Q2 2021 Factset Research Systems Inc Earnings Call
Good day, and thank you for standing by and welcome to the Factset second quarter earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session. The ask a question. During the session you will need the pet star one on your telephone please be advised of todays conferences.
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We're quite of any further assistance. Please press star Zero I would now like to hand. The conference you speak of today Rima Hyder head of Investor Relations. Please go ahead.
Thank you Joelle. Thank you and good morning, everyone. Welcome to Factset second fiscal quarter of 2021 earnings call. We will we continue to be in various from out locations today.
We may have some audio quality issues and we really appreciate your of patients should we experience of disruption.
Before we begin I would like to point out that the slides we will reference during this presentation can be accessed via the webcast on the Investor Relations section of our website at Factset dotcom the.
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 the questions from investors to be fair to everyone. Please limit yourself to one question plus one follow up.
Before we discuss our results I encourage all of listeners to review the legal notice on slide two.
Which explains the risks of forward looking statements and the use of non-GAAP financial measures. Additionally.
Additionally, please refer to our forms 10-K, and 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 of the most directly comparable GAAP measures are in the appendix of the presentation and in our earnings release issued earlier today.
Joining me today are Phil Snow, Chief Executive Officer, and Helen Shan Chief Financial Officer.
I'd now like to turn the discussion over to Philip Snow.
Thanks, Rina and good morning, everyone.
I am pleased with our solid second quarter and overall first half results and the investments we've made to further advance our offerings in both content and workflow solutions are resonating.
Over the past 12 months, we've proven our resilience and our ability to strengthen our value to clients and we began the second half of this fiscal year with good momentum greater visibility and continued confidence in our ability to execute.
Our investments in content and technology are progressing at pace and we see market validation of our strategy with some key wins this quarter <unk>.
All contents of advances, particularly in deep sector of beef being well received by clients, especially across the sell side supporting workstation growth and I'll focus on digital transformation of allows us to offer more personalized solutions and an increasing number of ways to deliver value for clients.
The market is looking for solutions out of both easy to integrate and unite the front middle and back office and we are well positioned to capitalize on this trend or shift of the public cloud is progressing. According the plan with the majority of our new storage and collection centers successfully migrate.
This quarter, we are particularly pleased to see growth in our core workstation offering the efforts we've made through our investment strategy of starting to drive our topline and we delivered a strong first half due to our ability to execute on our pipeline with continued discipline.
And our second quarter, all organic as the plus professional services growth rate accelerated to five 5% the.
Acceleration was led by our sales team effectively growing wallet share with existing clients as well as capturing a higher price increase from the Americas.
This was partially offset by cancellations.
Largely across the asset management firms.
We're pleased that our performance resulted in increased adjusted operating margin and EPS, we have good momentum going into our second half.
We reaffirm our ability to deliver results within our guidance for fiscal 'twenty, one and are raising the lower end of our full year organic ASD growth range $270 million from $55 million.
All of them will explain in more detail shortly.
Turning now to the performance in all regions, the Americas growth accelerated to 6% driven by strong sales of workstations in research and wealth solutions and data feeds and Cts solutions.
Our research solutions had a particularly good quarter supported by our digital transformation and the expansion of our deep sector of content offering.
This was evident from wins with a large existing banking clients, who benefited from Matteo with workflows, which allow them a more connected and personalized experience.
E. T. S also had a successful quarter as clients for more of our core and premium data feeds and then wealth. We're extremely pleased with the RBC. When this was an entirely virtual rollouts and I'm proud of how quickly and seamlessly integrated our advice of dashboard workflow and CRM solutions for all.
<unk> the entire wealth management team.
Asia Pac accelerated its growth rate for the 9% due to the strong performance in Hong Kong, Singapore and Australia.
We saw wins of institutional asset managers and day to provide us with our research and Ccs solutions.
This growth remained at 4% with wins across the region, most notably in France, and the Nordics the.
<unk> benefited from increased sales of Cts in the wealth solutions for asset owners and institutional asset managers as well as the accelerating new business.
Our diversified client base continues to seek mission critical data and we see strong demand for our growing content offering were pleased with the progress we are making in the ESG market as we further integrate our ESG products into clients every day workflows, we've already expanded our ESG content suite with the launch of true value.
The U N sustainable development goals monitor. This is in addition to a new joint offering with Ping, an insurance group, which offers ESG metrics on the companies incorporated in mainland China.
Overall, we see a long runway for growth as we execute for enterprise wide deals and believe that every touch point with clients today represents an opportunity the cross sell in the future.
The conversations we are having combined with our sales team's execution make us optimistic that we will continue to grow our market share long term.
In summary, our focus continues to be on achieving higher growth and providing clients with effective and efficient solutions across the entire investment workflow.
We remain committed to our investment strategy and for living our purpose, which is to drive the investment community to see more things bigger and do their best work.
We are starting to see the rollouts of the efforts we are making.
We continue to push ourselves to be a more diverse and inclusive of an impactful organization for that and I am pleased to say, we recently hired our first chief diversity equity and inclusion officer as part of our strategy to strengthen our organizational Accountability Inc.
