Q3 2020 Factset Research Systems Inc Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the fact that Q3 earnings conference call. At this time, all participants are in listen only mode.
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I'd now like to have a conference over to your speaker today, that's Rima Hyder Vice President of external communications. Thank you. Please go ahead.
Thank you Jamie.
Good morning, everyone. Welcome to the fact that third fiscal quarter consultant in 20 earnings call like last quarter I will be our various remote locations. Today, we may have some audio quality issues and we appreciate your patience should we experienced a disruption.
Before we begin I would like to point out that the flight we will reference during this presentation can be accessed via the webcast on the Investor Relations section.
Site at <unk> Dot com.
Slide will be posted on our website at the conclusion of fiscal.
A replay of today's call will be available via phone and on our website.
After our prepared remarks, well open the called to questions from investors.
To be fair to everyone. Please limit yourself to one question is not one follow up.
Before we discuss our results I encourage all listeners to review the legal notice on slide two which explains the risks of forward looking statements and those tend to use a non-GAAP financial measures.
Additionally, please refer to our form 10-K in 10-Q four discussion of risks factors that could cause actual results to differ materially from these forward looking statement.
Our slide presentation in discussions on this call will include certain non-GAAP financial measures for such measures reconciliation to the most directly comparable GAAP measures are in the appendix of the presentation and in our earnings release issued earlier today.
Joining me today, our Phil Snow, Chief Executive Officer, and Helen Chen, our Chief Financial Officer.
I'd now like turn the discussion over to fulfill.
Thanks, very much and good morning, and good afternoon, everyone.
So all things off I'd really like to thank the entire factset team for its remarkable efforts over the last quarter.
Really inspiring to see how Fox said those are going above and beyond each day to support our clients on each other as we all explore new ways of working.
We've been positively surprised how quickly we've been able to adapt to walking in new ways and are actively evaluating what this could mean in some sort of efficiency productivity points experienced talent.
Work life balance for our employees.
We've maintained a high level of engagement with both clients and employees over the last quarter, how do we show a healthy trends in client usage and interactions without coin service team or annual Appathon had a record number of project submitted this year with some fantastic ideas. In fact said this around the well continue to support our communities through companywide involved.
Turing and donation outlets.
Let me talk a little bit about digital transformation and our investment plan.
The events of this year on the uncertainty and what form the recovery might say is likely to put continued pressure on our end markets.
Even more urgency for funds to revamp the legacy platforms and accelerate that digital transformation efforts developing next generation manufacturing capabilities and delivering it more personalized.
Experience is gonna be the key to winning for asset managers and basketball.
And the success that funds on both the Buyside himself might have seen and walking remotely could be a meaningful catalyst in transforming historically, especially inefficient workflows.
The transition to a more digitally prevent future, which was already taking place is accelerating at a pace you would have predicted three months ago more phones are moving to the public cloud and upgrading that data and technology faster to meet the needs of a virtual workforce managed volatility and continue to adapt evolve and compete.
Our investment plan addresses these friends and this rooted in migration to the cloud and a longstanding mission of providing clients with actionable data and insights where when and how they want.
Every day, we're supporting our customers would their own digital transformation that bodes delivering personalized and value added solutions and as a result, deepening our relationships with them.
We remain confident and on track with the programs in all three are investment plan a focus on transforming our technology landscape.
Reading, a new universe of data from private markets, along with our expansion of critical content for banking and well positioned us well to capture market share.
We found this is a good market for talent and made some key industry highest in the third quarter.
This model has shown it sort of it resilience and confirmed that our solutions a mission critical for clients, particularly during times of market stress, we launched many new enhancements in the quarter and added deeper richer content and finance insurance and a real estate also weve reached an important milestone last week, where we had all left Vms.
Install mocking the end of project next Gen for those of you were the coldest project. It's been a log tend to undertaking for engineers over many years and completing this project allows them to focus on some of the newest things we're doing such as the shift to the public cloud.
Let me talk a little bit about I guess beyond the geographic breakdown was border attorneys to results I'm pleased with outperformance for the quarter, we executed well on our pipeline and we were effective at managing costs.
While we remain cautious given the uncertainty in the markets an economy, we remain on track to meet our revised I guess he guidance for fiscal 2020, which we have narrowed to 60 to 75 million.
This quarter, our organic ASV plus professional services grew 5%.
Our Americas region had a solid quarter with 5% growth benefiting from a healthy pipeline don't earlier in the Air Asia Pacific rebounded with strong growth of 9%.
So we're an acceleration in new business and the easing of pandemic related restrictions in key markets.
And our EMEA region, which grew at 4% benefited from an uptick in demand for Cts and the international price increase.
Yes, the growth in our third quarter was largely driven by well and research we continued to expand our wealth pipeline an AD wins this year despite facing some delays due to the pandemic research group, thanks to healthy demand from investments.
Asset management clients, especially in the Americas region, as well as our international price increase and improved client retention.
Deep sector strategy continues to have a positive impact on both retention and our ability to expand our coin base beyond the traditional investment space, particularly with corporate clients.
Content and technology solutions also performed well driven by continued strong demand for premium in core data feeds and the strategic win with cheap yet Japan's largest pension investment fund.
Analytics had a slightly weaker quarter, primarily due to some large deals being pushed out to the fourth quarter.
But it's been a solid contributor to date and that's a healthy pipeline.
Especially across performance reporting and fixed income.
Additionally, we delivered strong results in our adjusted operating margin and he is seeing some cost benefits related to the pandemic Helen will walk you through these in a few minutes.
