Q2 2025 FactSet Research Systems Inc Earnings Call
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Speaker Change: Good day and thank you for standby welcome to the fact that second quarter 'twenty 25 earnings conference call. At this time, all participants are in a listen only mode.
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Speaker Change: Thank you and good morning, everyone welcome to Factset second fiscal quarter 2025 earnings call.
Speaker Change: 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.
Speaker Change: A replay of today's call will be available on our website.
Speaker Change: 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.
Speaker Change: Before we discuss our results I encourage all listeners to review the legal notice on slide two.
Speaker Change: Which explains the risks of forward looking statements and the use of non-GAAP financial measures.
Speaker Change: Additionally, please refer to our forms 10-K, and 10-Q for a discussion of risks factors that could cause actual results to differ materially from these forward looking statements.
Speaker Change: Our slide presentation and discussions on this call will include certain non-GAAP financial measures.
Speaker Change: For such measures reconciliations to the most direct comparable GAAP measures are in the appendix to the presentation and our earnings release issued earlier today.
Speaker Change: During this call unless otherwise noted.
Speaker Change: Relative performance metrics reflect changes as compared to the respective fiscal 2024 period.
Speaker Change: Also.
Speaker Change: Insistent with the last quarter. Please note that starting fiscal 2025, Factset is reporting organic ESP, rather than organic <unk> plus professional services to focus on the recurring nature of our revenues.
Speaker Change: Joining me today are Phil Snow, Chief Executive Officer, Helen Shan, Chief Financial Officer, and Gordon Gogo Chief revenue Officer.
Speaker Change: Now I'll turn the discussion over to Phil Snow.
Speaker Change: Thank you yet and good morning, everyone. Thanks for joining us today before I begin let me start by welcoming Kevin Toomey is our new head of Investor Relations and thanking yet for serving in the role on an interim basis, maintaining strong investor engagement. During the past six months. In addition to his role as head of corporate development, Kevin brings to <unk>.
Speaker Change: At over two decades of experience in Investor Relations equity research and financial markets and I look forward to working with him to continue growing our Investor Relations program.
Now onto the results in the second quarter, we grew organic a S V four 1% year over year, delivering adjusted operating margin of 37, 3% and adjusted diluted EPS of $4 and 28.
Speaker Change: We are encouraged by the positive momentum of deals progressing through the sales cycle. This past quarter and have confidence that we are reaching an inflection point and a S V growth heading into the back half of the year, we anticipated a slow start to fiscal 2025 and continue to operate in a challenging market environment.
Speaker Change: Lower CPI has resulted in a lower year over year annual price increase and softer results in asset management and banking Master significant progress, we made developing and executing against our pipeline during the quarter.
Speaker Change: While acknowledging there remains market uncertainty I'm pleased with the strength of our pipeline and the product innovation and Factset is bringing to the market.
Speaker Change: Dialogue with clients continues to be constructive positioning our business positively for the growth acceleration, we anticipate in the second half of the year.
Speaker Change: With increased visibility into the remainder of the fiscal year, we are reaffirming the 5% midpoint of our organic growth guidance and narrowing the range of anticipated topline outcomes Alan.
Speaker Change: Alan will cover the rest of our revised guidance in more detail later in her remarks.
Speaker Change: Turning back to the second quarter a S V retention remained greater than 95% and client retention was 91%. We grew our client base to over 8600 led by an increase in corporates wealth and partners and I use account increased to over 219000, driven by our continued success and well.
Speaker Change: Starting with our performance by region in the Americas, We grew organic a S V by 4% strength in wealth and hedge funds was offset by mixed results for asset managers asset owners and partners.
Speaker Change: Few large losses masked the benefit of strategic seven figure wins in.
Speaker Change: In EMEA organic a S V growth was 3%, we're continuing to see momentum with hedge funds and P. E V C firms in the region, but these gains were offset by erosion headwinds faced in the quarter. This trend was most notable in asset management and banking.
Speaker Change: In Asia Pacific, we maintain a 7% organic a S V growth driven by continued strong sales of data solutions, particularly among wealth corporates hedge funds N P E B C pumps.
Speaker Change: Now turning to our results for my phone type perspective wealth reaccelerate its a double digit growth in the quarter lapping last year's large cancellation, we continue to gain market share with leading clients in wealth evidenced by UBS selecting factset to power their advisor desktops and client facing portal in the Americas.
Speaker Change: This is another example of an enterprise deal, where our digital and technology capabilities are winning in the market.
Speaker Change: Different shading wealth advisor solution and industry, leading client service were key to this success implementation and rollout are expected to occur throughout the remainder of the year with this latest win Factset is now the primary market data partner to half of the world's top 20 wealth management firms, including three of the four U S wire houses.
Speaker Change: And three of the top five Canadian wealth managers.
Speaker Change: For our wealth business is global and we are seeing traction with clients outside North America as we execute against our sales pipeline I am confident there is continued runway to extend our success, both geographically and beyond the advisor desktop into the wealth home office and adjacent workflows.
Speaker Change: Within dealmakers, while banking was a drag to growth we still saw renewal activity increased notably in the quarter, we signed more than a dozen large banking renewables securing multiyear contracts on many of them to reinforce factset as a trusted partner and opening the opportunity for future Upsells we are comp.
Speaker Change: And in fact, that's focused on workflow efficiency and total cost of ownership.
Speaker Change: Top of mind for many of our banking clients.
Speaker Change: We launched pitch create a midway through the quarter and already have a robust pipeline with more than 50 opportunities almost two dozen of our largest banking clients actively trialing our products in several of our clients and the latest stages of commercial negotiation.
Speaker Change: Pitch Greta and our recently acquired logo interim solution are extending factset lead in powering junior bankers by streamlining their daily workload clients are telling us they welcomed the practical workhorse approach banks. It is taking to boost the productivity of that junior employees, who are increasingly asked to do more in the current environment.
Speaker Change: We expect the acceleration of our banking business in the second half of the year, notwithstanding the more cautious sentiment and macro uncertainty of recent weeks.
