Q4 2020 Factset Research Systems Inc Earnings Call
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Thank you Kevin and good morning, everyone welcome to Factsets fourth quarter 2020 earnings call, we continue to be in various remote locations today.
And if we have any audio quality issues. We certainly appreciate your patience should we experience a disruption.
Before we begin I would like to point out that the slides we will reference during this presentation can be accessed via the website on the Investor Relations section of our website at <unk> Dot com.
Slides will be posted on our website at the conclusion of this call.
A replay of today's call will be available via phone and on our website.
After our prepared remarks, we will open the call to questions to investors to be fair to everyone. Please limit yourself to one plus 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 they use of non-GAAP financial measures.
Additionally, please refer to our forms 10-K.
10-Q for a discussion of risk factors that could cause actual results to differ materially from these forward looking statements.
Our slide presentation and 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 to the presentation and in our earnings release issued earlier today.
Joining me today are filled snow Chief Executive Officer, and talent Chen Chief Financial Officer.
I would now like to turn the discussion over to Phil Snow.
Thanks, very much and good morning, and good afternoon, everyone.
First I hope, everyone is healthy and continuing to do well.
When we started this fiscal year, none of US I think good events as a paid and what we'd be faced whereas over the last six months.
I really couldn't be prouder of all it seems performance and that's resolved to be that for our clients.
As we all quickly its assets and new ways of working on.
Our resilience and ability to execute over the last three months menthol client facing teams armed with an expanding suite of products achieved the highest quarter of incremental ASV in our history, we finish out fiscal year, having delivered 40 consecutive years of top line growth and 24 years of adjusted EPS growth.
I'm pleased with how our digital transformation efforts are supporting this growth.
And increasing our ability to build personalized solutions for our expanding client base.
Earlier this year, we partnered with Forbes insights to surveyed 200 asset managers macedonia's from around the globe to better understand where they stood with that digital transformation programs and how they're leveraging next generation technologies in the quarter.
According to the results, 75% of executives believe that farmers need to invest more in technology.
Acknowledge the initiatives I know.
And also 69% of executives believed that businesses are facing more competitive pressure than in the past as customers expect higher and more personalized levels of service.
Successful digital strategy includes having a scalable cloud foundation, a modern and say the layer with best of breed Tonsan streamline processes. The use of cognitive computing and the personalized client experience. This is a journey we ourselves are wrong as an organization and makes us stronger and more importantly, it will help our point.
And that's the way they too are ongoing we build.
We believe we're making tremendous progress on our initiatives and we will widely recognized by the industry in 2020 with numerous products awards for solutions that cross every aspects of our business, including best data providers or the buy and sell side and best buy side analytics tool from waters technology.
This past year, we executed well against the first year of the investment plan, we laid out back in September of 2019 on the technology front, we've made significant progress on our moved to the public cloud we have announced plans to migrate all real time slick appliance the Amazon Web services. This migration will create the first global ticket plans of its kind in the cloud.
We also opened up many more IP ice, creating new ways for clients to ingest processing program against our data and analytics. We added more interest for you saw deep such a program made progress on our private market strategy and executed on our wealth investments expanding coverage of our streetaccount off right in both Asiapac and Canada.
We remain committed to our multiyear investment plans for both content and technology and belief concerning to invest now it's the best long term strategy.
Turning to our results, we continue to execute well against our second half pipeline, resulting in a strong fourth quarter, our ASV growth rate accelerated 45 basis points over 5% and we maintained our margins as well as grow EPS for the quarter.
Both the Americas and to me as growth rates accelerated with both regions seeing strong contributions from our largest institutional asset management clients private equity venture capital and hedge fund clients also drove quote growth in the quarter helped in large part by our increasing private market content.
Asia Pac continues to be our fastest growing region, even though our business in the region saw a fair amount of challenges this year due to the effects of the pandemic. We saw some bright spots in Australia, and Singapore, but certainly with sovereign wealth funds and we believe we have good opportunities next year as the recovery proceeds, especially with our premium products such as reporting.
And trading solutions.
Looking at things globally, I'm happy to say that all our businesses contributed to the fourth quarter grow the greatest contributions year on year, where from wealth and analytics analytics grew 7% and was the biggest contributor to overall ASV.
This business saw strengthen our performance reporting fixed income and risk solutions and we believe these products will continue to benefit us as we go into 2021.
Yes, the second biggest contributor grew at 13% thanks to continuing demand for core data feeds and we're confident that this business will maintain its high growth rate as we head into 2021, especially as we develop new compounds and broaden our distribution channel wealth.
Well continue to execute well on its pipeline with a well distributed a number of wins across various client segments and sizes, resulting in a 9% growth rate.
Research saw increased retention this year and benefited from our investments in our industry specific or deep sector contest was particularly pleased to see the growth of this business remains stable at 1% with a well balanced client base that includes asset managers acetone as sell side research corporates and portfolio managers.
In summary, I'm pleased with our performance in fiscal 20, I'm proud of our team, which has executed well across all areas of our company our business model combined with our strong liquidity and balance sheet position us well to continue to manage through uncertain markets. We believe our focus on providing solutions aimed at our clients own digital.
Cancellations and an unwavering commitment to expanding our library of smart connected content is a winning strategy that is delivering results as our survey show digital transformation efforts aren't increasingly integral part of our clients' businesses. In fact that is supporting its own growth bikes celebrating our clients journeys through technology innovation.