In summary, we're executing well and remain confident in our ability to finished fiscal 2020 on a strong note at the same time, we're aware that the uncertainties surrounding the Corona virus endemic makes it more difficult to predict the longest some impact on our pipeline.
We're excited about the pace of innovation that facts I don't know industry. I believe we are well positioned to meet the needs of the virtual workforce and we're pleased with the high levels of engagement a productivity we have seen throughout the quarter.
The bold around this change is seemingly daily I'm proud to say that we are still closing deals, bringing on new clients and finding new ways to collaborate.
Before I turn the call over to Helen I want to take a moment to talk about what changes, we announced yesterday I, particularly want to thanks, Phil Hadley was decided to retire from onboard.
So welcome Robin Abrams's incoming share many of you know Phil who was Factset CEO for 15 years, and so does our board chair for 20 years I want to thank him both personally and on behalf of the entire Factset community for his visionary leadership and profound contributions the fact that success.
Additionally, I'd like to thank Scott Biller, do who's going to be with us until the end of the calendar year for his years of quite perspective, as well as staring the audit Committee and we also look forward to work in which to car choice at least Ravel, who both bring a breadth of experience to our board.
You'll never hear from Allen, who will take you through more details brought that corner.
Thank you, Phil and Hello, everyone I'm happy to be speaking with you today I Hope you and your loved ones remain safe and well.
I want to reiterate those appreciation to the fact that team our colleagues continued to show their strength and resilience and partnering with clients and with each other.
Positive outcome as reflected in our results.
We entered the third quarter with solid pipeline endorsement second quarter in a row, we celebrated our growth rate and asking in professional services.
Experience expansion in our operating margin and any increase in our E. Yes.
Back in March we noted that the uncertainty of the environment could impact both the top bottom line.
In terms of our ability to generate new agency.
The potential to real life, saving and lower discretionary costs such as peony.
With disciplined execution, we secured new wins and use productivity benefits helped fund our investments in content and technology.
I'll now walk us through the specifics of the third quarter.
We increased it has to be by 14 million, 5% year over year.
I think solid growth through existing clients with continued strong retention and realization of cross sell opportunities.
And your price increase outside the U.S. January $7 million, a 2 million dollar increase over the prior year affirming the value clients fine in our suite of offerings.
GAAP inorganic revenue increased by 3%.
Good and 74 million and 375 million respectively.
It was driven primarily by analytic Cts as well.
Please note that last year, we had a one time fell a bit either to a corporate client that positively impacting revenue for third quarter 2019.
Typically in the Americas region.
Adjusting for this transaction revenue growth rate year over year would have in 4%.
For geographic segments America's revenue grew 2% and the at 3% in Asia Pacific was the highest a 7% year over year.
The regions primarily benefited.
Greetings and analytics, well and Cts.
GAAP operating expenses for the third quarter totaled $252 million. It you cooperstein uptick over the previous year and in line with revenue.
Our GAAP operating margin increased 30 basis points to 32.5%.
Adjusted operating margin improved by 150 basis points to 35.5% versus last year.
These results also reflect the positive impact a 40 basis points due to favorable foreign exchange rate.
<unk> expenses for the quarter include investments in technology, and a new talent and capabilities offset by net savings and productivity from workforce mix and a reduction in discretionary expenses. The result in improved operating margin.
As a percentage of revenue a cost of sales were 70 basis points higher than last year on a GAAP basis.
Adjusted basis, the cost of sales was essentially flat.
Increased costs were driven by technology spend which includes our shift to the public cloud as part of our three year investment plan.
This total was partially offset by lower compensation costs, driven by more concentrated hiring in low cost location.
Laura X gene expenses are largely responsible for the increase in operating margin.
Expressed as a percentage of revenue actually DNA decreased 100 basis points over the prior year period on a GAAP basis.
Adjusted basis.
<unk> expenses decreased by 140 basis points year over year.
The drivers include materially reduced.
Entertainment costs as well as office related spend.
It looks like.
Aren't working environment, given closed offices and limited need for travel.
We expect a portion of the spend to resume once we were able to return to the office and operate as opposed to pandemic environment.
Moving on our tax rate for the quarter was 15% compared to last year's 19%.
I mean is mainly due to the timing of an income tax expense in the third quarter of 2019 related to finalizing the company's tax return there was no similar there for this quarter.
Got bps increased 11% to $2.63 this quarter versus $2.37 in the prior year and adjusted diluted EPS grew 9% to $2 an 86 cents.
Oh were driven by higher operating results and lower interest expense and got yes, which further boosted by the lower tax rate.
Like conciliation of our adjustments to GAAP EPS is disclosed at the end about press release.
Free cash flow, which we defined as cash generated from operations less capital spending was $149 for the quarter decreased to 6% over the same period last year.
This reduction is primarily due to the timing of certain international tax payments on a year to year basis free cash flow grew by 4% despite higher capital expenditures on facility.
With a third quarter are actually retention can you continue to be above 95%.
We grew the total number of clients by 1% compared to prior year, reflecting the addition of wealth and corporate clients.
A client retention rate held steady at 89% demonstrating the value of our offerings to clients, even and perhaps especially during these challenging time.
Third quarter, we bought back 47000 shares were totaled $12 million at an average strip price of $266.
We remain disciplined buyback program and the amount we purchased in part reflects the high performance of our share price this past quarter.
Year to date, we've repurchased $173 million of our shares.
Additionally over the last 12 months, we've returned over $343 million to our investors, that's one dividends and share repurchases.