Speaker Change: Outside of banking P E. B C remains a bright spot with accelerated double digit growth in the second quarter corporates also added to growth fueled by the momentum from our <unk> acquisition in the first quarter.
Speaker Change: Within the institutional buy side headwinds from cost rationalization and budget tightening persisted among our asset manager and asset owner clients, while retention pressure growth, particularly among active asset managers facing a U M outflows the impact in the second quarter included a seven figure counsel due to our proactive retirements of our legacy and bespoke.
Speaker Change: Solution that we are no longer supporting as clients continue to cut costs and optimize head count our managed services offering is providing a natural hedge and then additional growth channel. We gained further momentum with a large seven figure win displacing the legacy performance system with attached managed services to support the operational workflows.
Speaker Change: Of a leading asset management clients.
Speaker Change: Hedge funds were also a bright spot in the second quarter as we capitalized on fund launches higher workstation of attention and strong data solution sales.
Speaker Change: During the second quarter, we announced the acquisition of liquidity book to enhance Factset <unk> ability to serve the integrated workflow needs of our clients across the entire portfolio lifecycle.
Speaker Change: Liquidity books Technology Board O M. S. Three trade compliance an eyeball capabilities to our workstation enables us to more seamlessly link adjacent steps in the front office trade workflow. We are excited about the bidirectional cross sell opportunities that we are already executing on and I expect this acquisition to be immediately accretive.
Speaker Change: The facts that's growth.
Speaker Change: Our partnerships and C. G S growth in the second quarter remains solid we are seeing robust new business and expansion activity across multiple partner segments, particularly amongst index providers exchanges in the AI focused fintech.
Speaker Change: Similar to last quarter CGS benefited from the continued strong new issuance market across several asset classes.
Speaker Change: In summary, I want to reiterate that our number one priority is to drive top line growth.
Speaker Change: As we head into the second half of the fiscal year, we have increasing visibility into a robust sales pipeline and positive underlying momentum.
Speaker Change: Wealth will continue to be a growth engine, not only I'll be gaining market share and extending our track record of success displacing the incumbent in this market.
Speaker Change: But we're also widening the aperture on the breadth of workflows. Our solutions can address leading clients are choosing factset to be their enterprise partner and we continue to receive validating feedback that our products and service levels are positive differentiate us versus the competition.
Speaker Change: There is ample runway for accretive growth across our smaller firm types the acquisitions of urban and liquidity book in recent months are already driving cross selling opportunities and pulling factset into higher volume shorter sales cycle opportunities with corporates and hedge funds were client purchase decisions are more rapid Additionally, cobalt, which we acquired a few.
Speaker Change: Years ago continues to open doors and position us to cross sell P. E. B C clients seeking enterprise solutions.
Speaker Change: Our banking products remained best in class strengthened by content investments across private markets deep sector and fundamental data.
Speaker Change: Our clients consistently provide positive feedback on the breadth and quality of our data that we feel is a competitive advantage. We believe factset has the best banking product in the market and we continue to extend this lead with a focus on workflow productivity now.
Speaker Change: Past 18 months, we renewed more than a third of our banking a S V representing over 40% of banking users, including more than half of our top 25 investment banking clients to multi year contracts limiting downside risk in the second half of the year and positioning factset to grow wallet share with our expanded enterprise data and workflow.
Speaker Change: Activity solutions for.
Speaker Change: But the institutional buy side, we are making steady progress driving client engagement at the enterprise level with a focus on improving that total cost of ownership.
Speaker Change: In it services and our expanded data solutions offering are contributing to a healthy second half pipeline and lowering the risk of large client cancellations.
Speaker Change: Our teams are intensely focused on capitalizing on Factset early mover status on Jenny I products executing our go to market strategies across our new and differentiated solutions and mitigating the headwinds that pressured retention in the first half we are well positioned to deliver on our mission the supercharged financial intelligence and I am can.
Speaker Change: Confidence in our path forward I'll now turn it over to Helen to take you through our second quarter and first half 2025 performance in more detail.
Thank you, Phil and Hello to everyone on the call.
Helen Shan: Over the first two quarters of the fiscal year, we delivered solid financial and operating performance that sets us up for a strong second half as we previously guided we utilize our balance sheet to acquire central capabilities for our buy side cooperate and banking workflows, while continuing to return capital to our shareholders.
Helen Shan: Phil mentioned, you have a promising pipeline across all firm types, which should boost S. A in the remainder of the fiscal year.
Helen Shan: As a result, we have updated our fiscal 2025 guidance by narrowing our organic S. He growth range to reflect our confidence in achieving the 5% midpoint.
Helen Shan: We are also reaffirming the ranges for adjusted operating margin and adjusted diluted EPS with our productivity and expense management efforts expected to absorb the dilution from recent acquisitions.
Helen Shan: For a detailed information to follow the first I will review our quarterly results.
Helen Shan: Organic ASB grew by $19 6 million in the quarter and 4.1% year over year. It is important to remember that our annual price increase partly depends on CPI, which has declined compared to last year.
Helen Shan: Impacting the price increase for this fiscal year <unk>.
Helen Shan: Recaptured over $18 million in price increases primarily in the Americas versus 25 million in the prior year, resulting in a nearly 7 million dollar headwind to ASE growth this quarter.
Helen Shan: GAAP revenues increased four 5% year over year to $571 million, while organic revenues, which exclude foreign exchange movements and impact from acquisitions or dispositions over the past 12 months increased 4% to $568 million.
Helen Shan: For our geographic segments organic revenues grew by 4% in the Americas, 3% in EMEA and 7% in Asia Pacific.
Helen Shan: GAAP operating expenses, which include one time nonrecurring items rose, 5.8% year over year to $385 million.
Helen Shan: This increase resulted from higher acquisition related professional fees and technology expenses, partly offset by lapping a one time restructuring charge in the prior year.
Helen Shan: Due to these factors GAAP operating margin decreased by approximately 80 basis points to 32, 5% compared to last year's second quarter.