Kris diversity across all levels of our company and ensure work force equity.
We know we have more work to do and we remain committed to furthering our efforts I.
I am pleased with our progress as we strive to be the best place to work and give our employees the flexibility they need to thrive in the new normal I.
I am proud of the ways in which we are showing up for one or another and for our clients every day.
With that I'll now turn things over to Helen who will take you through the specifics of our second quarter and first half 2021 performance.
Thank you, Phil and Hello, everyone.
Hope that you and your loved ones continue to be safe and healthy.
I'm proud of the Factset team for finding new ways of this past year, the support for our clients and each other.
Today, I will share more details on the performance to date and to provide an update triangle outlook.
The first off the fiscal 2021, we grew our revenue by 6%.
And of our adjusted operating margin.
This points and increased our adjusted EPS by 9% per year.
Most of your investment plan is on track and beginning to materialize the topline growth.
Last quarter, we welcomed the true value of that for Factset.
Please to report that the integration of the team and other.
Of the ESG and technology assets is largely complete.
Many of the acquisitions, we will exclude any benefits of enhanced.
Associated with the.
The putting out an organic related metrics.
2021.
As Bill stated earlier, we grew organic F&D cost of professional services.
And then of half per cent and access.
Elevation from the first quarter that looks for the diligent execution of our pipeline powered by healthy demand for workstations and David.
Ongoing investments and of course, the notion of continued to resonate with clients ask for.
And our annual Americas price increase which totaled $48 million.
For the prior year.
The previous years, our annual price increase.
Cash and again the share.
Further accelerating the growth rate.
For the second quarter cash burn will increase.
The 382 million.
Panic revenue, which excludes any impact from foreign exchange acquisitions at the current revenue amortization.
5%.
The mine life.
Growth was driven primarily by analytics Cts solutions.
Our geographic segments revenue growth.
7% EMEA from 8% in Asia Pacific of 10%.
All regions primarily.
The increase in our analytics and Cts solution.
GAAP operating expenses grew 5% in the second quarter to $276 million.
The higher cost of sales.
Compared to the previous year, a GAAP operating margin expanded by 90 basis points to 30 per cent and our adjusted operating margin Inc.
At this point the retailers.
Yep.
These improvements largely due to net savings continued.
Continued productivity total workforce mix.
Sure.
Our share of expenses, including those related to travel.
Professional services.
These benefits were partially offset the higher spending both compensation and the technology.
The percentage of revenue cost of sales loss of 230 basis points higher than last year on the GAAP basis.
170 basis points higher.
Thank you.
The increase was driven by higher technology expenses related to our shift to the public cloud and increased compensation expense for existing employees as well as new talents to support our multiyear Inc.
And the plan.
And expressed as a percentage of revenue SG&A includes year over year of about 320 basis points on the GAAP basis.
250 basis points on an adjusted basis.
I'm already drivers include materially lower travel and entertainment costs every day.
Due to office closures offset in part of the higher compensation costs.
These results are in line with the expectation as noted in our full year guidance.
As discussed on previous calls we planned for the incremental investment spend of $15 million each year, starting in 2022 of 2022.
While realizing the benefits from productivity and delayed ramp ups in hiring last year, we are on track for spend around 26 million.
FY 'twenty one.
As noted on last quarter's call. We're also using a portion of the pandemic savings.
Further in both sales and new product development.
Moving on our tax rate for the quarter was 16% compared to last year's rate of 14%.
Due to lower tax benefits realized from stock option exercises of this quarter.
GAAP EPS increased 9% to $2.50 this quarter.
$2 30 in the prior year.
Interestingly the diluted EPS grew 7% of $2.72.
Well the EPS figures from the largely driven by improved operating results, partially offset by a higher tax rate.
A reconciliation of our adjustments to GAAP EPS. This quarter was at the end of our press release.
Free cash flow, which we'd kind of cash generated from operations less capital spending.
The $30 million out of the court.
The increase of 75% over the same.
The Cherry last year.
The increase is primarily due to the timing of certain tax payments and well on the capital expenditures.
<unk> completed the majority of its bill.
Now.
For the first quarter, our ASP of retention continued to be above 95%.
We grew out of a total number of clients for 7% compared to the prior of year, reaching over 6000 clients for the first time for our history.
This reflects the addition of more.
Well of course.
The buyers have the donors.
Ongoing trend.
Continued as we continued to diversify our client base.
A part of retention improved to 90% the over here.
For the mission criticality of our solutions and the solid efforts of our sales team.
You should count of 12% year over year and cost of total of the 150000.
It needs for additional wealth and research workstation users.
And of course released this morning, we revise the methodology for how we define our users the capture more of expenses across all of our solution.
It provided revised use accounts for the last few quarters at the.
And of the press release.
For the second quarter, we repurchased over 221000 shares of our common stock for a total of $72 million.
Average share price that's great.
On June $22.
The board of Directors recently authorized additional 206 million charter shares repurchase program for them.
