Q4 2021 Factset Research Systems Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the fact that one fiscal quarter 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to get the start under one key on your touched on telephone.
Please be advised that today's conference maybe recorded.
Recall offer assistance. Please press Star then zero I would now like to turn the conference I'll, let you speak of host today Rima Hyder. Please go ahead.
Thank you and good morning, everyone welcome to Factset fourth fiscal quarter 2021 earnings call.
We continue to be in various remote locations today, we may have some audio quality issues and we appreciate your patience should we experienced a disruption.
Before we begin I would like to point out that the 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 to 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 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, 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 to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued earlier today.
Joining me today are 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 Regina and good morning, everyone. Thanks for joining us today I'm pleased to share that we delivered strong fourth quarter and full year results. We ended the year with record organic ASB plus professional services growth of $68 million for the quarter crossing the 100 million.
Fuel asp's threshold for the first time and soundly, beating the top end of our guidance.
Our year on year organic <unk> growth rate accelerated 200 basis points to over 7% and we delivered annual revenue of $7.0 billion and adjusted EPS of $31.0
Our outperformance was driven by two years of planned accelerated investment in content and technology, which is paying dividends.
Our goal to be the leading open contents and analytics platform is resonating in the marketplace and increasing our wallet share with clients.
Our targeted investment in new content sets was a significant ASP driver in fiscal 'twenty, one and fueled our workstation growth.
Continued development of our deep sector coverage improved sell side retention and expansion with our largest banking clients and help secure new business.
Content and technology were both key to our expansion with wealth management firms, where we landed important wins, including with the Royal Bank of Canada, and Raymond James Canada.
These wins were due to our market, leading data and the launch of Factset advise a dashboard.
We are also expanding our addressable market by increasing our content and delivery capabilities across the front middle and back office, we added meaningful ASB from our cloud and API solutions this year, including delivering more data through the cloud and cloud voice platforms.
Entity mapping and linking client data through our data management services, or Dms and unlocking opportunity in new workflows by unbundling, our components to plug and play into other third party systems such as CRM.
Cloud delivery, coupled with the strength of our Dms in concordance as a service solutions that enable our clients to centralize integrate and analyze disparate data sources for faster and more cost effective decision, making this has been a major driver for our Cts business.
As we look ahead to 2022 and beyond we remain focused on three things scaling up our content refinery to provide the most comprehensive and connected set of industry proprietary and third party data for the financial market.
Two enhancing the client experience by delivering hyper personalized solutions. So clients can discover meaningful insights faster and third driving next generation workflow specific solutions for asset managers asset owners sell side wealth management and corporate clients.
We added new data and capabilities to further these goals by acquiring differentiated assets over the past year.
The addition of true value lapses grown our ESG offering btu analytics advanced our deep sector content for the energy markets and Cabot technologies will better support the portfolio analytics workflows of asset managers and asset owners.
The progress we have made on our investment plan along with these acquisitions and our award winning products give us a distinct competitive advantage.
Turning now to our financial results, we accelerated our organic <unk> plus professional services growth to seven 2%.
Our strong performance was driven by stellar execution from our sales and client facing teams throughout the entire year and especially in the fourth quarter.
Our buy side and sell side growth rates increased 104 hundred basis points, respectively. Since the third quarter, reflecting higher sales across our key clients.
On a year over year basis, we saw an increase in ASP growth rates from high single digit to double digits across banks asset owners hedge funds data providers wealth managers, and corporates, including private equity and venture capital firms we.
We capitalized on the strength of our end markets, particularly in banking and landed several large deals in our wealth and Cts businesses.
Turning now to our geographic segments, we saw acceleration in every region.
<unk> growth in the Americas rose to 7% in the fourth quarter, driven primarily by increased sales to our banking corporate and wealth clients. We also had a large data partner win this quarter and Cts.
Asia Pac had a record quarter and delivered a growth rate of 12% we.
We saw wins across many countries with global and regional banks as well as our research management products.
Cts and analytics also contributed to growth with wins across asset managers and data providers.
EMEA accelerated to a 6% growth rate driven by a strong performance with data providers asset managers and banking clients and Cts had the highest contribution to this region.
All of my research.
Now turning to our businesses research was the largest contributor to our ASP growth. This year with a growth rate of 6% driven by very strong growth on the sell side at 12%.
We increased research workstation users by 86% this quarter versus a year ago with growth across both sell side and buy side clients.
Increasing our workstation presence and footprint with our largest clients positions us very well for cross selling opportunities in the future.
Analytics and trading accelerated in the second half in fiscal 2021 versus the first half ending the year at a 6% growth rate, we saw wins across performance and reporting front office and core analytics solutions.
Within our front office solutions, we are really pleased to see larger wins with our trading platform and believe this will be a contributor to analytics going into next year.
Cts grew 16% driven by core company data and data management solutions sold through an increasing number of channels.