Helen Shan: On an adjusted basis operating expenses were six 3% and operating margin decreased 100 basis points year over year just 37.3%.
Helen Shan: This was primarily driven by a 31% increase in technology related spend due to higher cloud and software expenses and greater amortization of internal use software, reflecting our ongoing investment in generative AI.
Technology cost accounted for over 10% of revenue in the quarter up from 8% in the prior year.
Helen Shan: Employee expenses increased 3% year over year, primarily due to last year's lower bonus accrual.
Helen Shan: Building this factor our employee expenses would have been flat to down year over year.
Helen Shan: People expenses are our largest cost category constituting 40% of revenue, which was down nearly 60 basis points versus the prior year.
Helen Shan: By streamlining processes and utilizing automation, we continuously find ways to enhance workforce efficiency and maintain cost discipline, while investing in strategic priorities.
Helen Shan: Third party content costs rose, 7% year over year, but remained less than 5% of revenues similar to the prior year's quarter.
Helen Shan: With increased data demand we have actively managed this growth for example in the second quarter, we replaced several providers with our own self collected data.
Helen Shan: We not only reduced licensing fees, we pay third parties, but also now offer superior content with full redistribution rates that aligns seamlessly with factset proprietary identifiers.
Helen Shan: Real estate and related facilities expense decreased 6% year over year, staying under 3% of revenues about 30 basis points lower than the prior year.
Helen Shan: Please refer to the appendix for today's earnings presentation for a more detailed expense walk from revenue to adjusted operating income.
Helen Shan: During the quarter, our cost of services as a percentage of revenue was higher year over year by approximately 50 basis points on a GAAP basis and more than 180 basis points on an adjusted basis, primarily due to higher technology expenses, partially offset by lower compensation expense.
SG&A as a percentage of revenue was approximately 30 basis points higher year over year on a GAAP basis, primarily due to increased professional fees linked to acquisitions offset by reduced bad debt expense.
Helen Shan: On an adjusted basis SG&A was about 75 basis points lower after excluding onetime nonrecurring items.
Helen Shan: Our GAAP effective tax rate in the second quarter was 15, 9% a decrease when compared to the 16.4% tax rate in the second quarter of last year.
Helen Shan: This change was mainly due to lower U S tax on foreign earnings, partially offset by discreet items like reduced tax benefits from stock based compensation.
Helen Shan: Our GAAP diluted EPS increased 11, 3% to $3.76 this quarter versus $3 65 in the same period last year, primarily due to higher revenue, partially offset by an increase in acquisition related professional fees and technology related expenses.
Helen Shan: Adjusted EPS increased by six cents, a 1.4% or $4 28.
Helen Shan: EBITDA for the quarter grew three 6% compared to the prior year period to $225 million driven by higher net income free cash flow, which we define as cash generated from operations minus capital spending was $150 million in the second quarter up 23% over the same period.
Helen Shan: Last year.
Helen Shan: This result was driven by positive working capital shifts due to decreased income tax payables and improved accounts receivable collections.
Helen Shan: Turning to return of capital to shareholders in the quarter, we repurchased nearly 137000 shares for approximately $64 million at an average share price of $470 70.
Helen Shan: At fiscal quarter end, we had a capacity of $187 million remaining under the $300 million share repurchase authorization approved by our board of directors last September.
Helen Shan: Today, we paid a quarterly dividend of $1 four per share to holders of record as of February 28 2025.
Helen Shan: We remain diligent with our buyback program and are committed to delivering long term value to our shareholders.
Helen Shan: Binding dividends and share repurchases, we returned $392 million to our shareholders over the last 12 months.
Helen Shan: At the end of the second quarter, we paid off the remaining principal of the $1 billion term loan winter Cat Cora CGS acquisition three years ago.
Helen Shan: Funded the recent liquidity book acquisition with new borrowings under our revolving credit facility with $480 million drawn at quarter end.
Helen Shan: Our gross leverage ratio was one seven times consistent with our aim to maintain investment grade ratings.
Helen Shan: Finally, we remain confident in our second half top line acceleration and are reaffirming the 5% midpoint of our prior guidance on organic as feedback.
Helen Shan: We're also narrowing our ASP growth range by adjusting both the top and bottom ends of the range by 10 million to $100 million to $130 million, reflecting a growth rate range of approximately 4.4% to five 8%.
Helen Shan: Our guidance for revenue is now a range of 2.305 billion the $2.3 billion to $5 billion, a $20 million increase from our previous guidance the.
Helen Shan: The change factors and the expected impact for the rest of the year from our recent acquisitions of Irwin in November liquidity book in February and logo in turn in early March.
Helen Shan: And our solid performance and conscientious cost management in the first half we are maintaining our guidance range for adjusted operating margin of 36% to 37% and adjusted diluted EPS at 16080 cents to $17 40. This decision illustrates our ability to mitigate the modest mark.
Helen Shan: <unk> and EPS dilution from the aggregate impact of our recent acquisitions.
Helen Shan: On a GAAP basis, we expect operating margin in the range of 32% to 33% and EPS to be between $14 80 to $15.40 for the year.
Helen Shan: This decrease from prior guidance at 50 basis points, and 30 cents, respectively reflect one time nonrecurring expenses incurred in connection with these acquisitions.
Helen Shan: The guidance range for our effective tax rate remains unchanged between 17% to 18%.
Helen Shan: As Phil indicated our teams are well equipped to deliver second half growth, we have clearer visibility into our pipeline strength based on our increased breadth of solutions and growing client interest in our Gen AI solutions.
Helen Shan: We will continue to leverage our expense base and invest smartly, focusing on differentiated products and internal efficiencies.
Helen Shan: We anticipate higher expenses in the second half for planned Gen. AI infrastructure projects alongside go to market initiatives to further boost pipeline volume and quality over the next 12 months.
Helen Shan: In conclusion, we are prioritizing assay growth operational focus and strategic capital allocation to enable factset to deliver sustainable long term value for shareholders.