The total size of $350 million inline with the recent years.
We remain disciplined and our buyback program and committed to returning long term value to our shareholders.
Given our solid first half performance and improved visibility for the rest of the year, we are bringing up the lower end of our organic it has to be sort of professional services gross guidance range from China.
5 million to 70 million for.
The range is now 79.
This raises our midpoint.
What we said.
The first of all of this guidance six months ago.
High demand for our enhanced solutions alongside of the momentum we built our sales team gives us greater conviction in our second half pipeline.
Based on the first half results.
Encouraged by the client response for enhanced product suite reflected in both growth and new clients as well as increased expansion of existing clients.
You're doing day in an uncertain environment as different parts of it wont begin to recover from this pandemic.
Well for your views take into account the clients continue to perform in the current market conditions and that additional delays in decision, making and taking kind of budget for.
The impact our short term performance.
The global environment will continue to prevent the present challenges.
I believe we are well positioned for the longer term.
With that we're ready for your questions I'll turn this over the July.
Thank you as a reminder to ask the question you will need the press star one on your telephone to withdraw your question press. The pound key please standby will be compile the Q&A roster.
The first question comes from Manav Patnaik with Barclays. Your line is now open.
Yeah, Hi, good morning.
I just wanted to ask you know early in the call you talked about you know the move to public cloud is going well and I just wanted to maybe take a step back and I was hoping you could.
Help us just to appreciate.
The Factset today is in terms of its tech stack and how long do you think you get to the way you want to be.
Yeah. Thanks Manav.
Yeah, let me.
Published you know our three year plan six quarters ago.
We have a three year window to get 80% into the public cloud.
Which will just give us a think of lot of advantages in terms of speed and agility.
Across you know, how we develop products and how we deliver.
Product to our clients, so I'd say, where we're on pace, we're halfway through that journey of world already beginning to see a lot of the benefits.
From being in the public cloud so that is a major piece of the move from the technology standpoint, I would say the second the thing is opening up the platform. So.
Providing apis to access factset contents of analytics.
Whether or not you are of clients and you want to just program directly against our database or if you want to access it through some of the means.
Through some of the channel, we're making that available as well and it should also make factset easier to integrate with other third party systems. So that's another important <unk>.
Aspect of that so overall, we're pleased I'd say were halfway through that original plan.
The technology company. So of course that net brands, but we are beginning to definitely see.
Some of the benefits of the work that we've been doing.
Okay got it and then just on the true value labs, and the ESG integration you talked about.
The I guess I just wanted to I appreciate maybe better what's the strategy day was or what the all.
With the value that should be kind of like the street accounts in many ways in terms of to get a good offering just integrated in your packages.
Yeah, I would say, it's the different than the street accounts. So we certainly have a fantastic product that we couldn't sell today as its own offering.
That will continue a very often that the feed these.
Dave.
However, we've done a lot of work already to integrate the true value labs data through the Factset.
Workflows so.
I think we all of sort of.
Recognize that ESG is very important.
And will it be a piece of just about everybody's workflow in some way shape or form so for us making sure that you can access the ESG.
Directly or as an overlay of whether you're a research analyst Youre of Quants, maybe you want to look at your portfolios and group things a certain way or added some metrics. We wanted to make sure that all of that's available through our platform and one of the advantages of again of using Factset as you can.
The seamlessly stitch together all of those workflows. So we've learned a lot in terms of integration you know during our lifetime and this has been one of the faster.
Integrations of both the people and the technology and the content that I've seen so we're well on our way.
Very optimistic about ESG as a theme.
And we.
We think we'll begin to see of the benefits of that before too long.
Got it thank you so much true.
Thanks.
Thank you. Our next question comes from Toni Kaplan with Morgan Stanley. Your line is now open.
Thank you.
I wanted to ask about Wilson, congratulations on the RBC win.
Just in terms of the overall strategy.
Strategy and and features there I know you have the full featured web deployed version that you created about two years ago. You've won some significant contracts just I guess, how are you tracking versus your expectations and well then how much opportunity is left there.
You know just given that you've been sort of ramping up and well so over the last few years.
Thanks, Tony.
See a ton of opportunity in wealth is one of our fastest growing firm types that we sell into obviously these big wins are very important because.
I think it gets us more notice in the marketplace and what the advisers move around from.
From the firm over the years I think they will get used to using factset as a as a tool. So we think there's a ton of runway here.
See the you know there are a lot of interesting trends going on in the wealth space.
And today, you know we own a small piece of the workflow.
One thing that we're excited about is our advise the dashboard products, which essentially.
The helps an adviser thinking about what that next best action is so we're beginning to introduce cognitive.
Cognitive computing.
To look at the clients' portfolios in the news associated with the holdings they have to really help them organize that day and so on so we think that's unique.
A unique and a good opportunity.
Attunity for us.
And we just think that in terms of the wealth space. There are lots of other places over time that.
We could begin to move into.
The.
That would be accretive to the factset.
That's great and can you also just hone in on the true differentiators that you're offering.
