Q1 2024 Factset Research Systems Inc Earnings Call

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be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Allie Van Ness, SVP-IR. Please go ahead.

Speaker Change: Be advised that today's conference is being recorded I would now like to turn the conference over to your Speaker Today Ali then that's S V. P. I R. Please go ahead.

Thank you and good morning everyone. Welcome to FACSED's first fiscal quarter 2024 earnings call.

Ali: Thank you and good morning, everyone welcome to Fox, that's first fiscal quarter 2024 earnings call.

Before we begin, the slides we referenced during this presentation can be found through the webcast on the Investor Relations section of our website at facset.com and are currently available on our website. A replay of today's call will be available via phone and on our website.

Ali: Before we begin the slides we reference during this presentation can be found through the webcast on the Investor Relations section of our website at Factset Dotcom and are currently available on our website.

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. The call is scheduled to last for one hour. To be fair to everyone, please limit yourself to one question. You may reenter the queue for additional follow-up questions, which we will take if time permits.

Ali: After our prepared remarks, we will open the call to questions from investors. The call is scheduled to last for one hour to be fair to everyone. Please limit yourself to one question you may reenter the queue for additional follow up questions, which we will take if time permits.

Before we discuss our results, I encourage all listeners to review the legal notice on slide 2, 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 discussion of risk factors that could cause actual results to differ materially from those forward-looking statements.

Ali: 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.

Ali: Additionally, please refer to our Form 10-K, and 10-Q for a discussion of risk factors that could cause actual results to differ materially from those forward looking statements.

Our slide presentation and discussions on this call will include certain non-GAAP financial measures.

Ali: Our slide presentation and discussions on this call will include certain non-GAAP financial measures.

For such measures, reconciliations to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued earlier today.

Ali: For such measures reconciliations to the most directly comparable GAAP measures are in the appendix to the presentation and in our earnings release issued earlier today joining.

Joining me today are Phil Snow, Chief Executive Officer, and Linda Huber, Chief Financial Officer. We will also be joined by Helen Shan, Chief Revenue Officer, and Kristi Karnofsky, Chief Product Officer, for the Q&A portion of today's call. I will now turn the discussion over to Phil Snow.

Ali: Joining me today are Phil Snow, Chief Executive Officer, and Linda Huber Chief Financial Officer, We will also be joined by Helen Shan Chief revenue Officer, and Kristy Karnofsky Chief product officer for the Q&A portion of today's call I will now turn the discussion over to Phil Snow.

Thank you, Allie, and good morning, everyone. Thanks for joining us today. In the first quarter, we grew organic ASV plus professional services by 7.1% year over year, delivering adjusted diluted EPS of $4.12 and an adjusted operating margin of 37.6%. This quarter, we closed two marquee deals that serve as proof points for our long-term strategy, even as macro conditions remain.

Phil Snow: Thank you Allie and good morning, everyone. Thanks for joining us today in the first quarter, we grew organic <unk> plus professional services by seven 1% year over year, delivering adjusted diluted EPS of $4 12, and an adjusted operating margin of 37, 6% this quarter we <unk>.

Phil Snow: Those two marquee deals that serve as proof points for our long term strategy, even as macro conditions remain challenging. The first was a large wealth win at a major U S farm, but we displaced a competitor as a result of this deal our user count increased by more than 17000 seats.

The first was a large wealth win at a major US firm where we displaced a competitor. As a result of this deal, our user count increased by more than 17,000 seats.

The second was a significant trading win at one of the largest US asset managers, highlighting the strength of our open platform and portfolio lifecycle solution.

Phil Snow: The second was a significant trading win at one of the largest U S asset managers, highlighting the strength of our open platform and portfolio of lifecycle solutions.

We ended this quarter with almost 8,000 clients and 24 net new logos. ASV retention remained greater than 95% and client retention was 90%

We ended this quarter with almost 8000 clients and 24 net new logos ASB retention remained greater than 95% client retention was 90%.

Nevertheless, since our last earnings call in September , sales cycles have continued to lengthen challenging our near-term forecast. Client budgets remain restricted due to lower deal-making volume layoffs and geopolitical uncertainty. So while the recent Federal Reserve commentary may be positive for the macro environment, we are revising our fiscal 2024 top-line guidance to reflect ASB growth of $110 to $150 million or 6% growth at the midpoint.

Nevertheless, since our last earnings call in September sales cycles have continued to like them challenging our near term forecast client budgets remain restricted due to lower dealmaking volume layoffs and geopolitical uncertainty. So while the recent federal reserve commentary may be positive for the macro environment. We are revising our fiscal 2024 top.

Line guidance to reflect ISP growth of $110 million to $150 million or 6% growth at the midpoint.

We will also be implementing a cost reduction program in the second quarter of FY24. This program will support our investments in multi-year initiatives such as deep sector in real time and allow us to accelerate our AI strategic investments.

Phil Snow: We will also be implementing a cost reduction program in the second quarter of FY 'twenty for this program will support our investments in multi year initiatives, such as deep sector in real time and allow us to accelerate our AI strategic investments, we expect to review variable costs and personnel related costs with the goal of delivering adjusted op.

We expect to review variable costs and personnel related costs with the goal of delivering adjusted operating margin within our original guidance range of 36.3% to 36.7%. Linda will say more about this later in the call.

Phil Snow: <unk> margin within our original guidance range of 36, 3% to 36, 7% Linda will say more about this later in the call.

Turning now to our performance by region, growth this quarter was driven mainly by the large wealth win in the Americas as well as solid demand for data solutions offsetting weaker results in other parts of the business.

Phil Snow: Turning now to our performance by region growth. This quarter was driven mainly by the large wealth when in the Americas as well as solid demand for data solutions offsetting weaker results in other parts of the business <unk>.

America's ASV growth accelerated 88 basis points over the prior quarter to 7.9 percent, where outside of wealth, lower net hiring and banking and asset managers led to softer demand for workstations compared with a year ago. Inamia organic ASV growth decelerates to 5.4 percent, mainly due to a slowdown in our core buy-side markets in the UK and France.

Phil Snow: Americas <unk> growth accelerated to 88 basis points over the prior quarter to seven 9% were outside of well lower net hiring in banking and asset managers led to softer demand for workstations compared with a year ago.

Phil Snow: In EMEA organic ASB growth Decelerates to five 4%, mainly due to a slowdown in our core buy side markets in the UK and France.

Our clients are experiencing reduced revenues and margin pressures, which led to delays in planned projects and slower sales cycles.

Phil Snow: Our clients are experiencing reduced revenues and margin pressures, which led to delays in planned projects and slower sales cycles.

Higher demand for data solutions partially offset these headwinds. In Asia-Pac, we delivered organic ASV growth of 8% driven by solid gains with asset owners partially offset by seasonal banking layout.

Phil Snow: Higher demand for data solutions, partially offset these headwinds in Asia Pac we delivered organic growth of 8% driven by solid gains with asset owners, partially offset by seasonal banking layoffs.

From a firm type perspective, wealth accelerated the most compared with last quarter due to the marquee deal I mentioned earlier. While pipeline visibility remains limited until the broader market recovers some momentum, ongoing C-suite conversations at several firms point to continued opportunity to displace wealth competitors.

Phil Snow: From a firm perspective wealth accelerated the most compared with last quarter due to the marquee deal I mentioned earlier, while our pipeline visibility remains limited until the broader market recover some momentum ongoing C suite conversations at several farms point to continued opportunity to displace wealth competitors for.

For deal-makers, we added new logos in private equity and corporates, but not at the rate we saw last year. Churn and lower seasonal hiring led to erosion in banking. On the institutional buy side, cost-cutting and headcount reductions at institutional asset managers caused a deceleration in workstation sales. For asset owners and hedge funds, elongated sales cycles further dampened resources.

For Dealmakers, we added new logos in private equity in corporates, but not at the rate we saw last year churn and lowest seasonal hiring led to erosion in banking on.

On the institutional buy side cost cutting and head count reductions at institutional asset managers caused a deceleration in workstation sales for asset owner and hedge funds elongated sales cycles for the dampened results.

Finally, new business and the sales of data solutions drove growth with partners across regions.

Phil Snow: Finally, new business in our sales of data solutions drove growth with partners across regions.

Overall, retention was flat in the first quarter with the positive effects of the fiscal 2023 price increase partially offset by higher councils and erosion.

Phil Snow: Overall retention was flat in the first quarter with the positive effects of the fiscal 2023 price increase partially offset by higher cancels and erosion.

Over facts that's 45 year history new product releases have driven our strong market position. These included universal screening in 1986 portfolio analytics in 1995 and facts at fundamentals in 2008 last week we added to this list with the beta release of facts at mercury our new conversational AI interface.

Phil Snow: Oh, perfect Thats 45 year history, new product releases have driven our strong market position. These included universal screening in 1986 portfolio analytics, and 1995 and Factset fundamentals in 2008 last week, we added to this list with the beta release of Factset Mercury on new conversational AI.

Facset Mercury is a large language model based knowledge agent. It uses natural language to request company information, provides supporting context, and also suggests next steps.

Phil Snow: The pace Factset Mercury is a large language model based knowledge agents. It uses natural language to request company information provide supporting context and also suggests the next steps users can also ask for any chop using natural language, which has been prepared and delivered into Microsoft office.

Users can also ask for any chalk using natural language, which is then prepared and delivered into Microsoft Office.

FACSET Mercury is part of FACSET Explorer, a product preview program. We are working on Explorer with our leading banking clients and will soon offer it to institutional buy side and wealth clients. Also, last quarter, we released AI Enhanced Transcript Highlights and new summaries which received positive reviews from our users.

Phil Snow: Accent Mercury as part of Factset explorer a product preview program. We are working on explorer with a leading banking clients and will soon operate to institutional buy side in wealth clients also last quarter, we released AI enhanced transcript highlights and new summaries, which received positive reviews from our users.

These are just the first of many workflows that will use generative AI to improve our clients.

Phil Snow: These are just the first of many workflows that will used generative AI to improve our client's efficiency.

And along with these AI initiatives, work continues on deep sector and real time, the wealth workstation and the portfolio life cycle. Each of these multi-year investments is driving growth, including last quarter's big wins in banking and asset management.

Phil Snow: And along with these AI initiatives work continues on deep sector and real time, the wealth workstation and the portfolio lifecycle. Each of these multiyear investments is driving growth, including last quarter's big wins in banking and asset management.

Finally, the private credit market is growing fast and is almost the size of the leveraged loan market.

Phil Snow: Finally, the private credit market is growing fast and is almost the size of the leveraged loan market. It is well served by both our data solutions and our Middle office analytics. For example, cobalt can be used for private credit fund portfolio monitoring. We can also expand our fixed income capabilities to private credit risk assessments benchmark.

It is well served by both our data solutions and our middle office analytics. For example, Cobalt can be used for private credit fund portfolio monitoring. We can also extend our fixed income capabilities to private credit risk assessments, benchmarking and performance monitoring.

And performance monitoring and.

In summary, I remain confident in our strategy and the health of our business, and I am optimistic about the opportunity ahead of us. Demand for our high-value products remains strong, demonstrated by our marquee wins this quarter and increased interest from global firms consolidating to Factset's open platform.

Phil Snow: In summary, I remain confident in our strategy and the health of our business and I am optimistic about the opportunity ahead of us demand for our high value products remains strong demonstrated by a marquee wins this quarter and increased interest from global firms consolidate into Factset is open platform.

I'll now turn it over to Linda to discuss our first quarter performance in more detail.

Phil Snow: I'll now turn it over to Linda to discuss our first quarter performance in more detail.

