Q1 2022 Factset Research Systems Inc Earnings Call

December 21, 2021

Ladies and gentlemen, thank you for standing by and welcome to FactSet Q1 2022 earnings 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 need to press star one on your telephone. If you require any further assistance. Please press star zero. I would now like to turn the call over to your host, Kendra Brown, you may begin.

And answer session.

To ask a question during the session need to press star one on your telephone. If you require any further assistance. Please press star zero. I would now like to turn the call over to your host, Kendra Brown, you may begin.

Thank you and good morning, everyone. Welcome to FactSet's first fiscal quarter 2022 earnings call. Before we begin, I would like to point out that the slides we will reference during this presentation can be assessed via the webcast on the Investor Relations section of our website at Factset.com. 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.

Site at the conclusion of this call a replay of today's call will be available via phone and on our website.

After 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. 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.

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.

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 Linda Huber, Chief Financial Officer. Before we get started, I want to let you all know that we are planning an investor day in early April and we will be sharing more information soon so stay tuned. With that, I will turn the discussion over to Phil Snow.

Thank you Kendra and good morning, everyone. Thanks for joining us today. Before I begin, let me start by welcoming Kendra, who recently became FactSet head of Investor Relations. Kendra has worked at Factset for more than two decades. Most recently, serving as my chief of staff. She brings a deep knowledge of the company and industry expertise to her new role. I look forward to working with Kendra to continue growing our Investor Relations program I'd also like to welcome Linda to her first earnings call as a member of the FactSet team. We are excited to have her here and have already begun leveraging her deep financial and operational expertise as we continue to execute our growth strategy.

I look forward to working with Kendra to continue growing our Investor Relations program I'd also like to welcome Linda to her first earnings call as a member of the FactSet team. We are excited to have her here and have already begun leveraging her deep financial and operational expertise as we continue to execute our growth strategy.

Turning to our performance. FactSet is off to a strong start to fiscal 2022 and I am pleased to share that this quarter had the highest Q1 incremental ASV on record. Building on the momentum from Q4, we grew organic ASV plus professional services by 9% year over year in Q1, the strong performance of our sales and client-facing teams carry forward from Q4, increasing the pace of our go-to-market strategy.

Building on the momentum from Q4, we grew organic a S V plus professional services by 9% year over year in Q1, the strong performance of our sales and client facing teams carry forward from Q4, increasing the pace of our go to market strategy.

These teams continue to drive increased retention and expansion rates among our existing clients. While achieving a high number of new business wins. The biggest contributor to this quarter's growth were institutional asset management clients as we continue to see strength in our workstation and accelerating growth in our analytics workflow solutions.

While achieving a high number of new business wins.

Biggest contributor to this quarter's growth, where institutional asset management clients as we continue to see strength in our workstation and accelerating growth in our analytics workflow solutions.

The last two years of accelerated investments in content and technology continue to drive topline growth. We are seeing increased demand for differentiated content and workflow solutions. FactSet's leading open content and analytics platform is allowing us to meet this demand and capture more share of wallet with our clients. By client type wins were broad-based we saw double-digit ASV growth rates from our banking wealth hedge fund and corporate clients as well as private equity and venture capital funds and partners, our investments in content and technology, including deep sector well. And then analytics solutions continue to support client retention rates and renewals across the board. Overall, we are pleased that our performance resulted in a 13% increase in adjusted EPS from the prior-year period, our adjusted operating margin of 33.6% exceeds our guidance. Linda will walk you through the details in a few minutes.

Factset is leading open content and analytics platform is allowing us to meet this demand and capture more share of wallet with our clients.

By client type wins were broad based we saw double digit a S V growth rates from our banking wealth hedge fund and corporate clients as well as private equity and venture capital funds and partners, our investments in content and technology, including deep sector well.

And then analytics solutions continue to support client retention rates and renewals across the board. Overall, we are pleased that our performance resulted in a 13% increase in adjusted EPS from the prior-year period, our adjusted operating margin of 33.6% exceeds our guidance. Linda will walk you through the details in a few minutes.

Overall, we are pleased that our performance resulted in a 13% increase in adjusted EPS from the prior year period, our adjusted operating margin of 33.6% exceeds our guidance.

Linda will walk you through the details in a few minutes.

We are now in the final year of our multi-year investment plan and we remain on track to achieve our goals. All focus is on our digital platform scaling all content refinery and creating hyper-personalized workflow solutions. Within all content refinery ESG data for well private markets and deep sector are all fueling workstation growth. We continue to grow our deep sector data launching real estate and technology media and telecom in November. Deep sector and our investments in private markets have translated into growth and higher retention within sell-side firms. And our recent acquisition of cobalt further advances our private market strategy by connecting differentiated data with tracking and portfolio monitoring providing value to our private equity and venture capital clients.

And deep sector are all fueling workstation growth, we continue to grow our deep sector data launching real estate and technology media and telecom in November deep.

Deep sector and our investments in private markets have translated into growth and higher retention within sell side firms and our recent acquisition of cobalt further advances our private market strategy by connecting differentiated data with tracking and portfolio monitoring providing value to our private equity and venture capital clients.

Our workflow solutions, which deliver efficiencies across the front middle and back office continue to add meaningful ASV. Our analytics APIs are resonating with our clients and we are increasingly integrating with cloud-based platforms. Earlier this month, we launched over 90 data sets and a number of API as an Amazon data exchange, the first major data and analytics provider to do so. Our trading business continues to grow bolstered by the recent addition of fixed income support for trade execution. This enables our clients to surface, new insights and trade across asset classes with greater speed and efficiency and was a significant contributor to the growth of our analytics and trading business during the quarter.

This month, we launched over 90 data sets and a number of API as an Amazon data exchange the first major data and analytics provider to do so.

Our trading business continues to grow bolstered by the recent addition of fixed income support for trade execution. This enables our clients to surface, new insights and trade across asset classes with greater speed and efficiency and was a significant contributor to the growth of our analytics and trading business during the quarter.

Our product teams are focused on identifying developing and implementing made for client workflow solutions for each of our client types. This has been incredibly successful within well as our advisor dashboard maintains a healthy pipeline and solid client engagement for FY '22. We see this hyper-personalization as a key differentiator and are committed to working with our clients to evolve our offerings.

We see this hyper personalization is a key differentiator and are committed to working with our clients to evolve our offerings.

Looking across our regions. We saw continued strength in ASV growth across all our markets. The Americas was the biggest contributor as organic ASV growth accelerated to 9% supported by broad-based strength across our businesses. This was driven by strong retention and expansion among asset managers and asset owners. The region also benefited from capturing higher price increases. In EMEA growth accelerated to 7% consistently improving over the past three quarters. Research and advisory had a particularly positive impact driven by improved retention among asset managers and wealth clients and strong workstation sales to new customers. Asia Pacific had another robust quarter with growth accelerating to 14% driven primarily by CTS. We again saw wins across many countries with hedge funds asset managers and asset owners driving ASV growth.

The region also benefited from capturing higher price increases.

In EMEA growth accelerated to 7% consistently improving over the past three quarters.

Research and advisory had a particularly positive impact driven by improved retention among asset managers and wealth clients and strong workstation sales to new customers.

Asia Pacific had another robust quarter with growth accelerating to 14 point, 14% driven primarily by C. T S.

We again saw wins across many countries with hedge funds asset managers and asset owners driving ASV growth.

In summary, I am proud of the FactSet team for delivering such strong results to the start of the year. The first quarter, as you know, is historically a slower start to the fiscal year and not necessarily an indication of our performance for the rest of the year. However, our momentum from Q4 has continued and we are well-positioned to deliver on our targets for the year. As such we are reaffirming our fiscal 2022 guidance and we remain confident in our pipeline and in the value. We are delivering to our clients. Looking ahead, we continue to focus on three strategic priorities scaling up our content refinery. Enhancing the client experience through hyper-personalized solutions and delivering next-generation workflow solutions for clients.