<unk> had robust sales to data providers this year and expanded their footprint across multiple workflows within middle and back office functions at asset management and banking clients. Additionally, while all true value labs ESG sales are excluded from our organic numbers I'm pleased to report that ESG data sales were a <unk>.
Tribute to Cts as overall growth this quarter.
Wealth ended the year with a 6% growth rate wealth workstations grew 24% year over year and they alongside Factset advisor dashboard has been the biggest contributors to winning new clients.
We've seen a combination of large and medium sized wins as existing clients continue to expand their advisory businesses and we are equally pleased with our new business wins.
We are also seeing cross selling opportunities with analytics products as wealth managers increasingly look to advance the sophistication of their offerings.
Moving forward with fiscal 'twenty, two we will report three workflow solutions, we are combining the desktop portion of the wealth business with research into one business to be known as research and advisory. We believe this is the right strategy to further our goals to Holistically manage our desktop solutions accelerate the build out of <unk>.
<unk> front office solutions and facilitate the global expansion on the adoption of Street account news and Factset web.
We have also taken the wealth digital business and combined it with Cts to better align our digital solutions.
In summary, we are entering fiscal 'twenty, two with strong momentum and a solid pipeline as reflected in our annual <unk> guidance.
The need for more differentiated content and analytics is at an unprecedented high and we are perfectly positioned to capture this demand and poised to deliver best in class workflows, and a hyper personalized experience for our clients.
I am proud of our company's strong performance in fiscal 'twenty. One we have advanced our digital platform executed at a high level and strengthened our relationship with clients.
I'll now turn it over to Helen who for the last time as CFO will discuss our fourth quarter and full year performance in more detail and take you through our fiscal 2022 guidance.
I want to thank Alan for leading our global Finance organization in the past three years and I am confident that as our chief revenue officer, She will bring a disciplined growth oriented mindset and the same rigor to the sales organization. This you did leading finance enabled enabling us to continue our success going forward.
Thank you, Phil and Hello, everyone I'm happy to be here with you today and I hope that we will continue to engage even after I fully transition into my sales role.
Like sale I want to congratulate Zach centers around the world for achieving outstanding results in fiscal 2021.
While we have continued primarily the operate remotely.
All impressed with the resilience with which our Factset teams are able to serve our global client.
Our 7% topline growth. This year is a testament to the hard work of our teams and validates our strategy to invest in content and technology capitalize on market trends and address client needs.
Throughout this fiscal year, we accelerated our growth rate and ASB plus professional services through consistent conversion of our pipeline delivering over $100 million NASD growth and surpassing our most recent guidance for the year.
Full year revenue also exceeded our target as we realize more revenue from ASB booked early in the fourth quarter.
We generated solid earnings through disciplined expense management and operating leverage.
Driving sustainable long term growth requires continued investment back into the business as reflected by our increased spend on differentiated content and cloud enabled technology.
We executed our planned well and our operating results are in line with expectations due to higher revenue and productivity gains with higher adjusted operating income and growth in adjusted EPS.
Let me now walk you through the specifics of our fourth quarter.
Before I explain the quarterly results I want to remind everyone that our prior year fourth quarter GAAP results were impacted by a onetime noncash charge of approximately $17 million related to an impairment of an investment in a third party.
Thus any year over year comparison of GAAP operating results for the fourth quarter of 2021 should take that into consideration.
As you saw on the previous slide our organic ASC plus professional services growth rate was seven 2%.
This increase reflects the higher demand for our solutions as clients execute on their own digital transformation.
Our success in solving their workflow challenges has resulted in higher levels of both client retention and cross selling activity.
For the quarter GAAP revenue increased by 7% to $412 million.
Organic revenue, which excludes any impact from foreign exchange acquisitions, and deferred revenue amortization also increased 7% to $410 million.
Growth was driven by our analytics Cts and research solutions.
For our geographic segments organic revenue for the Americas grew 6% EMEA.
EMEA grew to 7%.
In Asia Pacific to 12%.
All regions, primarily benefited from increases in our analytics and Cts solutions.
GAAP operating expenses grew 3% in the fourth quarter to $293 million impacted by a higher cost of services.
Compared to the previous year, our GAAP operating margin increased by 320 basis points to 28, 9% and our adjusted operating margin decreased by 150 basis points to 31, 6%.
As a percentage of revenue our cost of services was 10 basis points higher than last year on a GAAP basis and flat to last year on an adjusted basis the.
The increase is primarily driven by growth in compensation comprised of higher salary expenses for existing employees, new hires to support our multiyear investment plan.
And higher bonus accrual in line with stronger than anticipated ASP performance.
SG&A expenses when expressed as a percentage of revenue improved year over year by 330 basis points on a GAAP basis, but increased 170 basis points on an adjusted basis.
The primary drivers include higher compensation cost, reflecting the same factors as noted and the cost of services.