We also have a strong and experienced sales team focused on deepening client relationships and further diversifying our client basis, a client base for these reasons, we remain confident that the execution of our investment plan along with continued product innovation open and flexible solutions and retooling our workforce to adapt.
So a virtual environments will help us what sounds like a higher growth rate over time.
Having said that we approach, our 2021 guidance and future higher targeted growth with necessary caution, we do not yet know the full extent of the impacts a lot clients as it relates to the pandemic and we acknowledge rest remains such as delays in completing complex deals and challenges in client retention as budgets tighten.
We are therefore viewing the new fiscal year carefully with projected ASV plus professional services growth anticipated to be in the range of 55 to 85 million. However.
Alan will take you through the details of our 2021 guidance in a few moments.
Just to wrap up you know we enter fiscal 2021 with a sense of excitement we're in a period of accelerated innovation within our industry as clients look to differentiate themselves and be more efficient, there's a great opportunity for us to work in new ways and create new products to improve the experience of both our clients and Factset does around the globe.
You will now hear from Allen, who will take you through the specifics of our fourth quarter and full year performance for 2020.
Thank you, Phil and Hello, everyone I'm happy to be speaking with you today and I Hope you and your loved ones are safe and healthy.
I want to Echo Phils sentiments on the strong performance by the fact that team their efforts are clearly reflected in our.
Full year results.
<unk> financial results and 2020 proves the strength and resilience of our business model the critical value of all contracts and the strength of our client relationships.
At the start of the locked down in March our team quickly pivoted to focus on helping clients and ensure they were able to operate productive way from remote locations.
We were rewarded with continued loyalty as reflected in our clients actually retention rate.
Since the first quarter of 2020, we celebrated our growth rate and ASV plus professional services through solid execution.
Our second half pipeline crossing over the billion dollar Mark and exceeding our most recent guidance for the year.
Building upon our operational improvements in 2019, we continued greater productivity to workforce mix and disciplined expense management, we executed on our investment plan, adding needed talent and technology.
Savings and costs related to the pandemic contributor to our results as we managed it deliberately to keep our employees safe and productive while working remotely.
Our teams notable efforts led to an adjusted operating income improvement of 6% and adjusted operating margin expansion of 40 basis points to 33.6% and adjusted EPS growth of 9% to $10.87, primarily driven by higher operating earnings and supported by a decrease.
And our tax rate.
We are really pleased with our full year results, especially in mid unexpected challenges of the Corona virus Pandemics. Let me now walk you through the specifics of our fourth quarter.
As noted on the previous slide we increased ASV by more than 5% year over year, reflecting strong retention across our client base and continued realization of cross selling opportunities.
Before I explain the quarterly results. Please note that our fourth quarter GAAP results were impacted by a onetime noncash charge impairment of an investment in a third party of approximately $17 million.
GAAP and organic revenue increased by 5% to 384 million and $383 million respectively.
Growth was driven primarily by analytics Cts and well.
For our geographic segments, Americas, and Asia Pacific revenue, each grew 6% and EMEA grew 5% so.
Regions, primarily benefited from increases in analytics, well and Pts.
GAAP operating expenses for the fourth quarter totaled $285 million and 13% uptick over the previous year, mainly impacted by the onetime charge.
Our GAAP operating margin decreased 490 basis points to 26% without discharge our margin would have largely been in line with last year at 30%.
Adjusted operating margin decreased by 70 basis points to 33% versus last year. These results also reflect the positive impact of 34 basis points due to favorable foreign exchange rates.
Aside from the one time charge GAAP expenses for the quarter include our planned investments in technology, and a new talent and capabilities.
Offset by net savings from continued workforce mix productivity and a reduction in discretionary expenses, mainly due to pandemic related savings.
As a percentage of revenue our cost of sales was 180 basis points higher than last year on a GAAP basis.
On an adjusted basis, our cost of sales was 260 basis points higher driven by technology spend which includes our shift to the public cloud as well as our multi year investment plan.
Total was partially offset by lower data costs then.
Hi, X gene expenses are largely responsible for the decrease in our GAAP operating margin as the investment impacted.
She is today and.
GAAP margins.
And when expressed as a percentage of revenue ex GSK increased 310 basis points over the prior year period on a GAAP basis on an adjusted basis, the S. United expenses decreased by 180 basis points year over year the dry.
The drivers include materially reduce travel and entertainment costs as well as office related spend due to office closures unrestricted travel some of offices have started to open we expect a portion of the spend tourism.
Moving on our tax rate for the quarter was 7% compared to last year, 16%.
Unusually low tax rate was primarily due to higher exercises of stock options, resulting in a tax benefit.
Excluding these exercises and onetime items, our tax rate would have been 18%.
We have estimated an amount for stock option benefit in our tax rate guidance for fiscal Twentytwenty, one, but as you have seen this year timing and the amount of stock option exercises can cause large variances.
Versus our estimate.
GAAP EPS decreased 2% to $2.29 this quarter versus $2.34 in the prior year.
About the onetime charge, our GAAP EPS would have increased 16% to $2.71.
Adjusted diluted EPS grew 10% to $2.88.
Oh, yes figures were primarily driven by the lower tax rate and improved operating results.
A record EPS reconciliation of our adjustments to GAAP EPS is this close at the end of our press release.