Are you winning more now because of the quality of the product or price or service I'm just trying to understand.
You have some momentum there so wanted to get to the right.
Yeah sure on the product side.
You know we have very good search functionality. So it's very easy for an advisor to come into our wealth offering and find what it is they're looking for them very quickly.
<unk> has.
<unk> has been a big winner.
And our web offering.
As seamless to navigate as well just in terms.
The sort of navigating from the screen the screen the speed of the product.
It's really good so if you're an adviser and you're managing the assets of 200 families or individuals being.
Being able to kind of get around quickly is important.
And service has been a big piece of the Tony's So as I mentioned in my opening remarks, we were able to virtually rollouts.
This offering too.
I think 8000 advisors.
Really quickly and then some ways of doing it virtually was easier than.
How we might have done it two years ago, which would be literally the fly around so almost every city, we could sort of trained people in Boston. So we've learned a lot about efficiency over the last year and that's been a good experience on both sides. So I think it's that classic factset combo of the product and the service, that's really allowing us to win here and it's the inverse.
Once that we've made in technology that I just spoke about that are allowing us the scale upload more portfolios.
And support more people than we might have been able to do one of our old Tech stack.
Thank you.
Thanks.
Thank you and the next question comes from hands on the XI with Jefferies. Your line is now open.
Good morning, just start of question on the SV.
Acceleration is that all I know you touched on the prepared comments with what the pricing.
Is that all of the RBC win in the U S V acceleration or is there anything else in there I know you touched on pricing and then as part of that.
Is there a reason why the low end of the revenue guide wasn't raised but you did raise the SV.
On a on the low end.
Yeah sure. So let me I'll try to answer both of those and how I'm. Please chime in on the second one if there's more to be said.
So you know in terms of the acceleration of Hamzah, we're seeing very good.
Performance from our research offering so the core workstation and called web offerings of.
Doing very well so yes, obviously it was a really nice win in a lot of the users you see there in terms of the increase were driven from that but we're also doing exceptionally well with our large banking clients.
In terms of renewals and the adoption.
Just more usage through our deep sector offerings. So that certainly has been a driver and we've seen.
Thank good.
The uplift in terms of the buy side as well in terms of the research offerings. So I think it's that core factset workstation.
That is performing well in this environment given the investments that we've made and some of the trends that are out there. So that's the main thing that I would attribute it to.
And revenue always takes a long time to catch up to yesterday so.
A lot of our.
A lot of our ASB comes in the second half of.
The amount of revenue that would be captured from that.
Isn't as much as we would for from stuff that we closed in Q1 and you knew that in the Q1, we were sort of minus seven out of the ASB side.
No that's exactly right I'm sorry. Thanks for your question, we are backend into the back half loaded and I would say even within the second half we typically have strong Q4s.
That doesn't reflect.
Turning to revenue necessarily in the year. So that's why we did not change Iran.
Revenue guidance.
That's very helpful and just my follow up question.
Is it just you had mentioned you know areas outside of wealth.
You know, whether it'd be corporate insurance, maybe private equity and maybe other areas.
Do you have to invest more in sales or go to market to be able to penetrate some of those verticals or do.
Do you have enough capacity.
You know you can penetrate those verticals with the sort of the head count you have today.
Yes.
We can do it with the head count we have today.
As I mentioned on the RBC, when we were able to deploy a large number of users very virtually so I think what we're learning is that for.
For the non.
Enterprise wide sales sort.
Selling and supporting our clients for the core workstation.
Is something that we can do very efficiently.
We are beginning to explore new ways of how the double down on that in terms of how we can.
Get more of those clients at the smaller end.
More efficiently so that we can focus the rest of our resources on the larger more enterprise wide deployments.
Got it thank you so much.
Thanks.
Thank you. Our next question comes from Owen Lau with Oppenheimer. Your line is now open.
Good morning, and thank you for taking my question could.
Could you. Please talk about your recent traction in the asset owner space do you have the ESG products, you'll like to further penetrate into this area.
And what other products do you think can help you increase your penetration. Thank you.
Yes, thanks for the question.
And the asset owner space, our analytics suite really plays a big part of this so very often when we're working with asset owners will be doing a risk deployment or will be doing.
Portfolio of analytics across size of the internally managed or externally managed assets, so where we've done a lot of work as you know across the portfolio of lifecycle and we've done a lot of work to invest in multi asset class offerings. So we do have some good momentum across different types of asset owners.
And it's the space that we're increasingly optimistic about.
Got it and then.
And then could you. Please also talk about your partnership with with Ping an.
Or are the ESG content providers in China can you talk about what is the value proposition of <unk> connect and also it's just content content exclusive to Factset users.
Yeah.
Yes, so we we.
Have a good relationship with Ping, an and China and.
I think they they've developed some very good ESG content and we just weren't good channel partner for them. So I think where you'll see this show up first of all of us in the open factset marketplace and the.
Then we should have plans to integrate that into the factset offering for the workflows that our clients care about.
And I'm not in a position to sort of talk about whether or not of it and exclusive.
Alright, Thank you very much that's it for me.