Recently increased our dividend by 7% to 77 cents.
Marking our 15th consecutive year of dividend increases we remain committed to returning long term value to our shareholders.
Turning now to our outlook for the remainder of our fiscal year.
As Tony mentioned, our performance over the past few months reflects the Zillions C bench strength back that business model and mission critical value about content.
Moreover, our current cash flows I'm strong balance sheet flexibility during times of market volatility.
We continue to believe these attributes will allow us to succeed to further challenges and emerge stronger when the economy essentially recovers.
Given our solid third quarter performance. We believe we were able to address some of the factors we discussed on our last earnings call.
However, we remain cautious for fourth quarter.
First we noted that there might be delayed and decision, making which could cause longer sales cycle.
We've seen examples of trials, taking more time and disruption internal approvals process, especially with larger clients.
A number of Q3 deals moved into Q4, but in line with the previous year.
Similarly, the same dynamic resulted in benefits as we experienced lower cancellation.
As the prior year.
Tension rate remains high.
Second we are excited the potential delays and implementation is due to restrictions on being able to work on site.
Well, we have some clients who are unable to accommodate our virtual implementation. These deals today not impacted our top line and the meaningful way.
Third we had highlighted the uncertainty around seasonal hiring at the investment banks over the summer months.
Yes, I see from our banking businesses, primarily comprised of large investment bank with midsize and boutique firms, making up a smaller percentage today over half of these large banking clients have confirmed their new class higher numbers, which are inline or better than 2019.
With the past many of these decisions are confirmed by mid August well, we are encouraged by the results. Thus far we will likely not have final view until the end of this summer so a risk a smaller classes were hiring delayed remain.
As many of you know the fourth quarter's typically our largest.
What we know today.
We remain guardedly confident and our ability to execute against our pipeline and moderate our spend.
Based on these factors, we're bringing up the bottom end of our ASV guidance range for our full year is now expected to be $60 million to $75 million.
Given how we performed to date and our control log and visibility into the investments and operating spend in the fourth quarter were increasing our guidance range for other key metrics, such as GAAP and adjusted operating margin and GAAP and adjusted EPS.
We are lowering the guidance range for annual effective tax rate. These revisions aren't noted on slide 14.
In closing I want to reiterate our conviction and in our business model operating plan and investment strategy. The company's liquidity position remains strong with low leverage and ample cash flow.
Oh workforce mix continues to generate more productivity as we need to hiring need on both the core business and investment plan, our spending digital offerings and on our own infrastructure has served us well, while operating pandemic environment.
The current situation is generating unplanned savings, but we believe that a more normalized level of activity you overturned the future.
In the meantime, we will continue to focus on execution and on generating long term value for all of our stakeholders.
With that you're not ready for your question.
Me.
Thank you as a reminder to ask your question you will need to press Star then one on your touched on telephone to withdraw your question from the can you. Please press the pound T. P sand Bible, we can politics una roster.
Our first question comes from Toni Kaplan with Morgan Stanley. Your line is now open.
Thanks, very much for taking my question.
Just wanted to make sure I understand the expense guidance changes clearly.
Is it that you're benefiting from lower T. any is it the productivity that you mentioned just trying to get a sense of maybe a breakdown of the pieces that are contributing to the to the better margins that you're expecting for this year.
Sure. Thanks, Tony for your question. So I would look at three different areas. When we think about what's driving the expense reduction are really margin expansion. So the first our expenses that are pandemic related item. So t. any office related even U.S. medical costs, which were actually lower.
Sure as many folks not going to their normal dr. medical activity. So we actually saw a savings on that as well.
Then the second bucket I would call 'em operational discipline. So that's.
Our our ability to manage third party content and professional fees and some cases, reducing in other cases, it's more of managing from a timing perspective, and the workforce makes which we've talked about before telling you. As you know that has continued to play it out well we have for example, we've hired 7%.
During our workforce, but we've actually had 2% higher is a mix of low cost, which is high cost and then the last bucket I would say our investments where we were also adjusting both by using our own employees for some of the needs that we have and then also hiring and low cost so a tighter management around.
You know is more important the three areas I would say on pandemic related operational discipline and spending investments of which the pandemic piece is largely I'd say nearly 60 to two thirds of the benefits that were seeing in the quarter.
That's very helpful and Phil you mentioned a D train just in the industry basically accelerating technology changes given the Covance period, and I know that your investment plan has been you know sort of a multiyear period, where you're investing in content.
In technology and I'm, just wondering if anything from this period has changed where you're planning on spending within the investment plan, maybe change the weightings short change towards different products or just anything sort of structural in terms of industry changes changing the way that you're.
We're attacking it thank you.
Yeah, Thanks, Tony I'm, sorry, say nothing has changed.
Change the nothing that we're really focused on its how clients are gonna be walking in the future. So you know we quickly a sense how the survey to our clients. When they were working from home to sort of understand how their lives were changing and try to predict how they may change in that features. So you know obviously the plan is very.
Heavily weighted to moving to the public cloud or you know opening up the tech stocks and creating a more personalized experience that nothing's gonna really change in such a big buckets, but.
But we do see a great opportunity to streamline workflows other going to become one digital for our clients I you know around collaboration tools and you know we hold in an industry for long time, so we sort of know which of our workflows are still pretty manual right. When there's a lot of.
People, putting together pitch books or or models or what have you and I do think that now people have been surprised I mean, I I've been surprised by how quickly we were able to adapt and that's what I hear from our clients. So I do think it sort of really giving people an opportunity to think multiple away.
