a lot of these firms that are having more cost.
Russia is is that there's going to be more of a top down push to save costs.
And do some of what you just described.
Okay. Thanks for confirming.
Yep. Thank you.
Your next question comes from line as Joseph Foresi from Cantor Fitzgerald. Your line is open.
Hi.
It seems like you're going to sort of maybe a portfolio shift because.
Some of the Buyside stuff Intelsat stuff isn't working as well I'm sure we call understand that when do you think you'll hit an inflection point, where organic growth starts to accelerate because the portfolio has been right size.
Oh I'm, hoping Joe that this is the inflection point and that when we talk to you in Q2, you know we can't we can point to that obviously, it's hard to predict the future, but you know when I look at what I. Just described in terms of analytics when I think about our Cts product suite, which we havent talked a lot about today Butch we're having exception.
All momentum there selling all content.
You know the wealth pipeline, our efforts to fill out the portfolio lifecycle.
All of that isn't really great. I think we are seeing obviously people pressure in our industry and you know a lot of a lot of pressure on the research side. So that's the piece, that's a little bit harder to kind of predict but you know we feel like we thought the right strategy and we've got a team that sort of really excited to execute even in what is.
But what is a tough environment.
Yeah, I guess my follow up will be an old question.
Maybe we could start to get a breakdown from a percentage of revenue where you could just give us rough ballpark numbers around you know the new pieces of the business and what they're growing versus sort of the old pieces of the business. So that we can kind of start to model off the inflection point.
Ourselves.
I'm just wondering if there's any thoughts around that or if there's any general numbers. Because you said you hope that theres the inflection point out right now thanks.
Hi, Alan Thank you for your question I mean, a lot of what we provide is even when we talked in client a bundled as well so while we do track we don't actually have plans right now to be breaking that out.
But certainly we'll give you updates as we go on each each call it.
Okay. Thank you.
Okay. Thank you.
Your next question comes from the line of Shlomo Rosenbaum from Stifel. Your line is open.
Hi, Good morning, Thank you for taking my questions.
Phil just a quick question not to be debt research cancellations to death, but.
Is it people that are just no longer there or is there moving to a different platform I'm just trying to understand that dynamic a little bit more.
I don't have all of that detail Shlomo I imagine some of it. It's just people pressure right within the research side that as a sort of less hiring going on.
You know some of it may be competitive pressure I think there are situations, there, where we're taking market share and others are taking it from us.
Again, I'll point to the fact that is typically a smaller order so when calling it out this quarter just because it's one of the you know larger numbers, but in the big in the Big picture when you're thinking about on numbers for Q2 in Q4, especially I wouldn't read too much into into that for this quarter.
But it's I guess what people are trying to figure out is there any see any pickup in roughing. It is is there anything going on and on the cat by two side that's becoming.
Nipping at your heels is there any change in any of that stuff I guess, that's what I'm trying to get too or is it just really well you know when I look at.
The the competitive win loss were still I think doing doing well from a market share taking market share standpoint.
Okay, and then just open facts said Oh <unk> are there any additional metrics you can give us. Besides you know maybe some of the <unk>, how that's tracking I start to generate any any meaningful revenue over there just does that seems like an interesting part of the business I wanted to delve into more.
Yes. So we're we're beginning to get some momentum there there's a there's different pieces to it. So you know the piece that's generating I think the growth in Cts is really the data exploration platform that weve created so it's really the ability to come in and look at all content. In addition to some of the okay.
And providers that we've added some of the alternative data.
But a lot of that a lot of the growth Youre seeing is really from factset on content.
And we're beginning to see a pretty healthy pipeline for you know some of the alternative data providers that a combined with that is I think it's as much the model and the ability to come in and begin programming in Python using Tablo, you know kind of what the analysts to the future and the data scientists of the future is going to want to use.
That's a that's really the most exciting piece of it.
Alright, Thank you very much.
Thanks.
Your next question comes from a line of Bill Warmington from Wells Fargo. Your line is open.
Good morning, everyone.
So you are you had mentioned the strain can analytics, yet cts and well fan.
By implication I would take it that research it had turned negative this quarter and I just wanted to confirm that and and ask if that was really the results of the the churn that youve mentioned and to ask how long you think it'll take to return to low single digit type target growth.
Yes, so you're right Phil no. The other three businesses were positive this quarter and recent negative again, you know, it's a smaller order.
So again, it's hard to predict we feel good about the research business as we look out the rest of the year on my last quarter, we gave sort of longer term guidance for what we think that business can do a the investments we're making in deep sector in private markets.
And Street account, all well we believe bolster.
That business and allow it to grow overtime.