Thanks Phil, and hello to everyone. As you've seen from our press release this morning, Q1 organic ASB and revenue growth exceeded 7%.

Thanks, Phil and Hello to everyone as you've seen from our press release. This morning, Q1, organic <unk> and revenue growth exceeded 7%.

I will now share additional details on our fiscal first quarter performance. As Ali noted, a reconciliation of our adjusted metrics compared to GAAP is included at the end of our press release.

Speaker Change: I will now share additional details on our fiscal first quarter performance.

Speaker Change: Ali noted a reconciliation of our adjusted metrics compared to GAAP is included at the end of our press release first a few observations on macro conditions last Wednesday, the federal reserve decided to hold rates constant and signal three quarter point rate cuts next year inflation has eased, but remains higher than the feds too.

First, a few observations on macro conditions. Last Wednesday, the Federal Reserve decided to hold rates constant and signaled three-quarter point rate cuts next year. Inflation has eased, but remains higher than the Fed's 2% target.

Equities rallied on the news as rates fell across the yield curve. While this news was helpful, it will take time for capital markets and deal activity to pick up. As Phil mentioned, we expect that market recovery will come later than we anticipated in our September fiscal year 2024 guidance.

Speaker Change: <unk> targets <unk>.

Speaker Change: Equities rallied on the news as rates fell across the yield curve. While this news was helpful. It will take time for capital markets and deal activity to pick up.

Speaker Change: <unk> mentioned, we expect that market recovery will come later than we anticipated in our September fiscal year 2020 for guidance.

For the quarter, gap revenue increased 7% to $542 million. Organic revenue, which excludes any impact from acquisitions and dispositions over the last 12 months and foreign exchange movements, increased 7% to $541 million due to higher wealth sales and increased sales of data. For our geographic segments, organic revenues grew by 8% in the Americas, almost 6% in EMEA and 8% in Asia Pacific.

Speaker Change: For the quarter GAAP revenue increased 7% to $542 million organic revenue, which excludes any impact from acquisitions and dispositions over the last 12 months and foreign exchange movements increased 7% to $541 million due to higher wealth sales and increased sales of data.

Speaker Change: For our geographic segments organic revenues grew by 8% in the Americas, almost 6% in EMEA and 8% in Asia Pacific.

Turning now to expenses, gap operating expenses increased 6% year over year to $353 million driven by higher employee expense, technology costs, and royalties. Compared to the previous year, gap operating margin increased by approximately 80 basis points to 35%. This was due to a decrease in professional fees, personnel, and facilities costs partially offset by higher technology-related expenses.

Speaker Change: Turning now to expenses GAAP operating expenses increased 6% year over year to $353 million driven by higher employee expense technology costs and royalties compared to the previous year GAAP operating margin increased by approximately 80 basis points to 35%. This was due.

Speaker Change: Due to a decrease in professional fees personnel and facilities costs, partially offset by higher technology related expenses.

On an adjusted basis, operating expenses grew 9%, primarily driven by technology expense, which increased 28% year over year. We've continued to invest in technology to drive growth, with technology costs now representing about 9% of revenue, consistent with our medium-term outlook.

Speaker Change: On an adjusted basis operating expenses grew 9%, primarily driven by technology expense, which increased 28% year over year. We've continued to invest in technology to drive growth with technology costs now representing about 9% of revenue.

Speaker Change: With our medium term outlook.

Employee expense grew 8% year over year, primarily due to increased salaries for existing employees.

Speaker Change: <unk> expense grew 8% year over year, primarily due to increased salaries for existing employees.

third-party data content costs increased 12 percent due to lapping a one-time accrual release in the first quarter of fiscal 2023, as well as higher variable fee expense.

Speaker Change: Third party data content costs increased 12% due to lapping a one time accrual release in the first quarter of fiscal 2023, as well as higher variable expenses.

Finally, our continued efforts to right size our real estate footprint resulted in a 1% decrease in year-over-year facilities expense.

Speaker Change: Finally, our continued efforts to rightsize, our real estate footprint resulted in a 1% decrease in year over year facilities expenses.

Looking at margin, adjusted operating margin decreased by 70 basis points to 37.6%, driven by the previously mentioned higher technology expenses, partially offset by lower facilities, professional services, and TNE expenses.

Speaker Change: Looking at margin adjusted operating margin decreased by 70 basis points to 37, 6% driven by the previously mentioned higher technology expenses, partially offset by lower facilities professional services and <unk> expenses.

As always, you'll find an expense walk from revenue to adjusted operating income in the appendix of today's earnings presentation.

Speaker Change: As always you'll find an expense walk from revenue to adjusted operating income in the appendix of todays earnings presentation as a percent of revenue our cost of services was about 140 basis points higher than last year on a GAAP basis, and about 220 basis points higher on an adjusted basis, largely due to technology and personnel costs.

As a percent of revenue, our cost of services was about 140 basis points higher than last year on a gap basis and about 220 basis points higher on an adjusted basis, largely due to technology and personnel costs.

and SG&A as a percentage of revenue was 230 basis points lower year over year on a gap basis and about 150 basis points lower on an adjusted basis.

Speaker Change: And SG&A as a percentage of revenue was 230 basis points lower year over year on a GAAP basis, and about 150 basis points lower on an adjusted basis. This was due to decreases in professional fees facilities expenses and personnel expenses.

This was due to decreases in professional fees, facilities expenses, and personnel expense.

Turning now to tax, our tax rate for the quarter was 15.2 percent compared to last year's rate of 13.4 percent. This increase was primarily due to lower benefits related to stock option exercises and restricted stock vesting. The remainder of the increase was due to higher pre-tax income and a higher foreign tax rate, partially offset by foreign tax credit.

Speaker Change: Turning now to tax our tax rate for the quarter was 15, 2% compared to last year's rate of 13, 4%. This increase was primarily due to lower benefits related to stock option exercises and restricted stock vesting. The remainder of the increase was due to higher pretax income at a higher foreign tax rate partially.

Speaker Change: Offset by foreign tax credits.

Turning now to EPS, GAP EPS increased 9.1% to $3.84 this quarter versus $3.52 in the prior year. This was driven by higher revenue and margin expansion, partially offset by a higher tax rate. On an adjusted basis, EPS increased 3.3% to $4.12, driven by revenue growth, partially offset by margin compression and a higher tax rate.

Turning now to EPS GAAP EPS increased nine 1% to $3.84 this quarter versus $3 52 in the prior year. This was driven by higher revenue and margin expansion, partially offset by higher tax rate on an adjusted basis EPS increased three 3% to $4 12.

Driven by revenue growth, partially offset by margin compression and a higher tax rate EBITDA.

EBITDA increased $219 million, up 9.3 percent year-over-year due to higher net income and higher income tax add-backs.

Speaker Change: EBITDA increased $219 million up nine 3% year over year due to higher net income and higher income tax add backs and finally free cash flow, which we define as cash generated from operations less capital spending was $139 million for the quarter, an increase of 56% over the same.

And finally, free cash flow, which we define as cash generated from operations less capital spending, was $139 million for the quarter and increased to 56% over the same period last year. This was driven by significantly higher net cash from operating activities, which was nearly $50 million greater year over year due to higher cash collection.

Speaker Change: Period last year. This was driven by significantly higher net cash from operating activities, which was nearly $50 million greater year over year due to higher cash collections.

Turning to share repurchases for the quarter, we repurchased 135,950 shares for $59.9 million at an average price of $440.67.

Speaker Change: Turning to share repurchases for the quarter, we repurchased 135950 shares for $59 $9 million at an average price of $440 67.

We intend to continue our share repurchases during fiscal 2024 with a target of 250 million of purchases spread ratably throughout the year.

Speaker Change: We intend to continue our share repurchases during fiscal 2024, with a target of $250 million of purchases spread ratably throughout the year.

We remain disciplined in our buyback program and committed to returning long-term value to our shareholders.

Speaker Change: We remain disciplined in our buyback program and committed to returning long term value to our shareholders, providing our dividends and share repurchases, we've returned $378 $6 million to our shareholders over the last 12 months. As a reminder, we also increased our dividend by 10% to <unk> 98 per share in the third quarter of fiscal 2020.

Combining our dividends and share repurchases, we've returned $378.6 million to our shareholders over the last 12 months. As a reminder, we also increased our dividend by 10% to $0.98 per share in the third quarter of fiscal 2023.

And finally, turning to our revised guidance for fiscal 2024. As Phil mentioned earlier, we expect that the market recovery will happen later in the year than anticipated when we first gave guidance for fiscal 2024. Given this revised view, we are guiding to incremental organic ASB plus professional services growth of $110 to $150 million, reflecting 6% growth at the midpoint down from our original 7% growth guidance.

Speaker Change: Three.

Speaker Change: And finally, turning to our revised guidance for fiscal 2024 as Bill mentioned earlier, we expect that the market recovery will happen later in the year than anticipated when we first gave guidance for fiscal 2024.

Speaker Change: Given this revised view, we are guiding to incremental organic <unk>, plus professional services growth of $110 million to $150 million, reflecting 6% growth at the midpoint down from our original 7% growth guidance.

Given the headwinds in ASV and the lag timing of ASV in the first half of the fiscal year, we are lowering our expected revenue range to $2.2 billion to $2.21 billion. At the midpoint, revenue growth is also expected to be approximately 6%, a deceleration of about 75 basis points from our previously issued guidance.

Given the headwinds in the ASC and the lag timing of ASP in the first half of the fiscal year, we are lowering our expected revenue range to $2 $2 billion to $2 two $1 billion at the midpoint revenue growth is also expected to be approximately 6%.

Speaker Change: A celebration of about 75 basis points from our previously issued guidance.

We've reduced our gap operating margin guidance to 32.5% to 33%, which is down from 33.1% to 33.5%.

Speaker Change: We've reduced our GAAP operating margin guidance to 32, 5% to 33%, which is down from 33, 1% to 33, 5%. However, it should be noted that we have not changed our adjusted operating margin guidance of 36, 3% to 36, 7% at the midpoint. This provides.

However, it should be noted that we have not changed our adjusted operating margin guidance of 36.3%.

36.7 percent. At the midpoint, this provides 30 basis points of continued margin expansion. While we have already met our adjusted operating margin medium-term outlook of 36 percent, we are committed to balancing continued sustainable margin expansion with investments to drive top-line growth.

Speaker Change: 30 basis points of continued margin expansion, while we have already met our adjusted operating margin medium term outlook of 36%. We are committed to balancing continued sustainable margin expansion with investments to drive top line growth. It is also worth noting that our effective tax rate guidance has been reduced by 50 basis points to <unk>.

It is also worth noting that our effective tax rate guidance has been reduced by 50 basis points to 16.5 to 17.5 percent.

Speaker Change: <unk>, 5% to 17, 5%.

And finally, adjusted EPS is expected to range from $15.60 to $16, which represents 7.8% growth at the midpoint and a $0.10 reduction from guidance at the midpoint.

And finally, adjusted EPS is expected to range from $15 62.

To $16, which represent seven 8% growth at the midpoint and a 10% reduction from guidance at the midpoint as Phil mentioned, we continued to execute disciplined expense management to support strategic investments to grow our topline accordingly, we expect to take a $10 million to $15 million charge in the second quarter of fiscal <unk>.

As Phil mentioned, we continued to execute disciplined expense management to support strategic investment to grow our top line.

Accordingly, we expect to take a 10 to 15 million dollar charge in the second quarter of fiscal 2024.

Focus areas for expense reduction include both variable and personnel related costs.

2024 focus areas for expense reduction include both variable and personnel related costs.