As such we are reaffirming our fiscal 2022 guidance and we remain confident in our pipeline and in the value. We are delivering to our clients. Looking ahead, we continue to focus on three strategic priorities scaling up our content refinery.

Enhancing the client experience through hyper personalized solutions and delivering next generation workflow solutions for clients.

And we believe that our people culture and performance-driven mindset will enable us to execute on these priorities as we accelerate the pace of change. We are committed to investing in and developing the talent experience and skills of our team as we build the industry's leading open content and analytics platform. Finally, an important milestone in our company's history occurred earlier this week when FactSet became part of the S&P 500 Index. Our addition was in fact predicted by our S&P 500 constituents predictions signal on October 1st. Our inclusion is a proud moment for FactSet and a testament to our tremendous growth and our efforts to help our clients do their best work. Our team's creativity, dedication, and collaborative spirit make us a trusted partner and I'm tremendously proud of their drive to create smarter, more innovative solutions for our clients. I'll now turn it over to Linda who will take you through the specifics of our first-quarter performance.

Finally, an important milestone in our company's history occurred earlier this week when Factset became part of the S&P 500 Index or addition was in fact predicted by our S&P 500 constituents predictions signal on October 1st our inclusion is a proud moment for Factset and a testament to our tremendous growth and our <unk>.

To help our clients do their best work.

Our team's creativity, dedication, and collaborative spirit make us a trusted partner and I'm tremendously proud of their drive to create smarter, more innovative solutions for our clients. I'll now turn it over to Linda who will take you through the specifics of our first-quarter performance.

I'll now turn it over to Linda who will take you through the specifics of our first quarter performance.

Thank you, Phil, and hello to everyone on the call. I'm really pleased to be here today as part of the FactSet team. I've been at FactSet for just a few months, but in that short time, it's become clear that the company has been performing really well from accelerating topline growth and strong free cash flow generation to its long history of consistent and growing shareholder returns. And there's still a lot of runway ahead of us as the investments made over the past two years are paying off and driving growth. There is undeniably a great deal of talent across the organization. I look forward to working with the team to build on FactSet's history of outstanding performance, while generating meaningful value for shareholders. Looking now at the first quarter as you've seen from our press release this morning. We are pleased to report acceleration in our top line with high single digit growth both in terms of revenue and organic ASV plus professional services.

Factset for just a few months, but in that short time, it's become clear that the company has been performing really well from accelerating topline growth and strong free cash flow generation to its long history of consistent and growing shareholder returns and there's still a lot of runway ahead of us as the investments made over the past two years are paying off and <unk>.

Writing growth there is undeniably a great deal of talent across the organization I look forward to working with the team to build on Factset history of outstanding performance, while generating meaningful value for shareholders looking now at the first quarter as you've seen from our press release. This morning. We are pleased to report acceleration in our top line with high <unk>.

growth both in terms of revenue and organic ASV plus professional services.

I'll now share more details on our first-quarter performance. First, on ASV, we grew organic ASV plus professional surfaces by 9%. It's still noted previously we typically see a seasonal deceleration in Q1. Our performance reflects increased demand for our content and product, higher retention and our ability to realize higher pricing. The marketplace has been supportive with solid workstation growth in banking and greater demands for our portfolio of analytic solutions. As market conditions continue to evolve, our subscription-based ASV will continue to support value-based pricing.

Ally's higher pricing the marketplace has been supportive with solid workstation growth in banking and greater demands for our portfolio of analytic solutions as market conditions continue to evolve our subscription based a S. D will continue to support value based pricing.

GAAP revenue increased by 9% to $425 million, while organic revenue, which excludes any impact from foreign exchange and acquisitions increased 9% to $423 million growth was driven primarily by analytics and trading and research and advisory. All regions experienced notable year over year. For our geographic segments on an organic basis, Americas revenue grew 9%. EMEA also came in at 9% and Asia Pac revenues grew at 14%. The main drivers in the region were analytics, CTS, and workstation growth.

For our geographic segments on an organic basis Americas revenue grew 9% EMEA also came in at 9% and Asia Pac revenues grew at 14% main drivers in the region, where analytics Cts and workstation growth.

Turning now to expenses. GAAP operating expenses grew 13% in the first quarter to $302 million impacted by anticipated changes incurred during the period. We recorded a restructuring charge of $9 million to drive a more efficient and empowered organizational structure. Ongoing savings from this realignment will primarily be used for product reinvestment in key talent retention.

Merely be used for product reinvestment in key talent retention.

In addition, we recognized $4 million of expense related to vacating certain office space in New York City, We recently pulled our employees on optimal work arrangements and consistent with what we see in the market. The vast majority prefer a hybrid or remote working model. Given this preference, we are reassessing our real estate footprint to better reflect our new work arrangements. Also in Q1, we incorporated the FactSet charitable foundation to facilitate our corporate social responsibility goals.

[noise] arrangements.

Also in Q1, we incorporated the Factset charitable foundation to facilitate our corporate social responsibility goals.

Compared to the previous year, our GAAP operating margin decreased by 230 basis points to 29% and our adjusted operating margin decreased by 70 basis points to 34%. As stated before, this exceeds our guidance on this measure. Our increased expenses were partially offset by lower compensation expense. As a percentage of revenue our cost of sales was 32 basis points higher than last year on a GAAP basis, and 72 basis points lower on an adjusted basis. This reflects increased data and infrastructure costs and higher compensation expense for our existing employee base. These expenses also include our ongoing shift to the public cloud as part of our digital transformation and multi-year investment plan lower personnel expenses, partially offset these increases.

As a percentage of revenue our cost of sales was 32 basis points higher than last year on a GAAP basis, and 72 basis points lower on an adjusted basis. This reflects increased data and infrastructure costs and higher compensation expense for our existing employee base. These expenses also include our ongoing shift to.

The public cloud as part of our digital transformation and multi year investment plan lower personnel expenses, partially offset these increases.

When expressed on a percentage basis of revenue, SG&A was 198 basis points higher year over year on a GAAP basis, and 145 basis points higher on an adjusted basis. The primary drivers include increased employee compensation, higher bonus accrual, and real estate exit costs. This was partially offset by lower stock compensation year over year.

Compensation year over year.

Turning now to taxes, our tax rate for the quarter was 10% compared to last years rate of 16%. This lower rate was due to a tax benefit from the exercise of stock options as a result of a record stock price. This caused the annual estimated benefit to be higher than expected. The lower annual rate was partially offset by higher than expected US income. GAAP EPS increased 7% to $2.79 this quarter versus $2.62 in the prior year. Adjusted diluted EPS grew 13% to $3.25 driven by higher revenues and a lower tax rate. A reconciliation of our adjustments to GAAP EPS is provided at the end of our press release.

Set by higher than expected U S income.

GAAP EPS increased 7% to $2.79 this quarter versus $2.62 in the prior year adjusted diluted EPS grew 13% to $3.25 driven by higher revenues and a lower tax rate a reconciliation of our adjustments to GAAP EPS is provided it.

The end of our press release free.

Free cash flow, which we defined as cash generated from operations less capital spending was $64 million for the quarter, a decrease of 9% over the same period last year. This was primarily due to the timing of tax payments, higher year over year employee bonus payments, and a reduction in capital expenditures related to facilities build-outs. Our ASV retention remained at greater than 95%. We grew the total number of clients by 14% compared to the prior year, which continues to be driven by the addition of more wealth and corporate clients. Our client retention improved to 92% year over year, which speaks to the success of our products and investments and the efforts of our sales teams.