Okay. Then a follow up question for you on the data feeds business.
You know that seems like a business that could potentially become commoditized and so I wanted to ask about what you guys are doing to differentiate your offerings there.
Yes. So you know some up some of the date as unique. Some is you know other people have it I think the value that factset, there's always brought to the marketplace over the last 40 is is the integration of content. So you can deliver datasets all day out of a marketplace for a library, but the hard work is integrating the data. So that you can use it as one.
On database.
And and providing the tools to analyze the data. So that's what we do a we do very well of course, it's great to have our own content as well to monetize but the real value for our content is how well it plays together.
How well we can integrate it with other datasets and within other people systems.
Well, thank you very much.
Thanks Bill.
Your next question comes from line of David Chu from Bank of America. Your line is open.
Thank you so related to previous question can you just provide some color on what you're seeing in terms of client budgets overall I mean.
His cost cutting more than four focus versus let's say a year ago.
Hi, David Yes, Yes, I believe it is I think we you know this or active managers in particular continue to be under cost pressure and you know it's up to factset to provide them tools that allow them to be more efficient.
And that's really you know that that that's the that's where it is with active managers. If I talk if we think about other client types that are out there you know, we're making a lot of exciting progress in asset owners or which include plan sponsors and sovereign wealth funds. That's an area of growth for us, we're doing very well with hedge funds I.
I mentioned that we were positive this quarter were selling hedge funds a lot of Cts product Oh, we're seeing good momentum in private equity. So that's an area that we're investing but it's a small area of our business, but that's one that is going pretty rapidly a we're doing well in the corporate space that continues to build momentum for us. So you know were.
Obviously active managers are a big piece effects as business were providing good long term solutions for them, but or other markets that we're going into that or that have a lot of great momentum.
Okay. That's helpful. Thank you and one is the one to capex number of proper run rate for the year.
Thank you for that question, yes. It is about that we are expecting to be up year on year.
I think we ended last year around 60 million and we're looking more like an 80 million for.
Yeah.
Perfect. Okay. Thanks.
Thank you.
Your next question comes from the line of key How's him from Northcoast Research. Your line is open.
Good morning, Hey, Phil if we look at the research environment.
Customers getting rid of some of their.
Employees, how protected is facts I if one of your customers just goes from say 100 employees down to 50 employees do you guys have minimums baked into your contracts that you're protected or not.
We do it you know we do in some cases, so you know as clients have gotten larger when a and and our footprint just gotten bigger with them you know they've looked for I think more certainty within their budgets overtime and we do have floors in that some clients. The other thing that we've made a try.
Position towards a that continues is you know a bigger and bigger percentage of our ASV is tied to more workflow solutions unless people. So the majority of what I. Just described at the analytics business has a lot less to do with seat count and a lot more to do with work flow and enterprise solutions and on the feeds is the same thing.
So obviously, it's an evolution I won't happen overnight, but I think it's the right strategy for us and one that we're already.
Capitalized.
Okay.
So do I understand then if guys research Crusade consolidates further next year you guys might have some protection with some of your contracts based on some of the floors somebody may not.
Yes, I think that's right.
Okay, Great and then if I just turning to the international side International revenue was down compared to last two quarters was there anything unique I guess the end of last year that affected that revenue or anything unique in this quarter that their revenue decline actually your sequentially.
Yeah, I don't think does anything unique you know Europe clearly is under I think probably more pressure than the Americas and Asia Pac we see a ton of opportunity in Asia Pac its hard to imagine that not continuing if we make the right moves that but Europe Europe .
Under a lot of a pressure for a lot of different reasons.
Great. Thank you.
Yes, so as mentioned before I mean, I think that pipeline is healthy and we have seen some good new business growth. So as we think that's for the rest of the year, we would no we're feeling feeling more positive about if that's right.
Your next question comes from a line of Kevin Mcveigh <unk> from Credit Suisse. Your line is open.
Great. Thanks.
Phil.
So your Finn is changing hands twice within the last 18 months or so you know as they become part of the L. I see any thoughts from a competitive perspective does that change in behavior on the continent at all or even in the current form as part of Blackstone to these seen any competitive dynamic shift.
Yeah. Thanks, Kevin I, you know obviously for a lot about that I doesn't feel to me that you know the combination of LLC in rough initiative is gonna be much different frankly to US then you know what we've been dealing with from a competitive standpoint went for funding level over the last couple of decades.
So you know this still uncertainty I would think you know within both the client base and their employee base in terms of what's happening and we're just capitalizing on that uncertainty right now.
And with that kind of lay the opportunity the extent [noise].
For any.
Kind of integrating did you see competitive advantage on that.