Despite the uncertain environment, we remain confident in our long-term growth. We have a diverse pipeline and are seeing improved price realization and increased interest in our products. In addition, our enterprise contracts and diverse end markets provide us with downside protection in an uncertain market. As a result, we are confident that we are positioned well for the future. We are now ready for your questions.

Speaker Change: Despite the uncertain environment, we remain confident in our long term growth we have a diverse pipeline and are seeing improved price realization and increased interest in our products. In addition to our enterprise contracts and diverse end markets provide us with downside protection in an uncertain market. As a result, we are confident that we are positioned well for the future.

Speaker Change: We are now ready for your questions operator.

Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced.

Thank you.

Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again please.

To withdraw your question, please press star 11 again.

Please stand by while we compile the Q&A roster.

Speaker Change: Please standby, while we compile the Q&A roster.

Our first question comes from the line of Seth Weber from Wells Fargo.

Speaker Change: Our first question comes from the line of Seth Weber from Wells Fargo.

Hi, good morning. Thank you. Um, I guess I just wanted to ask get a little bit more clarity on the updated outlook. Um, can you just talk about whether. Deals are falling out of the pipeline. Um, our deal size is getting smaller any pressure on the pricing side, or do you really feel like this is all just kind of.

Hi, good morning, Thank you.

Seth Weber: I guess I just wanted to ask a.

Seth Weber: A little bit more clarity on the updated outlook.

Seth Weber: Can you just talk about whether deals are falling out of the pipeline.

Our deal sizes getting smaller any pressure on the pricing side or do you really feel like this is all just kind of.

you know, getting pushed to the right, just while your customers try to navigate the macro environment.

Speaker Change: Getting pushed to the right just Bob well your customers try to navigate the macro environment. Thank you.

Hey, Seth. Thanks. It's Phil. I'm going to say a few words, and then I'm sure Helen has more detail. So, you know, I think clearly we had a good Q1. We had a great win there on the wealth side. Q2 looks to be a little bit weaker than we originally anticipated.

Speaker Change: Hey, Seth Thanks itself I'm going to say a few words and then I'm sure Helen has more detail.

Helen Shan: So I think clearly we had a good Q1, we had a great win there on the wealth side Q2 looks to be a little bit weaker than we originally anticipated.

And it's always hard to predict when market sentiment is going to turn around, essentially. So we're still very optimistic about Q4. And as usual, we have a tail of two halves. So I think we have the product, the strategy, the competitive positioning to really do well. But we are facing some headwinds in the market, just in terms of clients, their budgets, obviously, they're looking very closely at their own headcount.

Helen Shan: It's always hard to predict when market sentiment is going to turnaround essentially so we're still very optimistic about Q4.

Helen Shan: As usual, we have a tale of two half. So I think we have the product the strategy the competitive positioning.

Helen Shan: Really do well, but we are facing some headwinds in the market just in terms of clients that budgets, obviously that looking very closely at their own head count.

Yeah, and maybe I can add a little bit to that. Thanks. Thanks for the question. So as

Speaker Change: Yeah, and maybe I can add a little bit to that thanks. So thanks for the question. So as Phil just said I do think that the continued demand for our middle office offerings.

Phil just said, I do think that the continued demand for our middle office offerings and data and middle office services has really been strong and similarly for data feeds.

And data and Middle Office services has really been strong and similarly for data feeds right now the total cost of ownership has been a differentiator for us, but there are the exogenous events.

Right now, the total cost of ownership has been the differentiator for us.

But there are the exogenous events that are impacting budgets and timing and hiring.

Speaker Change: Impacting budgets and timing and hiring so what changed from 90 days ago, Let me try to break that down a bit for you I would look at around 40 basis points coming from the impact from pricing pressures and lower price realization.

So what changed from 90 days ago? Let me try to break that down a bit for you. I would look at around 40 basis points coming from the impact from pricing pressures and lower price realization.

We definitely see that being a part of the dynamic that's playing out. We're seeing some impact from higher erosion, that's about, you know, 30 some basis points, and then 25 basis points coming from what we view as delayed decisions in spend. We're seeing more of that coming into the fourth quarter, and from that perspective, that makes it a little bit tougher to gauge exactly when that will come to fruition. We have not seen a lot of fallout, so that again helps us.

Speaker Change: We definitely see that being a part of the dynamic that's playing out.

Speaker Change: Seeing some impact from higher erosion, that's about 30, some basis points, and then 25 basis points coming from what we view as delayed decisions and spend we're seeing more of that coming into the fourth quarter and from that perspective that makes it a little bit tougher to gauge exactly when that will come to fruition.

Speaker Change: We have not seen a lot of fallout because that again helps us.

Think about the strength of our business, but not necessarily the timing of it

Speaker Change: Think about the strength of our business, but not necessarily the timing of it.

If you think about the reduction by firm type, the way we look at it is about half of it will come from dealmakers, which is largely banking. And we can see right now weaker net hires, but it's very difficult to tell until we get into the second half, as you know, for seasonal hiring.

If you think about the reduction by firm type the way we look at it it's about half of it will come from Dealmakers, which is largely banking and we can see right now a weaker net net hires but it's very difficult to tell until we get into the second half as you know for seasonal hiring from the buy side that's about.

From the buy side, that's about 25% of our total. There, we're seeing a bit of the higher erosion due to cost realization, or cost rationalization, rather, and also delayed decisions. We're actually seeing good opportunities in the 6-plus figure, but those take longer to come about.

25% of our total there we're seeing a better at a higher erosion due to cost realization.

Okay cost rationalization, rather and also delay decisions, we're actually seeing good opportunities in the six plus figure, but but those take longer to come about and then lastly on wealth strength like was mentioned very strong on the wealth side of a great win this quarter Windsor.

And then lastly, on wealth, strength, like was mentioned, very strong on the wealth side of a great win this quarter.

uh... wins this quarter but but i i take a look at what else is happening there is that we're seeing some slowdown in uh... advisor hiring and income losses on smaller firms

Speaker Change: Wins, this quarter, but but if I take a look at what else is happening there is that we're seeing some slowdown in adviser hiring in and some losses on smaller firms.

I, we still see a path to hit the higher end of a revised range would have put us back into the midpoint.

Speaker Change: We still see a path to hit the higher end of our revised range will put us back into the midpoint.

Things such as higher conviction on the improvement in the capital markets so that we would see more investments that are in flight go back into technology.

Speaker Change: Things such as higher conviction on the improvement.

Speaker Change: In the capital markets. So that we would see more investments that are in flight go back and technology higher investment banking flow that we think would drive higher seasonal hiring and then we've got a number of large competitive opportunities in our pipeline.

higher investment banking flow that we think would drive higher seasonal hiring. And then we've got a number of large competitive opportunities in our pipeline, all in that six and seven-figure deal range. And those can change and determine whether or not we hit the high end as well. So hopefully that gives you a sense of...

Speaker Change: And that six and seven figure deal range and those can change and determine whether or not we hit the high end as well. So hopefully that gives you a sense of.

what drives the delta between our guidelines. That's great colors. Thank you. I appreciate it. You're welcome.

Speaker Change: What drives the delta between our guidance.

Speaker Change: That's great color. Thank you I appreciate it.

Speaker Change: Welcome.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Our next question comes from the line of Tony Kaplan from Morgan Stanley .

Our next question comes from the line of Toni Kaplan from Morgan Stanley.

Thank you. I was hoping you could talk a little bit about the price increase that you're implementing for the upcoming calendar year. I know, Helen, you just mentioned some difficulties in passing through price, but I guess what's the sort of list price increase and what your expectation is for how that flows through?

Toni Kaplan: Thank you.

Toni Kaplan: I was hoping you could talk a little about the price increase that you're implementing for the upcoming calendar year I know I'm, telling you just mentioned.

Toni Kaplan: Some difficulties in passing through price, but.

Toni Kaplan: I guess, what's the sort of list price increase.

Toni Kaplan: What your expectation is for how that flows there. Thanks.

Yeah, sure. Thank you, Tony. You're right. The Americas is done on Jan. 1, and then our International, we'll see that come through in April . So interestingly, the actual rate cards, we have not increased.

Speaker Change: Yeah sure. Thank you Ah Tony you're right. We are the Americas has done on Jan one and then our international we'll see that come through in April So interestingly the actual our rate cards. We have not increased what we do is we have an annual price increase based off of our contracts and quite quite frankly.

What we do is we have an annual price increase based off of our contracts.

And quite frankly, up till now, we've seen everything go through pretty well. In other words, clients are not pushing back on the price increase per se. They understand it, they understand the improvements we've made and the enhancements we've made. The issue that we have a little bit more of is clients are taking the opportunity then to perhaps...

Speaker Change: Up till now and we've seen everything goes through pretty pretty well.

Speaker Change: Other words clients are not pushing back on the price increase per se they understand it they understand that the improvements we've made enhancements. We made the issue that we have a little bit more of those clients are taking the opportunity then to perhaps.

go through a review of their list so we see some erosion that comes from as a result and also from a price Realization perspectives in other words. We're seeing some downshift. We have to we have to kind of

Speaker Change: Ill go through a review of their less so we see some erosion that comes from as a result, and also from a price realization perspective in other words, we're seeing some down shift we have to we have to kind of.

approved deals that are a bit lower on our price realization, about a point lower than we saw in Q4, for example, and that's driving some of that delta. So we expected to have to continue to be competitive, especially on new deals, but the actual annual price increase so far has been received pretty much in line with what we've seen in the past.

Speaker Change: Approved deals that are a bit lower on our price realization about a point lower than we saw in Q4 for example, and that's driving some of that Delta. So we expected to have to continue to be competitive, especially on new deals and but the actual annual price increase so far has been has been received pretty much in la.

Even with what we've seen in the past.

Terrific. Thank you.

Thank you. One moment for our next question.

Speaker Change: Yeah.

Speaker Change: Thank you one moment far next question.

Speaker Change: Okay.

Our next question comes in the line of Alex Cram from UBS.

Speaker Change: Our next question comes from the line of Alex Kramm from UBS.

Yes. Hey guys, maybe a little bit too short term focus here, but talking about the second quarter, a little bit more in detail, you said that was the biggest change of your, of your outlook. So when I look at last year, I think you added 54 million in, in the quarter organically, and I think 31 of that was pricing. So are you basically saying pricing should be fairly consistent, but then.

Alex Kramm: Yes, Hey, guys, maybe a little bit too short term focused here, but let's talk about the second quarter, a little bit more detail you said that was the biggest change.

Alex Kramm: Of your of your outlook.

Alex Kramm: So when I look at last year, I think you added 54 million.

Alex Kramm: In the quarter organically and I think 31 of that was pricing. So are you basically saying pricing should be fairly consistent but then.

you may actually have, you know, a negative elsewhere, or how would you think about the second quarter specifically? Because I know there's a lot of things going on, including at my firm.

Alex Kramm: You may actually have.

Alex Kramm: Negative elsewhere or how would you think about the.

Alex Kramm: The second quarter, specifically, because I know theres a lot of things going on.

Alex Kramm: At my firm.

[laughter] Alex are hired talent. Thanks for your question and thanks for the specifics so you've you've hit the nail on the head on a number of your points. So yes last year, we had a very strong Q2.

Alex, hi, Talyn, thanks for your question and thanks for the specifics. So, you've hit the nail on the head on a number of your points. So, yes, last year we had a very strong Q2, and so this year, while we've not changed our rate card, the actual annual price increase is a little bit lower than last year, so that is part of the reason, so you're spot on there.

And so this year, while we have not changed our rate card the actual annual price increases a little bit lower than last year. So that is part of the reason so you're spot on there.

The other is that we do know or anticipated a couple of material headwinds. One is the impact.