Free cash flow, which we define as cash generated from operations less capital spending was $145 million for the quarter, an increase of 52% over the same period last year.
This increase is primarily due to the timing of certain tax payments and lower capex on facilities. Thanks.
On a full year basis free cash flow grew by 16% despite higher capital expenditures on facilities.
For the fourth quarter I ask you retention continued to be above 95%.
We grew the total number of clients by 5% compared to our prior year, reflecting the addition of more well and corporate clients.
Due in part to the focused and successful efforts of our sales team.
Client retention improved to 90%.
Well the fourth quarter, we repurchased 82000 shares for a total of $27 million at the average share price of $349 we were.
We remain disciplined in our buyback program and the amount we purchased in part reflects the high performance of our share price this year.
For the full year, we repurchased $200 million of our shares and increase our dividends for the 15th consecutive year.
We remain committed to returning long term value to our shareholders.
Turning now to our outlook for fiscal year 2021.
We operate in an environment that is indeed, a greater digital capabilities and differentiating solutions, which presents numerous opportunities for success.
That reason and given the solid progress we have already made we remain confident in our strategy of investing in content and technology.
Our ability to drive growth with our clients and to operate efficiently.
The current environment also gives us less visibility due to pandemic economic and political factors that may well have an impact on our clients' budgets for next year there.
Therefore, we remain cautious as we start our new fiscal year.
I still mentioned and as you can see in our press release from this morning, we expect SP plus professional services for the year to increase between 55 and $85 million over fiscal 2020.
The remaining metrics listed on this slide all stem from our ASV ranges and reflects our planned investments we will continue to execute at the same pace in content and technology as outlined last September.
We believe momentum in our businesses from fiscal 2020 or carrier into fiscal 2021, with a number of tailwinds, including the strengths and our analytics business as clients add our front office solutions performance in risk in apiay to their workflows as well as.
As well as continuing demand for our core data feeds and wealth tool.
Additionally, we expect high client retention to continue and will serve as a solid base for research buoyed by the continued demand for expanded content coverage and deep sector and private market.
As highlighted earlier in the year I want to give you. Some details of external factors, we think may impact our top line growth for 2021.
First delay.
Delays in decision, making could cause longer sales cycle.
While we built a strong pipeline and converted it with solid execution in 2020, we did experience situations in which larger and more complex deals required additional reviews lengthening the time to close especially in this virtual environment.
We expect this may continue in 2021.
Second client budgets may tighten the mature.
The majority of our clients will finalize their 2021 budgets towards the end of this calendar year, depending on the speed of the vaccine and economic recovery clients may be cautious in your outlook and reduce work delay their spend.
And third a prolonged pandemic and virtual environment may slow new business growth.
The strength of our sales force and our value proposition converted into key wins this year proving that we can sell virtually however.
However, as pandemic related uncertainty blunts decision, making we acknowledge that clients may take longer to switch providers and it may take more time to build new relationships virtually.
These same factors impact our visibility when we consider the 2020 two targets laid out last September as part of a multi year investment plan while we.
While we maintained strong conviction in our ability and to achieve our milestones and solutions capabilities and savings, we would need greater visibility in order to reaffirm our 2022 targets, which we are unable to do so today we have.
We have modeled multiple scenarios, including one with an economic recovery that supports our 2022 growth objectives.
We believe that we have the right team and right products to see our growth objectives materialize. However.
However, we must continue to weigh the factors I, just mentioned and as time goes on to see the timeline of our growth targets that may shift from 2022 to beyond.
In closing our team rose to the many challenges that our industry, our clients and our world faced this year, we posted our highest as big quarter ever amid a global pandemic marked 40 years of consecutive growth our core.
Our core strengths served us well.
Well business model strong liquidity valued solutions and laser focused client service.
Results, our topline and.
And earnings growth increase in retention commitments to investments and growth in our client and employee base.
Confident that our strategy and team will continue to help us manage successfully through the challenging environment and generate long term value for our shareholders.
With that we are now ready for your questions.
Over to you Kevin.
Ladies and gentlemen, if you have a question or comment at the time police person argument one key on your Touchtone telephone. If your question has been answered you were somewhat soft in the queue. Please press the county.
Our first question comes from Kevin Mcveigh with credit Suisse.
Great. Thanks, Hey.
So you'd made a comment you said the highest quarter incremental.
If the growth in the company history.
Can you kind of just frame the puts and takes around that specifically it looks like on the research side.
Thats seen a little bit more momentum is that just you know structural change around coal bid or some of the really been sales you know the multiyear investments just any thoughts on that'd be helpful.
Sure.
So yes, it was a broad based across all of the businesses in Q4. It was very strong research I think was comparable to what we did in Q4 of last year, we did see decent.
Decent hiring in the banks I think many people were concerned that that was going to be significantly lower but we saw no.
Pretty good strength there and.
Analytics had a particularly strong quarter, we saw we talked about that earlier in the year, where some of the inver.
Some of the investments we've made previously around the portfolio lifecycle, we're really starting to gain momentum. So we did great with performance system, which was really the result of the acquisition apply some integrated with PA.
Also our reporting system, which was the vermilion acquisitions, so great quarter from analytics Cts had a very good quarter better than Q4 of last year.
Hoak sorts of gross Cts, a little bit faster this year, but we did have.
