Q3 2021 Factset Research Systems Inc Earnings Call
Good day, and thank you for standing by welcome to the Factset third quarter, 'twenty 'twenty, 1 and earnings conference call.
And as time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Ask your question there and this session you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your speaker today for me.
Please go ahead.
Thank you Joanna and good morning, everyone.
Welcome to Factset third fiscal quarter 2021 earnings call.
We continue to be and varies from mountain locations. Today, we may have some audio quality issues and we appreciate your patience should we experienced a disruption.
Before we begin I would like to point out that the slides and people will reference during this presentation can be accessed via the webcast on the Investor Relations section of our website at Factset dotcom.
Slides will be posted on our website at the conclusion on this call.
Replay of today's call will be available via phone and on our website.
After our prepared remarks, we will open the call for questions from investors to be fair to everyone. Please limit yourself to 1 question and plus 1 follow up.
Before we discuss our results I will encourage all listeners to review the legal notice on slide 2.
Which explains the risk for 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 for 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 Phil Snow, Chief Executive Officer, and Helen Shan, Chief Financial Officer, and Chief revenue Officer.
And now I'd like to turn the discussion over to Phil Snow.
Thank you Rima and Hello, everyone and thanks for joining us today.
I'm pleased to share our third quarter results headlined by strong topline growth. This has allowed us to increase our organic a S V plus professional services guidance for this fiscal year.
Building on last quarter's momentum we grew organic a S V plus professional services by 5.8% this quarter the investments made and both content and technology over the past 7 quarters have strengthened our product portfolio and as a result demand for our solutions is increasing further supported by our clients' own.
Digital transformation needs.
Our growth this quarter was strongest with wealth managers banking clients and asset owners and the acceleration and and I S. V reflect solid execution from the sales team, who increased wallet share with existing accounts and further improved client retention and our strategy to build the industry's leading open content and analytics platform.
<unk> continues to make an impact and the market.
We remain on track with our multiyear investment plan, we continue to build out our content offering with particular focus on deep sector private markets ESG and data for wealth managers and growth and workstations. This quarter was driven by deep sector and private markets data, especially with banks and corporate client.
<unk>.
And the expansion of our street account coverage, and Canada, and Asia as well as more fun data collection has generated greater demand from wealth managers.
And clients are using our data management solutions, which include entity mapping and data can coat and services to manage their own content.
These offerings are key differentiators, often sought by asset management clients.
On migration to the cloud is progressing as planned and gives us the opportunity to build new products that support a S. V growth..1 example is the advisor dashboard, which is being well received by wealth managers as evidenced by new wins and solid pipeline.
Clients are seeking personalized tools like the advisor dashboard that can surface insights increase efficiency and help users and identify the next best action.
In addition, we provide greater flexibility to clients by further opening up on our platform are brought on a P. I offerings allow clients to leverage core and alternative datasets and tap into a robust portfolio analytics engine build digital portals and gain access to proprietary signals.
We have seen strong demand for our analytics Apis as well as fundamental company day to Api's for Cts. We are also seeing more data sales through cloud based platforms, such a snowflake and having success with CRM integrations this growth and our digital solutions can be attributed to our technology investments.
Looking at our regions I'm pleased to say that are on a S V growth rate increased in the Americas and EMEA across the majority of our business lines. The Americas growth rate increased to 6% with strength across Cts research and analytics acceleration was driven primarily by strong workstation and sales to our banking clients.
And overall demand for premium and core data feeds and we've benefited from an increase in hiring and middle market and bulge bracket banks due to robust M&A and equity capital markets.
Emea's growth rate accelerated to 5% improving over the past 2 quarters, we experienced stronger results in research and analytics reflected in part by higher retention of our asset management and wealth funds. In addition, we captured greater international price increases as clients continue to or from the value of our.
Loosens.
Asia Pac's growth remained at 9% driven largely by research and analytics results include strong cross sales to asset management firms as well as increases to global banks, who are hiring more to accommodate increased capital markets activity. The region also benefited from higher price increases.
In summary, we enter the end of fiscal 'twenty, 1 with good momentum and have good visibility into our fourth quarter. We have a strong pipeline weighted most heavily towards institutional asset managers broker dealers and wealth managers and are increasing our organic a S V guidance 285 to 95 million.