Just feel like we're in a really great positions to.
Kinda meet those needs for our clients.
Terrific. Thank you.
<unk>.
[noise]. Thank you. Our next question comes from Manav Patnaik with Barclays. Your line is now open.
Yeah. Thank you. Good morning, guys, you guys talked about the unplanned cost savings and the benefits I guess from Covidien and kinda can follow up to the last question. So and we talked about this little bit before but do you think the keys to be me that maybe you can take some of the savings in accelerating maybe even more in terms of here.
Well I just you know since the whole wounds seems to digitize and so fast as well.
Well, we certainly are taking a look at what we've learned over the last year.
And new things that we'd be interested in doing so we do that every year, we've been through that process in the last quarter. So we're looking at you know what we chose to do that solid we're going to continue to invest in everything we said we were going to.
We do see some potentially new opportunities for us as well. So I do think that's an opportunity to do more and I do think there's an opportunity again for us to look at Ah you know not just the cost savings that we kind of seeing a in the last quarter.
But just look at how we're working as a company and how we may have been enough. There's some concerns about how we're servicing clients are doing other things that it's a much longer process to figure that out, but we're really actively looking at that and seeing what it might mean for us in the future. So.
I'm very excited it sounds like what the potential is from the company.
Got it fair and I think and then they might not I know one thing just <unk> yeah, Yeah, just to keep in mind I mean, <unk> cost like you give us medical that's still a little bit TBD as we go into that quarter and all these claims it next year and also some of the costs that we are getting the benefit this year or this quarter rather.
It's a little bit timing related but for sure were all looking to see how we can best leverage SAS into law as Phil mentioned mentioned existing investments if not you blends as well.
Got it then and I I was going to ask held and I can tell just you know you commented we do expect the business to be back to you know some normal see from the cost perspective. So for that was hoping perhaps you could maybe use the shouldn't be as an example, and maybe tell us what you're seeing there.
In terms, if you know the recovery and so forth.
Yeah, I mean, as we think about you know our thinking as we go forward I really look at in two different buckets in terms of the assumptions. So one is operational cost you know how do we see going going going out of Q3, we talked about the fact, we haven't seen a good market.
For a floor for hiring new talent.
I see that we increased our total head count for over 10000 employees now I think that's the high season.
So that's a 7% increase in hiring so we do we were able to do a lot of that would continue to invest.
Scott until I see some of that picking up enough, we're driving higher costs going forward from Oh My people perspective.
I think I just mentioned there are some cost as it relates to things that we held back in Q3, Oh, you know 90 days ago, we weren't sure where the world was gonna be so we want to ought to be quite cautious and some of that now showing that are having experienced what we had in Q3. So we're seeing that come through and well well well look to spend back yeah I mean.
Q4 in some of that maybe even to the following year.
As it relates the pandemic related savings. We also have cost that wants to see come through so those would be related to business continuity equipment Internet things and we need to make sure that are weren't question is properly.
Ready to work remotely consistently.
You have some office reopening that you know, it's a little bit I'm clear yet how we'll we'll deal with that.
Medical costs I would expect would come back as folks are now becoming more comfortable and now that where we are opening so I wouldn't look at that I'm going out and we think about go forward right.
Alright, Thank you there.
Welcome.
Thank you. Our next question comes a bill Warmington with Wells Fargo airline is now open.
Good morning, everyone.
Good morning.
So congratulations on the G.P.I. F.
Japan when I was hoping you could got you guys give us some of.
Additional details on on that what were the using previously was it an RFP with multiple competitors and then when does the new contract start.
Hi, Bill its Phil so yeah, typically don't give sort of that level of detail around but clients. When we did have a press release around less which I think is why were mentioning it.
But what I would point to I think more is just the.
The opportunity that exists with Factset for asset owners. So we do very well with you know sovereign wealth funds with plan sponsors we've got good momentum with insurance companies and when you think about our analytics suite, how long it and how it's really good I think for the asset owner on asset manager the future in terms of what we're able to.
To do I think that just just as a good area for factset to grow in the future.
You know that specific when was more cts related so they are taking I think a good amount to about contents essentially to a build out some of their own analytics. So I think that also speaks to our off platform efforts and our ability to deliver content and in new and interesting list.
And in your prepared remarks, you highlighted a strength in corporate clients is being one area.
Yeah, I wanted to ask about the new corporate clients I believe it or is it being driven by new corporate clients or existing corporate clients buying more products and are you displacing.
Existing vendors or are these first time users if you will.
So a lot of our new client wins I think we wouldn't that 55, new clients for the quarter or many of those came from the corporates and a good amount of them came from wealth advisors as well. So we're closing a lot of new names typically these aren't huge.
Deals, but they really add up you know when when you put them together and what we're selling traditionally is mostly into investor relations groups and business development groups, but asked me build out our deep sector content. A you know we started with financials insurance or be it needs to get into real estate I do think doesn't.
Opportunity to sell more to the existing clients on to Uncork, you know some corporate clients in a in industries that traditionally factsets.
May not have finished heavily weighted towards so you know, we typically do very well and the sexism industries that are very data and analytics, driven regulatory driven but you can imagine, but I do think over time, you know I see a lot of opportunity, particularly as the open up the platform to do more for clients that are not necessarily on wise.
So.
Great. Thank you very much for the insight.
Thanks Bill.
Thank you. My next question comes from Alex Kramm with here, Yes. Your line is now open.