Okay.
Thank you. Our next question comes from Kevin Mcveigh with Credit Suisse. Your line is now open.
Great. Thanks, so much hey, I Wonder can you give us a sense of where you are in the three year investment and then it sounds like Youre, making good progress on the cloud but.
Maybe just a little more context within the analytics Cts well some of it sounds like the research side, you're starting to see some benefits of that but any sense of kind of benchmarks, we should think about it.
We continue with the transition.
The message.
Okay.
Sure I'll take that.
Thank you Kevin for the question, let me take a shot at that chip. Thanks for the first yeah sure. So first we've made some really solid progress as we've discussed and we're very cognizant of strategy going forward on content and technology and the discussions that we've had over the 12 months of past 12 months, if anything its really only reaffirmed.
That is the investments that we're making is key for them and content statue of transformation and on the personalization front. So in terms of where we're beginning to see some of that impact.
Seeing that in our workstation growth.
And then talk a bit more so the investments we're making in each sector is really resonating with banking clients for example.
And in fact, some of the digital.
Once we've made has been part of one of the the key wins in the availability and availability of two they've got to the cloud.
And the integration there.
And then when you talk about Ccs as well as <unk>.
On the analytics front, we're seeing pickup in a P is for signals from tier on API Concordance and and then the benefit from the from the cost perspective. Some of the improvements. We've made is helping us on the automation front on content collection for example.
So those are what we would look at some of the key deliverables that are beginning to come through this year and why we make the <unk>.
Comment that that the impact is happening as we expected.
And we're going to continue to realize the index for the rest of year 2022.
And then just real quick it seems like you picked up about 100 basis points of client retention.
Was that some of the ITG. Chuck is the result of Covid or just any thoughts as to what's driving that retention improvement.
Yeah sure I think there's probably a mix I mean that debt that number can move a little bit around but it's pretty stable at.
About 90% of what we tend to focus on.
More of us on the on the.
On the ASB retention as well, but it really is like the.
The Haynesville continue some of it because of the renewables I think that the points made earlier.
On how we've been able to continue to service folks very well the faster implementation that we've got.
So it's really been the expansion has really resonated.
So I think those are all of those reasons on why we.
To maintain if not improve our client retention.
Great. Thank you.
Welcome.
Thank you. Our next question comes from Alex Kramm with UBS. Your line is now open.
Yeah, Hey, good morning, everyone just coming back to the earlier question on the outlook and what's changed there. It sounded to me like you said youre more confident in some of those deals coming through but can you talk about the pipeline as well as the pipeline growth and and given some of the wins that you've had so far this year like what.
What was missing to maybe get a little bit more aggressive on the high end of the range as well.
Hey, Alex Yeah, where we're very happy with the pipeline for the second half. So we do have the healthy pipeline.
I would say you know for us too and we certainly have the pipeline that could support the top end of our range. So the things that I think would need to go right there would be.
The.
The banking hiring in Q4, that's always a big variable for us. So I think if the banks are.
Having good hiring this year that bodes well for us just sort of given about some of the trends we already talked about on the sell side.
We're optimistic that we'll be able to execute on our Q3 price increase.
In EMEA and Asia Pac, which.
It comes after the Q2 price increase in the Americas.
The one area of our business that slowed a little bit of analytics.
I think the highest the absolute ASB contribution in most years.
And what's happening there I believe is that because of the COVID-19 environment. These longer sales cycle of more complicated implementations are taking.
Taking a little bit longer the analytics pipeline is very healthy it's comparable to last year. So if we're able to execute on that while I'm optimistic about what that means in terms of ASP for the for Ya.
Okay, Great and then just maybe Helen for you can you give us an update on the margin trajectory here I mean, I think you had a fairly good start to the year. I think you had said before that the margins for trickled down lower but I think given what you've done so far and you didn't change anything of what the guidance there still suggest the DS.
<unk> stepped down in the second half so maybe just refresh us on where that's coming from.
And if there could be any.
And the upside to some of what you've quoted the laid out thanks.
Sure I will do it.
Thanks for the question I'll touch a bit on Q2, and then talk about each two of which Oh.
The more of the same so it might be helpful. So we've been very pleased with the improvements that we've driven year over year as it relates to the operating results of part of that is clearly to the higher revenue as well, but if we think about the uptick on the costs.
The flex in a couple of different ways. The increased investments that we've made in our deep sector of content collection.
Digital capabilities, there was of coming through in higher salary and technology costs.
We also have made additional hiring in sales and product development.
As we talked about last quarter.
As reflected in the 8% growth in our head count year over year.
The year.
In terms of the headwinds that we had this quarter, whereas the bid on FX.
Impacted our margin.
30, 35 basis points and then offsetting all of that is the continued efficiencies that we're getting through the work force next we moved shift again to come from.
Lower cost countries kind of the 1%.
We've had reduced professional fees this quarter services cost this quarter, we do expect that the pick back up in the second half of it might be that is more of a timing issue.
And of course, we're getting the benefit of.
Of being out of the office.