For this fiscal year.
Overall, we are encouraged by market trends and clients are showing more willingness to spend against the backdrop of anticipated economic recovery decisions on more complex deals that had been delayed on now beginning to be reconsidered as clients look to execute on their own digital transformations, we see increased demand for enterprise wide technology.
<unk> and data management, a cio's and C. T OS look to future proof their technology stacks. This gives us conviction and the long term benefit of our multi year investment plan and our path to higher growth.
This month marks to Factset, 25th year as a public company I'm proud to reflect on our team's strong performance. The culture of continuous innovation, we have fostered and the significant value to shareholders. We have created over the years, we will continue to push ourselves to create smarter and more adaptive and more personalized.
<unk> that make us the trusted enterprise partner for our clients.
I'll now turn it over to Helen who as many of you know has taken over the leadership of our sales organization as Chief revenue officer, while continuing to serve as our CFO. She will take you through the quarter and more detail.
Thank you, Phil and Hello, everyone.
And you've seen from our press release. This morning, we are pleased to report and acceleration and our top line. Both in terms of revenue and organic ASB plus professional services.
Our quarterly results also reflect increased year over year spending and people and technology in line with our investment plan as well as anticipated higher a S V performance.
We believe the progress made and our own digital transformation is enhancing our ability to help clients do the same.
I will now share more details on our third quarter performance and provide an update to our annual outlook.
We grew organic ASP plus professional services by 5.8%, reflecting in part the client demand for our solutions driven by their own digital transformation needs. In addition, our ability to realize higher pricing is a direct reflection of the value our products provide to clients true.
That point in line with the $14 million captured last quarter with the Americas price increase we added $8 million from our international price increase this quarter.
Our investments and content and technology have further strengthened our product offerings with clients as reflected in both higher levels of client retention and cross selling.
Focused execution from our sales team and delivering key workflow solutions also accelerated our growth.
All of these factors underpin our results year to date.
For the quarter GAAP revenue increased by 7% to $400 million organic revenue, which excludes any impact from foreign exchange acquisitions, and deferred revenue amortization increased 6% to $397 million.
Growth was driven primarily by analytics and Cts solutions, which had been the drivers of ASC and prior quarters.
As a reminder, a S. C represents the next 12 months of revenue. So there is a lag between the recording of a S D and the realization of revenue.
For our geographic segments organic revenue growth for the Americas grew to 6% EMEA.
EMEA grew 5% and Asia Pacific to 11% all regions, primarily benefited from increases and our analytics and Cts solutions.
GAAP operating expenses grew 12% and the third quarter to $282 million impacted by higher cost of services compared to the previous year. Our GAAP operating margin decreased by 300 basis points to 29, and a half per cent and our adjusted operating margin decreased by 390 basis points.
For 31, 6%.
As a percentage of revenue our cost of services was 570 basis points higher than last year on a GAAP basis, and 560 basis points higher on an adjusted basis.
This increase is driven by higher compensation and technology costs.
Compensation growth is comprised of higher salary expenses for existing employees.
New hires to support on multi year investment plan.
And higher bonus accrual in line with stronger than anticipated ASC performance.
This higher technology spend relates to our planned migration to the public cloud.
We had been experiencing higher cloud usage and costs due to increased client trials enterprise hosting and new product development.
We anticipate this level of elevated expenses to continue as clients adopt our digital solutions.
SG&A expenses when expressed as a percentage of revenue improved year over year by 270 basis points on a GAAP basis, and 170 basis points on an adjusted basis. The primary drivers include reduced facilities expenses lower spend due to office closures and a decrease in professional fees.
Offset in part by higher compensation costs, reflecting the same factors as noted and the cost of services.
Moving on our tax rate for the quarter was 12% compared to last year's rate of 15%, primarily due to lower operating income this quarter and a tax benefit related to finalizing prior year's tax returns.
GAAP EPS was almost flat for last year at $2.62 this quarter versus $2.63, and the prior year and.
Adjusted diluted EPS decreased 5% to $2.72.
Both EPS figures were largely driven by higher operating expenses, partially offset by higher revenue.
A reconciliation of our adjustments to GAAP EPS is included at the end of our press release.