Hey, good morning, everyone up could you just come back and flush out the pipeline and guidance comments for the fourth you a little bit of particularly as it relates to some of the banking comments you made it you made it sounds like a you'll have a very strong I guess visibility here is that that is that based on talking to all these different.
Bangs and really having almost 9500% certainty what they're gonna do Oh, Oh, where they're coming from because you obviously reading some of those headlines they new hires are getting delayed they're getting you know fuel cells dalsa sit on the beach for two extra month. So just just wondering where that level of confidence it's coming from.
It's a particular thank you.
Yeah. Thanks, Alex So I think we typically don't get a final answer from the majority until August.
Well the indicate we think we spoke until about half the banks. So far and early indications are you know that they'll still be hiring that classes.
You know maybe it will get pushed out into Q1.
You mentioned, but when when we when we're looking at our pipeline for Q4, it's pretty heavily weighted towards analytics and Cts would show sort of more of our platform offerings and less heavily weighted towards the people. Let you know the pieces of business is very much workstation driven so.
So you know we've got good pipeline for Q4.
We certainly have you know enough in there to support the range that we narrows.
This morning on it.
Uh huh.
Okay no very good thank you and it and then secondly, I guess this is for Helen I mean, if asked this before it and maybe a little bit of too detailed question, but when you. When you look at your your adjustments to yard to your numbers. These days, obviously some of those adjustments like getting after getting bigger and bigger I think it was like five in it.
Half million. This this quarter for I guess, what one timeish items, but when you look at the foot knows it's kinda related to some of these investment spend but you're doing so can you just flush out where you think it's reasonable to back out some of the stuff because because quite frankly, if you if you're backing out a little these investments then you're baseball that's more if.
It doesn't come to us he asked if you know what I mean, so yeah. Please just just just help us why that's the that's reasonable in your opinion.
Sure Dan I'll call it maybe a little bit broadly and then he tells questions. You can never would obviously get that you're not directly. So there's a couple of different things that fall into that some as you know there's a there's a number in there that is I would say most of it is not necessarily investment. We are about three year plan why that is more infrastructure when paid or something.
What we're doing whether it's on workday or or or things that what I'll call. It corporate infrastructure. Okay. So those are my onetime we also have it there so rents that we have as we've been building out the salaries to some of them. So we've got.
Just been building and we already have a lease on a are the ones. So that's not really part of the ongoing so we called that got out as well. So that gives you a little bit of what they're they're not they're not really directly related to the three year plan.
Okay. Thanks again.
You're welcome.
Thank you. Our next question comes from Hamzah Mazari with Jefferies. Your line is now open.
Good good good morning. Thank you I just started question around the wealth business could you remind us.
You know how how what your market share is this what your market share is there specifically if you can talk about market share maybe you could talk about how are down market in wealth.
You could go so we all sort of know of a few large firms right third have armies of financial advisors, but just curious in terms of thinking about the wealth segment, how far down market can facts I'd go.
Yeah, Hey homes us Phil Thanks, a question.
So our wealth segment is around 10% affects us and some of that size I do think you know it's.
Got a ton of but total addressable market that we can look at a very high end of the market I think were suitable for no. The ultra high net worth work flow.
You mentioned sort of the Army's a financial advisors out, though so obviously, we had a big win a couple of years ago.
That we're very proud of and doing well within its uncorked a lot of.
Opportunities for us.
We had a significant well when this quarter. So it was a building on an existing relationship but we really.
Had sort of the.
A good size when displacing a major competitor they launch from and you know we haven't digital business, which really can get to tremendous amounts of uses a you know that sort of retail uses.
Okay and have a banker essentially so we've got.
The full gamut of stuff I think particularly for you know the market data a news segment. Other work flow I think now we're getting to the point, where the product can really begin to leverage our analytic suite, where those two can come together when we can begin to do more for existing clients.
On the risk oversight and the risk oversight or in some other areas. So were really optimistic about our ability to capture more market share in wealth and as I as I mentioned. This previously we close you know we closed a lot of smaller family offices in Boston buys as each quarter.
I mean did the same thing in Q3 of the show.
That's a very helpful. Just follow up question I'll turn it over.
You know it seems like the you you and U.S. regulators are scrutinizing exchanges buying geared up business is quite a bit and and so we're wondering if that creates an opportunity for you and what we mean by that is you know a number of years ago, you're you're good quite a bit of M&A and then you focused on integration.
And now you're sort of focused on you know this through your organic growth investment plan and just curious is can you still be opportunistic on M&A, while continuing to.
Execute on Dart investment plan or is M&A kind of off the table because you have a lot going on internally.
Well, we continue to look at things that are opportunistic so absolutely I think we've obviously got the balance sheet to support that.
We've done a lot of work to integrate the software companies that we acquired but we do think there's some good opportunity out there for you know for some day to smaller data sets will provide us that could really support you know what we've talked about right. It sounds like the areas as the market that we're interested in so we're actively looking at things like we always are.
Oh, I mean, obviously valuations were pretty high over the years and talking to banks I think deals are starting to get done again, it's kind of a frozen period, there, but I do believe that so you know the the ice restoring a little bit and begin to what's going to begin to see some deals in our space.
Great. Thank you so much.
Sure.
Thank you. Our next question comes on Shlomo Rosenbaum with Stifel. Your line is now open.
Hi, Thank you very much particular questions. So can you talk a little bit about the company's ability to sell in the current environment. Just it sounds like you guys are doing pretty well is how much of it is all the same way that you guys are benefiting from <unk>.