The after this quarter were constructive to lap the.
Previous year.
When we think about the second half Youre exactly right Alex would you expect cost due to the.
Ramp up further.
That's in part driven by the investment plan for sure as I mentioned in my remarks. We are we believe we will have around $26 million of costs.
Related to the on that sounds kind of next year versus.
Versus versus more of like 15 last year, and we're seeing that salary run rate start to really pick up and a lot of the investments that we're needing a more specialized the they tend to be in the Ohio across the country. So we see that pick up professional fees. We believe as we were implying the other should help us on the execution and implementation of front, that's going to pick up.
And we're still having the double counting costs between the cloud.
The and the data centers.
And then we also have the full absorption of the dilution from.
From the <unk> acquisition as well, we will ceiling, what kind of cost of will have to have as it relates to the debt.
The offices, hopefully reopening them as business starts to get closer to whatever that level of normal is of that could be an offset and we continue to be focused of course on managing the strength.
And and any discretionary costs that we have so we will be.
The focus on driving that as we have over the past two and a half years.
Great color. Thank you very much.
Youre welcome.
Thank you. Our next question comes from David Chu of Bank of America. Your line is now open.
Alright, Thanks, So subscriber count was up roughly like 6700 in the versus the first quarter and I think RBC brought over about 8000 users. So just wondering if user count sales on a quarter over quarter basis on an underlying basis ex the RBC users.
Sorry, all of them.
Okay.
Thanks for your thanks for your question so the.
The total number of subscribers.
We have we captured in some case of that that's the RBC.
Piece of that or a big piece of that but overall use of accounts, where we're off the subscribers were up.
The well 10 corporate sales.
That is a debt and corporates are while they are smaller in number in terms of each for them. There's been quite a few other than the both of them are driving the increase on the subscriber side.
Yes.
Okay.
I can focus on margins more broadly over like the next few years. So just given the recent strong performance and it feels like an increased focus on cost since how long you've been there taking over as CFO I was wondering if theres any reason you can't get above the historical 33, the 34% range just wondering if theres anything.
Structurally that would suggest that that's the long term range go forward.
Yeah, I don't I don't.
As you know, we don't necessarily talk about our long term margin right now if you take a look at our history.
Especially back when we were able to do a pretty material expansion.
Our margin.
We took the opportunity to reinvest in many of the things we're doing the 20th of margin in.
And in 'twenty, one part of the drivers of margin.
As you know the topline growth and that's exactly what the return so I don't look at what we have the structural issue.
We're investing and as we get the top line to grow given the debt.
For the life of that for our client.
We would expect op margin.
The improving.
The improving them as the as we continue to drive more of the topline growth.
Okay. Thank you.
Sure.
Thank you. Our next question comes from Shlomo Rosenbaum with Stifel. Your line is now open.
Hi, Good morning. Thank you for taking my questions here. So in Helena I, just thought I would just circle back to the one of the questions you touched on before just in terms of the validation of moving to the cloud.
Apologize if I missed this but were there specific.
Examples of products or something like that that youre seeing.
The uptake in sales on or new products that were generated because you were moving to the cloud that gave you. The go faster product development, they're able to point to in terms of debt validation. If you can.
Talk about debt a little bit of and then I'll have a follow up after that.
Sure. Thanks Shlomo.
So one of the things that I mentioned in my comments was moving our content collection efforts to the cloud so we've been working on sort.
Sort of re factoring how we collect contents on how we score content. So that we can onboard content of more quickly. So when you talk about deep sector private markets are very often these datasets can be orders of magnitude more than we've been used to collecting in the past so that was a very important.
Piece of work that we've been undergoing so we're beginning to see some of the benefits of that.
More will come later I believe on both the products and the <unk>.
Cost side as we as we complete that work. So that's one good example, the.
The the Apis and the endpoints that we're setting up those are also.
Getting some pretty good adoption, particularly in analytics. So that's a great example.
And then I think when you consider some of the work we're doing with firms like Snowflake for example.
We're able to sort of work with them.
And provide our data feeds and all concordance.
All of this is wrapped up into a digital transformation assets. So there there's a lot of foundational work here a lot of cost associated with moving.
But there are but the the real payoff will come.
When the work is completed over the next year of it.
Okay. Thank you and then just the European organic growth of one 5% is that kind of the legacy thing from some of the or the client cancellations in the quarter or two ago with it you just need to work through or how should we think about debt.
Yeah, we sort of slowdown in Europe, we did have one pretty large cancellation this quarter actually.
That had to do with the digital offerings. So it was remember we acquired.
Idms a few years back.
This was a pretty large bank in Europe that had a.
The big digital offering there so it was the legacy.
The legacy product that we ended up losing.
Each contributed to some of that slowdown.
I'd characterize that as more of a one off.
Okay. Thank you.
Thanks.
Thank you and the next question comes from Andrew Nicholas with William Blair. Your line is now open.
Thanks, Good morning, it seems like there's been quite a bit of of M&A and the portfolio management space, particularly of late.