Our ASD retention remained at nine greater than 95%. We grew the total number of clients by 14% compared to the prior year, which continues to be driven by the addition of more wealth and corporate clients or client retention improved to 92% year over year, which speaks to the success of our product.

<unk> and investments and the efforts of our sales teams.

For the first quarter, we repurchased 46,200 shares of our common stock for a total of $19 million at an average per-share price of $403. We remain disciplined in our buyback program and committed to returning long term value to our shareholders. We are reaffirming our guidance for 2022 and as we often say, our business is a tale of two halves. While it is clear that our momentum from Q4 has continued and we believe that we are well-positioned to deliver on our targets. It's still early in the fiscal year. We remain focused on developing our content, technology and people and delivering value for our shareholders. And with that, we're now ready for questions. Operator.

We are reaffirming reaffirming our guidance for 2022 and as we often say our business is a tale of two halves. While it is clear that our momentum from Q4 has continued and we believe that we are well positioned to deliver on our targets. It's still early in the fiscal year, we remain focused on developing our content.

<unk> and people and delivering value for our shareholders.

And with that we're now ready for questions operator.

Yeah.

Ladies and gentlemen, if you have a question or comment at this time, please press star then the one key on your touchtone telephone. If your question has been answered and you wish to remove yourself from the queue, please press the pound key. Our first question comes from Manav Patnaik with Barclays.

If your question has been answered and wish to move yourself from the queue. Please press the pound.

Yeah.

Our first question comes from Manav Patnaik with Barclays.

Thank you and good morning. Linda, just a follow up on that last comment on [inaudible] how much visibility you have and just in terms of the sustainability of the revenue growth that FactSet has kind of shown that acceleration over the last few quarters. Yeah, I'll take that one Manav, so I think we feel very good about the sustainability of the growth rates. The investments that we made in both our digital platform as well as content are really paying off. So on the content side. The investments in deep sector ESG, wealth content. These are all driving workstation growth very nicely. And then on the technology side, just the opening up of the platform. And the ability to serve our data to clients wherever they want it. Whether it's in Snowflake, Amazon through our API as you name it. That I think has a lot of runway. And then we just continue to invest in making sure that all software is the best in the industry and that we're creating an interface that is really pleasing to all clients, where they can come in sept through all the noise and really understand sort of what it is that's important to them.

And then just a follow up on that last comment on payroll.

Just wanted to get finished.

Yes.

And just.

Just in terms of the sustainability of the revenue growth that Factset has kind of shown that acceleration over the last few quarters.

Yeah, I'll take that one manav, so I think we feel.

We feel very good about the sustainability of the growth rates.

The investments that we made in both our digital platform as well as content.

Really paying off so on the content side.

The investments in deep sector ESG, wealth content. These are all driving workstation growth very nicely. And then on the technology side, just the opening up of the platform.

And then on the technology side, just the opening up of the platform.

And the ability to serve our data to clients wherever they want it. Whether it's in Snowflake, Amazon through our API as you name it. That I think has a lot of runway. And then we just continue to invest in making sure that all software is the best in the industry and that we're creating an interface that is really pleasing to all clients, where they can come in sept through all the noise and really understand sort of what it is that's important to them.

That I think has a lot of runway and then we just continue to invest in making sure that all software is the best in the industry and that we're creating an interface that is really pleasing to all clients, where they can come in sept through all the noise and really understand sort of what it is that's important to them.

Got it. I guess that was focusing a bit more scale on you know just the acceleration you've seen in the sell-side most notably. And then obviously this quarter the buy-side as well. So just I don't know how you guys are thinking about [inaudible] sell-side in and continue that. Any signs it's going to start slowing down you know just more along those lines.

And then obviously this quarter the buy side as well. So just I don't know how you guys are thinking about generic index outside in and continue that.

Any signs it's going to start slowing down you know just more along those lines.

We had a good quarter for the sell-side relative to last, this time last year. However, what I'm most excited about is the acceleration in the buy-side. So you can see that the buy-side as a whole the way that we measure it grew I think 200 basis points. The largest segment within that for us the largest firm type or just the institutional asset managers, where we've seen obviously a lot of pressure over the last few years, but our solutions are very are resonating with them. They had a very strong quarter. You know relative to the other phone types, I think it was the biggest contributor on an absolute basis relative to last year. So we're really bullish about the buy-side. And particularly our analytics solutions are beginning to take hold again, so I think there was some pent up. I think demand there on the buy-side and I think as we're sort of learning all learning how to operate within a new environment. We saw a lot of deals that had been kind of pushed off are beginning to come to fruition.

This time last year, however, what I'm most excited about is the acceleration in the buy side. So you can see that the buy side.

As a whole the way that we measure it grew I think 200 basis points are the largest segment within that for us the largest firm type or just the institutional asset managers, where we've seen obviously a lot of pressure over the last few years, but our our solutions are very are resonating with them. They.

They had a very strong quarter. You know relative to the other phone types, I think it was the biggest contributor on an absolute basis relative to last year. So we're really bullish about the buy-side. And particularly our analytics solutions are beginning to take hold again, so I think there was some pent up. I think demand there on the buy-side and I think as we're sort of learning all learning how to operate within a new environment. We saw a lot of deals that had been kind of pushed off are beginning to come to fruition.

You know relative to the other phone types I think it was the biggest contributor on an absolute basis relative to last year. So we're really bullish about the buy side.

And particularly our analytics solutions are beginning to.

Take hold again, so I think there was some pent up.

I think demand there on the buy-side and I think as we're sort of learning all learning how to operate within a new environment. We saw a lot of deals that had been kind of pushed off are beginning to come to fruition.

Okay. Thank you. Sure. Our next question comes from Toni Kaplan with Morgan Stanley. Terrific. Thank you. Great speaking with you again, Linda, just wondering if you could talk about you know how it's going so far and any best practices that are you know bringing with you from Moody's and MSCI. And you know really any sort of changes in capital allocation strategy as you think about it from what you've seen so far.

Sure.

Our next question comes from Toni Kaplan with Morgan Stanley.

Terrific. Thank you.

Great speaking with you again, Linda just wondering if you could talk about you know how it's going so far and any best practices that are you know.

Bringing with you from Moody's and MSCI and you know really any sort of changes in capital allocation strategy as you think about it from what you've seen so far.

Thanks, Tony and it's great to hear from you as well so far everything is going great. It's been about 10 weeks and for this quarter we've been able to pair you know some pretty terrific top-line growth with our start on what we're going to do on working on the margin. So you probably saw we did a $9 million restructuring charge. As well as the $3.7 million real estate charge.

We did a $9 million restructuring charge.

As well as the $3.7 million real estate charge.

And on the margin front, we've talked about the need to focus on four big buckets of cost, which would be compensation technology real estate and third party data. So what you're seeing here is the out of the box first efforts here to make sure we've got the margin plan moving along and this is a best practice, obviously that that has worked in other places. So the $9 million restructuring charge, we were able to take about 5% off the compensation line.

Moving along and this is a best practice, obviously that that has worked in other places.

So the $9 million restructuring charge, we were able to take about 5% off the compensation line.

We increased spans of control for the managers and we reduced the number of layers in the corporation by one. So that efficiency was very very helpful to us. We've also been very careful about our headcount additions. Headcount is about flat for this quarter and we did invest some of that 5% savings from the compline back into key talent and high potential employee performance compensation for those folks.

Percent savings from the comp line back into key talent and.

Our high potential employee performance compensation for those folks.