Lets salespeople I think that we needed at the beginning of the year going into 20, which we've corrected going into 21.
Well had a really good quarter relative to last Q4, so all businesses grow firing on all cylinders and the sales team did a tremendous job of executing on the pipeline that we had laid out at the beginning of the second half.
That's helpful and then telling real quick on the expense management continues to be really really effective any thoughts on you know just any structural savings may be on the travel side or occupancy and.
Does that allow you to share more with with the market or accelerate.
Product development, just any thoughts around that I know, it's still early but you've got a couple of quarters here.
Yes, no. Thank you for that question and it's definitely an important one.
Right now given our fiscal year end, we have this situation, where we have half a year of Noncovered happier co head right and so as we think about the go forward. We we have a proven that we've been able to Shelby.
Shell virtually very effectively and being we have to obviously take into account on how our client's behavior is and so when we think about the go forward would you assume that.
We are going to go back to the offices sometime in the second half for us, but also that there will be some level.
Of change under and that is built into our numbers now that is in part we are all say reinvesting some of that back into the business not all of it but.
But that is part of what when we gave our guidance slide 21 built in so we do think that there are some you are calling it structural change, but there will be some level of difference of how we just operate as a as a business that that is taken into consideration.
Thank you Jeff.
You're welcome thank you.
Our next question comes from Shlomo Rosenbaum with Stifel.
Hi, good good morning, Thank you for taking my questions.
Can you talk a little bit about the pipeline in what you're seeing just as your as you kind of the cadence.
Of sales running through the quarter and into the first quarter just to give a little bit more color on the support for kind of the accelerating organic growth rate that you're expecting over the course of the year.
Sure happy to touch on that so I think as.
Mentioned by by sell we think about our different businesses in particular for analytics one of the benefits we've seen over the course of 20, which we think will continue into 21 will be along the lines of expansion for example, with the reporting and risk and performance. We have found that those who have all costs.
For analytics solution.
Solution within a certain period of time to have those add ons. So that expansion is happening and so we think that will just continue to build as we go forward.
From an EPS perspective, as Phil mentioned, we have additional sales resources. For example, so we think that positions us better.
That will that will reflect itself and so and so 21.
And then what we're really building into our minds here as it relates to both.
Research and wealth is that solid retention.
It is in part buoyed by the investments that we've made and we would expect that to continue.
And you know and I were not looking for any large deal to necessarily be part of.
What's what's going to help us succeed in 21.
Okay, Great and then.
Just give me a little color as to the yes, the growth rate seems to be the expectation at least for the year is lower than the revenue growth rate and usually I would look at that is kind of a leading indicator you know it has to be grows faster in an improving environment and it would decline faster.
Slowing environment why was that was that different now.
Sure. So there's a little bit at the nature of ASV and revenue, which you hit upon but when you have a very strong say Q4, right. So you're not really recognizing that revenue in the year you recognize it really in the following let's say you know that.
The next 12 months, so there's a little bit of a lag effect that can occur because.
Because you're not going to see that all in there. So that's really what we're seeing here.
When we're talking about.
The.
Craig its the impact from the previous year, that's showing through into the subsequent year.
Okay. Thank you good luck.
You're welcome.
Our next question comes from Hamzah Mazari with Jefferies.
Hi, good morning, Thank you.
My question was just on Asia back.
It's been continuing to outperform I know you mentioned sovereign funds Bert, but maybe anything you can touch on and in terms of the mix of that business or or execution. I guess, it's a small base do you envision that business being as big as the U.S. overtime.
Just sort of any thoughts there would be helpful.
Sure Hey, Hamzah, it's filled so yes, Asia Pac had a slower Europe growth than we were expecting but we.
Do think that it will return to a higher growth rate. This year. It was the first region to get affected by the pandemic.
We did see particular strength in a couple of different countries and we see you know a lot of good momentum going into next year. So.
I don't I don't think that's sort of a longer term trend.
In terms of Asia Pac not growing at rates that it used to grow out and so.
In terms of getting back to you know overtime to the surface of the U.S. I mean, it is only around 10% of our business today. So it certainly has a lot of potential I think you know Asia Pac is a great market. If you're an active manager there is a lot of opportunity on the wealth side. There. So we're very bullish on it but it would take obviously a longtime friends.
I get to the size of the U.S., but I think we've been consistent over time, saying, we think you know our our EMEA plus Asia Pac business could be 50% of our ongoing revenue at some point and I think we're beginning to get close to that now.
Got it and then maybe if you could just update US on you know you laid out a multi year investment plan just in terms of timeline of that initiative.
Clearly, we're looking at U.S.V. bounced back, which is you know sort of a mild store to judge success, maybe of that program, but just maybe just update us on on on their timeline of Dart initiative.
And if there's been any change sorter due to coal varied I know you mentioned the sales.
The sales cycle, but any thoughts there would be helpful. Thank you.
So we're on track we've not changed our plans so that three year plan that we laid out we're still committed to so the broad buckets, which where our digital transformation, which include you know I moved to the public cloud opening up the platform through the eyes and more personalization.
All of that country.
Continues to do well on the content.
On the content side, we committed to deep sector private markets.
And some investments for the wealth clients, we did really well this year with the deep sector strategy. So we have significant releases.
The three sectors and we believe that.
That led to some very good retention at some clients. The work that we're doing there we've secured a lot more content providers to kind of fill out.