Free cash flow, which we define as cash generated from operations less capital spending was $122 million for the quarter a decrease of 13% over the same period last year.
This decrease is primarily due to higher capital expenditure from higher investment and internal software and the timing of certain tax items.
For the third quarter on a S V retention continued to be above 95 per cent and our client retention improved to 91%, which speaks both to the mission criticality of our solutions and the solid efforts and focused execution of our sales team.
We grew our total number of clients by 7% compared to the prior year to over 6100 clients largely due to the addition of more wealth and corporate clients, including private equity and venture capital firms and.
And our user count grew 11% year over year and crossed the total of 155000, primarily driven by wealth and corporate users.
For the third quarter, we repurchased over 178000 shares of our common stock for a total of $58 million and.
Average share price of $323.
We also increased our quarterly dividend by 6.5% to 83 cents per share marking the 22nd consecutive year, we have increased our dividend.
We remain disciplined in our buyback program and committed to returning long term value to our shareholders.
The impact of our multiyear investment plan is reflected and our results the demand for our strong content offering digital solutions and open platform is accelerating growth.
Given our strong performance this quarter and our cash.
And that we will execute successfully on a healthy pipeline as we close out the fiscal year, we are increasing our full year organic a S V plus professional services guidance range to $85 million to $95 million.
We are also reaffirming the other metrics and our annual outlook, given its timing and nature and increase and ASD and the fourth quarter will not materially.
And materially change revenue in fiscal year, 'twenty, 1, but would result, and a higher bonus accrual.
Related expense would impact on margins by an incremental 60 to 75 basis points.
We believe that we will remain within our stated annual guidance ranges.
And closing from the vantage point of now overseeing factset sales and marketing organization I can attest to the diligent focus and efforts. We have made this year, helping clients leverage our offerings building, a stronger and broader pipeline and converting opportunities to sales and I have confidence and our ability to continue to execute on all these fronts.
And grow our market share and we finish the year.
And with that we are now ready for your questions I'll turn it back to the operator.
Thank you as a reminder to ask a question you will need to press star 1 on your telephone so with China question cost per pound key to standby, while we compile the Q&A roster.
Our first question comes from Manav Patnaik with Barclays. Your line is now open.
Yeah. Thank you Goodbye and why did you said 1 question and that is and it sounds like the end markets with declines are pretty positive compared to what they were in the price and yours and so I was just curious on what you are seeing on the competitive side is that on.
Or is it a budget of the clients' increasing because of bad its competition, increasing just some overall dynamics there would be helpful.
Hey, Manav, it's Phil Thanks for the question sorry.
So I'd say, it's a combination of things you know, we're really excited about the movement on and off topline.
And I attribute that really to the investments that we've made over the last year or 2 in both content and technology. So we're seeing a lot of good uptake in the research and part of our business and the digital transformation in terms of opening the platform is allowing our clients to consume value from Factset and new 1.
And interesting ways. So the API is really driving some of the momentum, we're seeing and both C T S and showing some.
And strength now in the in the analytics business and I do believe were taking market share on the wealth side I think it's pretty well understood who we're competing with there and for the desktop business. That's a combination of firms and analytics again, it's a combination of firms, but overall I feel really good about the top line and how.
We're stacking up versus the competitors and the market place and overall, yeah. I think we're seeing that clients or we can all see a return to some sort of normalcy in terms of how we're working and.
And the underlying trends and the market are definitely positive.
Alright, I guess, then just related to that maybe can you just talk about your current pipeline and compare it to maybe the prior couple of years.
Sure. So yeah, we've got confidence and Q4, we've booked more a S V. At this time than we had last year and we have a stronger weighted pipeline. So there's a there's a higher confidence and the pipeline.
And a lot more bigger deals.
And it's well distributed amongst all the different business lines.
Alright, Thank you Bill.
Thank you. Our next question comes from Owen Lau with Oppenheimer. Your line is open.
Good morning, Thank you for taking my question.
The expense and the third quarter was a bit more than expected and I think <unk> had on your call a couple of things like salary bonus and technology alright.
But for the technology could you please add a bit more color on for lack of a predator on how much of debt will be like 1 time on non recurring in nature.