On the real estate line, as we said, we've got to take a look at our real estate footprint are given that a number of our employees are very excited about continued flexibility. The analysis here is to look at the real estate line, think about what we can best do to get the footprint right-sized and we haven't come to a conclusion yet on that because we have to make sure that the offices work well for the employees. But we're starting on our margin journey here. You see that the margin exceeded the guidance for the GAAP operating margin. And on capital allocation. We've begun our discussions. No official decisions quite yet. We will be releasing our 10-Q early in January.

To make sure that the offices work well for the employees, but where starting on our margin journey here you see that the margin exceeded.

guidance for the GAAP operating margin. And on capital allocation. We've begun our discussions. No official decisions quite yet. We will be releasing our 10-Q early in January.

And we'll see where we get to after that. But so far so good. Good focus on margin, good focus on capital allocation. And we're also looking to be more specific about the returns on our investments that we've made. Not quite there yet on that one but [inaudible] will be speaking some more about the fact that we've continued to invest through the pandemic and that is really paying off for us now. We continue to invest where some others pulled back. So, so far, so good. And thanks for the question.

So far so good good focus on margin good focus on capital allocation.

And we're also looking to be more specific about the returns on our investments that we've made not quite there yet on that one but still will be speaking some more about the fact that we've continued to invest through the pandemic and that is really paying off for US now we continue to invest where some others pulled back so so far so good and.

Thanks for the question.

Terrific. And as a follow-up. Just wanted to ask about sort of the product roadmap from here. You mentioned that the deep sector strategy is gaining some traction and so I guess, what's next and how are you thinking about and I'm sure we'll get some color on that at the Investor Day, but just anything you're excited about in this fiscal year. Thanks.

As a follow up.

To ask about sort of the product road map from here.

You mentioned that the deep sector strategy is is gaining some traction and so I guess, what what's next and how are you thinking about and I'm sure. We'll get some color on that at the Investor day, but just anything you're excited about and test it in this fiscal year. Thanks.

Yeah, well, thanks, Tony. There is still quite a bit of work to do to finish off the work that we set out three years ago. So we're on track for deep sector. So we, as I talked about in the script, we released a couple more are industries there. So we're we've got a few more to go. We continue to build out our ESG coverage. So we're very excited about the true value of labs acquisition that's growing at a good clip. And one of our you know one of the things we do well when we acquire data like that is just continue to build it out in terms of coverage. So there's a lot of effort behind that and then on the private market side, that's a relatively new area for us, was super excited about the cobalt acquisition.

The work that we set out three years ago. So we're we're on track for deep sector. So we as I talked about in the script. We released a couple more are industries. There. So we're we've got a few more to go we continue to build out our ESG coverage. So we're very excited about the true value of labs acquisition, that's growing at a good clip.

And one of our you know one of the things we do well when we acquire data like that is just continue to build it out in terms of coverage. So there's a lot of effort behind that and then on the private market side, that's a relatively new area for us, was super excited about the cobalt acquisition.

Data like that is just continue to build it out in terms of coverage. So there's a lot of effort behind that and then on the private market side, that's a relatively new area for US was super excited about the cobalt acquisition.

But we're just going to continue to build out you know what we can offer there from both the data and workflow standpoint. So I'd say on the content side. You know those are you know. It's still very exciting and still a ton of runway. And we think we can take a lot of market share once we complete all of those. And then you know, I would say on the software side, it's really this concept of next best action. So we've seen a lot of interest in our advise a dashboard, which has been sold to a number of wealth firms on that really are as we've spoken about allows an advisor to sit through the noise and sort of understand what he or she may want to do is the first 10 things on any given day, but we're going to extend that concept to other firm types and other workflows. So it's still early days for that but we do think that that's going to be an important differentiator for us as a firm.

It's still very exciting and still a ton of runway.

And we think we can take a lot of market share once we complete all of those.

And then you know.

I would say on the on.

On the software side, it's really this concept of next best action. So we've seen a lot of interest in our advise a dashboard, which has been sold to a number of wealth firms on that really are as we've spoken about allows an advisor to sit through the noise and sort of understand what he or she may want to do is the first 10 things on any.

Given day, but we're going to extend that concept to other firm types and other workflows. So it's still early days for that but we do think that that's going to be an important differentiator for us as a firm.

Thanks so much. Happy holidays. Yes, same to you. Thanks. Our next question comes from Ashish [inaudible] with RBC capital markets. Congrats on the solid results. I just wanted to hone down further on analytics, Phill obviously, you mentioned a pretty good pent up demand and pretty good momentum strong demand for yet in products. I was just wondering if you could talk about how big is the opportunity that you are in and exploring those opportunities. And then as we think about these implementations, are you replacing existing third party systems, our in house applications. I was just wondering if you could also talk about whether you are gaining market share. So any incremental color on the analytics front. Thanks.

Yes same to you. Thanks.

Our next question comes from Ashish <unk> with RBC capital markets.

Congrats on the solid results I just wanted to hone down further on analytics, a Philly obviously, you mentioned a pretty good pent up demand and us pretty good momentum strong demand for yet in products. I was just wondering if you could talk about how big is the opportunity that you are in and exploring those opportunities.

And then as we think about it.

These implementations are you, replacing an existing third party systems, our in house applications.

I was just wondering if you could also talk about whether you are gaining market share. So.

Any incremental color on the analytics front. Thanks.

Thanks, Ashish and you know as you know, it's a broad portfolio of solutions and products we have there. So maybe I'll break it down in terms of our front office solutions, what we have in there our trading capabilities. And we put on new Quant research environment in there. And both of those are doing very well. So we're seeing very good adoption of the front office solutions. And you know I think the release of our fixed-income trading capabilities should provide some good upside in the future. So on the front office side, we feel good there. We put a lot of effort into integrating those assets that we bought a few years ago, We released our portfolio management platform and we're seeing a ton of entrust. In the Middle office, we had a very good quarter as well. In fact, a lot of what drove analytics was good old portfolio analysis, and we saw very good uptick there. And that had been sort of flat for a while so that's sort of a testament I think to us continuing to invest in that product and some of the work we've done there to just continue to execute well on the sales front.

And we put on new Quant research environment and Theyre on both of those are doing very well. So we're seeing very good adoption of the front office solutions.

And you know I think the release of our fixed income trading capabilities.

should provide some good upside in the future. So on the front office side, we feel good there. We put a lot of effort into integrating those assets that we bought a few years ago, We released our portfolio management platform and we're seeing a ton of entrust. In the Middle office, we had a very good quarter as well. In fact, a lot of what drove analytics was good old portfolio analysis, and we saw very good uptick there. And that had been sort of flat for a while so that's sort of a testament I think to us continuing to invest in that product and some of the work we've done there to just continue to execute well on the sales front.

Good old portfolio analysis, and we saw very good uptick there and that had been sort of flat for a while so that's sort of a testament I think to us continuing to invest in that product and some of the work. We've done there to just continue to execute well on the sales front.

So we just see a ton of opportunity I mean, it's I think around 600 million dollar business today I think that's what we reported at the end of last fiscal year. But it's really nice to see the growth rate of that segment of our business, which has been differentiating for FactSet and should be moving forward. There's a lot of excitement amongst the team and that's what's been driving I think the improved relative performance on the buy-side. That's really helpful color and Linda, maybe a follow-up question. Thanks, again for providing that color on the cost. A portion of our cost takeout opportunity and margin expansion opportunity as well as capital allocation. I was wondering is, when do you plan to provide like an update on the mid or long term should we expect that the at the Investor day? And maybe if I can just ask on the margin front itself. How do you think about the margin expansion opportunity as you think about the full buckets of cost takeout? Thanks.

There's a lot of excitement amongst the team and that's what's been driving I think of the improved relative performance on the buy side.

That's really helpful color and Linda maybe a follow up question. Thanks, again for providing that color on the cost.