And so I'm wondering if you could update us on how you're thinking about your product suite there how it stacks up competitively and whether there are any product gaps or opportunities that you'd like to address in the near to medium term, whether it's organically or via M&A.
So the question is around consolidation within the asset management space just to clarify.
The adient.
Just the portfolio management kind of technology.
Technology space, as well and how that kind of if other if other players are kind of moving up the chain or adding pieces to their suite, if thats changed how your operating stats of companion books.
Yeah. Good question, so kind of consol.
Holiday season, obviously, the thing going on for a long time and our end markets.
And I've mentioned this on previous calls, but we are having more and more exciting conversations with our asset management clients at the C level. So very often now we'll be talking to the CTO CIO is about factset overall offering from research all the way through the client reporting.
And as these firms of consolidating the equation for them.
It gets more and more complicated in terms of how do they rationalize the spend across a large number of vendors.
And how do they make sense out of that technology stack in the how they are managing their own data.
Throughout their workflows. So we are so well positioned for these conversations is now given the offerings. We have all the way across the portfolio of lifecycle and the integration that we've done and I'll move to the cloud. So when we sit down with our clients now and talk about the trends in the marketplace the dealing.
With all of which in some ways of the same trends we're dealing with is the technology company, we're having really good conversations about how we can help them. So there's a big push I believe within the asset management space for these larger asset managers, particularly the the stitching together.
Different.
Entities.
To really simplify their lives, which means simplify the number of technology provide us they deal with the simplify the number of data providers. They deal with it so we're running towards those conversations in the.
These are these of longer term efforts with our clients, but I'm very encouraged by the level of conversations that our sales in the technology teams of having with clients on the buy side.
Okay. Thanks.
The I don't want the second yeah. The second part of your question is the.
These larger asset managers really only wanted to deal with sort of one or maybe two.
Major.
The partners to build their ecosystem around and there's a pretty short list frankly of firms that are able to do that for for for them and Factset is one of the phones on the shortlist. So.
For some consolidation there are other people kind of moving into the space as you mentioned.
But in terms of firms that have.
The number of workflows and the critical mass of content for the clients and that's a pretty short list.
And maybe I could just that's helpful.
Yeah, I'm not sure when.
We talk about adding on capabilities.
Can do that.
The acquisition of <unk> I think what you are saying more of the technology type of the asset, but often the assets that we have seen moving with true value come right.
The one that's more content.
They actually have a lot of the only proprietary capabilities, which adds quite a lot to us as well so I wouldn't look at purely technology capabilities as having to be.
Surely from technology acquisitions.
Got it got it that's all very helpful. Thank you.
And then for my follow up and variations of these questions have been asked and you've answered some of them.
I guess I'm, just wondering you've announced the three year investment program in 2019, obviously a lot of as has happened since then but I'm wondering given what seems like a bit more stable sales environment.
Are you thinking about debt high single digit ASP growth target I know it was originally estimated to be 2022, but how.
How has that timeline involved or changed in how you're thinking about that over the next couple of years. Thank you.
Yeah, I'll take that one.
I mean right now we've been catching up the world has changed and we are on plan and as you noted in terms of the of hiring and development milestones.
We expected for this fiscal year and our focus right now is executing and determining any changes well adapt to and the macro environment.
We think about next year, we're committed to our multiyear plan.
And as I said from the bigger.
We're really.
Reaffirmed in some sense of.
On our IR strategy, but the environment continued to be of uncertainty. So we're taking the continued measured approach and alcohol. It is to get to what we talked to lot of longer term.
The growth rate.
The timing of a.
Once we've got better visibility on our progress.
And the market then we'll be able to provide that great.
Great clarity.
But for now we're very pleased of where we for them over the life.
Why.
The one of mine.
Got it thanks again.
Welcome.
Thank you. Our next question comes from Ashish about job of Deutsche Bank. Your line is now open.
Thanks for taking my question Congrats on the RBC then just a quick clarification on the RBC is all of the RBC ESP included in the second quarter 'twenty, one but is there anything more coming in the out quarters. Thanks.
How long do you have the details on that I believe it may be spread out over a couple of quarters as all of the users.
Yes, I think the so some of it wasn't.
Q2 on some of them, but most of it now is in so I wouldn't necessarily look towards that as a material change in the back half of the year.
Okay. That's very helpful color and then just on the pricing increases this time it was 2 million more.
14 million of pricing increases from the Americas, if I've got that right.
Just wanted to better understand.
What's driving that higher price increases.
Phil you mentioned the deep sector strategy of driving a lot of sales is that also driving better prices and if that's the case just any incremental color on the deep sector strategy of where are you in the process of fully.
Fully building it out and the sectors have been pushed out of each one of us still in progress. Thanks.
Well I think generally on the price increase from Helen chime in if he's got more color here I think it was just very good execution with this within this environment clients for recognizing the value within the Factset product.
And I'm sorry, what was the second part of your question.
Oh I'm sorry, the second part was just on the deep sector.
You talked about the debt driving pretty good sales. So my question. There was on the deep sector. If you could just provide us an update on.