Yeah sure happy to talk about that and thanks. Thanks for your question when.
When we think about the higher costs and technology I would say and part it's really driven also by higher cloud related costs and the drivers of the cloud costs include the migration of our existing data and applications.
Which is always planned client related activities, such as hosting and trials and then new product development and so we're doing new products, which is going directly to the cloud and we monitor and he's pretty closely but we're learning along the way and in the cloud allows us to monetize usage better I would say most of the higher costs are really related to client activity and new product development.
And I think that reflects the faster adoption probably faster than we had planned. So it's it's in line with clients, who also need to make their own digital transformation and so we would expect all of this to give us and indication really linked to future a S V. Gross on a person this year specifically.
But I would say, but if we think about the higher costs on the cloud side a portion of it is just related to future topline growth.
Got it that's very helpful. And then switching gear to you I want to go back to true value laps, the sustainable development goals monitor and I think that the monitor it's for you but could you. Please talk about how youre going to monetize. These data said he is a true data fits or any other products. Thank you.
Yeah, Hey, Oh, and yes, so you're absolutely will continue to sell other data feeds and a P is that true value labs had developed and for the acquisition and we've been doing you know hard work to get all of that integrated into the broader factset suites. So that so that the true value labs.
Data and analytics can be available throughout factset. So that's a big piece of of the strategy.
Alright, Thank you very much.
Thank you. Our next question comes from Toni Kaplan with Morgan Stanley. Your line is open.
Thank you so much.
Wanted to ask about the 8% sell side growth and the quarter was there anything particular to call out there was it more a couple of client wins or was it more broad based and you mentioned the more willingness to spend by clients. So that seems positive. So just wanted to hear about your visibility into the new hiring classes.
Well at the banks. Thank you.
Sure so.
Yes. It is broad based Tony and I think we've seen the benefits of hiring this far into our fiscal year and and a lot of that is really driven by the investment that we've made and content and the and the core platform to support the extra workstations and there is still quite a few large banks that we don't have perfect visibility.
<unk> ability yet on the hiring classes and those are going to come in and.
And the next month or 2 but we feel optimistic about that just given the trends that we see and the market. So a couple of other things I'd point out for the sell side..1 is we're beginning to monetize feeds and analytics and the sell side, which previously we'd not done much of so that is supporting some of the growth and then in terms of new logos were positive.
This quarter it for and vote for co sell side firms, whereas Q3 of last year, we were negative. So we've seen a good relative even though we've closed more corporate and wealth clients. We're seeing good relative performance in terms of new logos for the sell side.
That's great and.
And now that you are seeing things turn and normalize a little bit and can you.
And just give us an update on if you've changed your thinking at all on the transformation targets in terms of either magnitude or timing.
Just any sort of extra color from those targets that you had previously laid out before COVID-19.
So you mean, the 3 year targets that we laid out yes, yeah. We're I think as we said last quarter or maybe a couple of quarters in a row, our we're not going to revisit those right now, but when we get to Q4, you know we'll be able to give you some guidance like we do every year for fiscal year 'twenty 2.
Fair enough. Thank you.
Thank you. Our next question comes from Andrew Nicholas with William Blair. Your line is open.
Hi, good morning.
And wanted to follow up on strong sales side ESP growth a little bit further specifically curious how much you would attribute that acceleration to the deep sector, rollouts and and maybe whats a reasonable expectation for the timing of new deep sector rollouts going forward or anything else you can.
Share on on areas of focus there.
I would definitely attribute some of it to that.
We had 1 significant win that 1.
Was related to deep sector.
And we're on track with that program. So the team did a tremendous job of laying out over a 3 year period.
And number of sectors that we would be developing.
Developing and.
And we're on track with that program, so 7 quarters into it we feel really good about the momentum there.
We've done a lot of hard work to partner with a lot of firms are to bring that data and integrated into Factset, which is something we always do really well and.
And then for other datasets for going out and collecting it ourselves. So overall, we're really thrilled with that program. The team has done an amazing job and it's beginning to have a real impact for us on the sell side, but it's not just the sell side, we will be able to monetize this data within the corporate space.
Within the buy side as well.
Got it makes sense and then for.
For my follow up I know.