A portion of our cost takeout opportunity and margin expansion opportunity as well as capital allocation I was wondering.

Is when do you plan to provide like an update on the mid or long term should we expect that the at the Investor day, and maybe if I can just ask on the margin front itself. How do you think about the margin expansion opportunity as you think about the full buckets of cost takeout. Thanks.

Ashish, maybe I'll start with your second question first. On the margin opportunity, it's quite clear that FactSet has some room to go and to improve on the margin front. So what we're going to do is we're going to look at all four of these buckets very carefully benchmark them and see what action we should take. And what you've seen this quarter. As I said is a start on that path. So our guidance for this year is 32 and a half to 33 and a half percent adjusted operating margin.

On the margin opportunity, it's quite clear that Factset has some room to go and two to improve on the margin front.

So what we're going to do is we're going to look at all four of these buckets very carefully benchmarked them and see what what action, we should take and what you've seen this quarter. As I said is a is a start on that path. So our guidance for this year is 32, and a half to 33 and a half a percent adjusted.

<unk> margin.

We're ahead of that for this quarter, which is really good. Very hard to predict the margin sequentially. So we're just going to stick with the annual guidance. And you know we have a very sharp eye on the margin focus at this point. On capital allocation, I think you're right as we move toward Investor Day, which is currently scheduled for April 5th. We'll see what happens as every day is a new day with COVID. We would like to talk a little bit more about this. I think directionally, many of the companies in this space or are sort of the investment-grade companies in the B double a triple B space. I think we'll think about that a little bit further and we'll give you a little bit more guidance as we move through the next earnings call and Investor Day.

We'll see what happens as everyday is a new day with Covid.

We would like to talk a little bit more about this I think directionally.

of the companies in this space or are sort of the investment-grade companies in the B double a triple B space. I think we'll think about that a little bit further and we'll give you a little bit more guidance as we

move through the next earnings call and Investor Day.

That's helpful color. Yes, no. It was very helpful. Thanks, Linda and congrats once again. Thank you. Our next question comes from Alex Kramm with UBS.

Yes, no. It was very helpful. Thanks, Linda and congrats once again.

Thank you.

Our next question comes from Alex Kramm with UBS.

Yeah. Hey, good morning, everyone. I think you mentioned Linda value-based pricing opportunities a couple of times in your prepared remarks. Can you flush that out a little bit more? I think you've talked recently about the inflationary environment potentially helping you, but when I look about the next quarter. That's usually when you have your America's increase. I think that added one and a half percentage to pricing last year. So clearly I don't think you can reprice across the whole book. So maybe talk a little bit about how much of your ASV actually is, you can reprice and then obviously how you feel about that 1.5% from last year this year in a higher inflationary environment. Thanks.

That added one and a half percentage to pricing last year. So clearly I don't think you can reprice across the whole book, So maybe talk a little bit about how much of your a S. V. Actually is is you can reprice and then obviously how you feel about that one 5% from last year this year in Ohio.

Stationary environment. Thanks.

Sure, Alex. Let me start and then Phil will pick up from there. So one of the things that is important to note is that most of our contracts indicate that we can take price increases if warranted at 3% or up to the rate of inflation. Now, we're not obviously going to price up to the rate of inflation, which recently, it's been quite a bit higher but I think it's important to note that the sales team led by Helen Shan has done a good job of upping the realization on the price front for us. Being very careful to provide appropriate value to our customers. So with that, I'll probably turn it over to Phil and let him speak a little bit more about what we see in the future for price.

<unk> now, we're not obviously going to price up to the rate of inflation, which recently, it's been quite a bit higher but.

I think it's important to note that the sales team.

Led by Helen Shan has done a good job of upping the realization on the price front for us being very careful to provide appropriate value to our customers. So.

With that I'll, probably turn it over to Phil and let him speak a little bit more about what we see in the future for price.

Thanks, Linda. Hey, Alex. Yeah. So I think we've got good pricing power and Linda mentioned that Helen put her in a massive amount of work frankly in the last two years to sort of rationalize a lot of the SKUs that we had on FactSet. In fact, I was told at one point that they were more FactSet's SKUs than molecules in the universe, which worried me a little bit. So we've done a great job to rationalize that. And Helen is suddenly for new business, making sure that we're using these new packages and it has made the lives of the salespeople so much easier. They have less to worry about in terms of making sure the packages are customized for clients. It's helping us be more efficient. I think it is providing more value in the marketplace and sort of clients are sort of, it's an easier choice for them. So I do think it's early days on this and we're not going to jam it all through it once but we're just going to move our way through this in a systematic way and make sure that we're keeping you know the health of our clients and the great relationships we have with them. As a top priority.

Yeah. So I think we've got.

We have got good pricing power and Linda mentioned that Helen.

Did she put her in a massive amount of work frankly in the last two years to sort of rationalize a lot of the skus that we had on on Factset. In fact, I was told at one point that they were more facts. It skews the molecules in the universe, which which worried me a little bit. So we've done a great job to rationalize that.

And Helen is suddenly for new business, making sure that we're using these new packages and it has made the lives of the salespeople so much easier. They have less to worry about in terms of making sure the packages are customized for clients.

They have less to worry about in terms of making sure the packages are customized for clients.

It's helping us be more efficient. I think it is providing more value in the marketplace and sort of clients are sort of, it's an easier choice for them. So I do think it's early days on this and we're not going to jam it all through it once but we're just going to move our way through this in a systematic way and make sure that we're keeping you know the health of our clients and the great relationships we have with them. As a top priority.

The health of our clients and the great relationships, we have with them.

Top priority.

Okay, great. Thank you and then I guess secondarily, just coming back to the margin. Obviously, decent severance action taken this quarter. And you said some of these savings are going to be reinvested. So any other color you can give us in terms of how quickly you're going to reinvest these savings? I mean, I look at last year and I know your margin was decent in the first quarter, but it was down year over year. I don't know what the cadence for the rest of the year is going to be but I guess my question would be should we expect that near term margins to come up a little bit as you realize the savings and then they get reinvested you know later on this year? So any help you could provide us will be helpful. Thank you.

Obviously.

Decent severance action taken this this this quarter.

And you said some of these savings are going to be reinvested. So any other color you can give us in terms of how quickly you're going to reinvest. These are these savings I mean, I look at last year and I know your margin was decent in the first quarter, but it was down year over year end.

I don't know what the cadence for the rest of the year is going to be but I guess my question would be should we expect that near term margins to come up a little bit as you realize the savings and then they get reinvested you know later on this year? So any help you could provide us will be helpful. Thank you.

Come up a little bit as you realize the savings and then they get reinvested you know later on this year. So any help you could provide us will be helpful. Thank you.

Yeah, and Alex, it's, as I said, tough to predict the margin quarter over quarter. This first quarter has run exceptionally strong in terms of sales as Phil has detailed. One of the things that we noted as a result of that which makes it difficult to talk about the margin quarter over quarter is the performance plans and the bonus plans associated partially with the sales team and with the rest of the corporation. So for example last year, we put up $15 million for the performance plan. And this year in fact that number is $21 million. Just to show you the difference in the strength between Q1 this year versus last year. So we will continue to work hard on making progress on the margin.

This first quarter has run exceptionally strong in terms of sales as Phil has detailed.

One of the things that we noted as a result of that which makes it difficult to talk about the margin quarter over quarter is.

The performance plans and the bonus plans associated partially with the sales team and with the rest of the corporation. So for example last year, we put up $15 million for the performance plan.

And this year in fact that number is $21 million just to show you the difference in the strength between Q1 <unk>.

This year versus last year. So we will continue to work hard on making progress on the margin.