Helen Shan: And with that we are now ready for your questions operator.
Helen Shan: Thank you.
Speaker Change: To ask a question please press star where money your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: We ask that you please limit yourself to one question. Please standby what we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Kelsey Xu with Autonomous your line is now open.
Kelsey Xu: Hi, good morning, Thanks for taking my question.
Speaker Change: I wanted to start with.
Speaker Change: I think they.
Speaker Change: In fact that definitely has a first mover advantage and I always want more.
Speaker Change: Providing more color around the traction.
Speaker Change: Especially when it comes to pitch.
Speaker Change: Pitch creator and some of the other product that you highlight or.
Speaker Change: How are you thinking about the pricing.
Speaker Change: And how receptive are clients out there.
Speaker Change: Additional service.
Speaker Change: Part of the current subscription.
Speaker Change: Thanks, Kelsey and stuff fell all started I think garden may have some extra what's to say here. So yeah, we're pleased with the momentum.
Speaker Change: We're well on our way to.
Speaker Change: Getting to the 30 to 50 bps that we spoke about in terms of monetizing these assets this year.
Speaker Change: And we've got six Skus now that we've sold and are there out there are more coming I would say the one SKU that sort of gotten most of the length of the pitch creator, which I spoke about in my opening comments, so very good reception from the banks.
Speaker Change: It's sitting on top of the best banking product in the industry already.
Speaker Change: So this has been very exciting for us and during the quarter.
Speaker Change: Gang logo intern was it was a nice little add that to kind of to put into the product. So it's just been released we had tons of people trialing, it and giving us feedback, but I do think we're now on the cusp of being able to monetize that more seriously as we get into Q3 and Q4.
Speaker Change: I would say the second SKU that we've got the most traction on is the conversational API. So that's really taking the ability to take what you can do in factset to search with AI capabilities and plugging it into your own environment, and we're seeing with Pepsi receptivity for that across all phone type. So there are many firms.
Speaker Change: Particularly the larger ones that want to control the research environment and combine the best.
Speaker Change: Something like Factset with their own data that sometimes they're reluctant to release out to anyone.
Speaker Change: And maybe some other sources, so that's going really well and then we are beginning to monetize portfolio commentary that has been a bit slower. Although what we've done is we've package that together with a bunch of other.
Speaker Change: Things that are a bit more sort of usage based for the buy side. So we think that's going to be a good approach people loved the product I think they're waiting for all the asset classes in some cases to be sold out we've done equity risk.
Speaker Change: But we have begun to sell it so those are the three today.
Speaker Change: And we're coming out with some other skus in Q3, and Q4, but I guess I'll pause there Gordon do you want to add.
Gordon Gogo: Just a couple of things one is clients are reacting very well to the pricing structure that we have put in place certainly are realizing productivity gains from the from the products that we have launched in particular in the pits creator we have almost 2000 active trials and are in various stages of negotiation with a number of.
Speaker Change: Of large or larger clients we.
Speaker Change: We are also helping clients drive their internal initiatives.
Speaker Change: Conversational API as well as <unk>.
Speaker Change: As long as Vectra Ais data packages that are ready for a call for clients to implement in their own environment. So all of those solutions are resonating well and as it is is our pricing structure for those.
Speaker Change: Thank you. Our next question comes from the line of Shlomo Rosenbaum with Stifel. Your line is now open.
Shlomo Rosenbaum: Hi, Thank you.
Speaker Change: Phil It sounds like your tone is definitely getting better as the year goes on and what I'm trying to understand is if you could parse out is the environment getting better or do you feel like the company is doing better in an environment, that's not really changing that much with all the proactive items. There that you guys have been doing so.
Speaker Change: I guess it sounds like the green shoots have been turning greener and I guess looking for the for the reasons for it just to understand how you guys are progressing.
Speaker Change: Yes, multi tim that so I appreciate that you recognize my tone is improving thanks Shlomo.
Speaker Change: Yes, so I think what we feel really good about is.
Speaker Change: I think we've derisked all of the big rocks for the year basically so we now have visibility on almost all of those and I think a lot of the things that we were battling for them in terms of the bigger renewals and so on I think of.
Speaker Change: The majority of that was a full on our way. So I think we feel good about sort of where we stand there and then I think we're seeing we're definitely seeing strength across.
Speaker Change: Every market so I would say the Americas Europe and Asia are all light look like they're going to come in they're going to accelerate and in the second half.
Speaker Change: The pipeline.
Speaker Change: Moves out.
Speaker Change: And we're seeing really good I think.
Speaker Change: Surgeons in asset management, so the environment is not getting any easier that's for sure but I do think that we're really beginning to see.
Speaker Change: Some real progress in selling at the enterprise level.
Speaker Change: You know on the buy side I really want to talk to the kind of performance reporting the managed services because I know you've asked about that continues to do well our feeds business, which decelerated a bit over the last year or two as having a really strong come back. So it's not just the real time.
Speaker Change: And reference data feeds that we have released more recently, but a benchmark data feeds are doing really well and in some of our core data is doing well also.
Speaker Change: And you know the smaller firm types of doing great like hedge funds private equity corporates.
Speaker Change: The wealth, obviously that growing at a high clip and what I want to stress, we're not relying on banking for the numbers that we talked about today and in the narrowing of the range So banking stuff.
Speaker Change: I don't think that you know the environment is getting any.
Speaker Change: Any more theres not more deals coming to market I think we saw that in January and February.
Speaker Change: So we're not relying on some data from the banking business to hit the numbers that we spoke about today if that comes through that'll be great that'll be a tailwind for us.
Gordon Gogo: Gordon you want to add anything.
Gordon Gogo: Just in addition to everything Phil said about the buy side the improvement I think in addition to our traditional strength in the Middle Office solutions performance solutions. We're also seeing improvement and we're quite pleased with our activity in D. M. S space with our port for solution as well as our front office.
Gordon Gogo: Solutions are gaining more and more traction Boston the buy side of things the liquidity book really helps us.