And you've touched on it here and there and the answers to other questions, but just maybe broadly speaking if you could update us on the selling environment right now you've talked in past quarters about Lincoln.
And when cleaning and the sales cycles and in analytics and some longer implementation cycles. So any any changes there over the past couple of months is distinctive.
And kind of picked up momentum or anything to call out there on a relative basis. Thank you.
We're beginning to see some real positive signs are there for analytics. So I think if you look at that space for our competitors as well I think it was an area that slowdown for many firms, but we've had a good quarter for analytics and the pipeline looks really strong so they've got a really good suite there of things we've been working on so the core P. A product is.
Actually doing well, we're adding new logos and seats for that I mentioned API is already we have a new quant research environment that we're releasing a which has gotten tremendous feedback from the market and our front office solutions are beginning to show some green shoots as well so analytics is definitely stabilizing and clients are willing to.
2 and now revisit a lot of these are decisions for some of these longer sales cycles deal. So on.
And obviously <unk>.
Clients are beginning to open up we are as well as a from I think the sales team's itching to get back out there.
Great. Thank you.
Yep.
Thank you and our next question comes from Hamzah <unk> with Jefferies. Your line is open.
Alright, Thanks for taking my questions actually Ryan Gunning filling in for Hamzah today for.
Can you just talk about how youre thinking about your pricing model, a day and whether you believe enterprise wide versus seat based it better and how you model currently works.
Sure.
Take that question for talent.
So I think we have a pretty good and next we do both and some cases soup Bowl and other cases and usage base.
On our larger deals larger clients, while you wait and see more perhaps at an enterprise pricing model and we do that but we do that the bands and therefore.
If he.
And users go up or down within the band of pricing is the same then and thank all of it and next here and it goes up so I would say for our largest clients that's where many of how many of them are setup again, it's a blend of and some cases usage and other cases users and and we've seen good growth. We can tell from the pricing increases that we've had on.
Annual price increase again and for international is up and when.
And able to capture more of that value for the clients have.
Put into until our product and we will continue to for our next there.
As sustainable.
Got it very helpful. Thank you and then I guess switching gears can you give us an update on how youre thinking about larger scale M&A, obviously, we've seen a good bit appeals and the info services space more recently, but any update there.
Sure I'll take that 1 as it relates to to larger deals and we don't we don't comment on that and as you know as we've talked about our focus has been on content and technology, we look to where we think we've got the best uses of net perhaps gaps.
And that we can help fill in and so we always look at buy versus build vessels partner and <unk>.
Terms of of acquisition, we just completed a small 1 that's called cabinet investment technologies, which provide the platform for more behavior.
Isis <unk> and.
Targeting asset managers and asset owners, so while it's small it really fits into our strategy as it relates to the current office and it relates to helping as Phil talked about and his opening remarks, and making that next best decision. So we're going to be very disciplined and how were approaching.
On the.
The potential acquisitions are out there, even though we are looking at and all of them as they come true.
Great. Thank you so much.
Thank you.
Thank you. Our next question comes from Alex Kramm with UBS. Your line is open.
Yes, Hello, everyone and just.
Just a couple of things on the margin side first of all Helen.
Can you just you you made a comment at the end there about the fourth quarter I think 60 to 75 basis points was that relative to what we just saw on the third quarter or how are how would you characterize that 60 to 75.
Right. So the way I think about it and its really 60 to 75 for the year, So and this particular quarter because once we have greater visibility, Alex and to where we would see inc.
Anticipating for the year, then we had to both true up for the first half as well as increase for Q3, but what I wanted to give was what does that impact for the entire year. We would say it's somewhere between we think 60 to 75 basis points, depending on where we end up and that is based not only on top line, but also on margin.
Okay. So so it should be reflected and the run rate if I heard you correctly now because you have true started to true up.
Okay, and then secondarily also a very quick 1 you talked about this that the cloud and the costs associated with that it sounds very much like does the spend to grow.
But I thought I was also under the impression that there were some duplicative costs as you've been migrating to the cloud and just.
And just can you remind us are the other still duplicate costs a day. If they are when are they I mean, how big of a day and when are they there so as opposed to tail off and and would you just reinvest those savings eventually or would you actually expect that to flow to the bottom line. If there are savings to be realized thank you.