We took some of these charges earlier in the year. So that we are hopeful that the run rate will improve as we move through the year. But in terms of headwinds you know, we've got some choppiness coming from what the fed has discussed. And potentially as the some con situation continues so we think we're doing and taking the right actions on our part, Alex, but it's kind of hard to tell with this market environment being as choppy as it is. But we're really pleased with the first quarter and the progress that we've made and we've taken the tough steps here. So we're optimistic and keeping a close eye on everything and [inaudible] anything more he wanted to add.

In terms of headwinds you know, we've got some choppiness coming from what the fed has discussed.

And potentially as as the some con situation continues so we think we're doing and taking the right actions on our part Alex but it's it's kind of hard to tell with this market environment are.

Being as choppy as it is but we're really pleased with the first quarter and the progress that we've made and we've taken the tough steps here. So we're we're optimistic and keeping a close eye on everything and Arnaud fill at anything more he wanted to add.

No that's good. Alright, thanks for the additional color. Our next question comes from Shlomo Rosenbaum of Stifel. Hi. Good morning. Thank you for taking my questions. Hey, Phil maybe you could talk a little bit more about the margin journey, just historically FactSet hit a certain philosophy in terms of reinvesting incremental margin over a certain level to drive long term revenue growth. With the discussions today and talking about room for margin to go up, is there a is there seem philosophy continuing but the idea is that we have a higher margin level that where you're kind of or range we're targeting? Or is there some kind of different approach that you're taking towards the margins in terms of balancing the margin versus the targeted revenue growth for driving long term value for the company?

Alright, thanks for the additional color.

Uh huh.

Our next question comes from Shlomo Rosenbaum of Stifel.

Hi, Good morning. Thank you for taking my questions Hey, Phil maybe you could talk a little bit more about the margin journey, just historically facts. It hit a certain philosophy in terms of reinvesting incremental margin over a certain level to drive long term revenue growth.

With the discussions today and talking about room for margin to go up, is there a is there seem philosophy continuing but the idea is that we have a higher margin level that where you're kind of or range we're targeting? Or is there some kind of different approach that you're taking towards the margins in terms of balancing the margin versus the targeted revenue growth for driving long term value for the company?

King towards the margins in terms of balancing the margin versus the targeted revenue growth for driving long term value for the company.

Yes, so thanks Shlomo good to talk to you. Yeah, we will continue to reinvest in our product we've done that over the last four decades. And as a technology and content company. It's so important that we do that. So you know we took that step back a couple of years ago, we're marching back to levels that we had back then. But I do believe that you know a big piece of that thesis here was to invest in that technology in a way that would make FactSet more efficient. So we do think there's a lot of efficiencies to be gained by what we've put in in terms of the tech stack.

And as a technology and content company. It's so important that we do that so you know we we took that step back a couple of years ago, we're marching back to levels.

That we had back then but I do believe that you know a big piece of that thesis here was to invest in that technology.

In a way, which would make factset more efficient. So we do think there's a lot of efficiency to be gained by.

What we've put in in terms of the tech stack and we.

We will just have to balance over time how much of that we leverage in terms of margin versus reinvesting in the business. And I would add we've increased the well on the margin by 50 basis points for this year. We would hope that that would be a trend to continue but stay tuned year over year. I think one of the other things we're going to have to watch and we can't fight measured yet. It's the management of the product portfolio effort under Christie. And with that, we're going to focus a little bit more on how do we think about their products, their profitability.

And Selim I would would add we've increased the well on the margin by 50 basis points for this year, we would hope that that would be a trend to continue but stay tuned year over year I think one of the other things we're going to have to watch and we can't fight measured yet.

It's the management of the product portfolio effort under Christie. And with that, we're going to focus a little bit more on how do we think about their products, their profitability.

Is there anything we need to trim or prune and just make sure that we have the product focus correctly in order. Phil may want to stay a little bit more about this but with respect that if we get that piece right, we may be able to find some more margin. And we're just not sure yet you just announced this change recently. So I think maybe in your follow up conversations with Kendra and Linda later, they can provide more detail here. But part of the restructuring. We also reorganized the company in a way where we're thinking about product management a little bit differently. So we elevated the chief product officer role under Kristie Karnofsky. And that did result in some changes in terms of how different functions [are organized].

The Plata focus correctly in order, Phil may want to stay a little bit more about this but with respect.

That if we get that piece right, we may be able to find some more margin and we're just not sure yet you just announced this change recently.

So I think maybe in your follow up conversations with Kendra and Linda later, they can provide more detail here, but part of the restructuring. We also reorganized the company and in a way, where we're thinking about product management, a little bit differently. So we elevated the chief product officer role under Kristie Karnofsky.

did result in some changes in terms of how different functions [are organized].

Okay, great. For my follow up, can you just talk a little bit about what you're seeing in terms of just employee churn. To note that some of the investment is to make sure you know to invest in retention of key personnel and it's no secret across Wall Street that there's a lot of movement going on right now. What are you seeing internally? I mean, there was only for Wendy you mentioned for in terms of headcount you kept a tight rein I don't usually see a net new additions in one quarter of just six people. I was wondering how much of that was purposeful on how much is really trying to manage the churn that might be going on.

For my follow up can you just talk a little bit about <unk>.

What you're seeing in terms of just employee churn.

To note that some of the investment is to make sure you know to invest and retention of key personnel and it's no secret across wall Street that Theres a lot of movement going on right now.

What are you seeing internally I mean, there was only for Wendy you mentioned for in terms of head count you kept a tight rein I don't usually see.

Net new additions in one quarter of just six people I was wondering how much of that was purposeful on how much is really trying to manage the churn there might be going on.

Yeah. Hey, Shlomo. So I think a lot of that just has to do with us becoming more efficient as a company. Linda mentioned that we went through this spans and layers exercise where we added one span of control on average for managers and we removed one layer from the organization. So I would attribute most of it to that but like any company right. We're very cognizant of the war for talent. We're really focused on making sure that you know the employee value proposition of FactSet is as strong as it's always been. And making sure that we're hiring and retaining the critical roles and functions that we need to succeed in the future.

Exercise, where we added one <unk>.

Span of control on average for managers and we removed one layer from the organization.

So I would I would attribute most of it to that but like any company right. We're very cognizant of the war for talent, we're really focused on making sure that you know the employee value proposition of Factset is as strong as it's always been.

And making sure that we're hiring and retaining the critical roles and functions that we need to succeed in the future.

Thank you. Our next question comes from David Chu with Bank of America. Hi. Thanks, guys. So deep sector has obviously been a key driver of both retention and new business. Definitely appears to be helping in the corporate channel. Just wondering if you can discuss the competitive landscape for these data assets and just wondering how unique your data is relative to other providers and how it is differentiated.

Our next question comes from David Chu with Bank of America.

Hi, Thanks, guys.

So deep deep sector has obviously been a key driver of both retention and new business.

Definitely appears to be helping in the corporate channel just wondering if you can discuss the competitive landscape for these data assets just wondering how.

Your data is relative to other providers and how it is differentiated.

Well, one of the differentiators, David, is I think just the great job that FactSet does connecting any data you know that we have on our refinery to the other datasets, so there's a ton of value to just making sure that we're linking all of this deeper data to everything with our entity data map. And we just see very broad-based demand obviously for more detailed data. As people are looking for alpha and in terms of their investment process. So we're not just seeing demand for this in banks as you pointed out we're seeing demand for incorporations are we seeing demand for it on the buy-side. So I would just say you know we're just competing generally in the market with us.

In our refinery to the other datasets, so there's a ton of value to just making sure that we're linking.

All of this deeper data to everything with our entity data map.

And we just see very broad based demand obviously for more detailed data.