Moving on our tax rate for the quarter was 15% higher than the prior year's tax rate of 7%, primarily due to lower tax benefit associated with stock based compensation in the current quarter as well as the tax benefit related to finalizing the prior year's tax return.
GAAP EPS increased 15% to $65.0 this quarter.
Versus $31.0 in the prior year.
Again. This improvement is primarily a result of the impairment charge, we recorded in the fourth quarter of 2020.
Adjusted diluted EPS remained flat year over year at $90.0
Adjusted EPS was driven by higher revenues offset by higher operating expenses and an increase in the tax rate.
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 $171 million for the quarter, an increase of 18% over the same period last year.
This increase is primarily due to higher net income improved collections and the timing of certain tax payments.
For the fourth quarter.
Retention remained above 95% and our client retention improved to 91%, which again speaks to the demand for our solutions and excellent execution by our sales team.
Compared to the prior year, we grew our total number of clients by 10% over 6400, largely due to the addition of more wealth and corporate clients.
And our user count grew 14% year over year and crossed a total of 160000.
Primarily driven by sales in our wealth and research solutions and in particular in the number of banking users.
For the quarter, we repurchased over 265000 shares of our common stock at a total cost of $93 million with a average share price of $348.
For the year, we repurchased $265 million of our shares and increase our dividend for the 22nd consecutive year.
With share repurchases and dividends.
On an annual basis, we have returned to shareholders almost 70% as a percentage of free cash flow and proceeds from employee stock option.
We remain disciplined in our buyback program and committed to returning long term value to our shareholders.
Turning now to our outlook for fiscal year 2022.
We delivered outstanding results in the back half of 2021 and believe this pace will carry into our next fiscal year.
For organic <unk>, plus professional services, we are guiding to an incremental $105 million to $135 million.
The midpoint of this range represents a 7% increase which is equal to this year's organic growth rate, reflecting continued momentum in our business.
We are confident in our ability to perform at the high standard we demonstrated in fiscal 'twenty one.
With underlying drivers to include disciplined execution and continued benefits from our investments.
We expect growth to be driven largely with existing clients through high retention and cross selling.
In addition, we expect our ability to successfully sell new business in this virtual environment to continue.
Our recent investment in digital and content and providing us with more opportunities to sell direct solutions tailored for specific workflows.
Drivers of future growth would include first.
Retention and expansion of our sell side client base.
Deep sector strategy as we launch new targeted industries. In addition to new private market offerings.
Second new wins with wealth managers, who had been responding well to our web based workstation and personalized advisor dashboard.
And third growth with institutional asset management clients, who benefit from our data management solutions and enhanced capabilities in front office and ESG workflows.
We're mindful about the global environment and potential future market disruptions, but we believe we have the right offerings and strategy to maintain our high performance and growth rate into fiscal 2022.
From an operational perspective, we plan for continued labor productivity and operating leverage.
In addition to our multiyear investment plan, new investments will be made in content in front office solution.
Funded in part by ongoing cost discipline, including permanent savings related to the pandemic and additional efficiency actions.
As a result of higher growth in revenues and continued cost discipline, we are guiding to an expansion in our operating margin combined.
Combined with our consistent use of capital for share repurchases, we expect to accelerate growth.
Our diluted EPS, both on a GAAP and adjusted basis.
We are seeing the results of our investments take hold in both technology and content as we look to fiscal 2022, we are focused on delivering more value to clients prioritizing our resources and ensuring execution excellence.
As I transition to my new role I am seeing firsthand the experience and skills of our sales team and adapting to meet the needs of the market.
Our client centric mentality combined with our expanding data universe and digital advances provide me with the confidence that we have the people strategy and product to build a leading open content and analytics platform in our industry.
All while generating long term value for our shareholders.
With that we are now ready for your.
A question and I'll turn it over to the operator.
Thank you, ladies and gentlemen, if you'd like to ask a question at this time you will need to press. The Star then the one key on your Touchtone telephone to withdraw your question press the pound key.
In fairness to all participants please limit yourself to one question and one follow up.
Please standby, while we compile the Q&A roster.
And I'll now first question coming from the line of Ashish.
So butler with RBC capital markets. Your line is open.
Thanks, Congrats on such a solid quarter and then.
So guidance.
My question more on the research side.
This is the first year, where we've seen such a massive acceleration to 6%.
As you mentioned your deep content as well as technology transformation bearing fruit I was wondering if you could provide more color. It looks like it's being driven by new wins client retention, but if you can just talk about how do we think about this research and advisory groups going forward is that kind of growth sustainable given youre deep sector strategy.
Thanks.
Hi, Ashish. Thank you for the question.
Yeah, we're very pleased with how our research business performed this year.
Clearly we had very good performance on the sell side and the investment that we made in new content are really helped drive new logos expansion at existing clients and helped with retention. So that was a big driver on the sell side. However, the research business grew at a healthy clip in lots of different firm types. So we did.