Yeah sure happy to happy to answer that so well.
Our cost as it relates to the cloud I would say a portion of it is part of our investment plant and you're absolutely right. It is that duplication and that's happening because we are not able to get out of our and on premise data center costs. At this point now the way that we've looked at it is that has meant that drop off as we complete our total migration so that'll drop.
We think towards the end of FY 'twenty, 2 or the end of our third yeah. That's why I was wanted to happen and at that point, we'll make the decision around.
Drop off and whether or not any question of that gets reinvested, but that is part of the savings that we would have expected going forward as well, we're not we've not really talked about that.
The dollar for dollar, but most of the vessel sales the increase and the spend on the cloud and there's really 2 airplanes client related.
Alright fair enough. Thank you very much.
Thank you.
Thank you and next question comes from Kevin Mcveigh with Credit Suisse. Your line is open.
Great. Thanks, Hey, Phil you talked about on the demand for open content and analytics fueling growth.
As your clients for a person digital transformations.
Is there any way to frame what the potential market for that can be as it relates to factset and is it.
Can it shift the organic growth of 100 basis points or just you know was your weighted just maybe tighten that comment up particularly around the digital solutions kind of the current and and how you see that playing out over time.
Yeah, I mean, I think the I mean, we play and a big market today right. So I think it's at least a $30 billion market that factset participates on.
And the trends definitely are moving to clients you know, putting together I think more customized workflows for themselves using open technology stack. So I.
I think it's really just and evolution honestly of how clients consume our content and analytics today and our strategy. We believe strongly is the right..1 in terms of creating these lego blocks that clients can then use to stitch together to differentiate themselves from their competitors. So those are the conversations we're having with our clients.
You know the workstation is not going away I think there's always going to be a place for that and the market.
But the firms that are going to win are the ones that are being able to.
Plug in and as needed for the clients across their entire workflows, whether it's buy side sell side wealth you name it.
Helpful and and then just anything to call out it seems like they see retention.
Around 95, but you saw some nice improvement on the client retention and the dynamics to call out there.
Around retention and client relative to ASC overall.
I just think it speaks to the strength of our product the investment we've made and how well the sales team has been executing we're interacting more and more with our clients are the virtual environment and in some way is up to the amount of interactions we have with them. So I think it just really speaks to the product and the fact that clients like working with us.
Great. Thank you.
Thank you and our next question comes from Shlomo Rosenbaum with Stifel. Your line is open.
Hi, Thank you for taking my questions Hey, Helen can you talk a little bit or about some other costs for the client trials are those increase people costs and increased technology costs.
Does that work it seems like it's you know, it's a precursor to future revenue to come in for maybe you could discuss that a little bit and then I have a follow up.
Sure happy to do that so I would think and majority of that is more along the technology costs..1 other nice things around the trials and the data exploration and.
And it shortens the sales cycle, so what used to take much more time and involvement with our sales on implementation folks now can be done.
And and matter of hours versus weeks or months, and so I would say and in some ways. There's there's people who help on that front, but the cost driver.
Question is much more on the technology side.
Okay. So is it like hosting costs like and if I'm, sorry, I'm just on that same sorry, I should be clear yes.
Yes and more.
On the house.
<unk> costs.
Okay very good and.
Both for data as well as for computation.
It is cloud.
Got it.
And then and so I'm assuming debt.
Those are good things that they can lead to future revenue growth I mean, that's the way that we should be looking at debt.
Just to finish up that question.
Yeah.
That is and the higher activity and why.
King out the different various foods question that lead to more even if theyre looking at all channel data fields on all on.
On our open factset, they often and.
Buying our own dataset data for.
And so I would say that it's a theater and to that.
Got it Okay and then 1 other thing just kind of a housekeeping items it seems like the.
There's some kind of a reallocation of revenue amongst the segments and the last year quarter. When I go back for and what's in the press release for Americas versus EMEA versus Asia Pac. The revenue is is much higher and the prior year, what's being reported now in Americas, and west and the other twos or something that that prompted that reallocation.
Or was there something that was talked about it and I missed over the last couple of quarters.
And you're saying the actual dollars.
Yeah, if you look at the dollar some tiger.