As people are looking for alpha and in terms of their investment process. So we're not just seeing demand for this and banks as you pointed out we're seeing demand for incorporations are we seeing demand for it.

buy-side. So I would just say you know we're just competing generally in the market with us.

But you know we're moving quickly. The visualization that we provide for the content is going over very well with our clients. We're making the data available through feeds in API, which is important as well. So we're just sort of treating it may be as the next generation of fundamental data essentially for our clients.

The visualization that we provide for the content is going over very well with our clients when making the data available through feeds in API, which is important as well. So we're just sort of treating it may be as the next you.

It's the next generation of fundamental data are essentially for our clients.

Okay, got it. And then just on the real estate side. My sense is that any reductions is not in guidance today. So would any savings represent potential upside to the margin guide? Is that fair? David, it's possible that that would be the case. I would just caution that some of the leases that we have are longer-term. And so it can take us a bit of time to think about the collection of leases that we would want to change. So directionally, yes, and we may have some more to say about this as we finish our analysis as we move forward.

Just on the real estate side.

My sense is that any reductions is not in guidance today. So.

Any savings represent potential upside to the margin guide is that is that fair.

David It's it's possible that that would be the case I would just caution that.

Some of the leases that we have are longer term and so it can take us a bit of time to think about the collection of leases that we would want to change.

So directionally, yes, and are we may have some more to say about this as we finish our analysis as we move forward.

Okay, great. Thanks, guys.

Our next question comes from on Lau with Oppenheimer.

Good morning, and thank you for taking my question just a quick one for me could you. Please provide some update on the opportunities in ESG and the progress of our offering to surface to clients. Thank you.

Yes, so thank you Owen.

Yeah, we see a lot of opportunity here like I think many firms do on the ESG front. So we acquired true value labs about a year ago, we've done I think well continuing to sell that product and we've also done a good job of integrating it into the Factset ecosystem. So you can now use ESG is an overlay for example in your portfolio analytics process.

And just to remind everyone. The differentiator for true value labs is really that it's an outside in look at our company.

It's more of a real time evaluation of how that company is doing so we were really stepping on the gas here in terms of building out the.

The coverage for this which we think will be important.

And just very optimistic about you.

You know you using E S G like throughout the system like depending on the business rock firm type of workflow everyone's going to want to look at it one way or the other so it's still relatively early for us, but we're very pleased with our progress.

Sorry, So just for me to understand better do you think it's better to build in house or do you think it's better to buy.

The surface for me from the outside party.

Well, we offer both so I think in truth Factset fashion.

We're you know we're Swiss about this we're very open we probably have you know up to 20 different ESG providers within Factset. So you know what I see mostly when I talk to clients as they the more than half of them are building their own solution, but they are using.

You know different elements of different providers ESG solutions. It's still you know its still not clear sort of exactly where we're going with ESG.

You know just in terms of regulation and so on so I think there's still a lot of opportunity. He has so most firms are building their own dashboards.

If they want to just take true value labs, that's fine with us, but more often than not they're integrating more than one and because its all on factset and it's connected with our entity data map, we make that very easy for them right. They don't have to manage all of these feeds themselves and that's one of the things that makes us so sticky.

Got it thank you very much.

Yep.

Our next question comes from Hamzah Mazar with Jefferies.

Hi, This is Mario <unk> filling in for Hamzah.

You guys mentioned omicron earlier, just on the margin side, but maybe you could walk us through how to think about omicron in terms of I guess delayed office reopening.

Does it.

The pushout, maybe sales are or the implementation of analytics packages.

Or is there any indication on any impact to the to the sales cycle.

I don't think so I mean, we've obviously performed exceptionally well over the last two years.

So we figured this out to do it remotely and we do want to offer our employees the best balance in terms of their own lives. So it's it's a moving target for everyone.

You know, we while our offices are open for business and our employees can come in if they're vaccinated.

And then you know I think we probably going to take another pause here and just sort of make sure that we're paying attention to local regulations, you know by city state or country I'm, just doing the right thing by our employees, but in terms of us running our business and working with our clients I don't see it's going to change anything.

Great and then just my follow up is.

Around sales force productivity. So maybe you can give us a sense for how it's trended.

Or how it's trending today and I guess, how much more room. There is for improvement there you guys mentioned that.

You guys your employee base as being a very efficient.

Again any indication there and then also what are your sales hiring plans for the remainder of the 2022 fiscal year.

So our sales productivity I believe is going up and I do think there's more runway. There. So Helen has suddenly hit the ground running as chief revenue officer, She's doing a great job there she's made up a few moves to sort of restructured the sales force by phone type, where we can and focus on different types of clients.

So you know we've invested a lot in our information systems over the last few years as I mentioned you know, we've we've done a lot to sort of rationalize the packages on factset.

Helens, putting some great incentives in there in place for the sales team, which I think were effective in Q1. So there's a lot of levers that we're pulling.

And obviously it's great.

The sales team is having a lot of success. So we've got a great you know a team at Factset on the sales front and and client service you know, it's a big team it might be on order of a couple of thousand people that we have facing off against our clients, but they're all working very well together, having fun and.

It's great to kind of see this momentum. So we will certainly keep hiring but we have we have essentially created a lot of really good salespeople at factset from people that come up through the consulting and specialty ranks on what makes factset salespeople. So effective is just how well they know our product.

Understood. Thank you very much.

Our next question comes from Andrew Nicholas with William Blair.

Alright. Thanks, so much this is actually Trevor Romeo in for Andrew.

First just wanted to touch on the on the retention side. It was nice to see client retention increased to 92, which I think was the highest in several years.

Just wondering if you think you have room for that metric to increase further and you know maybe what might be a realistic target for client retention.

So it's great to see the improvement and again. This is really just the the dedication and focus of the sales and client service teams and how well late been able to operate in this environment. So I know that retention has been something that Helen has been stressing extremely.

You know strongly with the sales team and.

And she's thought about sort of how to distribute that work there how to kind of allocate the work amongst teams and it's really paying off and again it just points to I think the strength of our products, how well we've worked with our clients in this environment.

Multiple reasons why that number is increasing and factset is just becoming stickier and stickier and a critical part of so many of our clients' workflow.

Okay, great. Thank you and then.

I think he touched on this a bit in the prepared remarks, but ASD growth in Asia, it's been quite a bit stronger than the other two regions over the past few quarters is there just anything you'd call out there thats benefiting the Asian markets in particular more than than the others.

I would just say that you know that market has grown faster than the other two for a long time.

Factset is a mature company, we just entered the S&P 500, but Asia is still our newest market.

And we do see a lot of opportunity out there in terms of leveraging some of the solutions that we built.

And I think active management, it seems to be more alive and well in every region, but I think it's probably a little bit easier to be inactive manager in Asia than it might be in some other regions and Factset, we have solutions for everybody, but we have great solutions for active managers.

Okay, great. Thank you very much.

Our next question comes from Kevin Mcveigh with credit Suisse.

Great. Thanks, so much and congratulations on the S&P admission that's a fantastic outcome.

Hey, Ana edible.

It should be for.

Phil It Linda but.

So can you unpack the HD a little bit I mean, it sounds like you are going to be in a period of probably better pricing and the retention is going up.

Should that imply some upside to that and then just can you unpack the pricing a little bit how much of it is just funded the rating is inflation as opposed to maybe the remixing of of higher value added services right. Because you say, obviously the core pricing, but then maybe there's a service component to it.

Help us understand that dynamic a little bit.

Sure. So I think for the first the first question.

Our success or acceleration was very broad based this quarter. So we saw strength across every region and we saw a relative strength across all of all three of our business lines.

As I mentioned, we saw very strong growth double digit growth in many of the firm types that we sell to so I would just I would just point to the.

The investments that we've made in technology and content apply to know all of these different areas. That's one thing.