Very well on a relative basis to last year within institutional asset management, we did well with corporates hedge funds.
A number of different firm types. So it was pretty broad based you can see that we grew our workstations.
By I think 14% over the last year. So just getting that footprint is really important for us moving forward to cross sell.
We closed lots of new logos. So my hats off to the research team they've done an amazing job and just really a monster quarter from the sales team in terms of going out and executing on all the opportunity to be had in front of us.
That's very helpful color. Thank you and maybe just a question on margins again, great to see margin expansion. Despite the investments.
My question was more.
Over the midterm as you retire your data center first the question is are you still on track to read out the data centers by end of fiscal 'twenty, two and how should we think about the cost savings as you get rid of some of the redundant cost and get back to a more normalized investment cycle. Thanks.
Hi, it's Alan Thanks for that for that question, yes, as it relates to the.
Status of our our investment plan, we remain on track with obviously.
Being able to as we've talked about in the past to be doing our transformation and transition to the cloud and that remains on track as well and so we do expect to complete most of what we expected to.
To get out of the data centers by year end, but obviously, we'll see how the year progresses, but there's nothing right now that changes our view.
That's helpful. Thanks, again, and congrats on the solid quarter.
Yeah. Thank you.
Okay.
And our next question coming from the line of Kevin Mcveigh with Credit Suisse. Your line is open.
Great. Thanks, so much and let me add my congratulations as well he for 22. The guide can you unpack, maybe a little bit Helen how are you thinking about new logos versus additional client offerings and then just any thoughts as to the client retention because again youre seeing a lot of success across.
Multiple vectors, so just try to get a sense of the build up a little bit.
Yeah happy to do that thanks for your thanks for your question. So we've been very pleased with the way we've been able to execute honestly as we think about a year ago to now I think what has been extremely.
Beneficial to us is our ability to grow with existing clients. So in the past we've talked about two thirds of the growth comes from existing one third from some new.
If we take a look at how the year actually progressed, we actually saw them with existing clients the ability between retention and expansion to be nearly three quarters of it. It doesn't mean that new business didn't grow in fact, it grew at the same paces in the past Kevin but what we saw was our ability from many of our investments to really resonate with our existing and even our large.
As clients. So we do look at new business going forward, continuing to do well and if I think about the course of the year.
We actually had more in terms of volume the average transaction price might be a bit lower but we made that up some volume and I think that just reflects the virtual environment and the situation that we're in but it continues to be a key part of our overall growth.
That's great and then just real quick.
It looks like in September Snowflake announced a new solution in the financial services data cloud it probably brings more leverage in terms of what you're doing with them, but any updates as to how that impacts kind of the existing partnership you announced back in January if at all.
I think it's just consistent.
Kevin with what we've been doing with them and we're working with lots of different cloud providers to make sure that we provide factset data and analytics in the places that our clients want to consume it so super happy with the Snowflake relationship, adding on services like Concordance will help us.
We do think that new channels like this are going to be important as we move forward.
Great Congrats again thank.
Thank you.
And our next question coming from the line of Manav.
Like with Barclays. Your line is open.
Thank you good morning.
I just had a question on the analytics business, you know Eugene I get stuck at the six 7% growth for the last couple of years is that.
Is that the right gold trade for this business as.
Any initiatives that could probably get that higher.
Hey, Manav. Thanks for the question, we certainly think analytics can do better.
Did get off to a bit of a choppy start with analytics in the last fiscal year and we attributed that to I think sort of everyone getting their feet under them as we learn how to work through the pandemic.
Analytics had a much stronger second half.
Very good performance with our front office solutions, which include our portfolio management platform as well as our trading solutions and analytics is setting up much better for next year. So we see.
Mike Good pipeline for the first half and good pipeline within the buy side, which as you know is where most of our analytics solutions appointment.
Got it and then just on the research.
Business.
Can you just talk about Oh God, you know how much of that growth came from.
In our new hiring on the sales side with the rest of the buy side and then I think you talked about winning some trading business, but can you just did.
But on the trading side of the offering.
Sure so we.
Thank that we outperformed significantly for three reasons, one is the investment in content and technology, which we outlined.
The excellent performance of our front office team and then we'd say about a third of it probably was us really just capitalizing on the strong trends in banking.
So I probably attribute about a third of it to the trends that are out there and it's the work that we put in though that allowed us to capitalize on those trends.
The trading business is really the portway business that we acquired a few years ago, we had a very strong year, we closed some new logos.
And we increased our transaction revenue I think a lot of that might have come from FX. So we've got a very strong FX.
Capabilities within our EMS.
Yeah, Manav I think it's important.
In mind that the retention piece that Phil alluded to is really quite key it is a.
Part of why research did so well this year.
Appreciate it.
And our next question coming from the line of Toni Kaplan with Morgan Stanley. Your line is open.
Thank you.