Alex Kramm: The other is that we do you know or anticipated a couple of material headwinds one is the impact of the.

of the acquisition of Credit Suisse by UBS and the downsizing that will occur there. We might be a little bit conservative there, but that's going to have a pretty material impact.

Alex Kramm: Acquisition of credit Suisse by by UBS, and the downsizing that occur there now where we might be a little bit conservative there, but that's going to have a pretty material impact to our growth year over year, and that's where the Q2.

to our growth year over year, and that's where the Q2, we will see a much more weak Q2 growth rate.

Speaker Change: We will see.

Speaker Change: A much more weak Q2 growth rate.

Speaker Change: Alright, thanks for the color.

Thank you. One moment for our next question.

Speaker Change: Thank you one moment for our next question.

Our next question comes from the line of Phaesia Alwey from Deutsche Bank.

Speaker Change: Our next question comes from the line of fascia always from Deutsche Bank.

Yes. Hi. Good morning. Thank you. I wanted to follow up on the cost savings that you mentioned. So maybe Linda, can you talk a little bit more about the timing of those savings and how we should We should think about that as we go through the year and maybe in general, sort of, how do you think about, you know, just your flexibility as it relates to to EPS, you know, flexibility around level of investments and what your priorities are.

Fascia: Yes, hi, good morning, Thank you.

Fascia: I wanted to follow up on the cost savings that you mentioned, so maybe Linda can you talk a little bit more about the timing of those savings and how we should we should think about that as we go through the year and maybe in general sort of how do you think about just your flexibility as it relates to.

Linda Huber: To EPS and your flexibility around level of investments and what your priorities are.

Yes, we are thinking through what it means to have at the midpoint a $15 million reduction in revenue, so obviously we would like to offset that and it is our intention to hold adjusted operating margin where we said at about 36.5% midpoint.

Speaker Change: Yeah, Hi play it's a yes.

Speaker Change: Yes, we are thinking through what it means to have at the midpoint of $15 million reduction in revenue. So obviously, we would like to offset that and it is our intention to hold the adjusted operating margin, where we said at about 36, 5% midpoint. So we've got to adjust our expenses.

So we've got to adjust our expenses. We've talked about taking a charge, which we will have more details on in the second quarter earnings call. So that's at the half year mark, if you will.

You talked about taking a charge, which we will have more details on in the second quarter earnings call. So that's at the half year, Mark If you will.

So we're shooting for about $30 million in cost cuts.

Speaker Change: So we're shooting for about $30 million and cost cuts.

And we're looking at 10-ish or so million dollars of cost cuts. The first thing you do is look at your variable

Speaker Change: And we're looking at 10 ish or so million dollars of cost cuts.

Speaker Change: First thing you do is look at your variable costs. The easiest one is is <unk>, we're looking at sort of $1 million to $2 million of a cut there.

The easiest one is T&Es. We're looking at sort of a million to $2 million of a cut there. Professional services is another one we're looking at. Call that $3 to $4 million. So call that bucket sort of $5 million in total.

Professional services is another one we're looking at call that $3 million to $4 million, so call that bucket sort of $5 million in total and then we're looking also at our bonus calculation. So we've just taken our guidance down a bit and we would expect that our bonus pool will will come down a bit as well maybe about.

And then we're looking also at our bonus calculation. So we've just taken our guidance down a bit. And we would expect that our bonus pool will come down a bit as well. Maybe about $5-ish million, but we don't know until we get to the end of the year.

Five ish million dollars, but we don't know until we get to the end of the year. So that would be about a total of $10 million and then we've talked about a $10 million to $15 million charge, which would probably lean more toward personnel and headcount reduction thoughts we're working through that right now we have not made it.

So that would be about a total of $10 million. And then we've talked about a $10 to $15 million charge.

which would probably lean more toward personnel and headcount reduction thoughts.

We're working through that right now. We have not made any final decisions on that, and of course that process has to be handled very, very carefully with an eye toward holding our investment funding, which is incredibly important to us, particularly given AI, which we'll be talking about in a bit.

Speaker Change: Any final decisions on that and of course that process has to be handled very very carefully with an eye toward holding our investment funding, which is incredibly important to us, particularly given AI, which we'll be talking about in a bit.

But we want to make sure that we bring our expenses back into line with our revenues. Now, if you look at our buckets, we had talked before about if you look at our third-party data costs, they're up a bit in the first quarter because we lapped a really good audit release last year, but those will be about flat for this year.

But we want to make sure that we bring our expenses back into line with our revenues now if you look at our buckets, we had talked before about our if you look at our third party data costs, they're up a bit in the first quarter, because we lapped a really good audit released last year, but those will be about flat for this year.

And if you look at our real estate costs, we've taken pretty close to $90 million in charges to right size our real estate footprint.

Speaker Change: And if you look at our real estate costs, we've taken pretty close to $90 million in charges to rightsize, our real estate footprint. So on that one those costs will actually be flat to down a bit year over year technology costs are going up we've talked a lot about that this is a technology company and three big drivers for the tech.

So on that one, those costs will actually be flat to down a bit year over year.

Technology costs are going up. We've talked a lot about that. This is a technology company and three big drivers for the tech costs, amortization coming through because we're building more of our softwares we've talked about, also more cloud expense and also more third-party software purchases.

Speaker Change: Costs amortization coming through because we're building more of our software as we've talked about also more cloud expense and also more.

Speaker Change: Third party software purchases footnote there on cloud expense. Please watch that carefully if christy and the team are successful with what they're trying to do for AI cloud expense May go up we have to watch that carefully but that's an important area of investment for us. So we'll keep our eyes on that which leaves people which is about.

Footnote there on cloud expense, please watch that carefully. If Christie and the team are successful with what they're trying to do for AI, cloud expense may go up. We have to watch that carefully, but that's an important area of investment for us. So we'll keep our eyes on that, which leaves people, which is about 65% of our expense base.

Speaker Change: 65% of our expense base. So we're going to have to make sure. We've got everyone in the right place for what we're trying to do going forward.

So we're going to have to make sure we've got everyone in the right place for what we're trying to do going forward. And I think that probably would provide about enough detail in terms of the ramp for expenses we put up three 338 million for the first quarter.

Speaker Change: And I think that probably would provide about enough detail in terms of the ramp for expenses, we put up three 338 million for the first quarter.

We would expect that to jump up to the neighborhood of $350 million for the second quarter, and then as a result of the charge sort of flattened out through the rest of the year.

Speaker Change: We would expect that to jump up to the neighborhood of 350 million for the second quarter and then as a result of the charge sort of flatten out through the rest of the year and yes, our margin tends to be a bit higher in the first quarter, we would see it might come off a bit as we move through the year. So the sort of normal trend that you see at Factset.

Yes, our margin tends to be a bit higher in the first quarter. We would see it might come off a bit

as we move through the year, so the sort of normal trend that you see at FACTSET.

So, that's a lot of information. I hope that's helpful and really appreciate your question, Kaisa. Thank you, Linda. That's very helpful.

Speaker Change: So that's a lot of information I hope that's that's helpful and really appreciate your your question Faiza.

Speaker Change: Thank you that's very helpful.

Speaker Change: Thank you.

Speaker Change: One moment for next question.

Speaker Change: Yeah.

Our next question comes from the line of Manav Patnaik from Barclays.

Speaker Change: Our next question comes from the line of Manav Patnaik from Barclays.

Thank you. I just want to follow up on, you know, kind of the macro discussion, you know, usually when you have these times of cost pressures, budget pressures, et cetera, there's a lot of talk around vendor consolidation as well. So I was just hoping are you seeing any opportunities in terms of, you know, maybe winning business from the lower end or maybe there's some M&A opportunities, you know, because of that, just hoping you could address that.

Manav Patnaik: Thank you.

Manav Patnaik: Wanted to follow up on kind of the macro discussion you know usually when you have these times of cost pressures budget pressures et cetera, There's a lot of talk around vendor consolidation as well. So I was just hoping are you seeing any opportunities in terms of maybe winning business from the lower end or maybe there's some M&A opportunities.

Manav Patnaik: Because of that just hoping you could address that.

Oh, yeah. Hey, Mena. Thanks for the question. That's Phil. We certainly are seeing opportunity. So, you know, as we go through these periods of market uncertainty, it's always a great opportunity for fax that to work with our clients who typically want to do more with us and trust us. So that's become an even more sophisticated conversation as our product suite has expanded.

Manav Patnaik: Oh, Yeah, Hey, Manav. Thanks for the question it's Phil.

Phil Snow: Certainly are seeing opportunity. So you know as we go through these periods of market uncertainty, it's always a great opportunity for Factset to work with our clients, who typically want to do more with us and trust us. So that's become an even more sophisticated conversation as our product suite has expanded.

And just in the last few weeks, I've heard a couple of very encouraging

Phil Snow: And just in the last few weeks I've heard a couple of very encouraging.

situations where it just feels like there's more of a top-down push now at the bigger clients to really save, to drive cost savings in our direction. So that is encouraging to me. I think at some firms there was still a bit of choice given to users, but we are an anchor partner of choice for our clients based on our strategy and our open platform. Our investments in generative AI and our approach there is landing really well.

Phil Snow: Situations, where it just feels like there's more of a top down push now is the bigger clients to really save.

Drive cost savings.

In our direction, so that is encouraging to me.

Phil Snow: Some firms there was still a bit of choice given to users, but we are an anchor partner of choice for our clients based on our strategy.

Phil Snow: And our open platform.

Our investments in generative AI and our approach there is lending really well.

So, I just feel more optimistic than I have in a long time about the long-term prospects of fax head in our competitive position. I'm happy to go through this firm type by firm type either on the call today or some other time with you. But overall, I think it's just a timing thing for us and getting through this period of uncertainty in the markets and I think them are in really good shape.

So I feel I, just feel more optimistic than I have in a long time about the long term prospects of factset and our competitive position.

Phil Snow: Happy to go through this from type pipeline type either on the call today or some other time with you.

But overall I think it's just the timing thing for us in getting through this period of uncertainty in the market and I think that we're in really good shape.

Maybe I can just add a little bit, Manav, just along what Phil just said. So, like he was talking about, clients are going through right-sizing exercises. That's been happening for several quarters. And most clients, their budgets are more flat. But what they're being asked is to provide more sophisticated tools in reporting to their clients.

Speaker Change: Got it maybe I can just add a.

Speaker Change: Hello to that Manav, just along with Phil just said so like he was talking about clients are going through right sizing exercises.

Speaker Change: That's been happening for several quarters and most clients their budgets are more more flat, but what they're being asked is to provide more sophisticated tools and reporting to their clients and yet they have not enough people or dollars or their current technology and processes some of which can be internal.

And yet they have not enough people or dollars or their current technology and processes, some of which can be internal.

just can't scale. And that's why we're so well positioned on that front. And that's why also from an open platform perspective, you can do replacement pieces, not need the entire piece, entire workflow.

Speaker Change: Just can't scale and that's why we're so well positioned on that front and that's why also from an open platform perspective, you can do replacement pieces not need the entire piece.

Speaker Change: Higher float workflow replace but but pieces and that's worked into our advantage as well so that that really goes to what Phil was just talking about which is theres a lot of good activity and timing is really the the question because of how complex they are.

but pieces and that's worked into our advantage as well. So that really goes to what Phil was just talking about, which is there's a lot of good activity and timing is really the question because of how complex they are.

Thank you. One moment for our next question.

Speaker Change: Thank you.

Speaker Change: One moment far next question.

Speaker Change: Yeah.

Our next question comes from the line of Heather Balski from Bank of America.

Speaker Change: Our next question comes from the line of Heather <unk> from Bank of America.