New sectors that were working on them you have a full team of sector specialists for each of the different sectors that we had the three year plan. So you know like any plan, you'll you'll make some tweaks here and there.
So, but those up the plant itself. The overall strategy the pace at which we're investing none of that has really changed.
Got it thank you.
Our next question comes from Toni Kaplan with Morgan Stanley.
Thank you.
First actually just want to convert confirmed that ASP guidance range, because I think the press release at the low end had 55 million, but on this slide I think it said 65. So I just wanted to make sure I have a good handle on on what the bottom and is but.
My main question, though is really you know you had a pretty nice acceleration in a is the last quarter to 5%. This quarter again to five three so so far you're really not seeing you know the cove. It impacts that I think I would have thought and and but then on the guidance being.
Lower it sounds like maybe it's just that it hasn't happened yet so.
Just wanted to understand is is it really conservatism or is it something that you're seeing in your data maybe in their attention reach or in something that's that's leading to sort of the slowdown.
Okay.
So yes, the low end should be 55 and I believe.
That's already been correctly, the decks that won't get we'll get that posted sales of the range is 65 to 85 okay.
Okay.
So yeah, we've been very successful Tony.
Selling virtually so im very proud of the team and I think we're very confident that we can sell fact subs and supported and implement that virtually and we're not sure how long that's going to go on I think you know there's a couple of things here. We are always very backend loaded in terms of ASV and.
Sometimes it's hard to have visibility into the second half of the year.
This is a year, where I think we would all agree that there's it there's more uncertainty more things that could happen. So we try to put a good number out there for you.
We need to adjust to that.
But the second half we can as we get more visibility.
The one area that I think we're a little bit.
You know just not worried about that but thinking carefully about is how do we.
Get the much larger deals teed up.
Over the year like can we do as many of those as we did in.
In fiscal year at 20.
We're able to do that it's just a question of other clients themselves and the.
In the end markets going to be willing to make those large decisions. So as we get closer to the end of the year will understand how clients are looking at their budgets.
Because we're an August company, that's a little bit different but I think we're going into the first goal budget cycle for clients you know since cobot began so we're just not sure how that's going to play out exactly.
You know what I can tell you is that we have a comparable pipeline going into F. Y 21, as we had going into F y 20.
And.
Like I said, when we if we need to revise our guidance at the mid year, Mark we well, but this is I think the range that we felt was appropriate so given what we know today.
Okay. That's helpful and my task that Cts, obviously, it's still double digit growth rate, but.
It is down from 15% last year, 20% in prior years I.
I think just trend in terms of expanding need for data and things like that I thought were sort of you know positive.
Sales wins for that segment and so.
Just wanted to understand that you know it's a good number but you know can you get back to 20% range on that line and I were there any specific drivers of the slowdown this year to get to that number.
I believe we can certainly grow this of the faster and as you mentioned the all the trends in the market are there it really is a tailwind.
This I believe we're growing this business faster than most.
Most of the competitors offer the type of data that was selling so I think were doing well and taking market share.
And we sold a lot of our call content, so as more of our as we develop more of these content sites and we've made a significant investment in content.
Recently, we are going to be able to have more skews on the shelf to sell.
To our clients one area that didnt come in as quickly as we thought it might be this year was the apiay. So traditionally clients have consumed factset content through.
Feeds it really just files we.
We have built a lot of eight the ice the clients to sort of pull the data and programming names that directly we believe that is a winning strategy. It just didnt come to fruition as quickly as we thought it might we've built out a lot more sales channels through other enterprise software providers and through our strategic partnerships and alliances team. So.
I believe it will be our fastest growing segment for some time.
And we've got a lot more specialists selling cts going into F Y 21 than we had going into slide 20, I do think.
That was that somewhat limited us that it's a very specialized sale.
And if you don't have enough people to sell it it can.
Slow down the growth rate.
Great. Thank you sure.
Sure.
Our next question comes from or mild conference on this.
Good morning, and thank you for what the taking my question.
Could you please give us an update on your wins in some non traditional sectors for factset like insurance and Westbury and also could you. Please talk about the value prop them and why they're switching over to Factset. Thank you.
Sure. Thanks for the question Alan.
He talked about insurance, so we do very well in the acetone. This space we grew that.
Type of client this year I believe in high single digits.
We did have a lot of successful then sharon's companies, particularly in the fourth quarter and usually the insurance companies are going to be using our analytics suite. So.
So we'll be selling into the general fund typically they'll be subscribing to our multi asset class risk solutions. So what.
So as we've continued to build out our capabilities that's resonated greatly with the insurance companies. So that is the space, we're very bullish about.
We don't do a lot with real estate companies today that is an area that we're investing in sales.
So maybe that's something we can talk about at a future call.
That's great very very helpful.
And then the follow up question.
You talk about Asia Pacific Decelerated, a little bit, but I also realize that accelerate.
Accelerator from 3.7% to 5.7% linked quarter any color you can provide any what's the driver for that thank you.
Yeah, we had a great quarter, great year in the EMEA region.
Analytics, and the Cts, where big drivers there, we did very well in some of the very largest accounts in the region.
And the UK sales team actually really crushed it this year. So we had a very good performance out of the UK.
And we did well with three distributors as well so we do have a segment of our business that.