Yes.
Which verticals.
<unk>.
Yes Hello.
Yes, so we've done work on financials insurance and real estate those of the three net worth talking about now but.
Part of our three year plan, we did we are.
The actively.
I have plans to do more of in those three sectors.
That stands for collecting yeah as it relates to be quite good price.
The increase I think that's.
The exact exactly right. We have spent a lot and it's part of our core culture of focusing on enhancements and making the service as best we can for the client and I think during if anything during this period during the pandemic that that has really come through really shown true with clients in the bedroom.
So I don't want to say that's exactly therefore, sometimes the price.
Higher prices, but it does mean it does reaffirm the value of that we're bringing to them.
Thank you very much.
Welcome.
Thank you. Our next question comes from George Tong with Goldman Sachs. Your line is now open.
Alright. Thanks, good morning wanted to dive deeper into the ESV growth guidance for the full year at the midpoint. DSV died was increased by extending the half million to what extent was that increase attributable to the new RBC contract versus other factors.
Hey, George its Phil.
I think it's a lot more than the obviously when.
As I mentioned earlier, the the confidence that we have in our research products and the performance that we're seeing there is very encouraging because the the call workstation on the web offering our cash.
Can be sold to all different client types and when do you see.
The number of net new clients that we added this quarter, even though they were on the smaller side for the net new business.
It was a really healthy mix across asset managers hedge funds asset owners price.
But equity corporates, so pretty much across the board, we're adding new names.
Which I think is a great indication of the strength, there and then youre seeing it.
As already described within the existing clients in terms of.
<unk>.
Just adding more seats and you know when we've got a seat we're able to cross sell more of our analytics products, where we're able to go in and sell Cts. So I would say that is the main.
Thing that's driving the optimism there.
For Ya.
And George I got it.
The ads that we start.
Back in September of providing our guidance.
It obviously was the wide with given the uncertainty and so what we wanted to see and what's come through which gives us a better net perspective for the back half of the year is the fact that of retention has retained.
Many of them stable and.
New business, which wasn't didn't know how that would kind of cause.
Come through.
In FY 'twenty one.
It's also been in line with the past quarters, and what's really been.
River is the expansion so we are selling more to existing clients.
That just helps us feel better of certainly around there.
For half of that range and that's why we moved it up so it is not attributable to a deal but rather the momentum we're seeing across the way of executing.
Got it that's helpful. You're a net client count increased by 160 for over the past three months, primarily driven by the increase in wealth management and corporate clients can you discuss how net client count is performing the among buy side clients.
Yeah. So I think I just mentioned that so we added a number of new names.
And institutional asset managers asset owners and hedge funds, which is.
Most of most of the firms that we have on the buy side.
Got it.
From the net basis buy side clients went up in the quarter correct, yes, there definitely does kind.
Thank you.
Sure.
Thank you.
And our next question comes from Keith Thompson with Northcoast Research. Your line is now open.
Good morning, guys. A question for you regarding the the remainder of the year and how are you guys kind of thinking about bringing employees back and perhaps the returning more of a life of normalcy, assuming we're heading that direction. Now obviously just trying to think about how expenses are going to unfold through the rest of the year.
Yeah, that's of great questions. So we just had a couple of really good calls with our leadership team globally. The talk about that there is still a lot of factors out there.
But we're optimistic.
Particularly in the U S that we can begin to reopen offices on a phased basis starting in June. So we like many companies will step I'll weigh in and make sure that we do make things correctly. So we certainly won't be going back to a 100%.
I believe until sometime towards the end of this fiscal year or early next year in terms of the Americas and even when we do that I think we're going to be working in a hybrid environment. So a lot of employees of benefitted from the balance.
Both from a work end of life life standpoint.
So we're like every company of trying to make sure that we figure out what of that that balances the best for everybody other.
Countries that we operate in you know vaccines of less readily available.
But we're I'm sure over the next 12 months, we're going to be in a really good position. So.
I think the short answer is you'll begin to see us head back into the offices in locations where vaccines of readily available in the beginning of June.
And it will just ramp up from that.
And then switching over to the sales side.
This is the challenge is everybody of adjusted their sales structure to the virtual world.
We see the any pent up demand, though are expectations of pent up demand for when things do get the the format to normal just because of some things weren't able to be done virtually or do you think everybody is converted over.
Pretty much.
<unk> share expectation should be more as we've seen them.
For the larger more complicated enterprise deals.
Being face to face for.
Some of that sales cycle as well as the input the implementation.
We will have some degree of importance, but on the <unk>.
For the smaller deals that are more easily done virtually we've learned a lot there.
But the.
I think there is the world.
There should be some pent up demand of some sort of I think for the larger more complicated deals that we have out there.
Great. Thank you appreciate it.
Thanks.
Thank you. This concludes today's question and answer session I would now like to turn the call back over to Phil Snow for closing remarks.
Well, thanks, everyone for joining us today, we look forward to speaking to you next quarter and in the meantime, please call Rima Hyder with additional questions operator that ends today's call.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Yes.
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