I wanted to focus on wealth and the.
A S V was up 6% organically year over year, it's a little bit lighter than we've seen in the last few years.
You did mention that the work the workstations and wealth was up in the mid 20% range.
So just hoping you could give some color on on what sort of drag the rest of wealth down. Thanks.
Yeah. Good good question Tony.
So you're absolutely right the desktop business grew significantly at 24% in the a S V.
Ex the digital solutions part of wealth grew at about 10%. So we had one large deal that got canceled in February which was a legacy digital solution from the acquisition. We did many years ago not the type of solution that were sort of upgrading our.
Clients do these days so that was something that was out there. It was with a large firm that was under financial stress and.
And something that was a headwind for us in Q2, you might have remember I think I may have mentioned it in that quarter. We also had one of the loss on the digital side, which was not related to wells, but.
Another anticipated council. So in total we might've had about $6 million in counsel from the old legacy digital business.
So I would factor that in when you are thinking about our wealth business, but the new solutions. We are focused on and how we're going to market now that was exceedingly healthy.
And I think bodes well as we go into next fiscal year.
Got it and just regarding removing the wealth disclosure in the future I guess.
Why are you doing that and how much is related to research versus Cts and if is it sort of gives the growth rates of the pieces. So that we know how much to impact each of those segments by that'd be helpful. Thank you yeah. So it's just we've realigned our business so the wealth business.
Which was run by Gordon scope co has now become research and advisory, which he'll be leading once Christy moved into the chief product officer role about a quarter ago. So really there were two pieces to wealth, there was the web or workstation business, which which lines up nicely with our research.
Business line and then there's the digital part of wealth, which lines up very nicely with Cts. So that we're really good synergies on the product and workflow side that we can capture by organizing things. This way in the digital piece of wealth. Some new really good capabilities have been built there called Factset widgets.
Which is in line with our open strategies so.
I believe after the call Youll get all of the numbers that show you what the growth rates would have been this year for those three business lines, which I'm sure Raimo, we'll be happy to review with you later today.
Perfect. Thanks.
Yep.
And our next question coming from the lineup Hamzah Mazar with Jefferies. Your line is open.
Hi, This is Mario <unk> filling in for Hamzah.
First question just around on sale was just could you comment on how much capacity and room for improvement there may be and sales execution today and maybe you can also touch on what your hiring plans are over the next year.
Hi, This is Helen thanks for that question when I think about they are.
The continued pace for sales and in terms of what we have the opportunity to do I think from an execution perspective.
Results speak for itself for this year, and where we're looking to accelerate our efforts will be along the lines of some of our solutions at right. Now we were seeing a lot of client demand for on ESG on wealth analytics.
And what we're seeing as I mentioned earlier about our ability to expand with with our the wallet within the wallet share of our existing clients I would expect to see that continue as well.
So what we've done is we're going to be planning on.
Essentially focusing on premier type clients are our highest clients.
And including some that will we think we can really continue to do that that expansion on the enterprise front.
Front, so from a execution perspective, those are the areas that I think will continue to expand but it really is building on the momentum that we already have seen this year.
Thanks, and then for my follow up I mean, we've seen a lot of large M&A in the financial services space in general.
Maybe you can just talk about what your willingness is to participate in any of the larger M&A and specifically are there any synergies with assets that are currently not in your portfolio today.
And then is there are there any significant scale advantages.
Anything you might be lagging.
Well I think our answer has been consistent regarding M&A. So we're.
We feel that we have the scale, we need we're one very well integrated platform and we're very good at doing tuck in acquisitions for unique content and technology, which we demonstrated this year. So we're really happy with our platform and our ability to be a central player in the ecosystem.
Hmm.
And be really agnostic to the data that's on our platform, whether it's ours or us integrating third party content.
We do have a very healthy balance sheet, and we've said historically that if the right.
Transaction comes around that's larger we are in a position to execute on it but we don't feel that it's something we need to do to be successful and we've demonstrated that this year.
Great. Thank you very much.
Thank you.
And our next question coming from the line of Alex Kramm with UBS. Your line is open.
Yes, Hey, good morning, everyone.
Sorry, if I missed this in your prepared remarks, but can you just talk about the outperformance on is the in the fourth quarter. I mean, obviously you had some guidance out there that you gave us just a couple of months ago, and then I would say you beat that by 25 or so million dollars. So just wondering if there was anything chunky maybe.
Repetitive.
That that you would call out that we may have missed in because that obviously creates a tougher comp for for next year.
Well like some quarters, Alex we do have some large wins. So we did have very one very good win on the wealth side and we had one very good win on the data partner side.
But that doesn't mean, we can't have these types of wins in future quarters. So that certainly helped getting those done.
But again I think just excellent execution from the sales team.
Really closing out the year in dramatic fashion.
And capitalizing on those market trends that we spoke about earlier.