Gordon Gogo: Complete the plc a lifecycle. It makes says the go to for consolidation for our you know for hedge funds and smaller to mid size in our buy side clients, who were quite excited about that it creates a cross sell opportunity before us.
Speaker Change: <unk> solutions, and as Helen said and abide by directional crossover preterm yourself and we're excited about the second half here.
Speaker Change: There is there is a lot bogged in front of us and we have the tools to do it.
Speaker Change: Thank you. Our next question comes from the line of Alex Kramm with UBS. Your line is now open.
Alex Kramm: Yes, Hey, good morning, everyone just actually to follow up on the last question. Phil you just mentioned you're not relying on banking all the cell sites.
Alex Kramm: But obviously theres a range. So maybe you can be a little bit more specific does that mean, you don't need banking to pick up to hit the low end or are you talking about the mid point because clearly post election. There was a lot of enthusiasm most capital markets picking up and then hiring picking up and clearly that continues to get pushed out so.
Alex Kramm: It should continue to be a swing factor. So just wanted to figure out where exactly does that swing factor lie in your in your guidance range. Thanks.
Alex Kramm: Yeah. So I think we've been fairly conservative and sort of what we've put in the pipeline and some of the banking hiring.
Alex Kramm: That's in our numbers.
Alex Kramm: I think the bright spot is definitely pitch creative so that could actually.
Alex Kramm: To help their core and what are you, saying that's.
Speaker Change: As Phil said I think what we are.
Speaker Change: What we are baking in for our midpoint in terms of guidance is really you know slightly lower or you know even head count compared to the last year. So there is no. There is no upside in those numbers that we are into we're counting on I think it would be a swing towards higher or higher end of the range.
Speaker Change: Thank you. Our next question comes from the line of Faiza <unk> with Deutsche Bank. Your line is now open.
Speaker Change: Yes, hi, thank you.
Speaker Change: Couple of quick questions about.
Speaker Change: Yes, we in the quarter.
Speaker Change: One just for avoidance of doubt I wanted to make sure as the UBS well to deal included in the ESV This quarter end.
Speaker Change: If you could help quantify that that would be helpful. And then just secondly, you talked about the proactive retirement of a legacy solution.
Speaker Change: Maybe if you can help quantify that also end.
Speaker Change: If there is any sort of.
Speaker Change: Are there any more.
Speaker Change: Legacy contracts like that or products that are expected to be retired whether it's this particular product or something else in the future. Thank you.
Speaker Change: Hi.
Speaker Change: If corn so it's a couple of things absent the lower price increase to that.
Speaker Change: You know because we implemented this quarter end.
Speaker Change: And couple of strategic deals that we proactively canceled dinner before they're actually seen acceleration in the quarter.
Speaker Change: So you know there is no further retirements of the products that we're planning on.
Speaker Change: For the rest of the year, so you've already seen the impact of that in.
Speaker Change: In Q2 back.
Speaker Change: Back to your question about the UBS deal you know we signed the contract in the quarter, we are thrilled with it.
Speaker Change: Another strategic brand for the fastest growing segment of our portfolio. So in a rear. So we're quite pleased with it I think it speaks to the strength of the project product to be purely want us on.
Speaker Change: On a better product.
Speaker Change: Product suite really and.
Speaker Change: It enables us to further expand this relationship as you know.
Speaker Change: As the years progressed implementation of it well will take place throughout the next five or six months.
Speaker Change: I think we will be starting that convert into quarter three and in Q3.
Speaker Change: It's a very strategic for us we love our position in that space, and it's really positioned us to land and expand as we expand to additional services to all of these.
Speaker Change: Clients in the markets, where we have won over the last few years.
Speaker Change: Yeah, Faiza just to add on so yes. It is it was booked in Q2 are the users for UBS won't come through until the next quarter or two as we as we roll it out so.
Speaker Change: The a S V that we captured at least in the initial stages of UBS is not part of the second half, where we see like a like a really robust pipeline.
Speaker Change: You can model that out.
Speaker Change: Thank you. Our next question comes from the line of Ashish <unk> with RBC. Your line is now open.
ashish: Thanks for taking my question just wanted to clarify it.
Speaker Change: In the quarter. So there was a reference to lower CPI being on pricing, but I was just wondering if you could provide any color on pricing versus pricing realization, but existing gain versus new and renewals any color on that front and then similarly on international should we expect similar pressure on the international pricing in the third quarter is the tax.
Speaker Change: <unk> I'll take that one so thank you for clarifying your thoughts there are standard contracts include annual price increases based on the higher CPI RPI plus 3%. So our guidance range does reflect the lower inflation rate versus last year. So we.
Speaker Change: The international price increases to align proportionally to that what we've seen in the Americas.
Speaker Change: We do adjust rate cards throughout the year. So in January we activated on that we actually raised our global rate cards, depending on the package and we have seen higher price realization and certain firm types like corporates and hedge funds.
Speaker Change: Also along with Street account.
Speaker Change: Our new business, and we are seeing price realizations and slightly lower year over year at.
Speaker Change: But the volume was up nearly 25% so driving our total a S V from new business up nearly 10% and so that reflects our positioning and taking more market share. So we do believe in the sort of land and expand type of of strategy. So these impacts will come through our renewals and new business that separate from.
Speaker Change: The annual price increase.
Speaker Change: So the annual price increase is expected to be lower than last year, but we're capturing additional ASB.
Speaker Change: Either through higher pricing, the array cards or through higher quantity of new business.
Speaker Change: Thank you. Our next question comes from the line of Manav Patnaik with Barclays. Your line is now open.
Brendan: Hi, Good morning, this is brendan on for Manav.
Speaker Change: Wanted to ask on the.
Speaker Change: The margin guide given I believe you guys are very talked about tech costs going up quite a bit this year and 25% and then obviously you have the acquisitions coming in some some costs there.
Speaker Change: It seems like the people cost that has to be held down I guess net of those acquisitions quite a bit.