I feel benefiting from Retentions and their support not pulling out of the funnel and how much of it is that you're actually don't really doing a good job selling would show use is fairly impressive in this kind of work at home and Berman.
That's a great. It's a good Mexico almost so we've been able to close the new names you know, we did well in new business in Asia, which as I spoke about on the last earnings call I thought it would be you know kind of that's supposed to region to come back from that standpoint, but talking to our a leader of our European business. She is telling me that we're beginning to see some good.
It's you know these over there on the new business side, we have been really effective at closing what was enough pipeline you know for Q3. So when we spoke about spoke three months ago, and I think part of what Helena NIE, we're thinking about what would it really delay clients decisions to buy things, we've seen some of that Uh huh.
Well would we be able to implement things virtually we are very capable of doing that in some cases, our clients I think we're having difficulty engaging with us, but but net net I think again, we will positively surprised and.
How do we were able to do things.
More remotely that typically facts. So this done in the past so I think that's.
Very promising in terms of how we think about selling and supporting clients in the future.
Yeah that happened a few cases.
Of clients that were.
Planning on transitioning potentially to two other two other solutions.
And those of those those decisions have been delayed which has helped us a on the other side as well so.
But again not <unk>, it's been very positive.
Sure. It's not lost on use of this is the best third quarter that facts of us had since 2016.
And I think to execute in this environment and produce those results. It's something we're very proud of.
Okay, Great. One other question just on the Tech investment are there any milestones that you could talk about it and early signs of success that you could talk too.
You know just.
As we talk about the investment into potential predicts already to spend maybe you could talk about some of the things that you know maybe early innings, you've been able to accomplish.
Yes, the we've opened up a lot of a T.I.s I believe for up to about 40 that we put into or our develop a portal. So clients are able to now come in and program directly against facts that they were able to do that in some cases before and they're not analytics area. We've seen good adoption of 80 eyes. So we began to sell.
All you know the H.T.I.s for analytics, a little over a year ago. We had some initial success last year, but it's really begun it's a small number now, but it's beginning to grow pretty quickly.
I think we're learning as we go as well so that's one that I would point to.
Okay great.
Thank you. Our next question comes from Andrew Nicolas with William Blair. Your line is now open.
Hi, good morning, Thanks, taking my questions looks like ASV growth, we accelerated a bit and in a pack in the corridor, which is obviously encouraging just wondering if there's anything you can take away from that that uptick whether it be.
In terms of sales cycles pipeline conversion implementation timelines, and then and apply that how how you're thinking about you know the same dynamics in the U.S. for me over the next couple of quarters.
Sure I would say it was just a very good mix in Asia Pac and I think we saw good growth in Japan.
We saw good growth in Hong Kong, and North Asia, We saw good growth in Singapore, So I think the team.
Executed well across the whole region as we just pointed out we have some good business did wins on the on the new business side.
So you know I think we've begun to Oh go back to the office in Hong Kong. So that's the first office I think that we've begun to.
I have employees return to so looks like clients are really engaged over there and as we've spoken about before you know we view Asia as a you know it's our fastest growing region. One that has a ton of opportunity for them when the trends I really and I'll say that so we're really optimistic about well, what we're able to do there across all geographies and all of our.
Business.
Got it and then one more would just be on on onsite implementations I know that was kind of a headwind you called out last quarter I'm. Just curious if theres been any improvement in that capability, whether it be a factsets capability or or clients ability to.
Handle I, you know offsite implementations and kind of how that's evolved over the past couple of months.
Yeah, it's been really positive Oh, I think that I just pointed out with the previous question that we've been able to do almost everything we need to do from an implementation standpoint are you know virtually a I mean I know clients are learning how to do that as well. That's clearly one of the benefits of go into the cloud different business up there I think it just makes it.
Easier for all the for all of US to work together and if you have a T.I.s and components that sort of plug and very easily with other people systems and ecosystems that it makes the whole thing.
Much faster it really just classes the sales cycle on the implementation, saying buses kind of the heavy lift where it's more custom when you have to be onsite.
Got it thank you.
Thank you are next question cousin, David Chu with Bank of America. Your line is now open.
Hi, Thank you. So can you just totally the cadence of is the growth over the course of the order just wanted to see it like things were quite slow in like let's say mid March early April and things picked up quite significantly since then.
Yeah, I don't think does anything.
The front, David honestly from previous quarters. So you know, we had a healthy pipeline going into the quarter.
And you know from what I saw we but closing things that kind of the same rates.
We did you know in previous years I'm, you know like any sales team right, you're going to have that Matt push into the quarter or the end of a year. So you know all Q4, otherwise I'll take this quarter and typically in a quarter. You know people are very anxious to sort of a guest things and then one thing that we've done which is really helped us.
We've got.
Clearly a clearer compensation model for us sales team.
And they are really incented to bring things and earlier if they can.
And then getting paid on a more frequent basis, just just based on trends parents compensation models than they had in the past. So I think some of some of what we're saying here is to some of that discipline.
We put into the sales force over the last years and all the great work that's been done that.
Got it thing and then and then in the past if we looked at like past recessions <unk> revenue growth slowed most sharply up the tailwind or as the economy was coming out of the downturn like just wanted your thoughts around timing I mean, you feel like we've seen the worst in terms of a revenue impact or is that something.
Maybe still to come based on just the subscription nature of your business.
Well I think it's very hard for all of us to predict so I do think that this.
If you want to call it a downturn is different than what we experienced.
You know way didn't know nine but I think all of US as we look out over the next 12 months, it's very hard to predict what's going to happen in the world from a lot of chips one.