Okay No no. That's that's helpful. Just wanted to make sure there wasn't anything super chunk of it seems like two larger things and then just as a follow up to a question earlier.
You said that you think the environment added about a third of the growth. So I guess, a little bit over 2% or so so I guess as we look into 2022, what type of environment is kind of factored into your guidance from a from an overall industry perspective, because you can't ignore as you as you said yourself that.
It's been a there's been a lot of tailwind from capital markets that have helped you. So just just curious what do you expect if you expect us to persist or what kind of environment, we should be thinking about.
So just to be clear I would say a third of the outperformance versus our guidance was due to those trends not a third of our overall performance as a company.
And as I mentioned in an earlier question you know the buy side is setting up very nicely for US next year, we see a very healthy pipeline.
Good trends on the buy side. So even you know even though there are some tough conditions out there for asset managers, our investment in our platform our content to opening it up really allow us to take market share and really help them with some of their challenges, which is managing data better, which Cts does a great job of.
And then really being plug and play in terms of their workflow solutions. So we feel good about the buy side going into next year of course continued health on the sell side will help us, but we don't need that to be successful and to meet our guidance.
Oh, thanks for clarifying.
Okay.
Yeah.
And our next question coming from the line of Andrew Nicholas with William Blair. Your line is open.
Hi, This is actually Trevor Romeo in for Andrew Thanks for taking my questions.
Hoping you could provide an update on the selling environment and how sales cycles are evolved in terms of length and complexity you've seen any changes in the speed of client decision, making lately.
Hi, Thank you for that question.
Take that one so I think one of the other points that helped to drive our outperformance was our analytics business, which which accelerated and some of the deals that perhaps had taken a bit longer.
Really coming to fruition and we continue to see that as we think about the look at the pipeline going forward. So I don't think I would say theres wholesale change yet in terms of the decision, making and it really is case by case, but I will say that as we settle into a much more so of the virtual environment clients are.
Really focused on their own digital transformation, they need to to improve and as a result, some of the things that we've had for a while that got pushed well were realized and we will continue to see that going forward.
Okay, Great and then just in terms of the deep sector content investments that you've been making I was just wondering if there are any particular sectors or industries.
You've kind of seen the strongest uptake at this point and then going forward, which ones you might expect to see the most investments. Thank you.
Yes, so we've I think the three that we have released.
Our financials we've.
We've done some good work in insurance.
Real estate, so we're seeing really good usage across all of those.
And we're beginning to make progress on some of the other sectors, sorry, I'd say, it's pretty broad based there.
Alright, Thank you very much.
Yeah.
Our next question coming from the line of George Tong with Goldman Sachs. Your line is open.
Hi, Thanks, Good morning, I wanted to follow up on the components of your fee growth in fiscal 2022, you've had several larger wins in 2021 and also some larger legacy cancels. So as you look ahead to fiscal 2022, what kind of ESP growth do you expect across your realigned research analytics and Cts.
He says.
I don't think we're giving explicit guidance the GA on those three business lines, but I would say, it's well balanced between all of them.
C T S.
I would I would expect we'll continue to have a high growth rate just given the trends in the market and the opening up of the platform analytics as I've mentioned, Ms setting up well versus last year and not a lot has changed in terms of the components of that business line.
We're very optimistic about research, but just based on what we've seen over the last year and our ability to close new logos and meaningfully increase the number of users of factset across a lot of different firm types.
And George I would take a look across the geographies as well I mean, if I look at the pipeline.
Quite frankly, Americas, which has been very strong in <unk> and 'twenty 'twenty. One we expect to have that have continued strength that we saw double digit growth in Asia Pac and Europe picking up as well. So I think it's clearly quite broad based I think it's what gives us.
Not only a lot of pride of what we've just done that also the confidence as we go forward, which is reflected in our guidance.
Got it very helpful and then.
On pricing what kind of pricing assumptions are you, reflecting in your guide and how much do you expect pricing to go up by.
The forthcoming year, particularly as you think about how much competitors are raising their prices by so are you do you think you're raising prices in line with the competition ahead of or below the competition for next year.
Sure I'll take that one as well I mean, we were very.
We could see that our clients value our products by what we were able to capture this year and we will continue that into next year I think we'll be in line with many of our competitors as well.
So we would expect to see that similar impact if not more and we've spent a lot in enhancements in the the value that we can clearly tie back to our to what we've done for them. So so George I would expect to see it in line and not only in the market, but in the previous year.
Very helpful. Thank you.
And our next question coming from the line of Patrick O'shaughnessy with Friedman James Your line is open.
Hey, good morning in terms of your momentum with sell side customers to what extent would you ascribe to that growth to new customer wins, and new product sales as opposed to your existing customers growing their head count.
Yes.
Hi, Patrick it's Phil Snow.
Just in terms of new logos, we did better this year on the sell side than we did last year I think we were actually down in terms of new logos on the sell side and we were up this year. So we're certainly adding new clients and some of that is you can expect is being driven by just the investment that we've made particularly in the content area.