Speaker Change: To get to the midpoint I know normally you would kind of see those float up a little bit throughout the year. So I guess just what you.
Speaker Change: You've mentioned some efficiency program some initiatives I guess any any color on what you guys are doing and.
Speaker Change: How to kind of bridge to the to the midpoint.
Speaker Change: Sure I'll take I'll take that one as well thanks for the question. So yeah, we have seen in this quarter this half.
The way, we benefited from lower people costs, despite higher year on year comparison, because last year. There was a change in that bonus accrual without this the adjusted but people expenses would have been lower so we're actively managing that we've got mix that continues to float that way.
Speaker Change: We are managing our content and technology costs as well.
Speaker Change: Including having vendor credits and cancellations of contracts, which I mentioned in my earlier remarks, and we're also seeing some benefit in the first half on FX.
Speaker Change: It is also helping us as well. So those are those are the things that are helping on on the on the first half we.
Speaker Change: We will expect to see.
Speaker Change: A ramp up in expenses in the second half.
Speaker Change: As we prioritize strategic investments.
Speaker Change: The tech costs like you said are going to continue to ramp up and Jenny I and the infrastructure.
Speaker Change: And our go to market, we're actually going to put more money in to really build the pipeline in the next 12 months and we're not we're not looking for FX benefit either so that's really how we're we're coming through and absolutely. The benefit here is that we're able to absorb the dilution that comes from the acquisitions, which is about.
Speaker Change: Florida, the 50 basis points.
Owen Lau: Thank you. Our next question comes from the line of Owen Lau with Oppenheimer. Your line is now open.
Owen Lau: Hi, good morning, and thank you for taking my questions. So I have a follow up with the previous question about the data and fits our business and sales. So is it fair to say that the market uncertainty actually helps data basis, because people want more data people one more kind of.
Owen Lau: Inflammation, that's why that part of the business outperform compared to your initial expectation.
Owen Lau: The M&A part it looks like it cool down a little bit so thats why.
Owen Lau: You can still maintain the like for your ASC guidance or narrow too.
Owen Lau: Thanks.
Speaker Change: Yeah, maybe I'll start so I think factset always does very well.
Speaker Change: Through all types of cycles. So we will manage through whatever market. We're in I'm not sure that.
Speaker Change: That's the main reason for the data feed.
Speaker Change: You know predicted growth or growth I think a lot of a lot more of it has to do with us becoming increasingly an enterprise partner for our clients. So we're selling at the top of the house a very often now we're constructing agreements where our clients can.
Speaker Change: Really take value from Factset any way they want whether it's through the desktop analytics and API Jenny I some other provider.
Speaker Change: So that all feeds into that and again I think the fact that we've released some new products here.
Speaker Change: It's super exciting so called I don't know if you want to talk a little bit more about the feeds and then we'll come back to your acquisition question Yes.
Speaker Change: So just just to follow up on what Phil said it is the quality of our content, that's really driving the improvement in in our numbers in the data business asphalt put some more sales focus on it.
Speaker Change: But I think there is a high demand for high quality data.
Speaker Change: By hedge funds by other players in the private.
Speaker Change: Private players in the industry, but also as you see all of these new tech startups that are.
Speaker Change: Those are really AI focused.
Speaker Change: I think our best of breed data is really the fuel that drives that entire their entire development and professional growth. So we are focused on developing partnerships that we think will help us in the future. There is higher demand for our data in traditional business as well.
Speaker Change: With the development of our real time.
Speaker Change: Data fees exchange data piece as well as our security Master offering we are seeing more and more success, we do have a superior delivery and superior technological solutions for our clients.
Speaker Change: Really improved the efficiency of their operation as the spreads to talk to our products. That's evidenced by a number of wins in this quarter. We had about four or five there were very specific to some of the hardest to deliver exchange data feed sets in particular options that we are quite pleased pleased with that progress.
Speaker Change: And we believe that the data feeds business will be a driver of our success for the rest of the year and going forward.
Speaker Change: And maybe I can just add one other piece that we're beginning to see a growth in which is our data management services piece, which is where we're helping clients being able to concord not only our data, but also with the client data and that's quite difficult and that is largely done through technology with some people.
Speaker Change: Our services as well so that is a very profitable.
Speaker Change: Profitable service for Us and we expect to see that continue to grow going forward.
Speaker Change: Oh, and you asked about M&A and I do think that.
Speaker Change: Two or three things that we've done.
Speaker Change: This fiscal year are really going to help the smaller but there's so many great synergies and cross sell opportunities for the team so the the liquidity.
Speaker Change: Book acquisition, which we just announced when we acquired it was about $22 million of ASB, Oh, and previously was about nine.
Speaker Change: And that liquidity book comes with around 170 clients.
Speaker Change: I would say more than half of those are hedge funds, but there's also sort of a healthy group of clients.
Speaker Change: L site offering.
Speaker Change: And then there's a great opportunity for us to serve kind of the middle of the bell curve and the buy side for those that need the entire portfolio lifecycle from Factset. So this is really the missing piece and combining the O M. S N. The eyeball with banks at MFS in some of our other portfolio managing capabilities really does open.
Speaker Change: A lot more market for us with a lot of our existing clients. So we couldnt be more excited it also comes with a fixed network.
Speaker Change: That was probably in the press release, but there's some great synergies that we expect.
Speaker Change: To capture from that as well.
Speaker Change: Thank you. Our next question comes from the line of Andrew Nicholas with William Blair. Your line is now open.
Andrew Nicholas: Hi, Good morning, Thanks for taking my question I wanted to double back to the commentary on well in particular.
Speaker Change: <unk> growth accelerated.
Speaker Change: Big wins, there and you talked about your strong share within the top 20, and you help outline maybe what the land and expand strategy.
Speaker Change: Skewed towards on a go forward basis within that market is it adding additional services to existing clients is it downloading additional users within those contracts new.
Speaker Change: New regions, just trying to understand kind of where.
Speaker Change: The growth opportunities are once you have signed up as many flagship clients as you have at this point. Thank you.