Hi. Thank you for taking my question. I was just hoping you could talk a little bit about how you're thinking first half versus second half and the different drivers between the two.

Heather: Hi, Thank you for taking my question.

Heather: I was just hoping you could talk a little bit about.

Heather: How you're thinking first half versus second half and the different drivers between the two I guess part of the ear.

I guess parts of the year prior, I guess last earnings, you kind of had a stink about the recovery into the back half. It sounds like it's maybe pushed out a bit, but when do you see capital markets come back? Kind of what's based into that?

Heather: Prior I guess last earnings you kind of how to think about the recovery into the back half it sounds like it's maybe pushed out a bit but.

Heather: When do you see capital markets come back kind of what's baked into the first half versus second half.

Heather, it's Linda. I actually listened to an interview with Brian Moynihan on the way up this morning. So maybe we'll quote you back your own firm's information here.

Yeah, Heather it's Linda.

Linda Huber: I actually listened to an interview with Brian Moynihan on the way up this morning, So maybe I will quote you back your own firms information here.

I think the question is the timing of the turn, and I don't think, you know, anyone can predict that particularly clearly if they can. They should be, of course, running a hedge fund. But in any case, we have thought this might come a little bit sooner. What we're trying to say is that the turn is going to come a little bit later in the year than we had thought.

I think the question the timing of the turn and I don't think anyone.

Linda Huber: One can predict that particularly clearly if they can they they should be of course running a hedge fund but in any case, we have thought this might come a little bit sooner. What we're trying to say is that the turn is going to come a little bit later in the year than we had thought.

It should be noted that investment banking and banking hiring is a lagging indicator, okay, so we've had 500 basis points

Linda Huber: It should be noted that investment banking and banking hiring is a lagging indicator K. So we've had 500 basis points.

of interest rate increases. Times got tougher and so hiring is in fact a lagging indicator. There is a view that I also heard this morning, not from your boss, that Jay Powell shot the bears last week.

Linda Huber: Of interest rate increases Time's got tougher and so hiring is in fact, a lagging indicator. There is a view that I also heard this morning, not from your boss that Jay Powell shot the bears last week. So how long will it take for capital markets to come back if you speak to various institutions there.

So how long will it take for capital markets to come back if you speak to various institutions? They're saying they're seeing much greater activity right now. The tenure this morning was at 3.9, which beats the heck out of five.

Linda Huber: Saying, they're seeing much greater activity right now the 10 year. This morning was at 3.9, which beats the heck out of five so we would expect that things will turn up how quickly will that happen, it's very difficult to say so we're trying to be realistic about what we think about the pacing of that turn but.

So we would expect that things will turn up. How quickly will that happen? Very difficult to say. So we're trying to be realistic about what we think about the pacing of that turn. But we do, particularly with the Fed announcement last week, we do think that it is coming. It just may take a bit longer than we thought.

Linda Huber: But we do particularly with the fed announcement last week, we do think that it is coming it just may take a bit longer than we thought and there's a lot of focus on AI, we have incredible conversations going on with our clients and we'll be speaking more about that as others might want to ask about it but we do.

And there's a lot of focus on AI. We have incredible conversations going on with our clients.

and we'll be speaking more about that as others might want to ask about it, but we do, you know, we do see the turn coming, it's just a question of when. So I hope that makes things a bit clearer, but we appreciate your boss's interview this morning. Thank you, I appreciate the caller.

Linda Huber: We do see the turn coming it's just a question of when and so hope that makes things a bit clearer, but we appreciate your boss's interview this morning. Thanks.

Speaker Change: Thank you I appreciate the color.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: One moment far next question.

Our next question comes from the line of Shlomo Rosenbaum from Stiefel.

Speaker Change: Our next question comes from the line of Shlomo Rosenbaum from Stifel.

Hi, good morning. Thank you for taking my question. Linda, specifically for you, you talked about what you're doing in terms of cost cutting.

Shlomo Rosenbaum: Hi, Good morning, Thank you for taking my question.

Shlomo Rosenbaum: Linda.

Linda Huber: Specifically for you you talked about what Youre doing in terms of cost cutting.

But I was wondering, just as I look at various levers that might still be available, when I think about it, how much can you gain efficiency by AI? I think a lot of the AI you're talking about are for clients.

Linda Huber: Was wondering just as I look at various levers that might still be available when I think about it like how much can you gain efficiency by a I think a lot of the EA you're talking about are for clients, but what about the company's own ability to influence and AI internally are you from other companies that they can gain efficiency that way and then just again.

what about the company's own ability to influence some AI internally? I hear from other companies that they can gain efficiency that way. And then just again, the centers of excellence, you've got 68% of headcount over there. Is that kind of peaked out over there, or is that another lever that can continue to be pushed? And where does that

Linda Huber: The centers of excellence, you've got 68% of head count over there is that kind of peaked out over there or is there. Another lever that can continue to be pushed and where does that mix.

Yeah, slow mo. I'll let Phil talk a little bit about how far we can go with the Centers of Excellence, but you're right. We have good representation in those centers of excellence, and that's working really, really well for us.

Speaker Change: Yeah Slo-mo let.

I'll, let Phil talk a little bit about how far we can go with the centers of excellence, but youre right. We have a good representation in those centers of excellence and that's working really really well for us.

We do have our thoughts on efficiency coming from Gen AI, probably a little bit premature to talk about that. We're going to focus on the client side first.

Phil Snow: We do have our thoughts on efficiency coming from Gen AI, probably a little bit premature to talk about that we're going to focus on the client side first.

And that's really where we're looking hardest right now, but efficiency for engineers is really important. Efficiency for our, you know, our help desk kind of function is very, very important. And in future calls, we'll talk more about that. Shalamo, to answer a question you didn't ask,

Phil Snow: And that's really where we're looking hardest right now but efficiency for engineers is really important efficiency for our R.

Our help desk kind of function is very very important and in future calls, we will talk more about that.

Speaker Change: Shlomo to answer a question you didn't ask we did want to thank you for your noting that we had improved free cash flow and that we collected about $50 million more.

We did want to thank you for your noting that we had improved free cash flow and that we collected about $50 million more in cash collection than we did in the previous period last year. So in addition to our.

Speaker Change: And cash collection.

Speaker Change: Then we did in the previous period last year. So in addition to our.

giant macro calls that we have to make. We also have to make sure we're collecting our cash appropriately. So, appreciate your note on that, but I'm going to turn it over to Phil on COEs and also on the Gen AI opportunity for ourselves.

Speaker Change: Giant macro calls that we have to make we also have to make sure. We're collecting our cash appropriately. So I. Appreciate your note on that but I'm going to turn it over to Phil on Coes and also on the journey I opportunity for ourselves.

Yeah, thanks. Thanks so much. Yeah, so I think there are three

Phil Snow: Thanks, Thanks, Shlomo, yes, so I think there are three.

good buckets of cost opportunity internally for generative AI. One is engineering. So we have a lot of engineers at FaxArt, and we've successfully piloted GitHub Copilot with a number of groups. And I think we're deploying that more broadly now. So like other firms, we're seeing great efficiency just in terms of the amount of code that someone can produce in the same amount of time. So that.

Phil Snow: Good buckets of cost opportunity internally for generative AI. One is engineering. So we have a lot of engineers at Factset and we've successfully piloted Github co pilot with a number of groups and I think we are deploying that more broadly now so like other firms, we're seeing great efficiency just in terms of the.

Phil Snow: Amount of code that someone can produce in the same amount of time. So that is a good opportunity for us on the content collection side. There's also a good opportunity.

is a good opportunity for us. On the content collection side, there's also a good opportunity. And over the decades, we have continued to automate more and more of content collection. So this is just a bit of an inflection point.

Phil Snow: Over the decades, we have continued to automate more and more of content collection. So this is just a bit of an inflection point.

But I was in India, you know, a couple of months ago and sat down with a number of teams, and all of them were able to demonstrate to me in some way, shape, or form a really good efficiency that they could get from collecting all kinds of different databases. And then on the sales front, similarly, I sat down with someone and I helped us.

Speaker Change: But I was in India.

Speaker Change: A couple of months ago, and sat down with a number of teams in all of them were able to demonstrate to me in some way shape or form a really good efficiency that they could get from collecting all kinds of different databases and then on the sales front, similarly, I sat down with someone or and I help desk.

And we have a co-pilot for them, which is really good about

Speaker Change: And we have a co pilot for them, which is.

Speaker Change: It is really good about.

generating a code that a user might want. And 50% of our help desk calls tend to be coding calls, so you can imagine that that's a great efficiency.

Speaker Change: Generating a code that a user might want and 50% of our help desk calls tend to be coding call. So you can imagine that that's a great efficiency.

So the question for us and for any other phone, frankly, if you ask anyone about this.

Speaker Change: So the question for us and for any other firm frankly, if you ask anyone about this is whether or not you have that efficiency go through to margin or if you use it in other ways right. So we have a long list of things, we'd like to do on the product side. So we're still evaluating how much efficiency, we can get and how we'd want to spend that money.

is whether or not you have that efficiency go through to margin, or if you use it in other ways, right? So we have a long list of things we'd like to do on the product side. So we're still evaluating how much efficiency we can get and how we'd want to spend that money. Any real impact from those three things, I wouldn't expect to see until FY25 next fiscal year, but we might be able to recognize some of it later in the second half of this year.

Speaker Change: Any real impact from those three things I wouldn't expect to see until FY 'twenty five next fiscal year, but we might be able to recognize some of it in.

Speaker Change: Like later in the second half of this year.

The centers of excellence, we have great employees there. I think the question is, just can you continue to go up the value chain in terms of what you do in those locations? So we're always evaluating our people and location strategy and I think we've all learned in the last three years that there are even more options open to us than there might have been in the past. So overall, very optimistic about what we can continue to do to drive efficiency and drive the top line and through more product.

Speaker Change: The centers of excellence, we have great employees. There I think the question is just can you continue can you continue to go up the value chain in terms of what you do in those locations. So we're always evaluating.

Our people and location strategy.

Speaker Change: We've all learned in the last three years or even more options open to us and they might've been in the past. So overall very optimistic about what we can continue to do to drive efficiency and drive the top line through more product.

Thank you.

One moment for our next question.

Speaker Change: One moment for next question.

Our next question comes from the line of Andrew Nicholas from William Blair.

Speaker Change: Our next question comes from the line of Andrew Nicholas from William Blair.

Hi, good morning. Thanks for taking my question. I wanted to ask on the M&A opportunity set and your appetite there. It sounds like, you know, with the market or I would expect it with the market being a little bit choppier in the end markets or client budgets rather being being a bit.

Hi, Good morning, Thanks for taking my question I wanted to ask on the M&A opportunity set and your appetite there.

Speaker Change: It sounds like with the market or I would expect that with the market being a little bit choppy or in the end markets, our client budgets, rather being being a bit.

Harder to pin down that you might be seeing maybe some more opportunities or some some more reasonable multiples for potential acquisition So if you could touch on that and then maybe kind of bigger picture on the same vein

Speaker Change: Harder to pin down that you might be seeing maybe some more opportunities or some some more reasonable multiples for potential acquisition. So if you could touch on that and then maybe kind of bigger picture on the same vein.

Do you think that AI and its ability to drive

Speaker Change: Do you think that AI and its ability to drive.

content collection, I think, Phil, you said it's reaching an inflection point. Does that have an impact on potential multiples as you acquire data assets? Are they easier to get? Are they more valuable now, just kind of like a bigger picture question on the value of data assets? Thank you.

Speaker Change: Content collection I think Phil you said, it's reached an inflection point does that have an impact on potential multiples as you acquire data assets are easier to get are they more valuable now just kind of like a bigger picture question on the value of data assets. Thank you.