Dimensions, and what the impacts are gonna be on economies the markets and then US well I'll. Just go back to is that were resilient company. We've just showing that no no matter what the environment, we're going to I believe execute well against a but in terms of talking about whether or not we've seen the watch.
But I don't think anybody can say that with any certainty right now.
Sure that's fair thank you.
Thank you. Our next question comes from Peter Heckmann with D.A. Davidson. Your line is now open.
Hey, good morning, Thanks for taking my question, so about 19 million.
I see growth year to date coming from price increases can you talk about how that compares to last year and having your thoughts on the sustainability of that as you build out more depth and breadth of the company content sets and and go back and try and true up pricing how much how much.
Are you getting on those from line.
Sure why don't I, Oh try to address that thank you for your your question. So as you recall last quarter. When we talked about the America is we got an improvement of $2 million year on year and so the international at the strain. So that gives you a sensor that the improvement this year versus last year. So for.
1 billion.
But I think what we've seen I mean any move in a competitive environment. So that nobody can always the case, we have put in a lot of enhancements and value into <unk> products and the offerings I think that's really coming through so what we're seeing a in this year and we would.
We have also natural price increases in our contracts already.
Is that continued recognition by client that's the value we're bringing in is where he additional amount now that the we have to continually investing.
To be able to do that and they think the three year plan certainly meant to help out along.
Not only with new products that really enhancing our existing to maintain its not include increased.
Retention rate with existing clients.
Yeah, Yeah, Okay that makes sense and then I didn't hear you referred to it but just in terms of that you've talked in prior calls the outlook for 2022, the ability to or the F. regional gold hitting high single digit ASV growth can you give us an update about how you're thinking about that number you think that's still still achievable within.
18 months.
Yeah, I'll I'll take the first shot there you know we yeah, we're working hard to make sure. We can get the next three months correct. So I wouldn't say, there's a lot of variable is right now I plan hasn't changed we still see in terms of that belief of what the investments were bringing the upside I think we'll have more we're going through all that.
Right now would you like can you imagine then you know and budgeting process, but also in thinking through how investments warfare. So I think we'll come back to talk more about that right. Now we don't have any change in our view, but gosh, there's a lot that can happen in and out and what we're doing work on that right now.
Got it thank you.
You're welcome.
Thank you. Our next question comes from Ashish Sabadra with Deutsche Bank. Your line is no.
Thanks for taking my question. So maybe just a quick clarification you fees the blurring of the easy it's me guidance or not or down the revenue guidance for the year. I was just wondering if you could provide some color there, what's causing that isn't just the timing of when the revenue gets recognized and then just a quick one on well Frank.
You mentioned a significant when that I was just wondering if you can think about the sizing for that.
Significant event.
Compared to your fried event, and then do Weve been a visit that get implemented and <unk>.
When you get recognized tax right. Okay. Thanks, Ashish Yeah. So I think you know in March I think all of US. We're really wondering what was going to be happening right themselves or what was going on in the world around US. We mentioned, we had a very strong pipeline.
And we were just it just wasn't clear to us sort of how clients were going to react some really what was going to happen in the markets. If you remember some of our volatile things back then so you know we we came up with a methodology, which we which we thought was good to at least a you know be conservative in some of what can be achieved but we've.
I want a lot over the last quarter and as I mentioned, we were effectively able to execute on the pipeline that we had in Q3 and I still feel good about you know a pipeline for Q4 so.
That's right Yeah, we just feel like we can raise the fundamental that guidance up to 60 to give you an hour range as we look out for the quarter you know the the other well when <unk> was it was that an existing clients I think we're all where we have a pretty good deployment.
And I believe that much of that has already been deployed.
And that we're recognizing.
You know the ASV for that and the revenue in Q3.
So it's a it's not the same scale.
As.
The deal that we talked about two years ago, but it's a significant so seven figure when a at an important point for us.
Let me just I've been a little data as it relates to the revenue. So that's good news as we've gotten some this quarter Ashish some better confidence so that's a real positive because of some of the unknown because you talked about.
Okay mine in a subscription business really does matter linear ASCII comes in and so as you know the first quarter for us.
When it was softer than we had hoped and so that does carry through and depending on what happens and I'm on the back half of the year.
Without the Pandemics forgotten the dollars might have been limited for instance, RGB. We believe how revenue was going to come out, but knowing a that that we had a weaker Q1 that is really coming through that some of that perspective, as we look at the full year.
That's very helpful. Then maybe if Alex I can ask a follow up question on the margin trends, particularly around a yard or the low cost location or employees in the low cost location, what pushed down to 40 employees of cutting Kindle classification, and where do you think it can go or the mix them and then what does it mean for the margins because.
You have given that a much in go to <unk> Btwenty two given your cracking much I heard effect is there as you transition to the will of course destination does that put that provide upside to the much in the mix so much in targets.
Yeah, No. We've been we've continued to migrate and they look at high cost low cost and a and I mentioned it was that about 2% improvement next quarter, that's been pretty consistent so right now we're we're roughly around let's call. It does two things.
Words offshore one third onshore we did actually higher more onshore is actually growth and that would have been the first in a couple of quarters due to the capabilities that what we're trying to build.
And in some cases that can really be found more developed markets. So that's where you see that come through that was anticipated.
The opposite of that are not the balance that I mentioned, we've got some of that roles that we thought that my investment plan that we could feel that we thought we'd either need to be new hires.
Countries, we were able to either sell the crown folks or quite frankly with a with folks in the lower cost countries are going forward I mean, that's still going to be a driver for us on productivity with 2000 investments was a focus and we saw that that's why 19th.