Speaker Change: Okay.
Gordon Gogo: Hi, It's Gordon I will pick up so.
Speaker Change: So all of the above.
Speaker Change: And I think we certainly see opportunity for regional expansion expansion, we've done very well in Americas.
Speaker Change: <unk> made good progress in Europe, and we are focusing on kind of what we have done in U S and Canada really copying that too mature to what we're doing in Europe, particularly over Pakistan, Switzerland, and the UK is the growth market for us in the near future and then further expansion.
Speaker Change: And in Asia, as well Asia is growing.
Speaker Change: Quite nicely for us and we see those geographic opportunities are significant.
Speaker Change: We do see opportunities for more users, especially in the home office and replacing some of the higher end terminals. So that is another area of focus and we have been actually quite successful there, but then you know what.
Speaker Change: The real.
Speaker Change: In the extension of our strategies layering on additional services too to support additional workflows are our clients for.
Speaker Change: For example, you know B b supported their business development.
Speaker Change: Some of them.
Speaker Change: Some of our lead generation tools that we have recently launched and they're resonating quite quite far into the market and then all of the other portfolio management workflows that our clients undertake or other areas that we are building for an expanding into.
Speaker Change: I hope that answers your question.
Speaker Change: Thank you. Our next question comes from the line of Craig Huber with Huber Research Partners LLC. Your line is now open.
Craig Huber: Good morning.
Craig Huber: I remember coming into this decade, you guys announced the large at the time of a large three year and here I.
Speaker Change: I don't I don't I don't know if that's on our side or your son.
Speaker Change: Yes can you can you hear me here.
Craig Huber: Yes, we can now yes.
Speaker Change: I'm not sure what happened there.
Speaker Change: Coming into this this decade I recall, you guys announced a large three year internal investment program with the goal of accelerating your.
Speaker Change: Organic revenue growth to the high single digits.
Speaker Change: Successfully worked you would call it high single digit growth for two plus years and stuff and now you are on that.
Speaker Change: What about 31% increase in technology spend.
Speaker Change: Now are you anticipating a significant ramp up in.
Speaker Change: In your organic revenue growth because these internal investments spending here as you think out over next couple of years. Thank you.
Speaker Change: Hey, Craig its Alan let me try to answer that one so when we talked about this at our Investor day.
Speaker Change: As you know in our three year plan, we plan to be in that mid to high single digits.
Are the investments that we're making in technology is to help support that so theres no specific additional large investment plan that Mike. We had done that you rightfully said back in 2019 'twenty 'twenty. This is part of the archive consistent.
Speaker Change: Investment back into the business and technology N Gen AI and funding that through a rationalization of costs.
Speaker Change: Of our existing client our existing expense base.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of George Tong with Goldman Sachs. Your line is now open.
Speaker Change: Hi, Thanks, good morning.
Speaker Change: In light of the recent market downturn.
Speaker Change: Volatility can you talk a little bit more about changes, you're seeing with buy side budgets and broader sales cycles, especially among large asset managers and asset owners.
Phil Snow: Sure Hey, Jordan, it's Phil So yeah, I don't think we're really seeing much of a change at least not yet so.
Phil Snow: I think we've been working through like a great period of uncertainty for a number of years and the pressures that are on the buyer side in terms of the shift from active to passive obviously are not new.
Phil Snow: So I just I think that probably is the forcing function honestly, so we're addressing that with the enterprise.
Phil Snow: Solutions, we have the generative AI offerings.
Phil Snow: Yes, it could be choppy, but again I think we're very resilient through these markets and and we've built a very strong pipeline for the second half a lot of that is the buy side and we don't anticipate that the current.
Phil Snow: Market environment.
Phil Snow: Could influence.
Phil Snow: That pipeline that strongly.
Speaker Change: Thank you. Our next question comes from the line of Toni Kaplan with Morgan Stanley. Your line is now open.
Speaker Change: Thanks, So much I wanted to go back to the price increase you mentioned.
Speaker Change: The CPI being the lower CPI being a driver there.
Speaker Change: And so I guess when I was doing the calculation I was getting about 2% price increase versus roughly three last year.
Speaker Change: You know that that obviously it does impact the organic ASP growth.
Speaker Change: And puts pressure on that but you are it sounds like.
Speaker Change: Aiming for inflection here and so is it is your confidence coming from your strong pipeline and deals it.
Speaker Change: It sounds like the international price increase you're expecting would be sort of similar to U S. So that probably doesn't help that much. So is it the pipeline or is there something.
Speaker Change: You know that that is really going to drive this inflection higher than the organic ASC and maybe a competitive environment.
Speaker Change: Be relevant here as well if if that's a factor.
Tony: Hi, Tony.
Speaker Change: Corn.
Speaker Change: So theres a number of factors.
Speaker Change: I think Rick and foreign to us and a point point in time are booked a S fee is actually quite a bit higher year over year.
Speaker Change: And as compared to the 'twenty 'twenty, four and 'twenty to 'twenty three.
Speaker Change: So that gives us quite a bit of confidence the pipeline is better.
Speaker Change: Compared to the board to the both tiers and in terms of our selling environment, we see more equivalent to 2023, then 424.
Speaker Change: We have better visibility into the downside for us and as Phil and Helen Medicine.
Speaker Change: No no.
Speaker Change: We do not see any any large any material losses in the second half.
Speaker Change: So the year over year retention will improve in the second half.
Speaker Change: And we have a very solid and diverse pipelines for both we are quite happy with is that that path prime represents in a large seven figure deals, but also those midsized deals that they're easier to execute on so that all of that gives us confidence that.
Speaker Change: The real world that we are the inflection point for our for the organic growth for the rest of the year.
Speaker Change: Thank you as a reminder to ask a question at this time. Please press star one wondering you touched on telephone. Our next question comes from the line of Jeff Silber with BMO capital markets. Your line is now open.
Speaker Change: Hey, Good morning, this is Ryan on for Jeff.