Yeah, thank you. There's a lot in there. On the M&A front, the three buckets that we continue to spend time on are wealth, technology, private markets, and continuing to fill out the portfolio life cycle. Those are the three areas of higher interest. We do look at other interesting content assets.

Phil Snow: Yes. Thank you there's a lot in there so on the on the M&A front, the three buckets that we continue to.

Phil Snow: Spend time on our wealth wealth technology private markets and filling out our continuing to fill out.

Phil Snow: The portfolio lifecycle. So those are the three areas of higher interest we do look at other interesting content assets and yes. Your instincts are right. The market is beginning to throw a little bit I think a lot of sponsors are beginning to bring assets to market as they need to show some returns to their clients.

I don't know about the multiples coming down part, still to be determined, but we're in a much better position than we were six months ago, just because we've executed very well on the QCIP acquisition and effectively gotten our leverage down to the range that we said that we would. We did what we said we were going to do. So, we're active, we're looking at tons of stuff.

Phil Snow: About the multiples coming down park.

Phil Snow: Still to be determined, but we're in a much better position.

Phil Snow: Than we were six months ago, just because we've executed very well on the CUSIP acquisition and effectively gotten a leveraged down to the range that we said that we would we did what we said we were going to do so we're active we're looking at tons of stuff.

Um, on the AI front, I mean, the, I guess I'll answer it this way, the.

Phil Snow: On the AI front I mean, the I guess I'll answer it this way the.

I think the winners in artificial intelligence are going to be people that own the data, right? So we're in a great position there because we have a ton of data that we collect ourselves. We obviously have a lot of third parties that contribute data into our ecosystem and we connect that well, that's the real value there. And then clients are also trusting us with their data.

Phil Snow: I think the winners in artificial intelligence are going to be people that own the data right. So we're in a great position there because we have a ton of data that we collect ourselves. We obviously have a lot of third parties that contribute data into our ecosystem and we connect that well that's the real value. There and then clients are also trusting us with their data.

So, you know, potentially data, the price of data assets may go up, but also it might be easier for some newer firms to collect data. Now newer firms that have data are gonna need very often platforms like FACSA to monetize that. It's hard to go into a bigger bank or a bigger asset management as a small company and get their attention and get through all of the different things that you need to get through to have that sale. So we're in a great position here.

So.

Phil Snow: Potentially data the price of data assets May go up.

But also it might be easier for some newer phones to collect data now newer firms that have data are going to need very often platforms like factset to monetize that it's hard to go into a bigger bank or a bigger asset management as a small company and get their attention and get through all of the different things that you need to get through to have that sale. So we're we're in a great position.

And yes, we're actively looking at what's available in the market.

One here.

Phil Snow: And yes, we are actively looking at what's available in the market.

Speaker Change: Very helpful. Thank you.

Thank you. One moment for our next question.

Speaker Change: Thank you one moment far next question.

Our next question comes from the line of George Tong from Goldman Sachs.

Speaker Change: Our next question comes from the line of George Tong from Goldman Sachs.

Hi, thanks. Good morning. You talked about restructuring to take out variable and personnel-related costs. Can you elaborate on which parts of the business this is affecting? So, how much of this is coming from the desktop business, wealth business, data feeds, et cetera, and how these cost actions are spread out geographically, whether the actions are more concentrated in certain parts of the world versus others?

George Tong: Alright. Thanks, Good morning, you talked about restructuring to take out variable and personnel related costs.

George Tong: To elaborate on which parts of the business. This is affecting so how much of this is coming from the desktop business wealth business data feeds et cetera, and how these cost actions are spread out geographically.

George Tong: The actions are more concentrated in certain parts of the world versus others.

Yeah, hi George, it's Linda. We're not going to talk about headcount reductions via farm types, the main reason being that we haven't made our full decisions yet.

Speaker Change: Yeah, Hi, George it's Linda.

Linda Huber: We're not going to talk about head count reductions are by a firm types. The main reason being that we haven't made our full decisions yet.

We're looking to put our investments toward our higher value and our emerging opportunities. And obviously, we're looking really closely at

Linda Huber: We're looking to put our investments toward our higher value and our emerging opportunities and obviously, we're looking really closely at our products that we may have had for a while or opportunities that maybe have not lived up to everything that we had hoped for them.

products that we may have had for a while or opportunities that maybe have not lived up to everything that we had hoped for them.

Also, you know, in terms of where that headcount might come from, obviously we have to look hard at our onshore locations to make sure we're getting the best use out of our resources there.

Linda Huber: Also in terms of where that head count might come from obviously, we have to look hard at our onshore locations to make sure. We're getting the best use out of our resources there.

But again, all this is in progress right now, and we'll have a little bit more information as we go into the Q2 earnings call.

Linda Huber: But again all of this is in progress right now and we'll have a little bit more information as we go into the Q2 earnings call.

uh... but we we haven't made those decisions yet and i don't think we're going to get that degree of granularity uh... even when we get to that time we're looking to take out ten to fifteen million dollars on cost we're going to do it very thoughtfully uh... senior management of the firm looking at this

Linda Huber: But we haven't made those decisions yet and I don't think we're going to get that degree of granularity even when we get to that time, we're looking to take out $10 million to $15 million on costs, we're going to do it very thoughtfully.

Linda Huber: Senior management at the firm is looking at this with with great caution to make sure that where we're really thoughtful about what we're doing this doesn't come easily to us. So we wanted to take the time and get it right and you know I.

With great caution to make sure that we're really thoughtful about what we're doing, this doesn't come easily to us. So we want to take the time and get it right.

And, you know, I don't think we're going to go into too much more detail than that.

Linda Huber: I don't think we're going to go into too much more detail than that.

Speaker Change: Got it thanks for the color.

Thank you. One moment for our next question.

Speaker Change: Thank you one moment far next question.

Our next question comes from the line of Craig Huber from Huber Research Partners, LLC.

Speaker Change: Our next question comes from the line of Craig Huber from Huber Research Partners L. L C.

Great. Thank you.

hoping you could give a little more clarity on the workflow breakdown in the quarter year over year by client type, deal makers, partners, wealth and institutional buy side and also

Craig Huber: Was hoping you could give a little more clarity on the on the workflow breakdown in the quarter year over year.

But by client type Dealmakers partners wealth and institutional buy side also curious.

Craig Huber: Are you basically assuming the second half of the year, which areas pick up significantly versus what we've seen in the first half. Thanks.

Craig Huber: Okay.

Well, we won't give exact numbers, but what I can say is that banking was probably affected the most. And I think you saw that in our press release, right? We saw.

Craig Huber: Bob.

Bob: Wont give exact numbers, but you know what.

Bob: I can say is the banking.

Was probably affected the most and I think you saw that in our press release right we saw.

I think much weaker hiring or more churn on the banking side than we did last year. On the asset management side, you know, things came down a little bit, not dreadfully. We did see definitely weaker penetration in the front office, so we've begun to see the buy side clients, I think, reduce headcount a little bit more than they have in the past.

I think much weaker or hiring or more churn on the banking side than we did last year.

Bob: On the asset management side.

Bob: Things came down a little bit not dreadfully, we did see definitely weaker.

Bob: Penetration in the front office. So we began to see the buy side clients I think reduce head count a little bit more than they have in the past.

But overall, the growth rates of asset management, asset owners, and hedge funds didn't come down dramatically. Wealth went up quite a bit because of that big deal we had in Q1. And then some of the smaller parts of our business, like private equity, venture capital and corporations, in an environment like this, we did add new logos in both of those areas, but not at the rate that we might have had in previous years. So hopefully that helps. Thank you.

But overall the growth rates of asset management asset owners and the hedge funds.

Bob: Didn't didn't come down dramatically wealth went up quite a bit because of that big deal. We had in Q1 and then some of the smaller.

Bob: Parts of our business like private equity venture capital and corporations.

Bob: Environment like this we did add new logos in both of those areas.

Bob: But not at the rate that we might have had in previous years, so hopefully that helps.

Speaker Change: That's perfect. Thank you.

Thank you. One moment for our next question.

Speaker Change: Thank you.

Speaker Change: One moment far next question.

Speaker Change: Okay.

Our next question comes from the line of Kelsey Zhu from Autonomous.

Speaker Change: Our next question comes from the line of Kelsey Zhu from autonomous.

Thanks for taking my question. So, oh, well, I think you previously talked about an acceleration of growth and f y 24 and the general expectations of expending share and expending cam.

Kelsey Zhu: Thanks for taking my question. So Oh Wow I think you previously talked about an acceleration of growth from FY, 'twenty, four and general expectations of expanding share and expanding Tam.

Obviously, we've seen a large win this quarter, but I was wondering if you can tell us a little bit more about the key drivers and strategy behind that acceleration of growth. We've also talked about expanding into workflows outside of the advisory dashboard, so I was wondering if you can give us an update on that as well. Thank you.

Kelsey Zhu: Obviously, we're seeing a large win this quarter, but I was wondering if you can talk a little bit more about the key drivers and strategy behind that.

Kelsey Zhu: Salaries of growth at <unk>.

Kelsey Zhu: Also talking about expanding in shale workflows outside of it.

Kelsey Zhu: Advisory dashboard. So I was wondering if you can give us an update on that as well. Thanks.

Hi Kelsey, it's Helen. Thanks for your question and let me try to get to it. So when we think about wealth, as we mentioned, we had a very...

Speaker Change: Hi, Cathy it's a talent.

Cathy: Thanks for your question, let me try to to get to it. So when we think about wealth as we mentioned we had a very.

good win this quarter that helps us a lot and so when we think about what wealth clients are trying to do right now is that they are looking really to

Cathy: Good win this quarter that helps us a lot and so when we think about what wealth clients are trying to do right. Now is that they are looking really to <unk>.

improve and modernize their platform. The story with a lot of the large wealth firms.

Cathy: Prove and modernize their platform the story with a lot of the large wealth firms as you know and now we're seeing that now with the mid size firms coming through so that's where we're seeing more of that deal flow just as a reminder, for the large clients.

As you know, and now we're seeing that now with the mid-sized firms coming through. So that's where we're seeing more of that deal flow. Just as a reminder for the large clients that we have been able to win through competitive displacement, that includes Merrill.

Clients that we have been able to win through competitive displacement that includes Merrell Royal Bank of Canada, Raymond James and bank of Montreal, and with this newest one which actually for US is one of the ones that the longest or rather the highest total contract value that was a displacement of a long time incumbent.

Royal Bank of Canada, Raymond James, and Bank of Montreal. And with this newest one, which actually for us is one of the ones that the longest or rather the highest total contract value, it was a displacement of a long time incumbent. And so we look forward to building that relationship.

Cathy: So we look forward to building that relationship.

with them for the long term since our contract with them is actually longer than average you know over five years.

Cathy: With them for the long term since our contract with them is actually longer than average overall.

Cathy: Over five years, and so as as wealth clients now the mid the mid tier client wealth clients are now coming on board and wanting to.

And so as wealth clients, now the mid peer wealth clients are now coming on board and wanting to modernize their platform because their clients are demanding more sophisticated and digital technologies and they don't have the platform to be able to scale. And that's where they're turning to us.

Cathy: Ah modernize their platform because their clients are demanding more sophisticated and digital technologies and they don't have the platform to be able to scale and that's where they're turning to US total cost of ownership is really quite key and so the discussions that we're having include everything from just back to your question, whether or not they want to have.

Total cost of ownership is really quite key, and so the discussions that we're having include everything from, and this is back to your question, whether or not they want to get the data from APIs, for example, which does require more development costs. They need people to put that in versus, say, one of the products we're seeing a lot of demand for, which are widgets, which are easier to put in and therefore quicker.