And then in terms of price you know usually our major price doesn't go in price increase until Q2 for our clients in the Americas in Q3 for EMEA and Asia Pac. So I would just say up to this point at it you know it has to do with.

Price realization across these new packages that we've created.

So I hopefully that answers your question.

It does and then just real quick.

Obviously.

The cloud kind of transfer them in your business.

Where are you folks internally on that and then more importantly, like where are your clients right.

Obviously enabled a lot but from from a cloud adoption perspective can you help us frame, where you folks are internally and then where your clients are externally in terms of cloud adoption.

Yeah, that's a shock, but is there any way to frame that a little bit.

Yeah, I can't give you percentages for the clients I mean for Factset, we're more than halfway through our program to move to the public cloud. So it's a multi multi cloud strategy and we're also as you know partnering very well with firms like Snowflake, and Amazon, which we both been public about that so the reason that we're moving so quickly there.

As our clients are moving quickly to the cloud almost every single firm you talk to is going through some form of digital transformation. So the fact that we're.

So focused on this and we've made so much progress really allows us to sit down with these clients and have our tech teams face often talk about the technology stack, what we can do to help them and what we can do to help them rationalize their spend across content data technology providers, but also content providers. So I think it's sort of non.

<unk>, we all have to be doing it I'm very excited that we sort of decided we were going to do it aggressively two years ago and again I think that just speaks to some of the success that we're seeing now, particularly over the last few quarters.

No makes a lot of sense.

Thanks, so much.

Thank you.

Our next question comes from Keith has been with Northcoast research.

Good morning, guys. A question for you on the growth I guess, so can you talk to the growth you guys experienced this quarter and how it compares to prior quarters in terms of the growth from existing customers versus new customers that you're adding.

Yeah. So I think we saw relative to Q1 of last year.

We saw improvement in terms of expansion retention and new business. So again I think it was very broad based on the new business front you can see we added.

A lot of new logos.

This quarter one of those would driven by corporates, but we did see you know good uptick across some other firm types as well, but again I think it just speaks to that we're firing on all cylinders here in every way that you look at our business and how we measure and yet we're seeing we're seeing good momentum.

Great and I, just kind of a.

Kind of reconcile that in the past two three quarters, you've spoken to the strong momentum that youre seeing in the pipeline and perhaps talk about the pipeline this quarter comparison, perhaps compared to the fourth quarter. We just passed and then how does that compare with I guess that reconciled from comments that Linda made in terms of caution with honour crime and the federal reserve has your optimism.

Same level, you've had in the past few quarters.

Yeah, I think I feel very very good about our pipeline and as we've mentioned historically, sometimes it's hard to see out more than six months, but I would say you know relative to this time last year Q2, and Q3 are looking good.

And looking good across the institutional asset management, which again I view as sort of a key.

A firm type for us. So we've got we've got I think decent visibility on the next six months, but because Q4 is such a big quarter for Factset. Another just a little further out and some of the things that Linda mentioned and the fact that it's Q1, we just feel that it's important that we sort of give ourselves a little bit of time before we revisit.

Guidance.

Great. Thank you good luck.

Thanks.

Our next question comes from George Tong with Goldman Sachs.

Hi, Thanks, Good morning, and Linda welcomed Factset and excited to work with you again.

Thanks George.

Yeah. So maybe first question for you with the fact that previously had a longer term target of high single digit annual organic <unk> plus professional services growth what are your qualitative views on track that's longer term fee growth outlook, given your experience as CFO of other info services companies and your time so far.

At the company.

Yeah George I.

I think the the numbers that we put up probably speak more strongly than any of our opinions.

And the fact that we've been able to do 9%. This first quarter has really been a very strong statement to the growth potential for the company.

So it's also been really modest and hasn't mentioned that that growth is is very broad based this is not being done on the back of one or two mega deals or anything like that it is singles and doubles again, and again and again with clients who are telling us that the investments that we've made over the past two years when many other.

Bidders stood still are pulled back.

That time, it's really given us and the money is given us the opportunity to really have the best in class products.

For our clients, which is really very very exciting.

Secondly in terms of how we did this quarter and if you bring it down to the EPS line.

Looking at our comparison of this year over last year.

So pretty impressive performance last year on the adjusted diluted EPS, we were at $2.88. This year, we're at $3.25.

And.

We looked at some of the flash reports and a lot of that was attributed to two tax and a lower tax rate because of options exercise that's true, but if you take the beat of 37 cents about half is from the operating side and about half is from the tax side. So even if we had no change in tax rate, we would have beaten by.

About 20 cents, so we feel pretty good about that and we think it's a testament to the strength of the business. So the next steps our increased focus on the margin, which I talked about increased focus on the capital allocation and just really make sure that we're running the company as efficiently as we can.

It hasn't been spoken to George that last year. In addition, we had 18 and a half million dollars in Capex. We spent in the first quarter. This year, it's down to eight six part of that last year was the build out of our Manila office, but with that gone Capex has come down a bit so as Phil said, we kind of see the hump here in terms of this investment program that.

We've had but while there were a lot of doubters two years ago at a it seems to be paying off. So we're we're pretty excited about about all of that hope that helps you got it very helpful context, and then fill in fiscal 2021 research organic ESP plus professional services growth was five 7% in this.

It was meaningfully higher than the average of 1% growth between fiscal 2017 and fiscal 2020. So far in fiscal 2022 can you elaborate on the trends within research that may be similar or different to those that you saw in fiscal 2021 and whether you believe mid single digit plus growth is sustainable within research.

Yeah. Thanks, George So you have research had a very a tremendous.

A quarter. So I think we continue to see strength.

With sell side analysts in Q1 it wasn't that.

The primary driver of a S V by any means but it certainly helped.

And I think it just really speaks to all of the great work. Our you know the research and advisory team has put in over the last few years just to get more content into the platform and to build out.

Fantastic reports for for all for all of you that use our products. So I am optimistic about this part of the market. You know I think you know when we started talking a few years ago right, we talked about having that great balance between enterprise and analytics solutions and the desktop, but it's really nice to see the core factset.

Workstation really coming back strongly and there's just a ton of opportunity out there for us in terms of desk that we feel we can go capture now.

Yeah.

Got it thank you.

Our next question comes from Craig Huber with Huber Research partners.

Yes, hi, thank you.

In Europe, the buy side set of clients, you're obviously include corporations and other what percent overall now of your revenues or corporations, maybe how is that piece doing versus a year a year ago. Please.

Well, we don't break that out some Craig a number but I can tell you that it's growing.

Very quickly is probably the fastest growing.

Firm type we have.

And again I think because of you know the investment that we've made in new contents ups.

I think where we can appeal to more workflows within corporations, we might've historically.

But also can you go a little bit deeper into deep sector data that you guys are providing you talked about some new shutters you want to roll out here.

Sooner rather than later.

What sectors have you rolled it out for so for and what are your aspirations there. Thank you.

I think that's probably observed so we've spoken publicly about those it's a pretty long list, but I think and you'll follow up conversations lead US a day I think we can certainly give you more detail.

Okay. Thank you.

Sure.

And I'm not showing any further questions at this time I'll turn the call back over to Phil Snow for any closing remarks.

Great. Thank you all for joining us today in closing I want to reiterate how pleased we are with this quarter's performance as a company. We are ending the calendar year strong we saw the highest incremental Q1, a S V. In the company's history, and we celebrated the fantastic achievement of joining the S&P 500 index and we also welcomed cobalt software in its talent.

It seemed a factset please be well this holiday season, and if you have any additional questions. Our KOL Kendra Brown and we look forward to speaking with you next quarter operator that ends today's call.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

[music].

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Q1 2022 Factset Research Systems Inc Earnings Call

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