Speaker Change: You've talked in the past about selling more into the tech budget with just wondering what type of sensitivity.
Speaker Change: Even as the macro is unwound a bit compared to what you might see in the financial services and market data budgets and then just more broadly how our client conversations and sales cycles have been trending over the last few weeks. Thank you.
Speaker Change: Well I'll start so yeah, so I think selling into the tech budget budgets is good and I think everyone, including ourselves is investing very heavily in technology as we.
Speaker Change: As we sort of transition to a new paradigm of thinking in terms of how we're all going to be working over the next few years. So I think we've got good data to support that some of the deals that we're going out there and selling onto.
Speaker Change: Onto always into the market data budget, which is the one that not surprisingly has been under.
Speaker Change: Bunch of pressure and I'm not sure that we've seen much of a change in the last few weeks.
Speaker Change: So the question was specific to the sell side and the and the.
Speaker Change: <unk> not seen much of a change I think clients.
Speaker Change: Appreciate it you know we have best of breed products.
Speaker Change: And I think some of the in general I think lots of the conversations are a buzzer gen AI tools in that space and the conversations have been good I will just add you know we are having.
Speaker Change: You know.
Speaker Change: We are having.
Speaker Change: That level of.
Speaker Change: C level Tech technical discussions with some of the clients and some of the larger deals in the second half will come from that.
Speaker Change: The logical budgets rather than traditional market data. So that's definitely shifting more and more as clients invest more and more in the in their Janet Jenny I efforts.
Speaker Change: Thank you. Our next question comes from the line of Jason Haas with Wells Fargo. Your line is now open.
Jason Haas: Hey, good morning, and thanks for taking my question.
Speaker Change: So there was a nice uptick in the client count growth year over year.
Jason Haas: Then on the flip side it looks like.
Speaker Change: Non of users per client declines for the first time in a while so I wasn't sure what was causing that dynamic if it was M&A or something that maybe the type of clients that youre, bringing on so if you could explain that that'd be helpful. Thank you.
Jason Haas: Thank you Sir.
Jason Haas: So I'll take that so I think we have seen a significant uptick in our private equity in terms of the.
Jason Haas: The clients, we're bringing on Thursday, usually a smaller number of users for us.
Jason Haas: So you know.
Jason Haas: I think both competitively and in terms of our pricing and packaging as well as the improvement in the private markets product. We're seeing more success. There. So that is really what is impacting the number of users per client that youre seeing this quarter I think it may also be a function of we put in.
Jason Haas: All of the clients from the <unk> acquisition. This quarter. So the thing that was a few hundred clients right yes.
Jason Haas: In there there's a little bit as continued integration. So the users who are not included so that might be driving your number there as well.
Jason Haas: Thank you.
Speaker Change: Our next question comes from the line of sovereign understand with Jefferies. LLC. Your line is now open.
Speaker Change: Thank you.
Speaker Change: It sounds like the confidence in the second half comes through factor part of it is just not happening as much renewal activity and it sounds like you've gone through.
Speaker Change: Really solid period, where you've seen some really good strength in your renewals.
Speaker Change: Have you guys been more proactive about trying to get ahead of deals before renewal cycles or do we just happen to go through a renewal cycle where.
Speaker Change: Maybe there's just a lot more elevated activity are renewals coming up in the hospital, but just trying to understand.
Speaker Change: The forward cadence.
Speaker Change: How we should think about renewals and risking the cycle at this point in time and if just clients.
Speaker Change: Maybe you are trying to take advantage of pricing at this point and so you just.
Speaker Change: D themselves have been pushing for more renewals.
Speaker Change: So I think what you're seeing in the current cycle is really related.
Speaker Change: Related to the contract expiration dates going forward I think we're being a lot more organized around renewals we are.
Speaker Change: Think we spoke about this during our Investor Investor Day, and are creating as we have a very large number of clients now.
Speaker Change: We're creating playbooks for renewals, we're being proactive.
Speaker Change: Wherever we can we're trying to get ahead of those renewals and renewed renew them prior to their expiration date. So we are trying to make sure that we have in the.
Speaker Change: Better better dispersion of renewals across the entire year, but rather than them being bunched up and so.
Speaker Change: So all of that is.
Speaker Change: Something that we are paying lots of attention to in terms of our sales operations and how we're addressing those.
Speaker Change: Yeah, and as Gordon mentioned to get to your point on pricing for example, the dozen large banking renewals that we've done that we.
Speaker Change: <unk>.
Speaker Change: All of them.
Speaker Change: Were either flat or up and in aggregate. They were up so it is not a case, where we're sacrificing price.
Speaker Change: In terms of total ASC per contract.
Speaker Change: To to be able to renew it.
Speaker Change: As Gordon talked about at our Investor day retention is a huge focus of ours and I think youre seeing some of the benefits from that.
Speaker Change: I'm not going to be able to stop myself here. So a lot of what we talked about today with these banking renewals, we have an amazing banking product. So we've always had the best product in the industry and we're leaning into the technology part of list with pitch creator.
Speaker Change: But we've also made a massive investment and data over the last five years or so so we continue to build out the core factset fundamental data and the other data, but our investment in private company data Theres been significant we've I think gone from like three or 4 million, so almost nine or nine plus million private companies.
Speaker Change: With much higher quality data and we're not relying now on some third party sources, we're doing a lot of this ourselves because we can do it better and then the deep sector initiative that we started in 19, let's that's a long road, but that's beginning to pay off so I just wanted to really stress like for our banking clients.
Speaker Change: The combination of the technology integration with office the journey I work, we're doing as well as the data is just such a powerful combination and obviously a lot to do with the banks wanting to renew with Factset.
Speaker Change: So I think that's the last question. Thank.
Speaker Change: Thank you for joining us today in closing our solid financial performance and disciplined execution against our full year pipeline in the first two quarters of this year has positioned us well for the acceleration we anticipate in the second half. Thanks.
Speaker Change: Thanks for all the great questions today, and we'll see you next quarter operator that ends today's call.
Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].