Cathy: Get the data from <unk> for example, which does require more development costs. They need they need people to put that in versus say one of the products. We're seeing a lot of demand for which our widgets, which are easier to put in and therefore quicker. So those are some of the dynamics, we're seeing that's where we're expanding beyond.

So those are some of the dynamics we're seeing. That's where we're expanding beyond the wealth platform only and going into data. And then also into the CRM side, which is allowing our wealth clients to focus on their top line and giving their advisors the tools to be able to drive top line growth.

Cathy: The wealth platform only.

And going into data and then also into the CRM side, which is allowing our wealth clients to focus on the top line and giving their advisors are the tools to be able to drive topline growth.

Speaker Change: Thank you.

One moment for our next question.

Our next question comes from the line of Russell Quelch from Redburn, Atlantic.

Speaker Change: Our next question comes from the line of Russell Quelch from Redburn Atlantic.

Hi, thanks for having me on. So you had good user count growth and slowdown in the client growth and I think that's because of those two large deals you called out. I'm interested in is this a purposeful tilt in the sales strategy towards targeting larger enterprise deals and therefore should we expect ASV growth to be maybe more lumpy, more volatile on a quarterly basis going forward as a result of that approach?

Russell Quelch: Yes, hi, thanks for having.

Russell Quelch: So you had good user count growth.

Russell Quelch: Slowdown in the client growth so that I think.

Russell Quelch: Because of those two large deals you called out <unk>.

Russell Quelch: I'm interested in is this a person so till in the sales strategy towards targeting larger enterprise deals and therefore should we expect ISP growth to be maybe.

Russell Quelch: Maybe more lumpy more volatile on a quarterly basis going forward as a result of that approach and also I wanted to can you give a bit more specific around what you've assumed to be the size of the impact from credit Suisse. In your ISP. This year and it's also been a covenant in the second quarter. Please.

Also, can you be a bit more specific around what you've assumed to be the size of the impact from credit switch in your ASB this year and if that's all going to come in the second

I'm not sure we'll be able to speak to the exact size of that, but yeah, I think the opportunity for us to do much larger deals is increasing.

Speaker Change: Yeah, I'm not sure we'll be able to speak to the exact size of that but yeah, I think the opportunity for us to do much larger deals is increasing.

And what is really encouraging Russell is, you know, across wealth, which we just saw a big one in.

And what is really encouraging Russell is across wealth, which we just saw a big win in.

We had a very nice win on the institutional buy side this quarter in trading and the revenue for that doesn't really materialize until those trading systems get implemented. So that can take a while.

Speaker Change: We had a very nice win on the institutional buyer side, this quarter and trading and the revenue for that doesn't really materialize until those trading systems get implemented so that can take a while we had a fantastic large win in Q4 on the managed services side for the for performance.

We had a fantastic large win in Q4.

on the managed services side for performance.

And then in banking we've had some significant wins where we've completely just displaced a competitor because of deep sector So I'm beginning to see in my conversations that you know with the C-suite of our bigger clients a real appetite to engage more with fact that So yeah, I hope I hope stuff's lumpy particularly on the upside, right?

Speaker Change: And then in banking, we've had some significant wins, where we've completely displaced a competitor because of deep sector. So I'm beginning to see in my conversations with the C suite of our bigger clients, a real appetite to engage more with factset.

Speaker Change: So I hope I hope stuff's lumpy, particularly on the upside right and when.

And when you get those eight-figure contracts or those seven-figure contracts, it can sway things. I think one of the beauties about FACTSET's business model is our consistency, though.

When you get those eight figure contract. So those seven figure contracts that can sway things I think one of the beauties about Factset business model is our consistency though.

And I think as markets return to more normalcy, we'll still get a lot of singles, doubles and triples, which will, I think, continue to hopefully smooth things out. But yeah, we're always hunting for those big deals.

Speaker Change: And I think as markets return to more normalcy will still get a lot of singles doubles, and triples, which will I think continue to hopefully smooth things out, but yeah were always hunting for those big deals and the possibility of us getting those now is much larger just based on the product suite and our open strategy.

And the possibility of us getting those now is much larger just based on the product suite and our open strategy.

Thank you. One moment for our next question.

Speaker Change: Thank you one moment far next question.

Our next question comes in the line of Jeffrey Silber from BMO Capital Markets.

Speaker Change: Our next question comes from the line of Jeffrey Silber from BMO capital markets.

Thank you so much wanted to go back to AI you had mentioned that your focus is more on the client side and I believe you launched fast at Mercury. Can we have a little bit more color on that and maybe what your plans are going forward?

Jeffrey Silber: Thanks, So much wanted to go back to AI you had mentioned that your focus is more on the client side and I believe you launched Factset Mercury can we have a little bit more color on that and maybe what your plans are going forward.

Sure. Hi, Jeffrey. This is Christy. Yeah, we're very excited about fax at Mercury, but maybe it will be helpful if I talk a little bit about the whole AI blueprint and just highlight the areas in there where I think fax is really differentiated in our approach to responsibly leveraging AI to deliver value to our clients. So the first pillar.

Jeffrey Silber: Yeah.

Speaker Change: Sure Hi, Geoffrey this is Christie.

Christie: Yeah, we're very excited about Factset mercury.

Christie: But maybe it would be helpful. If I talk a little bit about the whole AI blueprint.

Christie: And just highlight the areas in there where I think factset is really differentiated in our approach to responsibly, leveraging AI to deliver value to our clients.

Christie: So the first pillar of the blueprint, it's all about what we call mile wide discover ability.

what we call mile-wide discoverability and facts that Mercury which we talked about in the press release

Christie: And Factset Mercury, which we talked about in the press release.

It's our conversational AI interface, and it's designed to unlock discoverability of all of the content and functionality that FactSet has to offer for our users. And it's really gonna become the mainstay of the FactSet user experience of the future, which is going to be a lot more personalized and insight.

Christie: It's our conversational AI interface and.

Christie: It's designed to unlock discover ability of all of the content and functionality that factset has to offer for our users and it's really going to become the mainstay of the factset user experience of the future, which is going to be a lot more personalized and insight driven.

And I think what's really interesting with Mercury, it's really our approach to providing auditability back to the reports and documents in context that's going to be a real time saver for users. Because it's going to enable them to act quickly on that information that they're getting back, and then move on with a high level of confidence to the next steps that they're taking. So really throughout the whole development process leading up to the beta.

Christie: And I think what's really interesting with Mercury, it's really our approach to providing audit ability back to the reports and documents in context, that's going to be a real time saver for users.

Christie: Because it's going to enable them to act quickly on that information that theyre getting back and then move on with with a high level of confidence to the next steps that they're taking.

Christie: It really throughout the whole development process, leading up to the theater relief.

We conducted extensive user research and through this, we really validated how important it is to deliver that auditability of the data back to our users. And we've already gotten great feedback on this and how we're approaching that in the.

Christie: We conducted extensive user research and through this we really validated how important it is to deliver that audit the auditor ability of the data back to our users.

And we've already gotten great feedback on this and how we're approaching that in the client meetings that we've had as.

as well as the other features that it offers like suggested prompts and

As well as the other features that it offers like suggested prompts and next steps to guide users to insights that they they might not have even realized were available.

to guide users to insights that they might not have even realized wherever.

The second pillar of the AI Blueprint is what we call mild deep workflow automation. So our strategy is really way beyond building an answer bot and kind of stopping there. So we're going user by user type, workflow by workflow to leverage gen AI and help streamline the workflows of each of our different client types that we know really well from over 40 years of supporting them.

Christie: The second pillar of the AI blueprint is what we call mile deep workflow automation. So our strategy is really way beyond building, an answer bot and kind of stopping there. So we're going user by user type workflow by workflow to leverage Jenny I and help streamline the workflows of each of our differing.

Christie: Client types that we know really well from over 40 over 40 years of supporting them.

So you would have read in the release that the first release of FACTS at Mercury is geared for junior bankers, but it will expand from there. But so for now, for junior bankers, in addition to being able to answer any questions that they have about companies, it can take a lot of steps out of the banker pitchbook building workflow process.

Christie: And so you would have read in the release that the first release of Factset Mercury is geared for junior bankers.

But it will expand from there, but so for now for junior bankers in addition to being able to you.

Christie: Answer any questions that they have about companies. It can take a lot of steps out of the banker pitch book building workflow process. The one great example of that is just by enabling them to simply ask for any chart in natural language and then have it delivered to them as a custom formatted factset active graph, which has been forever.

One great example of that is just by enabling them to simply ask for any chart in natural language and then have it delivered to them as a custom formatted fact set active graph, which is then forever refreshable inside their pitch deck. So they don't need to search through a gallery.

Christie: A refresh of ball inside their stack. So they don't need to search through a gallery, they don't have to adjust any setting.

Christie: Super easy for them.

And then, you know, the last pillar of our strategy is what we call mile high innovation acceleration. You know, we're very excited about what Gen AI unlocks in our own product development process and our teams are busy here building some really amazing solutions. But it's also, I think, important for everybody to remember that we're developing those those things in ways that can be leveraged as building blocks by our clients in their own product.

And then the last pillar of our strategy is what we call mile High innovation acceleration.

We're very excited about what Jenny I unlocks in our own product development process and our teams are busy here building some really amazing solutions, but it's also I think important for everybody to remember that we're developing those those things in ways that can be leveraged as building blocks by our clients in their own.

And I think our open flexible approach to this is very differentiated and unique, and we've already begun to commercialize our data solutions in that way, and I think there will be more demand for these building blocks as clients make more progress with executing on their own AI road map. So both of the three pillars and yeah, we're very excited about.

Christie: On products.

Christie: And I think our open flexible approach to this is very differentiated and unique.

Christie: And we've already begun to commercialize our data solutions in that way and I think there will be more demand for these building blocks as clients make more progress with executing on their own AI roadmap. So those are the three pillars and yeah. We're very excited about factset mercury launching into our Factset explorer.

FACSET Mercury launching into our FACSET Explorers Beta program last week. All right. Thanks. That's really helpful. Thanks so much.

Christie: Our program last week.

Speaker Change: Alright, Thanks, that's really helpful. Thanks, so much.

Speaker Change: Thank you.

Speaker Change: One moment for next question.

Our next question comes from the line of Owen Lau from Oppenheimer.

Speaker Change: Our next question comes from the line of Owen Lau from Oppenheimer.

Good morning. Thank you for taking my question. So just a follow up on the previous question about the AI for client side. I know it's too early, but could you please talk about the demand and timing of monetizing mercury or other AI products. How does it help the contract negotiations so far and how much have you baked into the ASU growth guidance in 2024.

Owen Lau: Good morning. Thank you for taking my question. So just a follow up on the previous question about the AI for client side.

Owen Lau: I know, it's still early but could you. Please talk about the demand and timing of monetizing mercury or our AI products. How does it help to contract negotiations so far and how much have you baked into your ASC growth guidance in 2024. Thank you.

This is Christy. Thank you for the question. I can talk a little bit about the approach we think we're going to take here. You know, what I was talking about with mile-wide discoverability with FACS at Mercury, we see that really as a natural evolution of the FACS at user experience, and so some level of conversational experience would be included with our different workstation packages.

Owen Lau: I can talk this is christie. Thank you for the question I can talk a little bit about the approach we think we're going to take here.

Christie: You know what I was talking about with mile wide discover ability with Factset Mercury, we see that really is the natural evolution of the factset user experience and so some level of conversational experience.

<unk> would be included with our different workstation packages.

And, you know, I know that this is going to help users unlock more value and improve their efficiency.