Goes out to other fintech companies or other consumers of financial data other than the buy side and sell side and that team had a very strong here yes.
That's very helpful. Thank you very much.
Yep.
Our next question comes from Bill Warmington with Wells Fargo.
Good morning, everyone.
Morning.
So I know that.
Contracts can vary from client to client, but could you talk about how for the majority of your revenue potential see reductions could impact or could or or wouldn't impact your revenue.
Sure all right I'll take that one Oh go ahead. So no you go ahead Alan.
Yes, so just to address quickly which is.
When we think about our contract like you said that they all varied.
They are multi year in nature. So that's 0.1.
The second point will be that many of them, especially the larger ones, which is probably where your question. Okay.
Hassan we have.
We have minimums and then we also have tiers so I.
So I think from the perspective of number of users, yes that may change overtime, but it would.
But it would have to be something more material for any kind of.
Any kind of impact more specifically as it relates to how our contracts are set up now I'm, giving you a general answer bill but that.
But that is how we would think about it.
Really the way it would play out.
That's helpful.
The the other question I have for you is it's really one where I was still.
This doing some we're doing some calculations early today and if we if we take the ASV.
Segments as you have them now and we take the growth rates that you have done this past quarter.
Sorry, just last year.
And he does run those out for about the next three years.
Orange is it doesn't it doesn't move the.
The ASV growth very much it takes it from like you know the.
5.2.
Two 5.3% growth too.
About 6%.
And.
The challenge.
I'm facing as I'm trying to figure out like how do you.
How do you get it to the upper single digit.
Which is where that 40% is.
Sorry, that's that 60%.
Growing now.
How do you get the whole company up to that level.
Okay.
Well the big the big movers for us, though Cts and analytics. So we have to execute on those two in particular and I think you know.
Its seat counts as well so how well do we do in capturing more seats in the wealth and research space. So when we laid out our plan we have a theory, where we can move.
Move each of these pieces of our business to a higher level than some have more opportunity than others, but that's that's that's really the theory is how quickly can each of them get sued the growth rates that we think that they can attain.
So as a group get to the high single digit number that we outlined for you last year.
Got it.
Alright, well, thank you very much.
Thank you.
Our next question comes from Manav Patnaik with Barclays.
Hi, Good morning, guys, Phil maybe somewhat tied he is probably a question you know.
You talked about there was no piece and the change of pure investment and early in the call. He talked about how all the claims and almost everyone. We listen to is going through this accelerated digital transformation and so on and so forth and I was just curious you know what your thought process and perhaps why maybe you guys decide to accelerate.
You know given given all the trends that we've seen there.
You mean investing more how it's really in this yeah investing more and faster and so forth.
Yeah, we certainly could do that I think you know we have this is an ambitious investment plan that we have and it's I think good too.
I think she see how it goes essentially so I think we're very encouraged with the investment that we've made so far.
And you know if it proves that some of these things.
Produce higher growth rates than we had originally imagined we could certainly consider that so you know we have tweaked some things.
And they're also as you know there is only so much capacity I think we have to execute on some of this stuff.
You know I have a certain rate so thats another potential limiting factor.
Okay Fair enough and then just a follow up you know on the content side, you know that the private sector expertise you're talking about could you just remind us or give us a flavor.
Where you're sourcing that detail, how you're collecting that data and how much of it is you know more proprietary. This is just the partnership just resell the data and so forth.
Yeah, it's a combination of partnerships and.
And thus collecting data ourselves so I don't know if be been completely public about some of the sources. We have so I want to be a little bit careful there but.
But it is a very healthy mix one of the big.
Kind of rocks within our did.
Digital transformation strategy.
To automate a lot of our own content collection. So we have a very good machine for collecting content, but if we would have set up our company all over again today, we probably do it in a different way so we're.
Making that transition and as we get.
Further along with that journey I think we'll be able to source more of this data ourselves that can come from a wide variety of documents and more unstructured content as well.
And monitor that make the AD yeah, just part of.
Part of it is having content and part of it is the concordance with everything else that we have which is a differentiating factor and an important one so wanted to sort of keep that in mind as well.
Okay. Thank you good thanks.
Thanks for that.
Our next question comes from Alex Kramm with you be EPS.
Okay.
Hey, Hello, everyone.
Just wanted to put a couple of these pieces together that you talked about maybe I, maybe stating the obvious but since you took the guidance the way for 2022, which is understandable I think this was mostly in ASV comment right in terms of top line growth, but there's some people that know what did you also basically saying the investment continues.
To go forward so.
There was a margin guide that was 33% plus 2022, and I assume that was predicated on getting to that higher growth that drives the merger expenses. So if we're not getting that growth I assume those margin targets off the table for now and we'll stay probably more at these levels is that a fair assumption.
Hey, Alex is Helen Thanks for that question. So since we're not commenting specifically on that.
And then hedge a little bit, but I would say if you take a look at the trend of what we've done in terms of 1920 and 21.
I would expect us to continue to see some of the productivity and efficiency gains.
And yes for sure the margin is impacted by the revenue growth.
Matt, but we would still be executing very well against the op.
The operational improvements that we've done thus far.
Okay, and then maybe just just to finish on margin a little bit more.
Little bit more near term on 2021, I know, it's a difficult year to model, but any any seasonal stuff you would you would point out as we should be thinking about it from a quarterly basis again, maybe related to when things reopened but how you would be thinking about it then just I think you said maybe 100.