Does it go ahead, Inc.
And for your question sorry.
No I was just going to say if you look at the dollars is what was reported in let's say Americas.
Last year and the 10-Q, it was like maybe $75 million, yeah, right and what's now and and the other ones were higher and it seems to be a reallocation as you just did something also change for the fourth quarter I'm, just try and figure out for modeling how it should be ambulance for sure no. Thanks for that question. Yes. There are some things are a re class and part due.
For you where the clients.
And our base when I can give you much more detail on that but that is a reclassification.
Okay and as debt, that's something that's going to be for the fourth quarter as well that the year over year comp is going to be different than what we saw if you. If you take out the K and you subtract the first 3 quarter for it.
I'm going to say, yes, because of the way that the movement of these are existing clients that move but again, if you spend on all the time between unless you can talk you through it.
Great. Thank you.
Yeah, you're welcome.
Thank you and next question comes from George Tong with Goldman Sachs. Your line is now open.
Hi, Thanks, Good morning, I wanted to follow up on the margin question earlier and the impact of higher bonus accruals. The 60 to 75 bps of margin impact full year can you clarify if that's relative to your original margin expectations for fiscal 2020, 1, which would imply you would land and the bottom half for your guidance range and perhaps discuss if there are any.
Offsetting factors to the upside that might mitigate that impact.
Sure. Thanks for your question. So yes, the impact for the year is higher so that 75, what has been beyond what we would have.
Provided in terms of our original plan there are offsets as we manage both from a people perspective, some of the productivity and lower professional.
Services for that and we think and and and we'll see how Q4 ends up but we had expected a certain level.
Kenny.
For Q4, and we'll see where that goes we do think from a margin perspective, though overall won't be on the lower end of our range. So I think that that is a fair way of thinking about it I would also add on what we're seeing come through that likely on the tax rate side will be on the law and as well.
I'll take both of those and take that a consideration.
Got it very helpful and then you're continuing to invest and content and technology earlier leave for you had mentioned.
For the full year of about 25.26 million.
Can you talk about your plans over the next 12 months you had laid out a 3 year investment plan and where it's 15 million on average per year. So how is that shaping up do you think your 3 investments might be similar or would step down from this year's levels.
Yeah, so well as Phil had alluded to earlier will give greater guidance on this L. Later on after Q4, I'll focus right and how that's obviously trying to execute and convert everything and and for this.
This fiscal year I will say the way to think about our investment plan is in terms of what we gave them and at the end and.
And at the beginning 2 years ago, we're on target both on milestones as well as and general spend that being said and the cadence of the mix.
On may the hiring which was slower and the first year caught up mainly in the second year, but that some of that might bleed into third year, but we'll give more guidance on that when we complete the year and have our call next time.
And thank you very helpful.
Youre welcome.
Thank you and our next question comes from David Chu with Bank of America. Your line is open.
Hi, Thanks, So when you guys first launched the accelerated investments and I think Alan you noted 25% of revenues should benefit should be and year, 2 with like 75% and you're at 3 <unk>.
Is this still the expectation or have you seen some of it Paul or given and it seems like it's really helping the ASD growth.
Thanks.
Thanks for your question I mean, I do we do think and general and that we'll see more of that benefit in that and the third year as things are belt and saw talked about a lot of like underpinning. Some of the acceleration is on the technology and cloud based side. So it's a little hard to point to any particular dollar and deal.
And I think we're still on that general range that I've given before that most of it's coming in the third year, but yeah. We're really pleased that where we are at this point given the higher ASP and growth thus far.
Okay, Great and then just on employee head counts and it looks like it was up about 6% over the past 12 months ex the true true value.
It sounds like that's slightly down from the last quarter about like 7.5 per cent. So just thoughts on how should we think about that over the next year or so.
Yeah, I think I mean, we've continued to do a lot of hiring for new investments and this churn and that's happening as well. So I think that's a fairly and we haven't and general cadence that you will see by quarter.
Wouldn't necessarily apply I would say it's on par from the previous share for this quarter. So I would expect to see that continue.
Okay, great. Thank you.
Welcome.
Thank you and next question comes from Keith Hudson with Northcoast Research. Your line is open.
Good morning.