Christie: And.

I know that this is going to help users unlock more value and improve their efficiency.

For what we call the mild deep workflow automation in our AI blueprint, things like pitch book building and automation with Gen AI for investment banking or portfolio performance commentary for the buy side and other mild deep workflows, we are currently working on the best commercial models for this.

Christie: For what we call the mile deep workflow automation and our AI blueprint thing like a pitch book building and automation with Jenny I for investment banking or portfolio performance commentary for the buy side and other mile Deep workflows. We are currently working on the best commercial models for this.

We're going to be able to significantly streamline these workflows and drive a measurable level of efficiency for our clients, so there's definitely going to be value there for them. And I think we're going to be able to share more color in future quarters as we make more progress and we get a little bit further along in the Facts that Explore beta program. Yeah, so hopefully that's

Christie: We're going to be able to significantly streamline these workflows and drive a measurable level of efficiency for our clients. So there's definitely going to be value there for them.

Christie: And I think we're gonna be able to share more color in future quarters as we make more progress then they get a little bit further along in the Factset explore a beta program.

Speaker Change: Yeah, so hopefully that gives a little bit more color.

Thanks, and Christy, I'll add a little bit to what you just said to answer the second part of your question, Owen, which is monetization is one that everyone's trying to determine. I think that you'll see, or will see rather, the benefits certainly come through from increased retention, and in fact, it's allowing us to have some very interesting conversations with new clients.

Speaker Change: Thanks, Christy I'll add a little bit to what you just said to answer the second part of your question now and which is monetization is one that everyone's trying to determine.

Speaker Change: I think that you'll see will see rather the benefits certainly come through from increased retention and in fact, it's allowing us to have some very interesting conversations with new clients. So we're going to see how those come through but it is not baked specifically into certainly.

So we're gonna see how those come through, but it is not baked specifically into certainly the guidance for this year. Got it, thanks a lot.

Speaker Change: The guidance for this year.

Speaker Change: Got it thanks a lot.

Speaker Change: Welcome.

Speaker Change: Thank you.

Speaker Change: One moment far next question.

Our next question comes from the line of Ashish Sabhadra from RBC Capital Markets.

Our next question comes from the line of Ashish Saba draw from RBC capital markets.

Uh, thanks for taking my question. Uh, just a question on the 6, 7 figure deals, which are in the pipeline, uh, are the closing of those contingent on opening up of the client budget. And also on the last call, there was a reference around a potentially client budgets opening up for calendar 24. and I was wondering based on your, obviously, we had a lot of conversation on macro, but just based on the client conversation. What are the expectations for client budgets for next year? Any color.

Ashish Saba: Thanks for taking my question.

Ashish Saba: Just a question on the six seven figure deals which are in the pipeline.

Ashish Saba: Closing of those contingent on opening up of the client budgets.

Speaker Change: Also on the last call there was a reference around potentially client budgets opening up for calendar year 2004, and I was wondering based on your obviously you had a lot of conversation on macro but just based on the client conversation what are the expectations for client budgets for next year any color on that front. Thanks.

I think, thanks for that question. Yeah, you're right. We, as Linda had talked about, we thought

Speaker Change: Hi, Thanks, Thanks for that question, Yeah, you're right, we as Linda had talked about we thought a bit of the recovery would improve more quickly into into the second half of the year, it's probably a little bit later and so what we're hearing right now and plan to sort of finishing up their budgeting process that most budgets are probably more flat.

A bit of the recovery would improve more quickly into the second half of the year. It's probably a little bit later. And so what we're hearing right now, and clients are sort of finishing up their budgeting process, that most budgets are probably more flat.

And what but they're still being asked to do a lot more with what they have and as I mentioned before Their ability to scale is still something at the top of mind. So

Speaker Change: And what but they're still being asked to do a lot more with what they have and as I mentioned before the ability to scale is still something that's top of mind so to your point around the <unk>.

to your point around the six to seven figure deals, yes, certainly some of that will depend on budgets improving. As mentioned, some of the benefit we have in our open platform is you can do things in pieces, so you don't have to commit to the whole redo of a platform, for example, but certainly as more dollars are being allocated to technology and Gen AI, we feel we're pretty well positioned to take advantage of that.

Speaker Change: Six to seven figure deals, yes, certainly some of that will depend on budgets improving.

Speaker Change: As mentioned some of the benefit we have in our open platform as you can do things in pieces. So you don't have to commit to the hull Pete whole redo of our platform for example.

Speaker Change: But certainly as more dollars are being allocated to technology N. Gen. AI, we feel we're pretty well positioned to take advantage of that.

Speaker Change: That's very helpful. Thanks.

Speaker Change: Welcome.

Thank you. One moment for our next question.

Speaker Change: Thank you.

Speaker Change: One moment for next question.

Speaker Change: Okay.

Our next question comes from the line of Surrender Thin from Jeffries LLC.

Speaker Change: Our next question comes from the line of surrender thin from Jefferies L. L C.

Hi Linda, just a big picture question here. I guess if I'm interpreting your prepared comments correctly.

Surrender Thin: Hi, Linda just a big picture question here.

If I'm interpreting your prepared comments correctly.

It seems like you're attributing some of the change in your outlook to kind of the market recovery taking maybe a bit longer than that, than what you guys had anticipated back in September .

Surrender Thin: It seems like Youre attributing some of the change in your outlook to kind of the market recovery, taking maybe a bit longer than that then what you guys had anticipated back in September.

Surrender Thin: I guess, given how much sentiment has improved.

since that time, or at least in the last 45 days, like, can you help me understand why this is the case? Like, could you not argue that from where we stand today, the outlook from a client perspective should be more positive now than when you initially gave guidance? Like, it seems like there's a bit of a disconnect.

Surrender Thin: Since that time or at least in the last 45 days like can you help me understand why this is the case could you not argue that.

Surrender Thin: From where we stand today.

Surrender Thin: Look from a client perspective should be more positive now that when you initially gave guidance it seems like theres a bit of a disconnect and I'm not sure. If there is.

some near term dynamics here because I know October was obviously very negative.

Surrender Thin: Some near term dynamics here, because I know October was obviously very negative.

From a sentiment perspective, and then we had a complete reversal. So I'm just not sure if we're seeing the reversal yet and people are still kind of focused on the October .

Surrender Thin: From a sentiment perspective, and then we had a complete reversal. So I'm just not sure if we're seeing the reversal yet.

Surrender Thin: People are still kind of focused on getting to the October.

The sentiment at that point in time, it just seems like theres a bit of a disconnect here.

Yeah, it's a perfectly fair question and one that I sort of wrestled with as we were getting ready for this call. So we originally gave guidance on September 21 you will recall that then we had the very tragic events of October 7 which made the macro situation even more difficult. So we gave guidance before that piece happened.

Speaker Change: Yeah, It's a perfectly fair question and one that I sort of wrestled with is we were getting ready for this call.

Speaker Change: So we originally gave guidance on September 21st you will recall that then we had the very tragic events of October 7th which made the macro situation even more difficult. So we gave guidance before that piece happened.

and sentiment frankly got worse. We're coming to the calendar year end for a lot of our clients, budgets got thinner, they tightened their belts yet again, and then last Wednesday we got what I think everybody considers to be a bit of a surprise from Chairman Powell. You know, I like this expression of he shot the bears. The market has turned dramatically and hard. Is it ahead of itself?

Speaker Change: And sentiment frankly got worse, we're coming to the calendar year end for a lot of our clients budgets got thinner they tightened their belts, yet again, and then last Wednesday, we got what I think everybody considers to be a bit of a surprise from chairman Powell.

Speaker Change: You know I I like this expression of his shop. The bears the market has turned dramatically and hard is it ahead of itself it could be but what I said before is really very important are the hiring and for some of our clients is a lagging indicator. So we have to work through that clear that take the impact of <unk>.

It could be, but what I said before is really very important. The hiring in for some of our clients is a lagging indicator. So we have to work through that clear that take the impact of what's going on with the credit suite.

Speaker Change: What's going on with the credit Suisse situation in our second quarter in a conservative way and then get back on track, which we are looking to do and I think yes. The unusual combination of our fiscal year end and win some pretty big news events have happened have caused what you might consider to be a bit of a disco.

situation in our second quarter in a conservative way, and then get back on track, which we are looking to do. And I think, yes, the unusual combination of our fiscal year-end and when some pretty big news events have happened have caused what you might consider to be a bit of a disconnect, but I hope that the explanation has helped you.

Speaker Change: But I hope that the explanation has helped you so where we're quite optimistic and I'm going to turn it over to Phil to just sort of bring us in for a landing here, but we very much appreciate your point of view and your question and your notes on timing.

So we're, we're quite optimistic and I'm going to turn it over to Phil to, uh, to sort of bring us in for a landing here, but, um, you know, we, we very much appreciate your point of view and, uh, your question and your notes on timing, um, probably pretty appropriate, but, uh, we are excited about what's coming next and maybe Phil can, uh, comment on that. Yeah. Thanks Linda. So yeah. I mean, and the sales cycles for our clients do take, um, some time, particularly for our enterprise solutions. So,

Phil Snow: Leap pretty appropriate, but we are excited about what's coming next and maybe sell can comment on that yeah. Thanks, Linda So yeah, I mean in the sales cycles for our clients do take some time, particularly for our enterprise solution. So.

I'm I really hope sentiment has turned and like we like we spoke about on this

Sell: I really hope sentiment has turned in like this like we spoke about on this call and it's just a question of timing so to summarize we're very excited obviously about artificial intelligence.

call it, it's just a question of timing. So to summarize, you know, we're very excited, obviously, about artificial intelligence. We have a lot of facts that is out in the market working with our clients and nothing beats sort of showing the product to the client and getting that wow, that wow back from them. So we're all really behind this. We've made a lot of progress in the last year. And I feel like we're really in good shape versus the competition based on what I'm seeing.

Sell: Have a lot of Factset is out in the market working with our clients. So nothing beats sort of showing the product to their clients and getting that wow that while back from them. So we're all really behind US we've made a lot of progress in the last year and I feel like we're really in good shape versus the competition based on what I'm seeing.

uh... we did take the guidance down uh... just because you know that i'm taking a bit longer than we thought uh... which we just spoke to uh... second quarter will be a little slower than planned just to summarize

Sell: We did take the guidance down just because the turn is taking a bit longer than we thought which we just spoke to a second.

Sell: Second quarter will be a little slower than planned just to summarize.

We may be taking a bit of a conservative view there, and we did mention, in particular, the Credit Suisse acquisition by UBS, which was well known.

Sell: So maybe taking a bit of a conservative view there and.

Sell: And we did mention the in particularly the credit Suisse acquisition by UBS, which was well known and then just to summarize I'm going to give a bit of a plug for factset focused so we're having our flagship user event in Miami. This April.

And then just to summarize, I'm going to give a bit of a plug for Facts at Focus. So we're having our flagship user event in Miami this April and the beginning of May. It's the first time we've done this in a number of years. We're bringing together top thought leaders, industry experts and key decision makers from both the finance and tech sectors.

Sell: In the beginning of May its the first time, we've done this in a number of years, but bringing together top thought leaders industry experts and key decision makers from both the finance and tech sectors, but really going to be focused very heavily on artificial intelligence and really demonstrating what we've done there and hopefully that will be.

We're really going to be focused very heavily on artificial intelligence and really demonstrating what we've done there, and hopefully that will be really engaging for anyone that attends.

Speaker Change: <unk> really engaging for anyone that at times. So that said, we will see you all next quarter operator that ends today's call.

So, that's it. We'll see you all next quarter. Operator, that ends today's call.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.