80 basis points at Covance was a margin benefit.
2020 for 2021 did you say how much of a margin benefit covert youre building in to the model today.
Yes, So let me talk to touch on that so for seasonality I normally on our business isn't that.
That seasonal per se. So the difference would be savings that comes from.
Some of the continued office.
Office close or little or TV as you suggest that the back half of the year, where we would see more of that.
In terms of the impact keeping him.
Keeping in mind that it given our fiscal year, we had half a year and 20 that are under the situation and let's call. It a half year 21, that's in that situation and the impact in both is roughly.
Around around 1% on a net basis.
For both the savings that we get from office.
Savings as well see any but also offset by some of the expenses were going to have to take in terms of business continuity and ensuring that our employees are able to talk effectively from home.
Alright that was clear thank you.
Thank you.
Our next question comes from Andrew Nicholas with William Blair.
Hi, good morning.
It seems like you are particularly successful growing the wealth business in the quarter was the primary driver of ASV growth user count client count.
I was just hoping you could speak a little bit more to the growth from the period what type of clients you were able to bring on board.
And the extent to which there were any notable wins in the period that are worth calling out.
Well I would say for the year.
We had a very broad based success with wealth.
You know there are some much larger deals that we were shooting for that unfortunately, we werent able to capture in the year, but we did capture you know three significant wins you know with some marquee names in three different countries and we also did very well.
Executing on sort of smaller and medium sized wealth shop. So we're really encouraged you know in terms of the product and the service level I think we've proven that just from the feedback from the marketplace.
And we also had a good year without digital business. So for those of you that remember we made an acquisition a few years ago and we we had a relatively good to you there.
With our digital solutions. So overall I think well just continue to execute well you know throughout the entire year.
And in one particular case I think really took advantage of some of the digital transformation that we've been doing what we're able to unpack a different views from factor.
Plug those into a client's ecosystem rather than just taking you know the truck traditional factset experience through the web but through the workstation.
Great. Thank you and then just as my follow up the conversation around DSG U.S.G. data seems to be growing.
With every passing quarter. So I was just kind of hoping you could talk a bit about how you're capitalizing on that trend at factset and and how material enough of an opportunity that can be within content and technology solutions. Thanks.
Yes, we view that as a significant future opportunity today, we integrate one of the best of breed DSG content, that's out there either through the workstation all through the open facts that marketplace. So if you go to open the facts that dot com you can see we've got I think a over 100 now providers of alternative data group by three.
Dean and.
The most popular theme and I'm guessing the one with the most contributors and it is.
Yes, CISO effects, that's always been great about taking everything that is.
Everything that's out there putting it in one place providing great analytics and service. That's the that's the current approach would seeking with the SG, but we're certainly taking a very careful look at what we can do ourselves from a proprietary standpoint.
To take advantage of the trend Thats out there.
Great. Thank you.
Our next question comes from David Chu with Bank of America.
Hi, Thank you. So when you introduced a three year accelerated investments the idea was to get roughly like 25% of revenue benefit in fiscal 21 with the remaining in fiscal 22 I'm. Just wondering if that's what's embedded into your guide and what that means in dollar terms.
Thanks, Sarah Thanks for your question.
I think from the perspective of.
Of how we're looking at that those 25 and 75 was was obviously based off of what we thought we would be able to continue to do for under normal.
Under normal conditions. It is some of the benefit that comes through from the investments that come through in the form of retention.
As well as.
As well as as new logos, so I think from that from the view of giving an exact dollar that's that's not how we think about that.
But rather that it is supporting the overall growth.
Going into and 21, I think the benefits will come across all businesses, but given where we are in the different investments research get some of the earlier benefits from that and we'll see that come through on the digital side.
Into analyzing PPS going forward.
Okay, Great and then no Cts remains quite strong.
And just wondering who are the primary let users here just wondering if they're mainly wants and what your thoughts on the sustainability sustainability of that user base might be.
So you're right that a very large percentage of what we traditionally sold wants to quantify either through feeds or through other mechanisms, but we do sell a lot of data to into performance systems. Other systems. When clients are doing application development. They need a lot of content to do that so there are.
Multiple workflows that we sell to we also sell real time feed it's a smaller piece of what we do but we do have a good offering there.
And were currently looking at you know all of the different addressable market for us on the feed side, so as we enter flights.
Slide 21, we sort of taken a fresh look you know EPS, Cts and where weve appointed.
We're still going to do very well and Kwan, but we are ramping up the focus on some areas.
That we can sell feeds to that traditionally we haven't spent as much time focused on.
Great. That's very helpful. Thank you.
Sure.
Or with Deutsche Bank.
Hi, Thanks for taking my question, maybe just a question on the M&A pipeline. How are you thinking about any acquisition opportunity, but it's been a few years since we have really seen any acquisition pushy. Thanks.
You want to take that one hill.
Sure happy to do that thanks for your question. So we as you can tell from our solid liquidity.
Liquidity and balance sheet, we have the capacity to do so and Weve initially chosen to continue to invest in organic has a way of building.
Building our growth, we continue to analyze acquisitions that support our strategy in content and technology and that we want ones that have the adequate returns that exceed our hurdle rates as you can guess.
Market's pretty frothy and from the perspective of UBS.