Okay.
And then I guess speaking of the head count theme.
<unk> head count growth has slowed I think it was 4% in the fourth quarter year over year, I think closer to 3% ex acquisitions was that an intentional deceleration in your head count growth or does it reflect challenges in terms of hiring and retaining talent in this environment.
Well I think we've done very well in terms of the employee value proposition at Factset over the last year, we've done a lot to really make sure that our employees feel.
Like that taking care of that they have flexibility in terms of how they work.
And so on so I think we've we have a lot to be proud of their for for our employees.
Lots of firms right, we're gonna be faced with.
A lot of movement I think on the talent side, we believe that creates a good opportunity for us in the marketplace. We think we'll be able to retain the talent we need at Factset, but also attract.
Some really good new talent to the company.
So I think we're probably in line frankly in terms of what we planned in terms of head count growth. There I don't know how long if you've got anything you wanted to add.
No I think what we've seen is in our own productivity and efficiency improvements as we've gone through I think we've talked before around workforce next it might take a look at where while our head count has.
Gone up the mix of that is also quite key and and then when they talk about the operating leverage of our labor productivity, you've seen that come through as well and please note that especially since we've invested quite a lot in the technology front that is meant to help us in terms of having the type of work that our folks do so I wouldn't necessarily.
When you look at people count as the driver here when you think about our opportunities going forward.
Thank you.
You're welcome. Thank you next.
And our next question coming from the line of Owen Lau with Oppenheimer. Your line is open.
Thank you for taking my question going back to the driver of C. T. S. Could you. Please remind us some of the use cases of six years and as this segment continues to evolve do you see a scenario that customers will like mostly an API and data feeds but not.
So much on the desktop or they will still come hand in hand, because desktop can still qualify a good distribution channel to two customers. Thank you yeah. Great question. Thank you.
Yeah. So you know traditionally factset has.
<unk> sold a lot of data workflow solutions through Cts.
Took quants, but that's not the only workflow that we've sold to so we still do very well.
Selling to Quants, but we're also thinking about how do we expand our market share by getting into more workflows across the middle and back office and as we've opened up our platform and invested in new content.
It's created some great opportunity for us to help clients manage their own data with our entity data mapping our concordance services managing data is expensive and Factset is really expert at that so that is one area that we're seeing really good growth from particularly as we make those services available through new channels.
Such as a cloud provider.
Riders that we already spoke about we've done.
<unk> traditionally well with performance workflows as well this was a very good year for us with a benchmark data feeds. So factset does a lot of work to integrate all of the different benchmarks and indexes that are out there that feed into our clients' own performance system, so that could be our own performance system.
But we're not the only performance system out there.
And so the sort of lots of opportunities here, you know real times and other opportunities sort of that trading workflows. So as we've developed more of our own capabilities. There we view that.
As a good opportunity.
And just to add to that when we talk about the sell side Phil alluded to it before the growth. There is also on the seed side and so we're seeing interestingly that being a driver for our Cts business. So I think that's an important piece to consider as well.
Just to finish off your second point there is a valid one we do think that's going to be a very healthy balance out there for how people want to consume our value. So it could be through a workstation or a web where we tee up the next best action for a particular user.
Increasingly our firms are going to want to consume data in new ways as they are.
Analyze things in new ways and that could be just a research analysts deciding they want a.
Our program in Python or use tableau or some other.
Types of.
Systems to sort of do their analysis, so that it could be the same type of user but through a different workflow or it could be just feeding directly into our system that a client has like a CRM.
Got it that's extremely helpful and then going back to the research I think we touch on a lot about the growth there, but there are lots of news out there that many investment banks are raising this out of real estate junior bankers on the banking side do you see like in terms of the new that you said you would like additional subscription.
<unk> from these clients do you think.
So increase of hiring and Factset can't benefit from that as well. Thank you.
Yeah.
Yeah, I think that's what we just saw in Q4 as we saw the banks if I'm understanding your question correctly.
Higher a lot of new talent.
And when that happens you know very often factset will just get deployed automatically onto those desks.
Also in addition to the number of analysts to your point, though and.
What they're looking for us to be able to provide their analysts the tools that are needed and I think that's what we're finding and that's why I think our retention has grown has improved as well.
What we're finding is getting the tools of factset to the analysts to allow them to do their work in a more efficient way so they don't not spending.
100, plus hours I think all of that.
Comes into play.
Got it that's my question. Thank you very much.
Youre welcome.
And our next question coming from the line of David Chu with Bank of America. Your line is open.
Alright, thanks, guys.
You highlighted strong performance from the sales teams throughout the call Helen are there any key changes to the strategy. Since you took on the new role.
Yeah. Thank you for thank you for your question one of the things quite frankly is is how proud I am in the fact that how we have executed and and.