Due to look at other points in history does that free up incremental opportunity or no.
I'm not sure I understand the question.
I guess, you know as you're consolidating I'm sure. They see disruption in their sales force do you take advantage of that is your opportunity capture incremental share.
Yeah I.
I think so so yeah, I think that's where I was trying to describe yes as those uncertainty in the client base and then their employee base others, there's opportunity for us to go into clients and have conversations and take market share.
Got it and then just quick called the investments you're making in kind of the research product. When do you think the earliest you'll see that start to see the revenue benefit from that.
So overall I mean, when we think about both the content technology.
He is minimal in this year, but as it ramps up in general we would expect to see about 25% of the total growth coming in a year I want you to excuse me 2021, but the balance coming into a in 2022. So it's more of the Backended in terms of the list.
Understood. Thank you.
Your next question comes from line of Craig Huber from Hoover Research Partners. Your line is open.
Yes, Hi, I think I missed the first few minutes your comments, but I'm one of the.
Here was there any major cancellation fees that showed up in your revenues in the quarter. Each you guys just reported here.
Cancellation fees.
Well for many calling it's yours.
Any revenue that was pulled forward to account for revenues up to two and half million dollars sequentially. Yes. The of course was down slightly.
Just three months ago like is only a third time in the was 20 years or so I'm just wondering if there's any clients. The cancel really revenues that were recognized pulled forward maybe to some degree in November quarter.
First question right sure. This is how I know no. We don't we don't see that and it was helpful for Judy cancellation from from Oh I'm fine.
So that's not how I model works.
That's not a driver at all.
Okay and then thank you for that my other question again.
With the ASV down slightly versus three months ago, you went through your confidence level of wealth and Cts.
Cetra sounds like you're still comfortable with $65 million to $85 million increase in ASV is that you're thinking that's more backend weighted for the year.
Yes, correct. So you know we believe that this year in particular, it's always backend weighted I think if you go back historically, it's you know maybe somewhere between 60 40, just in terms of the split.
But the way that we thought about this year on the way that we've sort of modeled out a plan. We believed that the second year or the second half of the here is gonna be more heavily weighted than typical and we're still feel we're still feeling good about the guidance range that we issued last quarter.
And then I think you said you you know this three year investment program to enhance the.
Product and extra $45 million extra costs, I guess, but when we get to the end of fiscal 2022, how much of that you think will fall into this year versus next year.
So go through let me reiterate how that works. So we if we add $15 million in each of the years that we'll be investing in for 2020 122. So in terms of what falls into the first year its $15 million.
In very little that was obviously in the first quarter.
Right because much of the spend is people related and it takes time to higher especially for the capabilities that we're building, which has to deal as as Phil talked about in terms of content. They are the expertise there and also on the technical side is really digital capabilities.
Your last question comes from a line of George standby from Goldman Sachs. Your line is open.
Hi, Thanks, good morning.
Organic year, three plus professional services growth has decelerated to its lowest level in years, you talked a bit about client budgets coming under pressure and some fell five head count reduction can you elaborate on changes you're seeing with Buyside head count in both the U.S. and internationally.
Yeah, Hey, George its Phil So yeah. We're I think we're seeing you know the bite we're seeing pressure on headcount.
In the front office I think that's a pretty well known I think you know portfolio managers traders research analysts I think over time, you know on our thesis is that we'll see.
You know sustained pressure you know in terms of the number of people and that you know clients are going to want to go to more efficient solutions.
And more of a technology type solution.
Got it that's helpful. You noted a decrease in your add on business, where you cross sell to existing clients can you discuss broader trends, you're seeing with new product uptake versus your expectations and traction with client wallet penetration.
Yeah. So a lot of that really had to do with a large deal that we had in Q1 last year that was booked as an add on business that was an existing clients. So I think that was the vast majority of that and as I mentioned, a in my script and throughout the call. We're seeing a lot of very positive momentum.
For analytics product.
Feeds.
On the wealth side, a lot of its driven by use account.
Great. Thank you.
Thanks George.
There are no further questions at this time I turn the call back over to sell.
Well, thanks, everyone I'd like to Ah. Thank you all for joining US today, it's clear that the changes in our industry are happening at speed and we remain well well placed to lead the charge. Our efforts are already taking root as we position the company for the future, which is reflected in our new global headquarters here in Norwalk, Connecticut, and I'm very proud of the happens to be.
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Demand for open a flexible solutions is growing and I want to conclude by Everett reiterating our conviction in our outlook for the year and happy holidays to all of you. If you have additional questions. Please call Rima Hyder I mean look forward to speak into next quarter, operator that ends today's call.
This concludes today's conference call you may now disconnect.
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