In addition, we continue to look at that and in every one of our decision as we continue to look at many of the opportunities out there we agree that having some inorganic growth will be very helpful to support our overall longer term growth, but we are going to remain disciplined in making sure that we get those is adequate returns the positive here is that.
We have plenty of liquidity to be opportunistic and we'll continue to look to do so.
That's very helpful color and maybe just to follow up on the question on the Btwenty two targets.
They do you see like in Nielsen audio analysis, which segments or Mitch.
The markets are maybe geography do you see the biggest media into as you think about gift. When do you think you can solve it and told them that he can cool. Thanks.
Sure I'll take the first shot on that so when we think about the scenarios that helps support that.
Phil sort of talk to him before.
What will happen to help from even in getting towards upper range in the low 20 line.
When we think about the factors, which include those exaggerations factor of a delay decisions.
New business being done virtually as well as budgets.
Those all have to work more in the favor of I'll call. It a normal environmental though.
Normalizes is probably still a bit unclear, but having more confidence just like it with the markets. The more confident that there is in the future the more that our clients will have confidence in their spend we know that our products are resonating, we know that they fit the trends and the needs of what they need to be productive on their end.
But got confidence in the future and them and their own markets will allow for them.
For them too.
To work with us and for us to be able to reach the.
In the scenario that outlined to reach back to where we believe our original strategy is not to take us in the long term.
That's helpful. Thanks.
Welcome. Thank you.
Our next question comes from George Tong Goldman Sachs.
Hi, Thanks, good morning.
You talked about being cautious with your fee outlook due to potential economic political and pandemic related risks can you elaborate on on recent client sentiment in spending in pensions and whether you are actually seeing some of those risks manifest in.
What clients are saying.
Hey, George its Phil So, yes, I mean, we saw a little bit of that in Q4, even so.
I believe we would have had an even stronger second half if it hadn't been for the pandemic.
You know I've been on some calls myself, particularly with clients that feel like they're under a lot of cost pressure right. So there are obviously thinking about their own futures their own employees.
And what it is they want to do so you know we've been navigating through it I think it's already happening but again.
You know I think a lot of companies our budget towards the end of the calendar year EPS. The one thing that we think we'll get sort of more of as we get to the end of the year and.
And as people get more visibility of themselves on how they've operated during this period and how long they think the pandemics going to affect them.
Got it that makes sense and then switching gears.
Switching gears to margins, you're not reaffirming your fiscal 2022 margin target of 33% because of less operating visibility can you talk about whether this reduced visibility comes from unknown GSV growth, which can obviously impact margin flow through or if it reflects potential changes in what or how much you plan to invest in.
Since presumably you have more control over the investment levels in more control over margins.
Yeah. That's a good question and you are correct as we think about.
Where we've got more control and visibility so right now we intend to continue to invest at the pace that we talked about last year. So that we have the lever so to speak and who they buy.
They really.
Since it's all around revenue growth being higher than.
Spend growth expense growth, that's really what why we lack of visibility at this juncture, but our intent is to continue to invest that the pace.
That that we outlined a year ago.
Got it very helpful. Thank you.
Welcome.
Our last question comes from <unk> Gulf Coast Research.
Good morning, guys.
Question for you on the.
On the operations.
This is proving that you're able to sell virtually we get the your models than traditionally high touch consultants visiting customers often you know coming out of the current pandemic is there any expectation that the business model may change and you're able to cut back on some of the high touch T. any that you guys do.
Okay, Yes, Phil so yeah, we've been doing in tight sales now for six months, so I'm really intrigued by.
How can we be more efficient at selling you know the higher volume type sales of the smaller client smaller type clients.
Without necessarily having fact set us on the fly around the globe.
But I do think for the larger firms and the more complex deals there is going to have to be that elements of sort of being in front of the clients talking to them about their overall strategy.
Building those relationships face to face so it's not going to go away, but like every other company will get everything carefully our business model, how we work with our clients and also how we work as a company. So I think it prevents it presents more opportunity than not honestly and I've been very encouraged from what I've seen with the sales force and how they fit in.
Able to execute during the.
During the last six months.
Okay got it.
So to see if I can clarify your your pipeline expectations as of now clearly that we heard of several different comments is that the pipelines equal the size there was perhaps a year ago, but maybe you're not seeing as many large deals in that pipeline has some now and it's certainly probably not as strong as it was at the end of the second quarter is that a good summary of how you see the parent or no.
It's a comparable size going into the year as it was last year and you know the.
Sales build up and getting more confidence in those deals as the years go as the year goes on so.
The one area that I think we're just hesitant about and I need a little bit more time as it is can we.
Build up that pipeline of the larger deals for the second half the same way that we were able to do that in the first half of last year.
Great. Thank you.
Yep.
I would now like turn the call back over to Phil Smith for closing remarks.
I'd like to thank you all for joining us today I'm pleased with our teams and companies performance. This year and the strong progress we have made on our investment plan. We're excited for this new year as we continue to expand our offering and equip our team and our clients to operate successfully in this environment I am confident we will capture further wallet share.
Secure additional client wins and importantly, we remain committed to investing in our people our clients and communities to create long term value for our shareholders with that.
With that I'd like to thank you one more time for your time and if you have additional questions. Please call Rima Hyder and we look forward to speaking to you next quarter operator that ends today's call.
Ladies and gentlemen, you may now disconnect and have a wonderful day.