And I think the areas of focus if anything is more of an enhancement at this at this juncture I think what we will focus on is our go to market strategy. I think we will focus more on driving the enterprise discussion with senior client executives. It really allows us to provide a platform for their own digital transformation.
<unk>.
And in terms of major changes I would say no other than really again enhancing on the areas that we think we can.
Leverage across the firm types or quite frankly, operationally, where we can provide them more bandwidth to spend more time with clients.
Got it and then and then just on the wealth side are there any meaningful rfps coming up let's say in the next 12 months and how would you characterize to characterize our win rates now when you go into these rfps.
Yeah, we're not going to we're not going to comment on that but there is I think a steady drumbeat of these opportunities coming through each year.
And we do exceptionally well when we get into an RFP just based on the product we have.
And the legendary Factset service those are two things that really gives us an advantage when we're competing for those businesses.
Yes.
Okay got it thanks guys.
Thank you. Thank you.
And our next question coming from the line of Keith Hudson with Northcoast Research. Your line is open.
Good morning, guys and congrats on a great quarter.
The.
Pipeline that you guys have talked about in the past as being your fantastic if I remember back to last quarter. How would you talk about how would you characterize the pipeline coming out of the fourth quarter compared to I guess, the third and second quarter.
Well the way that I look at that Keith is just sort of versus the first half of last year.
And we got off to a pretty rough start last Q1, we would definitely digging out of a hole there and just came storming back in the last three quarters. So as I as I mentioned already a few times.
The first half which is typically the.
The period that we have the most visibility on is.
Is setting up quite nicely, particularly on the buy side with the analytics team.
Great.
If we talk about the growth that you guys are experiencing would you talk about it as more of a market share gain or an expansion of your overall product set and the expansion of the overall market.
It's a combination there I think we do very well competitively and our strategy. We believe is differentiating in terms of opening up the platform and investing in new content sets and being neutral in terms of what data we provide the market. So that is resonating, particularly well with our clients as they.
Try to differentiate themselves and become more efficient.
And yet and we get a lot of we get a lot of upside from expanding clients. When we we continue to build out our solution our clients Trust us and we've got great service and.
When trends are good like this in the market, we're able to really capitalize on that.
Great. Thank you.
Thank you.
Our next question coming from the line up Craig Huber with Huber Research partners. Your line is open.
Yes. Good morning. My first question is you remember two years ago, you guys first three year investment plan and stuff with I guess on the back end of your expected to be able to get to high single digit.
Fee growth in the back end of that is.
Is that still the plan here a year routers have been pushed out some as you've alluded to in prior calls because of this pandemic.
Thanks, Craig yet so we're entering the third year of that original three year plan and I think you can see our performance this year and what our guidance is for next year. So we certainly high single digits is certainly something that's achievable I believe back then we articulated that we would exit the year with a 33% mark.
And witches.
But I think I believe the middle of our guidance here for this year and you know.
Our aspiration was to get to double digit EPS growth I think if you look at the midpoint of our guidance mid to high single digits, but that doesn't mean, you know if we execute well we can't get to that thing so I.
Couldn't be prouder of our company, we have all worked exceptionally hard over the last two years and it's really great to see this level of performance and we're really optimistic as we go into FY 'twenty two.
And then my follow up please on the cost side related to that three year investment program. I think originally you thought you're going to spend $15 million each of the three years. It's changed maybe if you could just update us on what those numbers. Please I think it was higher last year do you have that number.
Sure I can I can talk broadly on on those on those points Craig Yes, I mean, we as discussed earlier, we are on target in terms of our plan. There are things that we probably accelerated in terms of spend and in some cases, where we've adjusted along the way and that's what you would expect in a three year plan. So.
So from a technology perspective, we probably spend a bit more.
And we're able to to to make that up as you can tell from our performance. This year to go back a little bit to your point on the us.
I was having pushed it out I think what's really I think admirable is the fact that with the situation that we had with the pandemic we were trying to be as transparent as possible and the fact that we were able to achieve what we have in it what we're indicating for the third year really does mean that were that we were able to meet what we had originally given guidance.
John.
Thank you.
I'm showing no further questions at this time I would now like to hand, the conference back over to Mr. Phil Snow for closing remarks.
Thank you all for joining us today in closing I want to reiterate how pleased we are with our performance. This fiscal year. We also made substantial progress on our internal ESG strategy steps. We have taken this past quarter alone include joining the UN global compact and principles of responsible investment publishing our global diverse.
The figures and committing to becoming MLT black equity at work. So this certified in addition to completing our sustainability plan, which outlines our ESG goals and aspirations.
I'm very proud of all Factset has accomplished this year and we look forward to speaking with you again next quarter in the meantime, please call Rima Hyder with additional questions. Operator. This ends today's call.
Ladies and gentlemen that does conclude our conference for today. Thank you for your participation you may now disconnect.
Okay.
Yes.
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