And I was hoping you would rather the context, it's obviously been for quarters in a row now where you guys had benefited from lower facility costs and peony.
How much debt benefiting.
Operating margins this quarter and how do we think about that going forward as you guys resume back to I guess, a more normalized world. However that normalized world is going to be.
Right. Thank you for the question, Yeah, and you know, it's 1 of those where when we first set our guidance we were thinking around the fact that the back half of the share where we're being much more I'll call. It back to whatever that new normal day. So we can expect and uptake.
And that come in from Q3, but we also lapping so I think on a go forward basis. When we think about the amount of savings on a run rate to be somewhere in that call. It 25 to 50 and.
Basis points.
Based off on FY 19 run rate and you can't look at last year and particular, so that's how I would think about that the hybrid model allows us to manage our facilities footprint and expenses much better and.
And honestly the learnings from operating virtually in terms of client interaction and implementation, which we can do remotely now as we've shown and several of our larger wealth implementations and internal meetings or just going to allow us to have that much more productivity.
And I appreciate it and then just as a follow up and changing gears on you and congratulations on the move over to the CRO role.
I guess any thoughts now as you approach the chief revenue officer position in terms of the sales direction on the sales department and the marketing strategy I guess any thoughts on <unk> and the move over.
Yeah, and no effect, thanks for that and I'm really really pleased and honored to be able to take on this role and the nice part is we've got a really talented sales organization and a solid leadership team and so I think our FY 'twenty, 1 and results per day reflect the focus execution and what still remains to be a challenging, albeit somewhat MP.
Moving environment and.
And so from my perspective and in the areas that we'll look to accelerate our efforts will be on the solutions that we bring to market from an investment plan. So ESG wealth analytics pilot markets and to increase the wallet share and on.
Targeted clock clients I think we talked a little bit about retention expansion and that's been a big driver for us.
And for Us and the share and we're just selling more things to our existing clients.
And then and then lastly, the focus will be more also on the enterprise discussion with senior senior executives and our aim is to really provide a platform for their own.
Digital transformation and so I don't I don't look at major changes as much as really enhance what we've got going on as far.
Great. Thank you and good luck.
Thank you.
Thank you our last question comes from Craig Huber with Huber Research Partners. Your line is open.
Great. Thank you can you just clarify a little bit further your cost for the.
On may quarter.
They liquidate up about $9 million or so if I look at them versus the February quarter was there anything or onetime in nature school to that a little bit further and we should think about as you try to think about cost for the August quarter I can see your guidance for margins, but is there anything onetime in nature.
This quarter that won't repeat for to catch up for accruals for incentive comp. Thank you.
The largest piece of that so thanks for your question the largest piece of that really is compensation and so the conversation, meaning that the bonus accrual and so we had to do a catch up from the first half of the year.
Now that we have greater visibility to will and I mean, we are a pay for performance culture. So we if we expect higher.
Performance and we will increase our bonus accrual as a result, so that's what you're really seeing Inc. Q3.
And that reflects both the catch up as well as the higher accrual for the quarter.
Are you able to quantify that for us.
I think that's what I said for the year, it's around 60 or 75 basis points for the year. If we had not had the improvement and if we did not add indeed bonus accrual and the increase that would've been 150 basis points for the quarter.
Okay and then my other question please.
$10 million to $15 million higher expectation for ESP organic growth for years for way for you to break down that within this segment for revenue, where the extra 10 to 15 million might come from if you look at it. Please.
Yeah, we don't I don't think we typically do this segments by quarter, but we are we've seen very good momentum within the research business. This year. So I think I would expect our research and I have a very strong quarter.
The Cts business the feed business is doing really well, particularly as we go to digital there's just more ways to monetize the data I spoke about analytics showing some stabilization there and then on the wealth side, we see a pretty strong pipeline there and some just some exciting deals. So I would just say it's pretty broad based.
Great. Thank you.
Thank you and knutsen.
I'm showing any further questions at this time I would now like to turn the call back over to Phil Snow for closing remarks.
Thank you all for joining US today, we look forward to speaking with you again next quarter in the meantime, please call Rima Hyder with additional questions operator that ends today's call.
This concludes today's conference call and thank you for participating you may now disconnect.
Okay.
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