Now and that's certainly part of our thinking as we were thinking about margin that we come out and that's what 22.
Alright.
That's very helpful. Thank you and thanks and good quarter.
Okay.
Thanks.
Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is now open.
Hi, Thanks, good morning.
Just wanted to dive deeper into the ASV growth outlook, you indicated that the pipeline was healthy in the quarter and that win rates have been relatively consistent can you talk about how ASV growth could evolve over the next 12 months given the high visibility there based on what you're seeing in the pipeline.
Well I think I've been consistent George and saying that it's a little difficult to see more than six months out with a huge degree of confidence. So I think we're comfortable talking about Q4.
The fact that you know we definitely got the pipeline to support the range that we provided and you know Q1, just bear in mind is typically a smaller quarter for us. So I think in terms of talking about next year. You know you know, we maybe able to give you some more visibility on that next quarter, but it's a little difficult support.
Typically and I think given the current environments, it's even more difficult to predict.
Okay got it and then if we dive into some of the components a b C. Specifically, just bifurcated renewal rate performance versus new business trends can you comment on both of those and how they've progressed within the quarter.
Yeah, I didn't see Oh go ahead out there now.
Oh I can we lean I think in retention is I'm sorry for that content is that was continued to see that I'd be as we talked about above 90, 95% that continue to be strong on for the reasons that we've already outlined a I.
Physicians can be somewhat delayed, but then we could benefit of that well and new business. I think has remained steady so look over the course of the last couple of quarters now that contribution from new business I'm, saying around.
The same level, which is around two to 4% to 5%.
Gross comes from your business.
Sorry, telling to drop.
No worries.
Got it thank you very helpful.
Thank you and on the last question comes from Keith Housum with Northcoast Research. Your line is now open.
Good morning, everybody.
Over the past few weeks you guys experience no change at the sales level, the doctors level and I think this no change here, probably third change over the past several years any reason for change any reason for a change of the strategy there how should we be thinking about that.
So are you know when I refer you back to the 8-K. There. So you know we don't typically comments beyond that in some to changes in leadership, but you know I. What I will say is the sales team has been executing exceptionally well when I look at the full leaders.
The Americas, the EMEA Asia Pac region, and all strategic client group.
Between them. They all have over 60 years of experience in total so without a very deep bench and they're all executing.
At a very high level and put in a tremendous amount of discipline in the salesforce over the last number of years and sons of pipeline management a pricing.
How we compensate folks so I'm really pleased with how the Salesforce is executing on the talent we have in the team.
And I'm confident in their ability to execute.
You know as we move fourth I don't I'm not planning a any changes in the organization right and sums of how things are structured I think that's working really well and it's working well with the specialty sales things that are organized the way. They also.
We're looking for a new leader there and in the meantime.
The sales leaders reporting to me.
On ethylene gauge the clients. So I feel really good about a team that we'd have myself I.
Gotcha. Okay. Appreciate as a follow up you guys are well known for having a great servicing.
Group of our consultants the younger kids out of college, and obviously now they're not traveling servicing the customers and that's obviously a inefficient role to travel.
Are we thinking that perhaps the consultants or lesser a number today. They were several months ago and as you guys travel more you hold me to hire more perrigo is able to I guess redefining what their roles were working more from home as opposed to travel.
Yeah, I think it's been an evolution where that role I mean, I was one of those consultants once upon a time and I checked in with one of them do she'd been with us for a year I asked at what life was like walking at home. So she's sort of at that point, but she is becoming dangerous I. Sometimes is how much access you knows and she told me that it's been a great experience and.
Working with clients and being able to train clients and even a finding that.
It's even easier sometime to engage with Stifel.
Over video that it might be like in a room full of people. So it's giving us a lot to think about in terms of.
You know, how we support clients in the future, but I do think there's a way for us to continue to involve what is an industry leading.
So this model for our clients and.
Just continue that great tradition.
Perfect. Thank you for the question.
Thank you.
Thank you even at this time I'd like to turn the call back to Phil Snow CEO for any closing remarks.
Thank you so.
I'd like to thank you all for joining us today I'm pleased with our accomplishments year to date and our ability to pivot around the challenges and rally to be that for each other in times of need its undeniably been a challenging few months rosol and that's really reflect on this past quarter, it's impossible not to think of the broader events that have occurred I want to take a moment to address that.
Here, particularly the black life's matter process at Factset, there's no place for racism, all discrimination of any time and I want to extend the special. Thank you to the members about black business resource group for sharing and organizing insightful conversations over the past year, including let's talk about race and the recognition of June chain.
I remain committed to supporting all black colleagues and clients and so listen unless.
I'm also committed to overall diversity and inclusion initiatives, we've had a focus the and I strategy enough. It in place since 2016, and we've come a long way cultivating a more inclusive environment I'm proud of what we've accomplished with the launch of up business resource groups unconscious biased training leadership commitment and increased investment in our return.
<unk> fans from programs for the bus leaders and we're now stepping into the next phase of our strategy and the company plans to significantly expand our investments in diversity and inclusion efforts with a focus on examining the processes by which we attract recruits support and promote our people to ensure eliminating any and all bias and to make progress.
Well continue to increase increased diversity at all levels of the organization I won't do our best to work to be an agent of change, but that I'd like to thank everyone wants more real time. If you have additional questions. Please call Rima Hyder and we look forward to speak into next quarter, operator that ends today's call.
Thank you ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program and you may now disconnect.
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